[Federal Register Volume 83, Number 160 (Friday, August 17, 2018)]
[Proposed Rules]
[Pages 41786-41951]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-17101]



[[Page 41785]]

Vol. 83

Friday,

No. 160

August 17, 2018

Part III

Book 3 of 3 Books

Pages 41785-42016





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Parts 414 and 425



Medicare Program; Medicare Shared Savings Program; Accountable Care 
Organizations--Pathways to Success; Proposed Rules

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

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 414 and 425

[CMS-1701-P]
RIN 0938-AT45


Medicare Program; Medicare Shared Savings Program; Accountable 
Care Organizations--Pathways to Success

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Proposed rule.

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SUMMARY: Under the Medicare Shared Savings Program (Shared Savings 
Program), providers of services and suppliers that participate in an 
Accountable Care Organization (ACO) continue to receive traditional 
Medicare fee-for-service (FFS) payments under Parts A and B, but the 
ACO may be eligible to receive a shared savings payment if it meets 
specified quality and savings requirements. The policies included in 
this proposed rule would provide a new direction for the Shared Savings 
Program by establishing pathways to success through redesigning the 
participation options available under the program to encourage ACOs to 
transition to two-sided models (in which they may share in savings and 
are accountable for repaying shared losses). These proposed policies 
are designed to increase savings for the Trust Funds and mitigate 
losses, reduce gaming opportunities, and promote regulatory flexibility 
and free-market principles. The proposed rule also would provide new 
tools to support coordination of care across settings and strengthen 
beneficiary engagement; ensure rigorous benchmarking; promote 
interoperable electronic health record technology among ACO providers/
suppliers; and improve information sharing on opioid use to combat 
opioid addiction.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on October 16, 2018.

ADDRESSES: In commenting, please refer to file code CMS-1701-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    Comments, including mass comment submissions, must be submitted in 
one of the following three ways (please choose only one of the ways 
listed):
    1. Electronically. You may submit electronic comments on this 
regulation to https://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1701-P, P.O. Box 8013, 
Baltimore, MD 21244-8013.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-1701-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Elizabeth November, (410) 786-8084 or 
via email at aco@cms.hhs.gov.

SUPPLEMENTARY INFORMATION: 
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following 
website as soon as possible after they have been received: https://www.regulations.gov. Follow the search instructions on that website to 
view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

I. Executive Summary and Background

A. Executive Summary

1. Purpose
    Currently, 561 ACOs participate in the Medicare Shared Savings 
Program (Shared Savings Program). CMS continues to monitor and evaluate 
program results to look for additional ways to streamline program 
operations, reduce burden, and facilitate transition to risk that 
promote a competitive and accountable marketplace, while improving the 
quality of care for Medicare beneficiaries. This proposed rule would 
make changes to the regulations for the Shared Savings Program that 
were promulgated through rulemaking between 2011 and 2017, and are 
codified in 42 CFR part 425. The changes in this proposed rule are 
based on the additional program experience we have gained and on 
lessons learned from testing of Medicare ACO initiatives by the Center 
for Medicare and Medicaid Innovation (Innovation Center). If these 
changes are finalized, we will continue to monitor the program's 
ability to reduce healthcare spending and improve care quality to 
inform future program developments, including whether the program 
provides beneficiaries with the value and choice demonstrated by other 
Medicare options such as Medicare Advantage (MA). We also propose 
changes to address the new requirements of the Bipartisan Budget Act of 
2018 (Pub. L. 115-123) (herein referred to as the Bipartisan Budget 
Act).
    Section 1899 of the Social Security Act (the Act) established the 
Medicare Shared Savings Program, which promotes accountability for a 
patient population, fosters coordination of items and services under 
Medicare Parts A and B, encourages investment in infrastructure and 
redesigned care processes for high quality and efficient health care 
service delivery, and promotes higher value care. The Shared Savings 
Program is a voluntary program that encourages groups of doctors, 
hospitals, and other health care providers to come together as an ACO 
to lower growth in expenditures and improve quality. An ACO agrees to 
be held accountable for the quality, cost, and experience of care of an 
assigned Medicare FFS beneficiary population. ACOs that successfully 
meet quality and savings requirements share a percentage of the 
achieved savings with Medicare.
    Shared Savings Program ACOs are an important innovation for moving 
CMS's payment systems away from paying for volume and towards paying 
for value and outcomes because ACOs are held accountable for spending 
in relation to a historical benchmark and for quality performance, 
including performance on outcome and patient experience measures. The 
program began in 2012, and as of January 2018, 561 ACOs are 
participating in the program and serving over 10.5 million Medicare FFS 
beneficiaries. (See the Medicare Shared Savings Program website at 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/ for information about the program, the program's 
statutory authority, regulations and guidance, the

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program's application process, participating ACOs, and program 
performance data.)
    The Shared Savings Program currently includes three financial 
models that allow ACOs to select an arrangement that makes the most 
sense for their organization. The vast majority of Shared Savings 
Program ACOs, 82 percent in 2018,\1\ have chosen to enter and maximize 
the allowed time under a one-sided, shared savings-only model (Track 
1), under which eligible ACOs receive a share of any savings under 
their benchmark, but are not required to pay back a share of spending 
over the benchmark. In comparison, there is relatively low 
participation in the program's two-sided, shared savings and shared 
losses models, under which eligible ACOs share in a larger portion of 
any savings under their benchmark, but are required to share losses if 
spending exceeds the benchmark. Participation in Track 2 (introduced at 
the start of the program in 2012) has slowly declined in recent years, 
particularly following the availability of Track 3 (beginning in 2016), 
although participation in Track 3, the program's highest-risk track, 
remains modest.
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    \1\ See, for example, Medicare Shared Savings Program Fast Facts 
(January 2018), available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Downloads/SSP-2018-Fast-Facts.pdf.
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    Recently, the Innovation Center designed an additional option 
available to eligible Track 1 ACOs, referred to as the Track 1+ Model, 
to facilitate ACOs' transition to performance-based risk. The Track 1+ 
Model, a time-limited model, began on January 1, 2018, and is based on 
Shared Savings Program Track 1, but tests a payment design that 
incorporates more limited downside risk, as compared to Track 2 and 
Track 3. Our early experience with the design of the Track 1+ Model 
demonstrates that the availability of a lower-risk, two-sided model is 
an effective way to encourage Track 1 ACOs (including ACOs within a 
current agreement period, initial program entrants, and renewing ACOs) 
to progress more rapidly to performance-based risk. Fifty-five ACOs 
entered into Track 1+ Model agreements effective on January 1, 2018, 
the first time the model was offered. These ACOs represent our largest 
cohort of performance-based risk ACOs to date.
    ACOs in two-sided models have shown significant savings to the 
Medicare program while advancing the quality of care furnished to FFS 
beneficiaries; but, the majority of ACOs have yet to assume any 
performance-based risk although they benefit from waivers of certain 
federal requirements in connection with their participation in the 
Shared Savings Program. Even more concerning is the finding that one-
sided model ACOs, which are not accountable for sharing in losses, have 
actually increased Medicare spending relative to their benchmarks. 
Further, the presence of an ``upside-only'' track may be encouraging 
consolidation in the marketplace, reducing competition and choice for 
Medicare FFS beneficiaries. While we understand that systems need time 
to adjust, Medicare cannot afford to continue with models that are not 
producing desired results.
    Our results to date have shown that ACOs in two-sided models 
perform better over time than one-sided model ACOs, low revenue ACOs, 
which are typically physician-led, perform better than high revenue 
ACOs, which often include hospitals, and the longer ACOs are in the 
program the better they do at achieving the program goals of lowering 
growth in expenditures and improving quality. For example, in 
performance year 2016, about 68 percent of Shared Savings Program ACOs 
in two-sided models (15 of 22 ACOs) shared savings compared to 29 
percent of Track 1 ACOs; 41 percent of low revenue ACOs shared savings 
compared to 23 percent of high revenue ACOs; and 42 percent of April 
and July 2012 starters shared savings, compared to 36 percent of 2013 
and 2014 starters, 26 percent of 2015 starters, and 18 percent of 2016 
starters.
    We believe that additional policy changes to the Shared Savings 
Program and its financial models are required to support the move to 
value, achieve savings for the Medicare program, and promote a 
competitive and accountable healthcare marketplace. Accordingly, we are 
proposing to redesign the Shared Savings Program to provide pathways to 
success in the future through a combination of policy changes, informed 
by the following guiding principles:
     Accountability--Increase savings for the Medicare Trust 
Funds, mitigate losses by accelerating the move to two-sided risk by 
ACOs, and ensure rigorous benchmarking.
     Competition--Promote free-market principles by encouraging 
the development of physician-only and rural ACOs in order to provide a 
pathway for physicians to stay independent, thereby preserving 
beneficiary choice.
     Engagement--Promote regulatory flexibility to allow ACOs 
to innovate and be successful in coordinating care, improving quality, 
and engaging with and incentivizing beneficiaries to achieve and 
maintain good health.
     Integrity--Reduce opportunities for gaming.
     Quality--Improve quality of care for patients with an 
emphasis on promoting interoperability and the sharing of healthcare 
data between providers, focusing on meaningful quality measures, and 
combatting opioid addiction.
    The need for a new approach or pathway to transition Track 1 ACOs 
to performance-based risk is particularly relevant at this time, given 
the current stage of participation for the initial entrants to the 
Shared Savings Program under the program's current design. The 
program's initial entrants are nearing the end of the time allowed 
under Track 1 (a maximum of two, 3-year agreement periods). Among the 
program's initial entrants (ACOs that first entered the program in 2012 
and 2013), there are 82 ACOs that would be required to renew their 
participation agreements to enter a third agreement period beginning in 
2019, and they face transitioning from a one-sided model to a two-sided 
model with significant levels of risk that some are not prepared to 
accept. Another 114 ACOs that have renewed for a second agreement 
period under a one-sided model, including 59 ACOs that started in 2014 
and 55 ACOs that started in 2015, will face a similar transition to a 
two-sided model with significant levels of risk in 2020 and 2021, 
respectively. The transition to performance-based risk remains a 
pressing concern for ACOs, as evidenced by a recent survey of the 82 
ACOs that would be required to move to a two-sided payment model in 
their third agreement period beginning in 2019. The survey results, 
based on a 43 percent response rate, indicate that these Track 1 ACOs 
are reluctant to move to two-sided risk under the current design of the 
program. See National Association of ACOs, Press Release (May 2018), 
available at https://www.naacos.com/press-release-may-2-2018.
    We believe the long term success and sustainability of the Shared 
Savings Program is affected by a combination of key program factors: 
The savings and losses potential of the program established through the 
design of the program's tracks; the methodology for setting and 
resetting the benchmark, which is the basis for determining shared 
savings and shared losses; the length of the agreement period, which 
determines the amount of time an ACO remains under a financial model; 
and the frequency of benchmark rebasing. We believe it is necessary to 
carefully consider each of these factors to create, on balance, 
sufficient incentives for participation in a voluntary program,

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while also achieving program goals to increase quality of care for 
Medicare beneficiaries and reduce expenditure growth to protect the 
Trust Funds.
    In order to achieve these program goals and preserve the long term 
success and sustainability of the program, we believe it is necessary 
to create a pathway for ACOs to more rapidly transition to performance-
based risk. ACOs and other program stakeholders have urged CMS to 
smooth the transition to risk by providing more time to gain experience 
with risk and more incremental levels of risk. The goal of the proposed 
program redesign is to create a pathway for success that facilitates 
ACOs' transition to performance-based risk more quickly and makes this 
transition smooth by phasing-in risk more gradually. Through the 
creation of a new BASIC track, we would allow ACOs to gain experience 
with more modest levels of performance-based risk on their way to 
accepting greater levels of performance-based risk over time (as the 
proposed BASIC track's maximum level of risk is the same as the Track 
1+ Model, which is substantially less than the proposed ENHANCED 
track). As stakeholders have suggested, we would provide flexibility to 
allow ACOs that are ready to accelerate their move to higher risk 
within agreement periods, and enable such ACOs to qualify as Advanced 
APM entities for purposes of the Quality Payment Program. We would 
streamline the program and simplify the participation options by 
retiring Track 1 and Track 2. We would retain Track 3, which we would 
rename as the ENHANCED track, to encourage ACOs that are able to accept 
higher levels of potential risk and reward to drive the most 
significant systematic change in providers' and suppliers' behavior. We 
would further strengthen the program by establishing policies to deter 
gaming by limiting more experienced ACOs to higher-risk participation 
options; more rigorously screening for good standing among ACOs seeking 
to renew their participation in the program or re-enter the program 
after termination or expiration of their previous agreement; 
identifying ACOs re-forming under new legal entities as re-entering 
ACOs if greater than 50 percent of their ACO participants have recent 
prior participation in the same ACO in order to hold these ACO 
accountable for their ACO participants' experience with the program; 
and holding ACOs in two-sided models accountable for partial-year 
losses if either the ACO or CMS terminates the agreement before the end 
of the performance year.
    Under the proposed redesign of the program, our policies would 
recognize the relationship between the ACO's degree of control over 
total Medicare Parts A and B FFS expenditures for its assigned 
beneficiaries and its readiness to accept higher or lower degrees of 
performance-based risk. Comparisons of ACO participants' total Medicare 
Parts A and B FFS revenue to a factor based on total Medicare Parts A 
and B FFS expenditures for the ACO's assigned beneficiaries would be 
used in determining the maximum amount of losses (loss sharing limit) 
under the BASIC track, the estimated amount of repayment mechanism 
arrangements for BASIC track ACOs (required for ACOs entering or 
continuing their participation in a two-sided model to assure CMS of 
the ACO's ability to repay shared losses), and in determining 
participation options for ACOs. Using revenue-based loss sharing limits 
and repayment mechanism amounts for eligible BASIC track ACOs would 
help to ensure that low revenue ACOs have a meaningful pathway to 
participate in a two-sided model that may be more consistent with their 
capacity to assume risk. By basing participation options on the ACO's 
degree of control over total Medicare Parts A and B FFS expenditures 
for the ACO's assigned beneficiaries, low revenue ACOs, which tend to 
be smaller and have less capital, would be able to continue in the 
program longer under lower levels of risk; whereas high revenue ACOs, 
which tend to include institutional providers and are typically larger 
and better capitalized, would be required to move more quickly to 
higher levels of performance-based risk in the ENHANCED track, because 
they should be able to exert more influence, direction, and 
coordination over the full continuum of care. By requiring high revenue 
ACOs to enter higher levels of performance-based risk under the 
ENHANCED track after no more than one agreement period under the BASIC 
track, we aim to drive more meaningful systematic change in these ACOs, 
which have greater potential to control their assigned beneficiaries' 
Medicare Parts A and B FFS expenditures by coordinating care across 
care settings, and thus to achieve significant change in spending. 
Further, allowing low revenue ACOs a longer period of participation 
under the lower level of performance-based risk in the BASIC track, 
while challenging high revenue ACOs to more quickly move to higher 
levels of performance-based risk, could give rise to more innovative 
arrangements for lowering growth in expenditures and improving quality, 
particularly among low revenue ACOs that tend to be composed of 
independent physician practices.
    The program's benchmarking methodology, a complex calculation that 
incorporates the ACO's risk-adjusted historical expenditures and 
reflects either national or regional spending trends, is a central 
feature of the program's financial models. We are proposing to continue 
to refine the benchmarking approach based on our experience using 
factors based on regional FFS expenditures in resetting the benchmark 
in an ACO's second or subsequent agreement period, and to address ACOs' 
persistent concerns over the risk adjustment methodology. Through the 
proposed redesign of the program, we would provide for more accurate 
benchmarks for ACOs that are protective of the Trust Funds by ensuring 
that ACOs do not unduly benefit from any one aspect of the benchmark 
calculations, while also helping to ensure the program continues to 
remain attractive to ACOs, especially those caring for the most complex 
and highest risk patients who could benefit from high-quality, 
coordinated care from an ACO.
    We would accelerate the use of factors based on regional FFS 
expenditures in establishing the benchmark by applying this methodology 
in setting an ACO's benchmark beginning with its first agreement 
period. This would allow the benchmark to be a more accurate 
representation of the ACO's costs in relation to its localized market 
(or regional service area), and could strengthen the incentives of the 
program to drive meaningful change by ACOs. Further, allowing agreement 
periods of at least 5 years, as opposed to the current 3-year agreement 
periods, would provide greater predictability for benchmarks by 
reducing the frequency of benchmark rebasing, and therefore provide 
greater opportunity for ACOs to achieve savings against these 
benchmarks. In combination, these policies would protect the Trust 
Funds, provide more accurate and predictable benchmarks, and reduce 
selection costs, while creating incentives for ACOs to transition to 
performance-based risk.
    Currently, the regional adjustment can provide overly inflated 
benchmarks for ACOs that are relatively low spending compared to their 
region, while ACOs with higher spending compared to their region may 
find little value in remaining in the program when faced with a 
significantly reduced benchmark. To address this dynamic, we would 
reduce the maximum weight used in calculating the regional adjustment, 
and cap the adjustment amount for all

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agreement periods, so as not to excessively reward or punish an ACO 
based on where the ACO is located. This would make the benchmark more 
achievable for ACOs that care for medically complex patients and are 
high spending compared to their region, thereby encouraging their 
continued participation, while at the same time preventing windfall 
shared savings payments for ACOs that have relatively low spending 
levels relative to their region.
    We would also seek to provide more sustainable trend factors for 
ACOs with high penetration in markets with lower spending growth 
compared to the nation, and less favorable trend factors for ACOs with 
high penetration in markets with higher spending growth compared to the 
nation. This approach would have little impact on ACOs with relatively 
low to medium penetration in counties in their regional service area.
    ACOs and other program stakeholders continue to express concerns 
that the current methodology for risk adjusting the benchmark for each 
performance year does not adequately account for changes in acuity and 
health status of patients over time. We would modify the current 
approach to risk adjustment to allow changes in health status to be 
more fully recognized during the agreement period, providing further 
incentives for continued participation by ACOs faced with higher 
spending due to the changing health status of their population.
    ACOs and other program stakeholders have urged CMS to allow 
additional flexibility of program and payment policies to engage 
beneficiaries and provide the care for beneficiaries in the most 
appropriate care setting. It is also critical that patients have the 
tools to be more engaged with their doctors in order to play a more 
active role in their care coordination and the quality of care they 
receive, and that ACOs empower and incentivize beneficiaries to achieve 
good health. The recent Bipartisan Budget Act allows for certain new 
flexibilities for Shared Savings Program ACOs to support these aims, 
including new beneficiary incentive programs, telehealth services 
furnished in accordance with section 1899(l) of the Act, and a choice 
of beneficiary assignment methodology. We would establish policies in 
accordance with the new law in these areas. For example, in accordance 
with section 1899(m)(1)(A) of the Act (as added by section 50341 of the 
Bipartisan Budget Act), we would allow certain ACOs under two-sided 
risk to establish CMS-approved beneficiary incentive programs, through 
which an ACO would provide incentive payments to assigned beneficiaries 
who receive qualifying primary care services. We would establish 
policies to govern telehealth services furnished in accordance with 
1899(l) of the Act by physicians and practitioners in eligible two-
sided model ACOs. We would also allow broader access to the program's 
existing SNF 3-day rule waiver for ACOs under performance-based risk.
    Other timely modifications to the program's regulations addressed 
in this proposed rule, include changes to the program's claims-based 
assignment methodology and the process for allowing beneficiaries to 
voluntarily align to ACOs in which the physician or other practitioner 
they have designated as their primary clinician is an ACO professional, 
and extending the program's recently finalized policy for addressing 
extreme and uncontrollable circumstances to performance year 2018 and 
all subsequent performance years. Further, feedback from the public 
sought in this rule would inform development of the program's quality 
measure set to support CMS's Meaningful Measures initiative for 
reducing provider reporting burden and promoting positive outcomes, and 
help to identify ways to improve existing data sharing and the quality 
measure set to address the nation's opioid emergency. Changes to the 
program's requirements regarding the use of certified electronic health 
record technology would help ensure Shared Savings Program ACOs are 
held accountable for using technology that promotes more effective 
population management and sharing of data among providers, and will 
ultimately lead to value-based and better care for patients. Lastly, 
through this proposed rule we seek comment on how Medicare ACOs and the 
sponsors of stand-alone Part D prescription drug plans (PDPs) could be 
encouraged to collaborate so as to improve the coordination of pharmacy 
care for Medicare FFS beneficiaries.
2. Summary of the Major Provisions
    This proposed rule would restructure the participation options for 
ACOs applying to participate in the program in 2019 by discontinuing 
Track 1 (one-sided shared savings-only model), and Track 2 (two-sided 
shared savings and shared losses model) while maintaining Track 3 
(renamed the ENHANCED track) and offering a new BASIC track. Under the 
proposed approach, the program's two tracks would be: (i) A BASIC 
track, offering a path from a one-sided model for eligible ACOs to 
progressively higher increments of risk and potential reward within a 
single agreement period, and (ii) an ENHANCED track based on the 
existing Track 3 (two-sided model), for ACOs that take on the highest 
level of risk and potential reward. This approach includes proposals 
for replacing the current 3-year agreement period structure with an 
agreement period of at least 5 years, allowing eligible BASIC track 
ACOs greater flexibility to select their level of risk within an 
agreement period in the glide path, and allowing all BASIC track and 
ENHANCED track ACOs the flexibility to change their selection of 
beneficiary assignment methodology prior to the start of each 
performance year, consistent with the requirement under the Bipartisan 
Budget Act to provide ACOs with a choice of prospective assignment.
    To provide ACOs time to consider the new participation options and 
prepare for program changes, make investments and other business 
decisions about participation, obtain buy-in from their governing 
bodies and executives, and to complete and submit a Shared Savings 
Program application for a performance year beginning in 2019, we 
propose to offer a July 1, 2019 start date for the first agreement 
period under the proposed new participation options. This midyear start 
in 2019 would also allow both new applicants and ACOs currently 
participating in the program an opportunity to make any changes to the 
structure and composition of their ACO as may be necessary to comply 
with the new program requirements for the ACO's preferred participation 
option, if changes to the participation options are finalized as 
proposed. We would forgo the application cycle in 2018 for an agreement 
start date of January 1, 2019. ACOs entering a new agreement period on 
July 1, 2019, would have the opportunity to participate in the program 
under agreement periods spanning 5 years and 6 months, with a 6-month 
first performance year. Additionally, we would offer ACOs with a 
participation agreement ending on December 31, 2018 an opportunity to 
extend their current agreement period for an additional 6-month 
performance year (January 1, 2019-June 30, 2019). These ACOs would then 
have the opportunity to apply for a new agreement under the BASIC track 
or ENHANCED track beginning on July 1, 2019.
    We propose modifications to the repayment mechanism arrangement 
requirements applicable to ACOs in performance-based risk tracks, 
including changes to update these policies to address new participation 
options under the BASIC track and, in certain circumstances, allow a 
renewing

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ACO to extend the use of its current repayment mechanism into the next 
agreement period, which would reduce the financial burden of 
maintaining two concurrent repayment mechanisms. Repayment mechanism 
arrangements provide CMS assurance that an ACO can repay losses for 
which it may be liable. The proposed changes include: (1) Adding a 
provision that could lower the required repayment mechanism amount for 
BASIC track ACOs in Levels C, D, or E; (2) adding a provision to permit 
recalculation of the estimated amount of the repayment mechanism each 
performance year to account for changes in ACO participant composition; 
(3) codifying the required duration of repayment mechanism 
arrangements; (4) adding a provision to allow a renewing ACO the 
flexibility to maintain a single, existing repayment mechanism 
arrangement to support its ability to repay shared losses in the new 
agreement period so long as it is sufficient to cover any increase to 
the repayment mechanism amount during the new agreement period; and (5) 
establishing requirements regarding the issuing institutions for a 
repayment mechanism arrangement.
    This proposed rule would establish regulations in accordance with 
the Bipartisan Budget Act on the use of telehealth services furnished 
on or after January 1, 2020, by physicians and other practitioners 
participating in an ACO under performance-based risk that has selected 
prospective assignment. This policy would allow for payment for 
telehealth services furnished to prospectively assigned beneficiaries 
receiving telehealth services in non-rural areas, and allow 
beneficiaries to receive certain telehealth services at their home, to 
support care coordination across settings. The proposed rule would also 
provide for limited waivers of the originating site and geographic 
requirements to allow for payment for otherwise covered telehealth 
services provided to beneficiaries who are no longer prospectively 
assigned to an applicable ACO (and therefore no longer eligible for 
payment for these services under section 1899(l) of the Act) during a 
90-day grace period. In addition, ACO participants would be prohibited, 
under certain circumstances, from charging beneficiaries for telehealth 
services, where CMS does not pay for those telehealth services under 
section 1899(l) solely because the beneficiary was never prospectively 
assigned to the applicable ACO or was prospectively assigned, but the 
90-day grace period has lapsed.
    We propose to allow eligible ACOs under performance-based risk 
under either prospective assignment or preliminary prospective 
assignment with retrospective reconciliation to use the program's 
existing SNF 3-day rule waiver. We also propose to amend the existing 
SNF 3-day rule waiver to allow critical access hospitals (CAHs) and 
other small, rural hospitals operating under a swing bed agreement to 
be eligible to partner with eligible ACOs as SNF affiliates for 
purposes of the SNF 3-day rule waiver.
    We propose policies to expand the role of choice and incentives in 
engaging beneficiaries in their health care. First, we propose to 
establish regulations in accordance with section 1899(m)(1)(A) of the 
Act, as added by section 50341 of the Bipartisan Budget Act, to permit 
ACOs under certain two-sided models to operate CMS-approved beneficiary 
incentive programs. The beneficiary incentive programs would encourage 
beneficiaries assigned to certain ACOs to obtain medically necessary 
primary care services while requiring such ACOs to comply with program 
integrity and other requirements, as the Secretary determines 
necessary. Any ACO that operates a CMS-approved beneficiary incentive 
program would be required to ensure that certain information about its 
beneficiary incentive program is made available to CMS and the public 
on its public reporting web page. Second, we propose modifications to 
the program's existing policies on voluntary alignment in order to 
comply with the Bipartisan Budget Act, by allowing beneficiaries to 
designate a broader range of ACO professionals as their ``primary 
clinician'' responsible for coordinating their overall care, and 
providing that we will continue to use a beneficiary's designation to 
align the beneficiary to the ACO in which their primary clinician 
participates even if the beneficiary does not continue to receive 
primary care services from an ACO professional in that ACO. We also 
seek comment on an alternative beneficiary assignment methodology to 
make the assignment methodology more patient-centered, and strengthen 
the engagement of beneficiaries in their health care. Under such an 
approach, a beneficiary would be assigned to an ACO if the beneficiary 
``opted-in'' to the ACO. These selections would be supplemented by 
voluntary alignment and a modified claims-based assignment methodology. 
Third, to empower beneficiary choice and further program transparency, 
we are proposing to revise policies related to beneficiary 
notifications. Specifically, we propose that ACO participants be 
required to include information on voluntary alignment in the written 
notifications they must provide to beneficiaries. ACO participants 
would be required to provide such notifications during each 
beneficiary's first primary care visit of each performance year, in 
addition to having such information posted in the ACO participant's 
facility and available upon request (as currently required).
    We propose new policies for determining participation options for 
ACOs based on the degree to which ACOs control total Medicare Parts A 
and B FFS expenditures for their assigned beneficiaries (low revenue 
ACO versus high revenue ACO), and the experience of the ACO's legal 
entity and ACO participants with the Shared Savings Program and 
performance-based risk Medicare ACO initiatives.
    We also propose to revise the criteria for evaluating the 
eligibility of ACOs seeking to renew their participation in the program 
for a subsequent agreement period and ACOs applying to re-enter the 
program after termination or expiration of the ACO's previous 
agreement, based on the ACO's prior participation in the Shared Savings 
Program. We also propose to identify new ACOs as re-entering ACOs if 
greater than 50 percent of their ACO participants have recent prior 
participation in the same ACO in order to hold these ACO accountable 
for their participants' experience with the program. We would use the 
same criteria to review applications from renewing and re-entering ACOs 
to more consistently consider ACOs' prior experience in the Shared 
Savings Program. Under this proposal, we would modify existing review 
criteria, such as the ACO's history of meeting the quality performance 
standard and the ACO's timely repayment of shared losses that currently 
apply to particular performance years of a 3-year agreement period, to 
ensure applicability to ACOs with an agreement period that is not less 
than 5 years. We also seek to strengthen the program's requirements for 
monitoring ACOs within an agreement period for poor financial 
performance and to ensure that ACOs with poor financial performance are 
not allowed to continue their participation in the program, or to re-
enter the program after being terminated, without addressing the 
deficiencies that resulted in termination.
    We propose to update program policies related to termination of 
ACOs' participation in the program. We propose to reduce the amount of 
notice an ACO must provide CMS of its decision to voluntarily 
terminate. We also address the timing of an ACO's re-entry into the 
program after termination.

[[Page 41791]]

Specifically, we seek to modify current requirements that prevent an 
ACO from terminating its participation agreement and quickly re-
entering the program to allow the flexibility for an ACO in a current 
3-year agreement period to terminate its participation agreement and 
immediately enter a new agreement period of not less than 5 years under 
one of the redesigned participation options proposed in this rule. We 
also propose policies that would prevent ACOs from taking advantage of 
this flexibility to avoid transitioning to risk by repeatedly 
participating in the BASIC track's glide path for a short time, 
terminating, and then entering a one-sided model in a future agreement 
period under the BASIC track. Specifically, we propose to restrict 
eligibility for the BASIC track's glide path to ACOs inexperienced with 
performance-based risk Medicare ACO initiatives, which we propose to 
define to include all levels of the BASIC track's glide path. We also 
propose to differentiate between initial entrants (ACOs entering the 
program for the first time), ``re-entering ACOs'' (ACOs re-entering 
after a break in participation following termination or expiration of a 
prior participation agreement, and new ACOs identified as re-entering 
ACOs because greater than 50 percent of their ACO participants have 
recent prior participation in the same ACO), and ``renewing ACOs'' 
(ACOs that participate continuously in the program, without 
interruption, including ACOs that choose to renew early by terminating 
their current agreement and immediately entering a new agreement 
period). This differentiation is relevant for determining the agreement 
period the ACO is entering for purposes of applying policies that 
phase-in over time (benchmarking methodology and quality performance 
standards) and for determining whether an ACO can extend the use of its 
existing repayment mechanism when it enters a new agreement period.
    Further, we would impose payment consequences for early termination 
by proposing to hold ACOs in two-sided models liable for pro-rated 
shared losses. This approach would apply to ACOs that voluntarily 
terminate their participation more than midway through a 12-month 
performance year and all ACOs that are involuntarily terminated by CMS. 
ACOs would be ineligible to share in savings for a performance year if 
the effective date of their termination from the program is prior to 
the last calendar day of the performance year, although we would allow 
an exception for ACOs that are participating in the program as of 
January 1, 2019, that terminate their agreement with an effective date 
of June 30, 2019, and enter a new agreement period under the BASIC 
track or ENHANCED track beginning July 1, 2019. In these cases, we 
would perform separate reconciliations to determine shared savings and 
shared losses for the ACO's first 6 months of participation in 2019 and 
for the ACO's 6-month performance year from July 1, 2019, to December 
31, 2019, under the subsequent participation agreement.
    To strengthen ACO financial incentives for continued program 
participation and improve the sustainability of the program, we propose 
changes to the methodology for establishing, adjusting, updating and 
resetting benchmarks for agreement periods beginning on July 1, 2019, 
and in subsequent years, to include the following:
     Application of factors based on regional FFS expenditures 
to establish, adjust, and update the ACO's benchmark beginning in an 
ACO's first agreement period, to move benchmarks away from being based 
solely on the ACO's historical costs and allow them to better reflect 
costs in the ACO's region.
     Mitigating the effects of excessive positive or negative 
regional adjustment used to establish and reset the benchmark by--
    ++ Reducing the maximum weight used in calculating the regional 
adjustment from 70 percent to 50 percent (within the existing phase-in 
schedule for applying increased weights in calculating the regional 
adjustment); and
    ++ Capping the amount of the adjustment based on a percentage of 
national FFS expenditures.
     Calculating growth rates used in trending expenditures to 
establish the benchmark and in updating the benchmark each performance 
year as a blend of regional and national expenditure growth rates with 
increasing weight placed on the national component of the blend as the 
ACO's penetration in its region increases.
     Better accounting for certain health status changes by 
using full CMS-Hierarchical Condition Category (HCC) risk scores to 
adjust the benchmark each performance year, although restricting the 
upward and downward effects of these adjustments to positive or 
negative 3 percent over the new agreement period.
    This rule also includes proposals for updating the program's 
policies in a variety of subject areas. We propose to expand the 
definition of primary care services used in beneficiary assignment to 
add new codes and revise how we determine whether evaluation and 
management services were furnished in a SNF. We also propose to extend 
the policies to address quality performance scoring and determination 
of shared losses owed by ACOs participating under performance-based 
risk in the event of extreme or uncontrollable circumstances that were 
adopted for performance year 2017 to apply for performance year 2018 
and subsequent years. We also discuss the potential effects of extreme 
and uncontrollable circumstances on benchmark year expenditures and the 
determination of the historical benchmark and seek comment on this 
issue.
    We seek comment on approaches to developing the program's quality 
measure set in response to the agency's Meaningful Measures initiative 
as well as to support ACOs and their participating providers/suppliers 
in addressing opioid utilization within the FFS population. We describe 
existing sources of program data that may be useful for ACOs to monitor 
trends in opioid utilization, and solicit comment on suggestions for 
providing additional aggregate data to ACOs. We also seek comment on 
quality measures that could be used to assess factors related to opioid 
utilization, including patient reported outcome measures.
    We propose to establish a new program requirement related to the 
adoption of Certified Electronic Health Record Technology (CEHRT) by 
eligible clinicians participating in the ACO. Specifically, we propose 
to require ACOs to certify, upon application to the program and 
annually thereafter, that the percentage of eligible clinicians 
participating in the ACO who use CEHRT to document and communicate 
clinical care to their patients or other health care providers meets or 
exceeds a specified threshold. For ACOs that are participating in a 
track (or payment model within a track) that meets the financial risk 
standard to be an Advanced APM, we further propose to align this 
requirement with the CEHRT use requirement for Advanced APMs under the 
Quality Payment Program. In conjunction with this proposal, we propose 
to discontinue the use of the double-weighted quality measure assessing 
the percentage of eligible clinicians that successfully meet the 
Promoting Interoperability Performance Category Base Score (Use of 
CEHRT, ACO-11) in order to reduce burden and align with the 
requirements of the Quality Payment Program. We also propose conforming 
revisions to the CEHRT requirement for Shared Savings

[[Page 41792]]

Program ACOs in the Quality Payment Program's regulations under 42 CFR 
part 414.
    Lastly, we seek comment on approaches for encouraging Medicare ACOs 
to collaborate with the sponsors of stand-alone Part D PDPs (Part D 
sponsors) to improve the coordination of pharmacy care for Medicare FFS 
beneficiaries to reduce the risk of adverse events and improve 
medication adherence. In particular, we seek to understand how Medicare 
ACOs, and specifically Shared Savings Program ACOs, and Part D sponsors 
could work together and be encouraged to improve the coordination of 
pharmacy care for Medicare FFS beneficiaries to achieve better health 
outcomes, what clinical and pharmacy data may be necessary to support 
improved coordination of pharmacy care for Medicare FFS beneficiaries, 
and approaches to structuring financial arrangements to reward ACOs and 
Part D sponsors for improved health outcomes and lower growth in 
expenditures for Medicare FFS beneficiaries.
3. Summary of Costs and Benefits
    As detailed in section IV of this proposed rule, the proposed 
faster transition from one-sided model agreements to performance-based 
risk arrangements, tempered by the option for eligible ACOs of a 
gentler exposure to downside risk calculated as a percentage of ACO 
participants' total Medicare Parts A and B FFS revenue and capped at a 
percentage of the ACO's benchmark, can affect broader participation in 
performance-based risk in the Shared Savings Program and reduce overall 
claims costs. A second key driver of estimated net savings is the 
reduction in shared savings payments from the proposed limitation on 
the amount of the regional adjustment to the ACO's historical 
benchmark. Such reduction in overall shared savings payments is 
projected to result despite the benefit of higher net adjustments 
expected for a larger number of ACOs from the use of a simpler HCC risk 
adjustment methodology, the blending of national and regional 
expenditure growth rates for certain benchmark calculations, and longer 
(at least 5 years, instead of 3-year) agreement periods that allow ACOs 
a longer horizon from which to benefit from efficiency gains before 
benchmark rebasing. Overall, the decreases in claims costs and shared 
saving payments to ACOs are projected to result in $2.24 billion in 
federal savings over 10 years.

B. Statutory and Regulatory Background

    On March 23, 2010, the Patient Protection and Affordable Care Act 
(Pub. L. 111-148) was enacted, followed by enactment of the Health Care 
and Education Reconciliation Act of 2010 (Pub. L. 111-152) on March 30, 
2010, which amended certain provisions of Public Law 111-148.
    Section 3022 of the Affordable Care Act amended Title XVIII of the 
Act (42 U.S.C. 1395 et seq.) by adding section 1899 to the Act to 
establish the Shared Savings Program to facilitate coordination and 
cooperation among health care providers to improve the quality of care 
for Medicare FFS beneficiaries and reduce the rate of growth in 
expenditures under Medicare Parts A and B. See 42 U.S.C. 1395jjj.
    The final rule establishing the Shared Savings Program appeared in 
the November 2, 2011 Federal Register (Medicare Program; Medicare 
Shared Savings Program: Accountable Care Organizations; Final Rule (76 
FR 67802) (hereinafter referred to as the ``November 2011 final 
rule'')). We viewed this final rule as a starting point for the 
program, and because of the scope and scale of the program and our 
limited experience with shared savings initiatives under FFS Medicare, 
we built a great deal of flexibility into the program rules.
    Through subsequent rulemaking, we have revisited and amended Shared 
Savings Program policies in light of the additional experience we 
gained during the initial years of program implementation as well as 
from testing through the Pioneer ACO Model, the Next Generation ACO 
Model and other initiatives conducted by the Center for Medicare and 
Medicaid Innovation (Innovation Center) under section 1115A of the Act. 
A major update to the program rules appeared in the June 9, 2015 
Federal Register (Medicare Program; Medicare Shared Savings Program: 
Accountable Care Organizations; Final Rule (80 FR 32692) (hereinafter 
referred to as the ``June 2015 final rule'')). A final rule addressing 
changes related to the program's financial benchmark methodology 
appeared in the June 10, 2016 Federal Register (Medicare Program; 
Medicare Shared Savings Program; Accountable Care Organizations--
Revised Benchmark Rebasing Methodology, Facilitating Transition to 
Performance-Based Risk, and Administrative Finality of Financial 
Calculations (81 FR 37950) (hereinafter referred to as the ``June 2016 
final rule'')). We have also made use of the annual calendar year (CY) 
Physician Fee Schedule (PFS) rules to address updates to the Shared 
Savings Program quality measures, scoring, and quality performance 
standard, the program's beneficiary assignment methodology and certain 
other issues.\2\
---------------------------------------------------------------------------

    \2\ See for example, Medicare Program; Revisions to Payment 
Policies under the Physician Fee Schedule, Clinical Laboratory Fee 
Schedule & Other Revisions to Part B for CY 2014; Final Rule (78 FR 
74230, Dec. 10, 2013). Medicare Program; Revisions to Payment 
Policies under the Physician Fee Schedule, Clinical Laboratory Fee 
Schedule & Other Revisions to Part B for CY 2015; Final Rule (79 FR 
67548, Nov. 13, 2014). Medicare Program; Revisions to Payment 
Policies under the Physician Fee Schedule, Clinical Laboratory Fee 
Schedule & Other Revisions to Part B for CY 2016; Final Rule (80 FR 
70886, Nov. 16, 2015). Medicare Program; Revisions to Payment 
Policies under the Physician Fee Schedule, Clinical Laboratory Fee 
Schedule & Other Revisions to Part B for CY 2017; Final Rule (81 FR 
80170, Nov. 15, 2016). Medicare Program; Revisions to Payment 
Policies under the Physician Fee Schedule, Clinical Laboratory Fee 
Schedule & Other Revisions to Part B for CY 2018; Final Rule (82 FR 
52976, Nov. 15, 2017).
---------------------------------------------------------------------------

    Policies applicable to Shared Savings Program ACOs have continued 
to evolve based on changes in the law. The Medicare Access and CHIP 
Reauthorization Act of 2015 (MACRA) established the Quality Payment 
Program (Pub. L. 114-10). In the CY 2017 Quality Payment Program final 
rule with comment period (81 FR 77008), CMS established regulations for 
the Merit-Based Incentive Payment System (MIPS) and Advanced 
Alternative Payment Models (APMs) and related policies applicable to 
eligible clinicians who participate in the Shared Savings Program.
    The requirements for assignment of Medicare FFS beneficiaries to 
ACOs participating under the program were amended by the 21st Century 
Cures Act (Pub. L. 114-255). Accordingly, we revised the program's 
regulations in the CY 2018 PFS final rule to reflect these new 
requirements.
    On February 9, 2018, the Bipartisan Budget Act of 2018 was enacted 
(Pub. L. 115-123), amending section 1899 of the Act to provide for the 
following: expanded use of telehealth services by physicians or 
practitioners participating in an applicable ACO to a prospectively 
assigned beneficiary, greater flexibility in the assignment of Medicare 
FFS beneficiaries to ACOs by allowing ACOs in tracks under 
retrospective beneficiary assignment a choice of prospective assignment 
for the agreement period, permitting Medicare FFS beneficiaries to 
voluntarily identify an ACO professional as their primary care provider 
and mandating that any such voluntary identification will supersede 
claims-based assignment, and allowing ACOs under certain two-sided 
models

[[Page 41793]]

to establish CMS-approved beneficiary incentive programs.

II. Provisions of the Proposed Regulations

A. Redesigning Participation Options To Facilitate Transition to 
Performance-Based Risk

    In this section, we discuss a series of interrelated proposals 
around transition to risk, including: (1) Length of time an ACO may 
remain under a one-sided model, (2) the levels of risk and reward under 
the program's participation options, (3) the duration of the ACO's 
agreement period, and (4) the degree of flexibility ACOs have to choose 
their beneficiary assignment methodology and also to select their level 
of risk within an agreement period.
1. Background on Shared Savings Program Participation Options
    In this section we review the statutory and regulatory background 
for the program's participation options by track and the length of the 
ACO's agreement period for participation in the program, and also 
provide an overview of current ACO participation in the program for 
performance year 2018.
a. Background on Development of Track 1, Track 2 and Track 3
    Section 1899(d) of the Act establishes the general requirements for 
shared savings payments to participating ACOs. Specifically, section 
1899(d)(1)(A) of the Act specifies that providers of services and 
suppliers participating in an ACO will continue to receive payment 
under the original Medicare FFS program under Parts A and B in the same 
manner as they would otherwise be made, and that an ACO is eligible to 
receive payment for a portion of savings generated for Medicare 
provided that the ACO meets both the quality performance standards 
established by the Secretary and achieves savings against its 
historical benchmark based on average per capita Medicare FFS 
expenditures during the 3 years preceding the start of the agreement 
period. Additionally, section 1899(i) of the Act authorizes the 
Secretary to use other payment models rather than the one-sided model 
described in section 1899(d) of the Act, as long as the Secretary 
determines that the other payment model will improve the quality and 
efficiency of items and services furnished to Medicare beneficiaries 
without additional program expenditures.
    In the November 2011 final rule establishing the Shared Savings 
Program (76 FR 67909), we created two tracks from which ACOs could 
choose to participate: The one-sided model (Track 1) that is based on 
the statutory payment methodology under section 1899(d) of the Act, and 
a two-sided model (Track 2) that is also based on the payment 
methodology under section 1899(d) of the Act, but incorporates 
performance-based risk using the authority under section 1899(i)(3) of 
the Act to use other payment models. Under the one-sided model, ACOs 
can qualify to share in savings but are not responsible for losses. 
Under a two-sided model, ACOs can qualify to share in savings with an 
increased sharing rate, but also must take on risk for sharing in 
losses. ACOs entering the program or renewing their agreement may elect 
to enter a two-sided model. Once an ACO has elected to participate 
under a two-sided model, the ACO cannot go into Track 1 for subsequent 
agreement periods (see Sec.  425.600).
    In the initial rulemaking for the program, we considered several 
approaches to designing the program's participation options, 
principally: (1) Base the program on a two-sided model, thereby 
requiring all participants to accept risk from the first program year; 
(2) allow applicants to choose between program tracks, either a one-
sided model or two-sided model, for the duration of the agreement; or 
(3) allow a choice of tracks, but require ACOs electing the one-sided 
model to transition to the two-sided model during their initial 
agreement period (see, for example, 76 FR 19618). We proposed a design 
for Track 1 whereby ACOs would enter a 3-year agreement period under 
the one-sided model and would automatically transition to the two-sided 
model (under Track 2) in the third year of their initial agreement 
period. Thereafter, those ACOs that wished to continue participating in 
the Shared Savings Program would only have the option of participating 
under performance-based risk (see 76 FR 19618). We explained our belief 
that this approach would have the advantage of providing an entry point 
for organizations with less experience with risk models, such as some 
physician-driven organizations or smaller ACOs, to gain experience with 
population management before transitioning to a risk-based model while 
also providing an opportunity for more experienced ACOs that are ready 
to share in losses to enter a sharing arrangement that provides the 
potential for greater reward in exchange for assuming greater potential 
responsibility. A few commenters favored this proposed approach, 
indicating the importance of performance-based risk in the health care 
delivery system transformation necessary to achieve the program's aims 
and for ``good stewardship'' of Medicare Trust Fund dollars. However, 
most commenters expressed concerns about requiring ACOs to quickly 
accept performance-based risk and we finalized a policy where an ACO 
could remain under the one-sided model for the duration of its first 
agreement period (see 76 FR 67904 through 67909).
    In earlier rulemaking, we explained that offering multiple tracks 
with differing degrees of risk across the Shared Savings Program tracks 
would create an ``on-ramp'' for the program to attract both providers 
and suppliers that are new to value-based purchasing, as well as more 
experienced entities that are ready to share performance-based risk. We 
stated our belief that a one-sided model would have the potential to 
attract a large number of participants to the program and introduce 
value-based purchasing broadly to providers and suppliers, many of whom 
may never have participated in a value-based purchasing initiative 
before (see, for example, 76 FR 67904 through 67909).
    Another reason we included the option for a one-sided track with no 
downside risk was that this model would be accessible to and attract 
small, rural, safety net, and/or physician-only ACOs (see 80 FR 32759). 
Commenters identified groups that may be especially challenged by the 
upfront costs of ACO formation and operations, including: private 
primary care practitioners, small to medium sized physician practices, 
small ACOs, safety net providers (that is, Rural Health Clinics (RHCs), 
CAHs, Federally Qualified Health Centers (FQHCs), community-funded 
safety net clinics), and other rural providers (that is, Method II 
CAHs, rural prospective payment system hospitals designated as rural 
referral centers, sole community hospitals, Medicare dependent 
hospitals, or rural primary care providers) (see 76 FR 67834 through 
67835). Further, commenters also indicated that ACOs that are composed 
of small- and medium-sized physician practices, loosely formed 
physician networks, safety net providers, and small and/or rural ACOs 
would be encouraged to participate in the program based on the 
availability of a one-sided model (see, for example, 76 FR 67906). 
Commenters also expressed concerns about requiring ACOs that may lack 
experience with care management or managing performance-based risk to 
quickly transition to performance-based risk, with some commenters 
suggesting that small, rural and physician-only

[[Page 41794]]

ACOs be exempt from downside risk (see, for example, 76 FR 67906).
    In establishing the program's initial two track approach, we 
acknowledged that ACOs new to the accountable care model--and 
particularly small, rural, safety net, and physician-only ACOs--would 
benefit from additional time under the one-sided model before being 
required to accept risk (76 FR 67907). However, we also noted that 
although a one-sided model could provide incentives for participants to 
improve quality, it might not be sufficient incentive for participants 
to improve the efficiency and cost of health care delivery (76 FR 67904 
and 80 FR 32759). We explained our belief that payment models where 
ACOs bear a degree of financial risk have the potential to induce more 
meaningful systematic change in providers' and suppliers' behavior 
(see, for example, 76 FR 67907). We also explained our belief that 
performance-based risk options could have the advantage of providing 
more experienced ACOs an opportunity to enter a sharing arrangement 
with the potential for greater reward in exchange for assuming greater 
potential responsibility (see, for example, 76 FR 67907).
    We note that in earlier rulemaking we have used several terms to 
refer to participation options in the Shared Savings Program under 
which an ACO is potentially liable to share in losses with Medicare. In 
the initial rulemaking for the program, we defined ``two-sided model'' 
to mean a model under which the ACO may share savings with the Medicare 
program, if it meets the requirements for doing so, and is also liable 
for sharing any losses incurred (Sec.  425.20). We have also used the 
term ``performance-based risk'' to refer to the type of risk an ACO 
participating in a two-sided model undertakes. As we explained in the 
November 2011 final rule (76 FR 67945), in a two-sided model under the 
Shared Savings Program, the Medicare program retains the insurance risk 
and responsibility for paying claims for the services furnished to 
Medicare beneficiaries. It is only shared savings payments (and shared 
losses in a two-sided model) that will be contingent upon ACO 
performance. The agreement to share risk against the benchmark would be 
solely between the Medicare program and the ACO. As a result, we have 
tended to use the terms ``two-sided model'' and ``performance-based 
risk'' interchangeably, considering them to be synonymous when 
describing payment models offered under the Shared Savings Program and 
Medicare ACO initiatives more broadly.
    In the June 2015 final rule, we modified the existing policies to 
allow eligible Track 1 ACOs to renew for a second agreement period 
under the one-sided model, and to require they enter a performance-
based risk track in order to remain in the program for a third or 
subsequent agreement period. We explained the rationale for these 
policies in the prior rulemaking and we refer readers to the December 
2014 proposed rule and June 2015 final rule for more detailed 
discussion. (See, for example, 79 FR 72804, and 80 FR 32760 through 
32761.) In developing these policies, we considered, but did not 
finalize, approaches to make Track 1 less attractive for continued 
participation, in order to support progression to risk, including 
offering a reduced sharing rate to ACOs remaining under the one-sided 
model for a second agreement period.\3\ We also modified the two-sided 
performance-based risk track (Track 2) and began to offer an 
alternative two-sided performance-based risk track (Track 3) for 
agreement periods beginning on or after January 1, 2016 (80 FR 32771 
through 32781). Compared to Track 2, which uses the same preliminary 
prospective beneficiary assignment methodology with retrospective 
reconciliation as Track 1, Track 3 includes prospective beneficiary 
assignment and a higher sharing rate for shared savings as well as the 
potential for greater liability for shared losses. Further, we 
established a SNF 3-day rule waiver (discussed further in section II.B 
of this proposed rule), for use by eligible Track 3 ACOs.
---------------------------------------------------------------------------

    \3\ See 79 FR 72805 (discussing proposal to reduce the sharing 
rate by 10 percentage points for ACOs in a second agreement period 
under Track 1 to make staying in the one-sided model less attractive 
than moving forward along the risk continuum); 80 FR 32766 (In 
response to our proposal in the December 2014 proposed rule to offer 
a 40 percent sharing rate to ACOs that remained in Track 1 for a 
second agreement period, several commenters recommended dropping the 
sharing rate under the one-sided model even further to encourage 
ACOs to more quickly accept performance-based risk, for example to 
20 percent, 25 percent or 30 percent under the second agreement 
period, or making a 5 percentage point reduction for each year under 
the second agreement period).
---------------------------------------------------------------------------

    The Innovation Center has tested progressively higher levels of 
risk for more experienced ACOs through the Pioneer ACO Model (concluded 
December 31, 2016) and the Next Generation ACO Model (ongoing).\4\ 
Lessons learned from the Pioneer ACO Model were important 
considerations in the development of Track 3, which incorporates 
several features of the Pioneer ACO Model, including prospective 
beneficiary assignment, higher levels of risk and reward (compared to 
Track 2), and the availability of a SNF-3-day rule waiver. Since Track 
3 was introduced as a participation option under the Shared Savings 
Program, we have seen a growing interest, with 16 Track 3 ACOs 
completing PY 2016 and 38 Track 3 ACOs participating in PY 2018. The 
continued increase in the number of ACOs participating in Track 3, a 
higher proportion of which have achieved shared savings compared to 
Track 1 ACOs, suggests that the track offers a pathway to improve care 
for beneficiaries at a level of risk and reward sufficient to induce 
ACOs to improve their financial performance. For example, for 
performance year 2016, about 56 percent of Track 3 ACOs (9 of 16 ACOs) 
achieved shared savings compared to 29 percent of Track 1 ACOs (119 of 
410 ACOs). See 2016 Shared Savings Program Accountable Care 
Organization Public Use File, available at https://www.cms.gov/Research-Statistics-Data-and-Systems/Downloadable-Public-Use-Files/SSPACO/index.html.
---------------------------------------------------------------------------

    \4\ See Pioneer ACO Model website, https://innovation.cms.gov/initiatives/Pioneer-aco-model/ (the Pioneer ACO Model ``was designed 
for health care organizations and providers that were already 
experienced in coordinating care for patients across care 
settings''); see also CMS Press Release, New Participants Join 
Several CMS Alternative Payment Models (January 18, 2017), available 
at https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2017-Press-releases-items/2017-01-18.html (the ``Next Generation ACO 
Model was designed to test whether strong financial incentives for 
ACOs can improve health outcomes and reduce expenditures for 
Medicare fee-for-service beneficiaries. Provider groups in this 
model assume higher levels of financial risk and reward than are 
available under the Shared Savings Program.'').
---------------------------------------------------------------------------

    Further, the Innovation Center has tested two models for providing 
up-front funding to eligible small, rural, or physician-only Shared 
Savings Program ACOs. Initially, CMS offered the Advance Payment ACO 
Model, beginning in 2012 and concluding December 31, 2015. See https://innovation.cms.gov/initiatives/Advance-Payment-ACO-Model/. The ACO 
Investment Model (AIM), which began in 2015, builds on the experience 
with the Advance Payment ACO Model. The AIM is ongoing, with 45 
participating ACOs. See https://innovation.cms.gov/initiatives/ACO-Investment-Model/.
    In the June 2016 final rule, to further encourage ACOs to 
transition to performance-based risk, we finalized a participation 
option for eligible Track 1 ACOs to defer by one year their entrance 
into a second agreement period under a two-sided model (Track 2 or 
Track 3) by extending their first agreement period under Track 1 for a 
fourth performance

[[Page 41795]]

year (Sec.  425.200(e); 81 FR 37994 through 37997). Under this deferred 
renewal option, we defer resetting the benchmark as specified at Sec.  
425.603 until the beginning of the ACO's second agreement period. This 
participation option became available to ACOs seeking to enter their 
second agreement period beginning in 2017 and in subsequent years. 
However, only a small number of ACOs have made use of this option.
    In prior rulemaking for the Shared Savings Program, we have 
indicated that we would continue to evaluate the appropriateness and 
effectiveness of our incentives to encourage ACOs to transition to a 
performance-based risk track and, as necessary, might revisit 
alternative participation options through future notice and comment 
rulemaking (81 FR 37995 through 37996). We believe it is timely to 
reconsider the participation options available under the program in 
light of the financial and quality results for the first four 
performance years under the program, participation trends by ACOs, and 
feedback from ACOs and other program stakeholders' about factors that 
encourage transition to risk.
b. Background on Factors Affecting Transition to Performance-Based Risk
    Based on comments submitted by ACOs and other program stakeholders 
in response to earlier rulemaking and our experience with implementing 
the Shared Savings Program, we believe a combination of factors affect 
ACOs' transition to performance-based risk.\5\ These factors include:
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    \5\ See, for example, 80 FR 32761 (summarizing comments 
suggesting a combination of factors could make the program more 
attractive and encourage ACOs to transition to risk, such as: the 
level of risk and reward offered under the program's financial 
models, tools to enable ACOs to more effectively control and manage 
their patient populations, opportunity for ACOs to gain experience 
with the program under the one-sided model under the same rules that 
would be applied under a two-sided model, including the assignment 
methodology, allowing ACOs to move to two-sided risk within an 
agreement period, and allowing for longer agreement periods).
---------------------------------------------------------------------------

    (1) Length of time allowed under a one-sided model and availability 
of options to transition from a one-sided model to a two-sided model 
within an ACO's agreement period. (Discussed in detail within this 
section. See also discussion of related background in section II.A.1.a. 
of this proposed rule.)
    (2) An ACO's level of experience with the accountable care model 
and the Shared Savings Program.\6\
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    \6\ See discussion in section II.A.1.a of this proposed rule. 
See also 81 FR 37996 (summarizing comments suggesting that if a 
Track 1 ACO is uncertain about its ability to successfully manage 
financial risk, the ACO would more likely simply choose to continue 
under Track 1 for a second agreement period.)
---------------------------------------------------------------------------

    (3) Choice of methodology used to assign beneficiaries to ACOs, 
which determines the beneficiary population for which the ACO is 
accountable for both the quality and cost of care. (Background on 
choice of assignment methodology is discussed within this section; see 
also section II.A.4 of this proposed rule.) Specifically, the 
assignment methodology is used to determine the populations that are 
the basis for determining the ACO's historical benchmark and the 
population assigned to the ACO each performance year, which is the 
basis for determining whether the ACO will share in savings or losses 
for that performance year.
    (4) Availability of program and payment flexibilities to ACOs 
participating under performance-based risk to support beneficiary 
engagement and the ACO's care coordination activities (see discussion 
in sections II.B and II.C of this proposed rule).
    (5) Financial burden on ACOs in meeting program requirements to 
enter into two-sided models, specifically the requirement to establish 
an adequate repayment mechanism (see discussion in section II.A.6.c. of 
this proposed rule).
    (6) Value proposition of the program's financial model under one-
sided and two-sided models.
    The value proposition of the program's financial models raises a 
number of key considerations that pertain to an ACO's transition to 
risk. One consideration is the level of potential reward under the one-
sided model in relation to the levels of potential risk and reward 
under a two-sided model. A second consideration is the availability of 
asymmetrical levels of risk and reward, such as in the Medicare ACO 
Track 1+ Model (Track 1+ Model), where, for certain eligible ACOs, the 
level of risk is determined based on a percentage of ACO participants' 
total Medicare Parts A and B FFS revenue, not to exceed a percentage of 
the ACO's benchmark (determined based on historical expenditures for 
its assigned population). A third consideration is the interactions 
between the ACO's participation in a two-sided model of the Shared 
Savings Program and incentives available under other CMS value-based 
payment initiatives; in particular, eligible clinicians participating 
in an ACO under a two-sided model of the Shared Savings Program may 
qualify to receive an APM incentive payment under the Quality Payment 
Program for sufficient participation in an Advanced APM. Lastly, the 
value proposition of the program is informed by the methodology for 
setting and resetting the benchmark, which is the basis for determining 
shared savings and shared losses, and the length of agreement period, 
which determines the amount of time an ACO remains under a financial 
model and the frequency of benchmark rebasing. See discussion in 
sections II.D. (benchmarking) and II.A.1.c. (length of agreement 
period) of this proposed rule.
    Currently, the design of the program locks in the ACO's choice of 
financial model, which also determines the applicable beneficiary 
assignment methodology, for the duration of the ACO's 3-year agreement 
period. For an ACO's initial or subsequent agreement period in the 
Shared Savings Program, an ACO applies to participate in a particular 
financial model (or ``track'') of the program as specified under Sec.  
425.600(a). If the ACO's application is accepted, the ACO must remain 
under that financial model for the duration of its 3-year agreement 
period. Beneficiary assignment and the level of performance-based risk 
(if applicable) are determined consistently for all ACOs participating 
in a particular track. Under Track 1 and Track 2, we assign 
beneficiaries using preliminary prospective assignment with 
retrospective reconciliation (Sec.  425.400(a)(2)). Under Track 3, we 
prospectively assign beneficiaries (Sec.  425.400(a)(3)).
    As described in earlier rulemaking, commenters have urged that we 
offer greater flexibility for ACOs in their choice of assignment 
methodology.\7\ In the June 2015 final rule, we acknowledged there is 
additional complexity and administrative burden to implementing an 
approach under which ACOs in any track may choose either prospective 
assignment or preliminary prospective assignment with retrospective 
reconciliation, with an opportunity to switch their selection on an 
annual basis. At that time, we declined to implement prospective 
assignment in Track 1 and Track 2, and

[[Page 41796]]

we also declined to give ACOs in Track 3 a choice of either prospective 
assignment or preliminary prospective assignment with retrospective 
reconciliation. Further, we explained our belief that implementing 
prospective assignment only in a two-sided model track may encourage 
Track 1 ACOs that prefer this assignment methodology, and the other 
features of Track 3, to more quickly transition to performance-based 
risk (80 FR 32773).
---------------------------------------------------------------------------

    \7\ See, for example, 76 FR 67864 (summarizing comments 
suggesting allowing ACOs a choice of prospective or retrospective 
assignment); 80 FR 32772 through 32774 (In response to our proposal 
to use a prospective assignment methodology in Track 3, many 
commenters generally encouraged CMS to extend the option for 
prospective assignment beyond Track 3 to Track 1 and Track 2. Other 
commenters saw the value in retaining both assignment methodologies, 
and encouraged CMS to allow all ACOs, regardless of track, a choice 
of prospective or retrospective assignment. Several commenters 
suggested CMS allow ACOs a choice of retrospective or prospective 
assignment annually, within the ACO's 3-year agreement period).
---------------------------------------------------------------------------

    We also have considered alternative approaches to allow ACOs 
greater flexibility in the timing of their transition to performance-
based risk, including within an ACO's agreement period. For example, as 
described in earlier rulemaking, commenters suggested approaches that 
would allow less than two 3-year agreement periods under Track 1.\8\ 
Some commenters recommended that CMS allow ACOs to ``move up'' the risk 
tracks (that is, move from Track 1 to Track 2 or Track 3, or move from 
Track 2 to Track 3) between performance years without being required to 
wait for the start of a new agreement period, to provide more 
flexibility for ACOs prepared to accept performance-based risk, or a 
higher level of performance-based risk. These commenters suggested that 
allowing an ACO to accept varying degrees of risk within an agreement 
period would position the ACO to best balance its exposure to and 
tolerance for financial risk and would create a true glide path for 
participating healthcare providers (81 FR 37995 through 37996).
---------------------------------------------------------------------------

    \8\ See, for example, 76 FR 67907 through 67909 (discussing 
comments suggesting ACOs be allowed 3, 4, 5, or 6 years under Track 
1 prior to transitioning to a performance-based risk track).
---------------------------------------------------------------------------

    Transition to performance-based risk has taken on greater 
significance with the introduction of the Quality Payment Program. 
Under the CY 2017 Quality Payment Program final rule with comment 
period,\9\ ACO initiatives that require ACOs to bear risk for monetary 
losses of more than a nominal amount, and that meet additional 
criteria, can qualify as Advanced APMs beginning in performance year 
2017. Eligible clinicians who sufficiently participate in Advanced APMs 
such that they are Qualifying APM Participants (QPs) for a performance 
year receive APM Incentive Payments in the corresponding payment year 
between 2019 through 2024, and then higher fee schedule updates 
starting in 2026. Track 2 and Track 3 of the Shared Savings Program, 
and the Track 1+ Model, are currently Advanced APMs under the Quality 
Payment Program.
---------------------------------------------------------------------------

    \9\ See Merit-Based Incentive Payment System (MIPS) and 
Alternative Payment Model (APM) Incentive under the Physician Fee 
Schedule, and Criteria for Physician-Focused Payment Models final 
rule with comment period, 81 FR 77008 (Nov. 4, 2016), herein 
referred to as the CY 2017 Quality Payment Program final rule with 
comment period.
---------------------------------------------------------------------------

    ACOs and other program stakeholders continue to express a variety 
of concerns about the transition to risk under Track 2 and Track 3. For 
example, as described in the CY 2017 Quality Payment Program final rule 
with comment period (see, for example, 81 FR 77421 through 77422), 
commenters suggested a new Shared Savings Program track as a meaningful 
middle path between Track 1 and Track 2 (``Track 1.5''), that meets the 
Advanced APM generally applicable nominal amount standard, to create an 
option for ACOs with relatively low revenue or small numbers of 
participating eligible clinicians to participate in an Advanced APM 
without accepting the higher degrees of risk involved in Track 2 and 
Track 3. Commenters suggested this track would be a viable on-ramp for 
ACOs to assume greater amounts of risk in the future. Commenters' 
suggestions for Track 1.5 included prospective beneficiary assignment, 
asymmetric levels of risk and reward, and payment rule waivers, such as 
the SNF 3-day rule waiver available to ACOs participating in Shared 
Savings Program Track 3.\10\ Another key component of commenters' 
suggestions was to allow Track 1 ACOs to transition to Track 1.5 within 
their current agreement periods.\11\ These commenters' suggestions were 
considered in developing the Track 1+ Model, which began on January 1, 
2018. This Model, which is being tested by the Innovation Center, 
includes a two-sided payment model that incorporates the upside of 
Track 1 with more limited downside risk than is currently present in 
Track 2 or Track 3 of the Shared Savings Program. The Track 1+ Model is 
currently an Advanced APM under the Quality Payment Program.
---------------------------------------------------------------------------

    \10\ See CY 2017 Quality Payment Program final rule with comment 
period for summary of comments and responses. Individual comments 
are available at https://www.regulations.gov, search on file code 
CMS-5517-P, docket ID CMS-2016-0060 (https://www.regulations.gov/docketBrowser?rpp=25&so=DESC&sb=commentDueDate&po=0&dct=PS&D=CMS-2016-0060). See for example, Letter from Clif Gaus, NAACOS to Andrew 
Slavitt, Acting Administrator, Centers for Medicare & Medicaid 
Services, regarding CMS-5517-P (June 27, 2016); Letter from Tonya K. 
Wells, Trinity Health to Slavitt regarding CMS-5517-P (June 27, 
2016); Letter from Joseph Bisordi, M.D., Ochsner Health System to 
Slavitt regarding CMS-5517-P (June 27, 2016); Letter from Kevin 
Bogari, Lancaster General Health Community Care Collaborative to 
Slavitt regarding CMS-5517-P (June 27, 2016).
    \11\ See 81 FR 77421 (describing comments suggesting CMS adopt a 
Track 1.5 and also suggesting that Track 1 ACOs should be permitted 
to move into this suggested Track 1.5 before the end of their 
current agreement period).
---------------------------------------------------------------------------

    The Track 1+ Model is designed to encourage ACOs, especially those 
made up of small physician practices, to advance to performance-based 
risk. ACOs that include hospitals, including small rural hospitals, are 
also allowed to participate. See CMS Fact Sheet, New Accountable Care 
Organization Model Opportunity: Medicare ACO Track 1+ Model, Updated 
July 2017 (herein Track 1+ Model Fact Sheet), available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Downloads/New-Accountable-Care-Organization-Model-Opportunity-Fact-Sheet.pdf. In performance year 2018, 55 ACOs began in 
the Track 1+ Model, demonstrating strong interest in this financial 
model design. The availability of the Track 1+ Model increased the 
number of ACOs participating under a two-sided risk model in connection 
with their participation in the Shared Savings Program to approximately 
18 percent, with approximately 22.7 percent of assigned beneficiaries 
receiving care through an ACO in a two-sided model. Of the 55 Track 1+ 
Model ACOs, based on the ACOs' self-reported composition: 58.2 percent 
attested to the presence of an ownership or operational interest by an 
inpatient prospective payment system (IPPS) hospital, cancer center or 
rural hospital with more than 100 beds among their ACO participants, 
and therefore these ACOs were under a benchmark-based loss sharing 
limit; and 41.8 percent attested to the absence of such ownership or 
operational interests by these institutional providers among their ACO 
participants (likely ACOs composed of independent physician practices 
and/or ACOs that include small rural hospitals), which qualified these 
ACOs for generally lower levels of risk under the Track 1+ Model's 
revenue-based loss sharing limit.
c. Background on Length of Agreement Period
    Section 1899(b)(2)(B) of the Act requires participating ACOs to 
enter into an agreement with CMS to participate in the program for not 
less than a 3-year period referred to as the agreement period. Further, 
section 1899(d)(1)(B)(ii) of the Act requires us to reset the benchmark 
at the start of each agreement period. In initial rulemaking for the 
program, we limited participation agreements to 3-year periods (see 76 
FR 19544, and 76 FR 67807). We have considered the length of the ACO's 
agreement period in the context of the amount of time an ACO may remain 
in a one-sided model and

[[Page 41797]]

also the frequency with which we reset (or rebase) the ACO's historical 
benchmark. For example, in the June 2015 final rule, we discussed 
commenters' suggestions that we extend the agreement period from the 
current 3 years to a 5-year agreement period, for all tracks, including 
not only the initial agreement period, but all subsequent agreement 
periods.\12\ These commenters explained that extending the length of 
the agreement period would make the program more attractive by 
increasing program stability and providing ACOs with the necessary time 
to achieve the desired quality and financial outcomes. We declined to 
adopt these suggestions, believing at that time it was more appropriate 
to maintain a 3-year agreement period to provide continuity with the 
initial design of the program. At that time we did not find it 
necessary to extend agreement periods past 3 years to address the 
renewal of initial program entrants, particularly in light of the 
policies we finalized in the June 2015 final rule allowing Track 1 ACOs 
to apply to continue under the one-sided model for a second 3-year 
agreement period and modifying the benchmark rebasing methodology. 
However, we explained that longer agreement periods could increase the 
likelihood that ACOs would build on the success or continue the failure 
of their current agreement period. For this reason we noted our belief 
that rebasing every 3 years, at the start of each 3-year agreement 
period, is important to protect both the Trust Funds and ACOs. See 80 
FR 32763. See also 81 FR 37957 (noting commenters' suggestions that we 
eliminate rebasing or reducing the frequency of rebasing).
---------------------------------------------------------------------------

    \12\ See 80 FR 32763. See also 80 FR 32761 (discussing several 
commenters' recommendation to move to 5 or 6 year agreements for 
ACOs and the suggestion that ACOs have the opportunity to move to a 
performance-based risk model during their first agreement period, 
for example, after their first 3 years under the one-sided model. A 
commenter suggested encouraging ACOs to transition to two-sided risk 
by offering lower loss sharing rates for ACOs that move from Track 1 
to the two-sided model during the course of an agreement period, and 
phasing-in loss sharing rates for these ACOs (for example, 15 
percent in year 1, 30 percent in year 2, 60 percent in year 3). 
Another commenter suggested that CMS allow all ACOs (regardless of 
track) the option to increase their level of risk annually during 
the agreement period.)
---------------------------------------------------------------------------

d. Background on Shared Savings Program Participation
    There remains a high degree of interest in participation in the 
Shared Savings Program. Although most ACOs continue to participate in 
the program's one-sided model (Track 1), ACOs have demonstrated 
significant interest in the Track 1+ Model. Table 1 summarizes the 
total number of ACOs that are participating in the Shared Savings 
Program, including those also participating in the Track 1+ Model, for 
performance year 2018 with the total number of assigned beneficiaries 
by track.\13\ Of the 561 ACOs participating in the program as of 
January 1, 2018, 55 were in the Track 1+ Model, 8 were in Track 2, 38 
were in Track 3, and 460 were in Track 1. As of performance year 2018, 
there are over 20,000 ACO participant Taxpayer Identification Numbers 
(TINs) that include 377,515 clinicians (physicians, physician 
assistants, nurse practitioners and clinical nurse specialists) some of 
whom are in small and solo practices. About half of ACOs are provider 
networks, and 66 ACOs include rural providers. See Medicare Shared 
Savings Program Fast Facts (January 2018) available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Downloads/SSP-2018-Fast-Facts.pdf.
---------------------------------------------------------------------------

    \13\ See Performance Year 2018 Medicare Shared Savings Program 
Accountable Care Organizations available at Data.CMS.gov, https://data.cms.gov/Special-Programs-Initiatives-Medicare-Shared-Savin/Performance-Year-2018-Medicare-Shared-Savings-Prog/28n4-k8qs/data.
---------------------------------------------------------------------------

    Based on the program's existing requirements, ACOs can participate 
in Track 1 for a maximum of two agreement periods. There are a growing 
number of ACOs that have entered into their second agreement period, 
and, starting in 2019, many that will begin a third agreement period 
and will be required to enter a risk-based track.
    The progression by some ACOs to performance-based risk within the 
Shared Savings Program remains relatively slow, with approximately 82 
percent of ACOs participating in Track 1 in 2018, 43 percent (196 of 
460) of which are within a second agreement period in Track 1.

     Table 1--ACOs by Track and Number of Assigned Beneficiaries for
                          Performance Year 2018
------------------------------------------------------------------------
                                                             Number of
                  Track                   Number of ACOs     assigned
                                                           beneficiaries
------------------------------------------------------------------------
Track 1.................................             460       8,147,234
Track 1+ Model..........................              55       1,212,417
Track 2.................................               8         122,995
Track 3.................................              38         993,533
                                         -------------------------------
    Total...............................             561      10,476,179
------------------------------------------------------------------------

    However, the recent addition of the Track 1+ Model provided a 
significant boost in Shared Savings Program ACOs taking on performance-
based risk, with over half of the 101 ACOs participating in the Shared 
Savings Program and taking on performance-based risk opting for the 
Track 1+ Model in 2018. The lower level of risk offered under the Track 
1+ Model has been positively received by the industry and provided a 
pathway to risk for many ACOs.
2. Proposals for Modified Participation Options Under 5-Year Agreement 
Periods
    In developing the proposed policies described in this section, we 
considered a number of factors related to the program's current 
participation options in light of the program's financial results and 
stakeholders' feedback on program design, including the following.
    First, we considered the program's existing policy allowing ACOs up 
to 6 years of participation in a one-sided model. We have found that 
the policy has shown limited success in encouraging ACOs to advance to 
performance-based risk. By the fifth year of implementing the program, 
only about 18 percent of the program's participating ACOs are under a 
two-sided model, over half of which are participating in the Track 1+ 
Model (see Table 1).
    As discussed in detail in the Regulatory Impact Analysis (see 
section IV. of this proposed rule), our experience with the program 
indicates

[[Page 41798]]

that ACOs in two-sided models generally perform better than ACOs that 
participate under a one-sided model. For example, for performance year 
2016, about 68 percent of Shared Savings Program ACOs in two-sided 
models (15 of 22 ACOs) shared savings compared to 29 percent of Track 1 
ACOs. For performance year 2015, prior to the first year of Track 3, 
one of the three remaining Track 2 ACOs shared savings, while about 30 
percent of Track 1 ACOs (118 of 389 ACOs) shared savings. For 
performance year 2014, two of the three remaining Track 2 ACOs shared 
savings while about 25 percent of Track 1 ACOs (84 of 330 ACOs) shared 
savings. In the program's first year, concluding December 31, 2013, 40 
percent of Track 2 ACOs (2 of 5 ACOs) compared to 23 percent of Track 1 
ACOs (50 of 215 ACOs) shared savings. See Shared Savings Program 
Accountable Care Organization Public Use Files, available at https://www.cms.gov/Research-Statistics-Data-and-Systems/Downloadable-Public-Use-Files/SSPACO/index.html. These observations, in combination with 
participation trends that show ACOs prefer to remain in Track 1 for a 
second 3-year agreement period, suggests that a requirement for ACOs to 
more rapidly transition to performance-based risk could be effective in 
creating incentives for ACOs to more quickly meet the program's goals.
    The program's current design lacks a sufficiently incremental 
progression to performance-based risk, the need for which is evidenced 
by robust participation in the new Track 1+ Model. We believe a 
significant issue that contributes to some ACOs' reluctance to 
participate in Track 2 or Track 3 is that the magnitude of potential 
losses is very high compared to the ACO's degree of control over the 
total Medicare Parts A and B FFS expenditures for the ACO's assigned 
beneficiaries, particularly when its ACO participants have relatively 
low total Medicare Parts A and B FFS revenue. We are encouraged by the 
interest in the Track 1+ Model as indicated by the 55 Shared Savings 
Program ACOs participating in the Model for the performance year 
beginning on January 1, 2018; the largest group of Shared Savings 
Program ACOs to enter into performance-based risk for a given 
performance year to date. Based on the number of ACOs participating in 
the Track 1+ Model for performance year 2018, a lower risk option 
appears to be important for Track 1 ACOs with experience in the program 
seeking to transition to performance-based risk, as well as ACOs 
seeking to enter an initial agreement period in the program under a 
lower risk model.
    Interest in the Track 1+ Model suggests that the opportunity to 
participate in an Advanced APM while accepting more moderate levels of 
risk (compared to Track 2 and Track 3) is an important financial model 
design for ACOs. Allowing more manageable levels of risk within the 
Shared Savings Program is an important pathway for helping 
organizations to gain experience with managing risk as well as 
participating in Advanced APMs under the Quality Payment Program. The 
high uptake we have observed with the Track 1+ Model also suggests that 
the current design of Track 1 may be unnecessarily generous since the 
Track 1+ Model has the same level of upside as Track 1 but under which 
ACOs must also assume performance-based risk.
    Second, under the program's current design, CMS lacks adequate 
tools to properly address ACOs with patterns of negative financial 
performance. Track 1 ACOs are not liable for repaying any portion of 
their losses to CMS, and therefore may have potentially weaker 
incentives to improve quality and reduce growth in FFS expenditures 
within the accountable care model. These ACOs may take advantage of the 
potential benefits of continued program participation (including the 
receipt of program data and the opportunity to enter into certain 
contracting arrangements with ACO participants and ACO providers/
suppliers in connection with their participation in the Shared Savings 
Program), without providing a meaningful benefit to the Medicare 
program. ACOs under two-sided models may similarly benefit from program 
participation and seek to continue their participation despite owing 
shared losses.
    Third, differences in performance of ACOs indicate a pattern where 
low revenue ACOs outperformed high revenue ACOs. As discussed in the 
Regulatory Impact Analysis (see section IV. of this proposed rule), we 
have observed a pattern of performance, across tracks and performance 
years, where low revenue ACOs show better average results compared to 
high revenue ACOs. We believe high revenue ACOs, which typically 
include hospitals, have a greater opportunity to control assigned 
beneficiaries' total Medicare Parts A and B FFS expenditures, as they 
coordinate a larger portion of the assigned beneficiaries' care across 
care settings, and have the potential to perform better than what has 
been demonstrated in performance trends from 2012 through 2016. We 
conclude that the trends in performance by high revenue ACOs in 
relation to their expected capacity to control growth in expenditures 
are indications that these ACOs' performance would improve through 
greater incentives, principally a requirement to take on higher levels 
of performance-based risk, and thus drive change in FFS utilization for 
their Medicare FFS populations. This conclusion is further supported by 
our initial experience with the Track 1+ Model, for which our 
preliminary findings support the conclusion that the degree of control 
an ACO has over expenditures for its assigned beneficiaries is an 
indication of the level of performance-based risk an ACO is prepared to 
accept and manage, where control is determined by the relationship 
between ACO participants' total Medicare Parts A and B FFS revenue and 
the total Medicare Parts A and B FFS expenditures for the ACO's 
assigned beneficiaries. Our experience with the Track 1+ Model has also 
shown that ACO participants' total Medicare Parts A and B FFS revenue 
as a percentage of the total Medicare Parts A and B FFS expenditures of 
the assigned beneficiaries can serve as a proxy for ACO composition 
(that is, whether the ACO includes one or more institutional providers 
as an ACO participant, and therefore is likely to control a greater 
share of Medicare Parts A and B FFS expenditures and to have greater 
ability to coordinate care across settings for its assigned 
beneficiaries).
    Fourth, permitting choice of level of risk and assignment 
methodology within an ACO's agreement period would create redundancy in 
some participation options, and eliminating this redundancy would allow 
CMS to streamline the number of tracks offered while allowing ACOs 
greater flexibility to design their participation to meet the needs of 
their organizations. ACOs and stakeholders have indicated a strong 
preference for maintaining an option to select preliminary prospective 
assignment with retrospective reconciliation as an alternative to 
prospective assignment for ACOs under performance-based risk within the 
Shared Savings Program. We considered what would occur if we retained 
Track 2 in addition to the ENHANCED track and offered a choice of 
prospective assignment and preliminary prospective assignment (see 
section II.A.4.c. of this proposed rule) for both tracks. We believe 
that ACOs prepared to accept higher levels of benchmark-based risk 
would be more likely to enter the ENHANCED track (which allows the 
greatest risk and potential reward). This

[[Page 41799]]

is suggested by participation statistics, where 8 ACOs are 
participating in Track 2 compared to the 38 ACOs participating in Track 
3 as of January 1, 2018. We note that for agreement periods beginning 
in 2018, only 2 ACOs entered Track 2, both of which had deferred 
renewal in 2017, while 4 ACOs entered Track 3 (for their first or 
second agreement period). ACOs may be continuing to pick Track 2 
because of the preliminary prospective assignment methodology, and we 
would expect participation in Track 2 to decline further if we finalize 
the proposal to allow a choice of assignment methodology in the 
ENHANCED track, since we would expect ACOs ready for higher risk (that 
is, a level of risk that is higher than the highest level of risk and 
potential reward under the proposed BASIC track) to prefer the ENHANCED 
track over Track 2.
    Fifth, longer agreement periods could improve program incentives 
and support ACOs' transition into performance-based risk when coupled 
with changes to improve the accuracy of the program's benchmarking 
methodology. Extending agreement periods for more than 3 years could 
provide more certainty over benchmarks and in turn give ACOs a greater 
chance to succeed in the program by allowing them more time to 
understand their performance, gain experience and implement redesigned 
care processes before rebasing of the ACO's historical benchmark. 
Shared Savings Program results show that ACOs tend to perform better 
the longer they remain in the program. Further, under longer agreement 
periods, historical benchmarks would become more predictable, since the 
benchmark would continue to be based on the expenditures for 
beneficiaries who would have been assigned to the ACO in the 3 most 
recent years prior to the start of the ACO's agreement period (see 
Sec. Sec.  425.602(a) and 425.603(c)) and the benchmark would be risk 
adjusted and updated each performance year relative to benchmark year 
3. However, a number of factors can affect the amount of the benchmark, 
and therefore its predictability, during the agreement period 
regardless of whether the agreement period spans 3 or 5 years, 
including: adjustments to the benchmark during the ACO's agreement 
period resulting from changes in the ACO's certified ACO participant 
list and regulatory changes to the assignment methodology; as well as 
variation in the benchmark value that occurs each performance year as a 
result of annual risk adjustment to the ACO's benchmark (Sec. Sec.  
425.602(a)(9) and 425.603(c)(10)) and annual benchmark updates 
(Sec. Sec.  425.602(b) and 425.603(d)). Further, as discussed in 
section II.D of this proposed rule, we believe the proposed approach to 
incorporating factors based on regional FFS expenditures in 
establishing, adjusting and updating the benchmark beginning with the 
ACO's first agreement period will result in more accurate benchmarks. 
This improved accuracy of benchmarks would mitigate the impact of the 
more generous updated benchmarks that could result in the later years 
of longer agreement periods.
    In summary, taking these factors into consideration, we propose to 
redesign the program's participation options by discontinuing Track 1, 
Track 2 and the deferred renewal option, and instead offering two 
tracks that eligible ACOs would enter into for an agreement period of 
at least 5 years: (1) BASIC track, which would include an option for 
eligible ACOs to begin participation under a one-sided model and 
incrementally phase-in risk (calculated based on ACO participant 
revenue and capped at a percentage of the ACO's updated benchmark) and 
potential reward over the course of a single agreement period, an 
approach referred to as a glide path; and (2) ENHANCED track, based on 
the program's existing Track 3, for ACOs that take on the highest level 
of risk and potential reward.
    We propose to require ACOs to enter one of two tracks for agreement 
periods beginning on July 1, 2019, and in subsequent years (as 
described in section II.A.7 of this proposed rule): either the ENHANCED 
track, which would be based on Track 3 as currently designed and 
implemented under Sec.  425.610, or the new BASIC track, which would 
offer eligible ACOs a glide path from a one-sided model to 
incrementally higher performance-based risk as described in section 
II.A.3 of this proposed rule. (Herein, we refer to this participation 
option for eligible ACOs entering the BASIC track as the BASIC track's 
glide path, or simply the glide path.)
    We propose to add a new provision to the Shared Savings Program 
regulations at Sec.  425.605 to establish the requirements for this 
BASIC track. The BASIC track would offer lower levels of risk compared 
to the levels of risk currently offered in Track 2 and Track 3, and the 
same maximum level of risk as offered under the Track 1+ Model. 
Compared to the design of Track 1, we believe this glide path approach, 
which requires assumption of gently increasing levels of risk and 
potential reward beginning no later than an ACO's fourth performance 
year under the BASIC track for agreement periods starting on July 1, 
2019 (as discussed in section II.A.7 of this proposed rule) or third 
performance year under the BASIC track for agreement periods starting 
in 2020 and all subsequent years, could provide stronger incentives for 
ACOs to improve their performance.
    For agreement periods beginning on July 1, 2019, and in subsequent 
years, we propose to modify the regulations at Sec. Sec.  425.600 and 
425.610 to designate Track 3 as the ENHANCED track. We propose that all 
references to the ENHANCED track in the program's regulations would be 
deemed to include Track 3. Within the preamble of this proposed rule, 
we intend references to the ENHANCED track to apply to Track 3 ACOs, 
unless otherwise noted.
    As part of the redesign of the program's participation options, we 
believe it is timely to provide the program's tracks with more 
descriptive and meaningful names. We believe ``enhanced'' is indicative 
of the increased levels of risk and potential reward available to ACOs 
under the current design of Track 3, the new tools and flexibilities 
available to performance-based risk ACOs, and the relative incentives 
for ACOs under this financial model design to improve the quality of 
care for their assigned beneficiaries (for example, through the 
availability of the highest sharing rates based on quality performance 
under the program) and their potential to drive towards reduced costs 
for Medicare FFS beneficiaries and therefore increased savings for the 
Medicare Trust Funds. In contrast, ``basic'' suggests a foundational 
level, which is reflected in the opportunity under the BASIC track to 
provide a starting point for ACOs on a pathway to success from a one-
sided shared savings model to two-sided risk.
    We propose that for agreement periods beginning on July 1, 2019, 
the length of the agreement would be 5 years and 6 months (as discussed 
in section II.A.7 of this proposed rule). For agreement periods 
beginning on January 1, 2020, and in subsequent years, the length of 
the agreement would be 5 years.
    Currently, under Sec.  425.20, we define ``agreement period'' to 
mean the term of the participation agreement, which is 3 performance 
years unless otherwise specified in the participation agreement. We 
propose to revise this definition to more broadly mean the term of the 
participation agreement. Additionally, we propose to specify the term 
of participation agreements beginning on July 1, 2019 and in subsequent 
years in

[[Page 41800]]

revisions to Sec.  425.200, which currently specifies the term of the 
participation agreement for each agreement start date since the 
beginning of the program. For consistency, we propose to revise the 
heading in Sec.  425.200(b) from ``term of the participation 
agreement'' to ``agreement period,'' based on the modification to the 
definition of ``agreement period'' in Sec.  425.20.
    We also propose to revise Sec.  425.502(e)(4)(v), specifying 
calculation of the quality improvement reward as part of determining 
the ACO's quality score, which includes language based on 3-year 
agreement periods. Through these revisions, we would specify that the 
comparison for performance in the first year of the new agreement 
period would be the last year in the previous agreement period, rather 
than the third year of the previous agreement period.
    The regulation on renewal of participation agreements (Sec.  
425.224(b)) includes criteria regarding an ACO's quality performance 
and repayment of shared losses that focus on specific years in the 
ACO's prior 3-year agreement period. In section II.A.5.c of this 
proposed rule, we discuss proposals to revise these evaluation criteria 
to be more relevant to assessing prior participation of ACOs under an 
agreement period of at least 5 years, among other factors.
    For ACOs entering agreement periods beginning on July 1, 2019, and 
in subsequent years, we propose to allow ACOs annually to elect the 
beneficiary assignment methodology (preliminary prospective assignment 
with retrospective reconciliation, or prospective assignment) to apply 
for each remaining performance year within their agreement period. See 
discussion in section II.A.4.c of this proposed rule.
    For ACOs entering agreement periods beginning on July 1, 2019, and 
in subsequent years, we propose to allow eligible ACOs in the BASIC 
track's glide path the option to elect entry into a higher level of 
risk and potential reward under the BASIC track for each performance 
year within their agreement period. See discussion in section II.A.4.b.
    We propose to discontinue Track 1 as a participation option for the 
reasons described elsewhere in this section. We propose to amend Sec.  
425.600 to limit availability of Track 1 to agreement periods beginning 
before July 1, 2019.
    We propose to discontinue Track 2 as a participation option. We 
propose to amend Sec.  425.600 to limit availability of Track 2 to 
agreement periods beginning before July 1, 2019. We based these 
proposals on the following considerations.
    For one, the proposal to allow ACOs to select their assignment 
methodology (section II.A.4.c) and the availability of the proposed 
BASIC track with relatively low levels of risk compared to the ENHANCED 
track would ensure the continued availability of a participation option 
with moderate levels of risk and potential reward in combination with 
the optional availability of the preliminary prospective beneficiary 
assignment in the absence of Track 2. We believe that maintaining Track 
2 as a participation option between the lower risk of the proposed 
BASIC track and the higher risk of the ENHANCED track would create 
redundancy in participation options, while removing Track 2 would offer 
an opportunity to streamline the tracks offered.
    Although Track 2 was the initial two-sided model of the Shared 
Savings Program, the statistics on Shared Savings Program participation 
by track (and in the Track 1+ Model) summarized in Table 1 show few 
ACOs entering and completing their risk bearing agreement period under 
Track 2 in recent years, and suggest that ACOs prefer either a lower 
level of risk and potential reward under the Track 1+ Model or a higher 
level of risk and potential reward under Track 3 than the Track 2 level 
of risk and potential reward.
    Further, under the proposed modifications to the regulations (see 
section II.A.5.c of this proposed rule), Track 2 ACOs prepared to take 
on higher risk would have the option to elect to enter the ENHANCED 
track by completing their agreement period in Track 2 and applying to 
renew for a subsequent agreement period under the ENHANCED track or by 
voluntarily terminating their current 3-year agreement and entering a 
new agreement period under the ENHANCED track, without waiting until 
the expiration of their current 3-year agreement period. Certain Track 
2 ACOs that may not be prepared for the higher level of risk under the 
ENHANCED track could instead elect to enter the proposed BASIC track at 
the highest level of risk and potential reward, under the same 
circumstances.
    We propose to discontinue the policy that allows Track 1 ACOs in 
their first agreement period to defer renewal for a second agreement 
period in a two-sided model by 1 year, to remain in their current 
agreement period for a fourth performance year, and to also defer 
benchmark rebasing. We propose to amend Sec.  425.200(e) to discontinue 
the deferred renewal option, so that it would be available to only 
those Track 1 ACOs that began a first agreement period in 2014 and 2015 
and have already renewed their participation agreement under the 
deferred renewal option and therefore this option would not be 
available to Track 1 ACOs seeking to renew for a second agreement 
period beginning on July 1, 2019, or in subsequent years. We propose to 
amend Sec.  425.200(b)(3) to specify that the extension of a first 
agreement period in Track 1 under the deferred renewal option is 
available only for ACOs that began a first agreement period in 2014 or 
2015 and therefore deferred renewal in 2017 or 2018 (respectively). We 
considered the following issues in developing this proposal.
    For one, continued availability of this option is inconsistent with 
our proposed redesign of the program, which encourages rapid transition 
to performance-based risk and requires ACOs on the BASIC track's glide 
path to enter performance-based risk within their first agreement 
period under the BASIC track.
    Deferral of benchmark rebasing was likely a factor in some ACOs' 
decisions to defer renewal, particularly for ACOs concerned about the 
effects of the rebasing methodology on their benchmark. Under the 
proposal to extend the length of agreement periods from 3 years to not 
less than 5 years, benchmark rebasing would be delayed by 2 years 
(relative to a 3-year agreement), rather than 1 year, as provided under 
the current deferred renewal policy.
    Eliminating the deferred renewal option would streamline the 
program's participation options and operations. Very few ACOs have 
elected the deferred renewal participation option, with only 8 ACOs 
that began participating in the program in either 2014 or 2015 renewing 
their Shared Savings Program agreement under this option to defer entry 
into a second agreement period under performance-based risk until 2018 
or 2019, respectively. We believe the very low uptake of this option 
demonstrates that it is not effective at facilitating ACOs' transition 
to performance-based risk. The proposed timing of applicability would 
prevent ACOs from electing to defer renewal in 2019 for a second 
agreement period beginning in 2020.
    Further, as discussed in section II.A.5.c of this proposed rule, we 
are proposing to discontinue the ``sit-out'' period under Sec.  
425.222(a), which is cross-referenced in the regulation at Sec.  
425.200(e) establishing the deferred renewal option. Under the proposed 
modifications to Sec.  425.222(a), ACOs that have already been approved 
to defer renewal until 2019 under this

[[Page 41801]]

participation option (ACOs with 2015 start dates in the Shared Savings 
Program that deferred entering a second agreement period under two-
sided risk until January 1, 2019), would have the option of terminating 
their participation agreement for their second agreement period under 
Track 2 or Track 3 and applying to enter the BASIC track at the highest 
level of risk and potential reward (Level E), or the ENHANCED track, 
for a new agreement period.
    Modifying the participation options in the Shared Savings Program 
to offer a new performance-based risk track requires the use of our 
authority under section 1899(i)(3) of the Act. To add the BASIC track, 
we must determine that it will improve the quality and efficiency of 
items and services furnished to Medicare beneficiaries, without 
additional program expenditures. Consistent with our earlier 
discussions of the use of this authority to establish the current two-
sided models in the Shared Savings Program (see 76 FR 67904 and 80 FR 
32771), we believe that the BASIC track would provide an additional 
opportunity for organizations to enter a risk-sharing arrangement and 
accept greater responsibility for beneficiary care.
    This proposed restructuring of participation options, more 
generally, would help ACOs transition to performance-based risk more 
quickly than under the program's current design. This proposed rule 
would eliminate Track 1 (under which a one-sided model currently is 
available for up to 6 years), offering instead a glide path with up to 
2 performance years under a one-sided model (three, for ACOs that enter 
the glide path on July 1, 2019), followed by the incremental phase-in 
of risk and increasing potential for reward over the remaining 3 
performance years of the agreement period. As described in section 
II.A.5.c. of this proposed rule, we propose that ACOs that previously 
participated in Track 1, or new ACOs identified as re-entering ACOs 
because more than 50 percent of their ACO participants have recent 
prior experience in a Track 1 ACO, entering the BASIC track's glide 
path would be eligible for a single performance year under a one-sided 
model (two, for ACOs that enter the glide path on July 1, 2019). As 
described in section II.A.7. of this proposed rule, we propose a one-
time exception to be specified in revisions to Sec.  425.600, under 
which the automatic advancement policy would not apply to the second 
performance year for an ACO entering the BASIC track's glide path for 
an agreement period beginning on July 1, 2019. For performance year 
2020, the ACO may remain in the same level of the BASIC track's glide 
path that it entered for the performance year beginning on July 1, 2019 
(6-month period). The ACO would be automatically advanced to the next 
level of the BASIC track's glide path at the start of performance year 
2021 and all subsequent performance years of the agreement period, 
unless the ACO elects to advance to a higher level of risk and 
potential reward under the glide path more quickly, as proposed in 
section II.A.4.b of this proposed rule. The glide path concludes with 
the ACO entering a level of potential reward that is the same as is 
currently available under Track 1, with a level of risk that matches 
the lesser of either the revenue-based or benchmark-based loss sharing 
limit under the Track 1+ Model.
    Further, we believe a significant incentive for ACOs to transition 
more quickly to the highest level of risk and reward under the BASIC 
track is the opportunity to participate in an Advanced APM for purposes 
of the Quality Payment Program. Under the BASIC track's Level E, an 
ACO's eligible clinicians would have the opportunity to receive APM 
Incentive Payments and ultimately higher fee schedule updates starting 
in 2026, in the payment year corresponding to each performance year in 
which they attain QP status.
    As noted in the Regulatory Impact Analysis (section IV. of this 
proposed rule), the proposed BASIC track is expected to increase 
participation in performance-based risk by ACOs that may not otherwise 
take on the higher exposure to risk required in the ENHANCED track (or 
in the current Track 2). Such added participation in performance-based 
risk is expected to include a significant number of low revenue ACOs, 
including physician-led ACOs. These ACOs have shown stronger 
performance in the first years of the program despite mainly opting to 
participate in Track 1. Furthermore, the option for BASIC track ACOs to 
progress gradually toward risk within a single agreement period or 
accelerate more quickly to the BASIC track's Level E is expected to 
further expand eventual participation in performance-based risk by ACOs 
that would otherwise hesitate to immediately transition to this level 
of risk because of uncertainty related to benchmark rebasing.
    Therefore, we do not believe that adding the BASIC track as a 
participation option under the Shared Savings Program would result in 
an increase in spending beyond the expenditures that would otherwise 
occur under the statutory payment methodology in section 1899(d) (as 
discussed in the Regulatory Impact Analysis in section IV. of this 
proposed rule). Further, we believe that adding the BASIC track would 
continue to lead to improvement in the quality of care furnished to 
Medicare FFS beneficiaries because participating ACOs would have an 
incentive to perform well on the quality measures in order to maximize 
the shared savings they may receive and minimize any shared losses they 
must pay.
    This proposed rule includes policy proposals that require that we 
reassess the policies adopted under the authority of section 1899(i)(3) 
of the Act to ensure that they comply with the requirements under 
section 1899(i)(3)(B) of the Act, as discussed in the Regulatory Impact 
Analysis (see section IV. of this proposed rule). As described in the 
Regulatory Impact Analysis, the elimination of Track 2 as an on-going 
participation option, the addition of the BASIC track, the benchmarking 
changes described in section II.D. of this proposed rule, and the 
proposal in section II.A.7. of this proposed rule to determine shared 
savings and shared losses for the 6-month performance years starting on 
January 1, 2019 and July 1, 2019, using expenditures for the entire 
calendar year 2019 and then pro-rating these amounts to reflect the 
shorter performance year, require the use of our authority under 
section 1899(i) of the Act. These proposed changes to our payment 
methodology are not expected to result in a situation in which all 
policies adopted under the authority of section 1899(i) of the Act, 
when taken together, result in more spending under the program than 
would have resulted under the statutory payment methodology in section 
1899(d) of the Act. We will continue to reexamine this projection in 
the future to ensure that the requirement under section 1899(i)(3)(B) 
of the Act that an alternative payment model not result in additional 
program expenditures continues to be satisfied. In the event that we 
later determine that the payment model established under section 
1899(i)(3) of the Act no longer meets this requirement, we would 
undertake additional notice and comment rulemaking to make adjustments 
to the payment model to assure continued compliance with the statutory 
requirements.
3. Creating a BASIC Track With Glide Path to Performance-Based Risk
a. Overview
    We propose that the BASIC track would be available as a 
participation option for agreement periods beginning on July 1, 2019 
and in subsequent years.

[[Page 41802]]

Special considerations and proposals with respect to the midyear start 
of the first BASIC track performance year and the limitation of this 
first performance year to a 6-month period are discussed in section 
II.A.7. and, as needed, throughout this preamble.
    In general, unless otherwise stated, we are proposing to model the 
BASIC track on the current provisions governing Shared Savings Program 
ACOs under 42 CFR part 425, including the general eligibility 
requirements (subpart B), application procedures (subpart C), program 
requirements and beneficiary protections (subpart D), beneficiary 
assignment methodology (subpart E), quality performance standards 
(subpart F), data sharing opportunities and requirements (subpart H), 
and benchmarking methodology (which as discussed in section II.D of 
this proposed rule, we propose to specify in a new section of the 
regulations at Sec.  425.601). Further, we propose that the policies on 
reopening determinations of shared savings and shared losses to correct 
financial reconciliation calculations (Sec.  425.315), the preclusion 
of administrative and judicial review (Sec.  425.800), and the 
reconsideration process (subpart I) would apply to ACOs participating 
in the BASIC track in the same manner as for all other Shared Savings 
Program ACOs. Therefore, we propose to amend certain existing 
regulations to incorporate references to the BASIC track and the 
proposed new regulation at Sec.  425.605. This includes amendments to 
Sec. Sec.  425.100, 425.315, 425.600, and 425.800. As part of the 
revisions to Sec.  425.800, we propose to clarify that the preclusion 
of administrative and judicial review with respect to certain financial 
calculations applies only to the extent that a specific calculation is 
performed in accordance with section 1899(d) of the Act.
    As discussed in section II.A.4.c. of this proposed rule, we are 
proposing that ACOs in the BASIC track would have an opportunity to 
annually elect their choice of beneficiary assignment methodology. As 
discussed in section II.B. of this proposed rule, we propose to make 
the SNF 3-day rule waiver available to ACOs in the BASIC track under 
two-sided risk. If these ACOs select prospective beneficiary 
assignment, their physicians and practitioners billing under ACO 
participant TINs would also have the opportunity to provide telehealth 
services under section 1899(l) of the Act, starting in 2020. As 
described in section II.C. of this proposed rule, BASIC track ACOs 
under two-sided risk (Levels C, D, or E) would be allowed to apply for 
and, if approved, establish a CMS-approved beneficiary incentive 
program to provide incentive payments to eligible beneficiaries for 
qualifying services.
    We propose that, unless otherwise indicated, all current policies 
that apply to ACOs under a two-sided model would apply also to ACOs 
participating under risk within the BASIC track. This includes the 
selection of a Minimum Savings Rate (MSR)/Minimum Loss Rate (MLR) 
consistent with the options available under the ENHANCED track, as 
specified in Sec.  425.610(b)(1) (with related proposals discussed in 
section II.A.6.b. of this proposed rule), and the requirement to 
establish and maintain an adequate repayment mechanism under Sec.  
425.204(f) (with related proposals discussed in section II.A.6.c. of 
this proposed rule). ACOs participating under the one-sided models of 
the BASIC track's glide path (Level A and Level B), would be required 
to select a MSR/MLR and establish an adequate repayment mechanism prior 
to their first performance year in performance-based risk. 
Additionally, the same policies regarding notification of savings and 
losses and the timing of repayment of any shared losses that apply to 
ACOs in the ENHANCED track (see Sec.  425.610(h)) would apply to ACOs 
in two-sided risk models under the BASIC track, including the 
requirement that an ACO must make payment in full to CMS within 90 days 
of receipt of notification of shared losses.
    As described in section II.E.4 of this proposed rule, we are 
proposing to extend the policies for addressing the impact of extreme 
and uncontrollable circumstances on ACO quality and financial 
performance, as established for performance year 2017 to 2018 and 
subsequent years. We propose that these policies would also apply to 
BASIC track ACOs. Section 425.502(f) specifies the approach to 
calculating an ACO's quality performance score for all affected ACOs. 
Further, we propose that the policies regarding the calculation of 
shared losses for ACOs under a two-sided risk model that are affected 
by extreme and uncontrollable circumstances (see Sec.  425.610(i)) 
would also apply to BASIC track ACOs under performance-based risk. We 
also propose to specify that policies to adjust shared losses for 
extreme and uncontrollable circumstances would also apply to BASIC 
track ACOs that are reconciled for a 6-month performance year under 
Sec.  425.609 or a partial year of performance under Sec.  
425.221(b)(2) as a result of early termination as described in section 
II.E.4 and II.A.6.d of this proposed rule.
b. Proposals for Phase-in of Performance-Based Risk in the BASIC Track
(1) Background on Levels of Risk and Reward
    To qualify for shared savings, an ACO must have savings equal to or 
above its MSR, meet the minimum quality performance standards 
established under Sec.  425.502, and otherwise maintain its eligibility 
to participate in the Shared Savings Program (Sec. Sec.  425.604(a)(7), 
(b) and (c), 425.606(a)(7), (b) and (c), 425.610(a)(7), (b) and (c)). 
If an ACO qualifies for savings by meeting or exceeding its MSR, then 
the final sharing rate (based on quality performance) is applied to the 
ACO's savings on a first dollar basis, to determine the amount of 
shared savings up to the performance payment limit (Sec. Sec.  
425.604(d) and (e), 425.606(d) and (e), 425.610(d) and (e)).
    Under the current program regulations, an ACO that meets all of the 
requirements for receiving shared savings under the one-sided model can 
qualify to receive a shared savings payment of up to 50 percent of all 
savings under its updated benchmark, as determined on the basis of its 
quality performance, not to exceed 10 percent of its updated benchmark. 
A Track 2 ACO can potentially receive a shared savings payment of up to 
60 percent of all savings under its updated benchmark, not to exceed 15 
percent of its updated benchmark. A Track 3 ACO can potentially receive 
a shared savings payment of up to 75 percent of all savings under its 
updated benchmark, not to exceed 20 percent of its updated benchmark. 
The higher sharing rates and performance payment limits under Track 2 
and Track 3 were established as incentives for ACOs to accept greater 
financial risk for their assigned beneficiaries in exchange for 
potentially higher financial rewards. (See 76 FR 67929 through 67930, 
67934 through 67936; 80 FR 32778 through 32779.)
    Under the current two-sided models of the Shared Savings Program, 
an ACO is responsible for sharing losses with the Medicare program when 
the ACO's average per capita Medicare expenditures for the performance 
year are above its updated benchmark costs for the year by at least the 
MLR established for the ACO (Sec. Sec.  425.606(b)(3), 425.610(b)(3)). 
For an ACO that is required to share losses with the Medicare program 
for expenditures over its updated benchmark, the shared loss rate (also

[[Page 41803]]

referred to as the loss sharing rate) is determined based on the 
inverse of its final sharing rate, but may not be less than 40 percent. 
The loss sharing rate is applied to an ACO's losses on a first dollar 
basis, to determine the amount of shared losses up to the loss 
recoupment limit (also referred to as the loss sharing limit) 
(Sec. Sec.  425.606(f) and (g), 425.610(f) and (g)).
    In earlier rulemaking, we discussed considerations related to 
establishing the loss sharing rate and loss sharing limit for Track 2 
and Track 3. See 76 FR 67937 (discussing shared loss rate and loss 
sharing limit for Track 2) and 80 FR 32778 through 32779 (including 
discussion of shared loss rate and loss sharing limit for Track 3). 
Under Track 2 and Track 3, the loss sharing rate is determined as 1 
minus the ACO's final sharing rate based on quality performance, up to 
a maximum of 60 percent or 75 percent, respectively (except that the 
loss sharing rate may not be less than 40 percent for Track 3). This 
creates symmetry between the sharing rates for savings and losses. The 
40 percent floor on the loss sharing rate under both Track 2 and Track 
3 ensures comparability in the minimum level of performance-based risk 
that ACOs accept under these tracks. The higher ceiling on the loss 
sharing rate under Track 3 reflects the greater risk Track 3 ACOs 
accept in exchange for the possibility of greater reward compared to 
Track 2.
    Under Track 2, the limit on the amount of shared losses phases in 
over 3 years starting at 5 percent of the ACO's updated historical 
benchmark in the first performance year of participation in Track 2, 
7.5 percent in year 2, and 10 percent in year 3 and any subsequent 
year. Under Track 3, the loss sharing limit is 15 percent of the ACO's 
updated historical benchmark, with no phase-in. Losses in excess of the 
annual limit would not be shared.
    The level of risk under both Track 2 and Track 3 exceeds the 
Advanced APM generally applicable nominal amount standard under Sec.  
414.1415(c)(3)(i)(B) (set at 3 percent of the expected expenditures for 
which an APM Entity is responsible under the APM). CMS has determined 
that Track 2 and Track 3 meet the Advanced APM criteria under the 
Quality Payment Program, and are therefore Advanced APMs. Eligible 
clinicians that sufficiently participate in Advanced APMs such that 
they are QPs for a performance year receive APM Incentive Payments in 
the corresponding payment year between 2019 through 2024, and then 
higher fee schedule updates starting in 2026.
    The Track 1+ Model is testing whether combining the upside sharing 
parameters of the popular Track 1 with limited downside risk sufficient 
for the model to qualify as an Advanced APM will encourage more ACOs to 
advance to performance-based risk. The Track 1+ Model has reduced risk 
in two main ways relative to Track 2 and Track 3. First, losses under 
the Track 1+ Model are shared at a flat 30 percent loss sharing rate, 
which is 10 percentage points lower than the minimum quality-adjusted 
loss sharing rate used in both Track 2 and Track 3. Second, a 
bifurcated approach is used to set the loss sharing limit for a Track 
1+ Model ACO, depending on the ownership and operational interests of 
the ACO's ACO participants, as identified by TINs and CMS Certification 
Numbers (CCNs).
    The applicable loss sharing limit under the Track 1+ Model is 
determined based on whether the ACO includes an ACO participant (TIN/
CCN) that is an IPPS hospital, cancer center or a rural hospital with 
more than 100 beds, or that is owned or operated, in whole or in part, 
by such a hospital or by an organization that owns or operates such a 
hospital. If at least one of these criteria is met, then a potentially 
higher level of performance-based risk applies, and the loss sharing 
limit is set at 4 percent of the ACO's updated historical benchmark 
(described herein as the benchmark-based loss sharing limit). For the 
Track 1+ Model, this is a lower level of risk than is required under 
either Track 2 or Track 3, and greater than the Advanced APM generally 
applicable nominal amount standard under Sec.  414.1415(c)(3)(i)(B) for 
2018, 2019 and 2020. If none of these criteria is met, as may be the 
case with some ACOs composed of independent physician practices and/or 
ACOs that include small rural hospitals, then a potentially lower level 
of performance-based risk applies, and the loss sharing limit is 
determined as a percentage of the total Medicare Parts A and B FFS 
revenue of the ACO participants (described herein as the revenue-based 
loss sharing limit). For Track 1+ Model ACOs under a revenue-based loss 
sharing limit, in performance years 2018, 2019 and 2020, total 
liability for shared losses is limited to 8 percent of total Medicare 
Parts A and B FFS revenue of the ACO participants. If the loss sharing 
limit, as a percentage of the ACO participants' total Medicare Parts A 
and B FFS revenue, exceeds the amount that is 4 percent of the ACO's 
updated historical benchmark, then the loss sharing limit is capped and 
set at 4 percent of the updated historical benchmark. For performance 
years 2018 through 2020, this level of performance-based risk qualifies 
the Track 1+ Model as an Advanced APM under Sec.  414.1415(c)(3)(i)(A). 
In subsequent years of the Track 1+ Model, if the relevant percentage 
specified in the Quality Payment Program regulations changes, the Track 
1+ Model ACO would be required to take on a level of risk consistent 
with the percentage required in Sec.  414.1415(c)(3)(i)(A) for an APM 
to qualify as an Advanced APM.
    The loss sharing limit under this bifurcated structure is 
determined by CMS near the start of an ACO's agreement period under the 
Track 1+ Model (based on the ACO's application to the Track 1+ Model), 
and re-determined annually based on an annual certification process 
prior to the start of each performance year under the Track 1+ Model. 
The Track 1+ Model ACO's loss sharing limit could be adjusted up or 
down on this basis. See Track 1+ Model Fact Sheet for more detail.
    Since the start of the Shared Savings Program, we have heard a 
variety of concerns and suggestions from ACOs and other program 
stakeholders about the transition from a one-sided model to 
performance-based risk (see discussion in section II.A.1.). Through 
rulemaking, we developed a one-sided shared savings only model and 
extended the allowable time in this track to support ACOs' readiness to 
take on performance-based risk. As a result, the vast majority of 
Shared Savings Program ACOs have chosen to enter and remain in the one-
sided model. We believe that our early experience with the design of 
the Track 1+ Model demonstrates that the availability of a lower-risk, 
two-sided model is effective to encourage a large cohort of ACOs to 
rapidly progress to performance-based risk.
(2) Levels of Risk and Reward in the BASIC Track's Glide Path
    In general, we propose the following participation options within 
the BASIC track.
    First, we propose the BASIC track's glide path as an incremental 
approach to higher levels of risk and potential reward. The glide path 
includes 5 levels: a one-sided model available only for the first 2 
consecutive performance years of a 5-year agreement period (Level A and 
B), each year of which is identified as a separate level; and three 
levels of progressively higher risk and potential reward in performance 
years 3 through 5 of the agreement period (Level C, D, and E). ACOs 
would be automatically advanced at the start of each participation year 
along the

[[Page 41804]]

progression of risk/reward levels, over the course of a 5-year 
agreement period, until they reach the track's maximum level of risk/
reward (designed to be the same as the level of risk and potential 
reward as under the Track 1+ Model). The automatic advancement policy 
would not apply to the second performance year for an ACO entering the 
BASIC track's glide path for an agreement period beginning July 1, 
2019. Such an ACO would enter the BASIC track for its first performance 
year of July 1, 2019 through December 31, 2019, at its chosen level of 
the glide path. For performance year 2020, the ACO may remain in the 
same level of the BASIC track's glide path that it entered for the 
performance year beginning July 1, 2019 (6-month period). The ACO would 
be automatically advanced to the next level of the BASIC track's glide 
path at the start of performance year 2021 and all subsequent 
performance years of the agreement period (discussed in section II.A.7. 
of this proposed rule).
    We propose that the participation options in the BASIC track's 
glide path would depend on an ACO's experience with the Shared Savings 
Program, as described in section II.A.5.c. of this proposed rule. ACOs 
eligible for the BASIC track's glide path that are new to the program 
would have the flexibility to enter the glide path at any one of the 
five levels. However, ACOs that previously participated in Track 1, or 
a new ACO identified as a re-entering ACO because more than 50 percent 
of its ACO participants have recent prior experience in a Track 1 ACO, 
would be ineligible to enter the glide path at Level A, thereby 
limiting their opportunity to participate in a one-sided model of the 
glide path. We also propose ACOs would be automatically transitioned to 
progressively higher levels of risk and potential reward (if higher 
levels are available) within the remaining years of the agreement 
period. We propose to allow ACOs in the BASIC track's glide path to 
more rapidly transition to higher levels of risk and potential reward 
within the glide path during the agreement period. As described in 
section II.A.4.b. of this proposed rule, ACOs in the BASIC track may 
annually elect to take on higher risk and potential reward within their 
current agreement period, to more rapidly progress along the glide 
path.
    Second, we propose the BASIC track's highest level of risk and 
potential reward (Level E) may be elected for any performance year by 
ACOs that enter the BASIC track's glide path, but it will be required 
no later than the ACO's fifth performance year of the glide path (sixth 
performance year for eligible ACOs starting participation in Level A of 
the BASIC track on July 1, 2019, see section II.A.7.). ACOs in the 
BASIC track's glide path that previously participated in Track 1, or 
new ACOs identified as re-entering ACOs because more than 50 percent of 
their ACO participants have recent prior experience in a Track 1 ACO, 
would be eligible to begin in Level B, and therefore would be required 
to participate in Level E no later than the ACO's fourth performance 
year of the glide path (fifth performance year for ACOs starting 
participation in the BASIC track on July 1, 2019). The level of risk/
reward under Level E of the BASIC track is also required for low 
revenue ACOs eligible to enter an agreement period under the BASIC 
track that are determined to be experienced with performance-based risk 
Medicare ACO initiatives (discussed in section II.A.5. of this proposed 
rule).
    We believe that designing a glide path to performance-based risk 
that concludes with the level of risk and potential reward offered 
under the Track 1+ Model balances ACOs' interest in remaining under 
lower-risk options with our goal of more rapidly transitioning ACOs to 
performance-based risk. The BASIC track's glide path offers a pathway 
through which ACOs inexperienced with performance-based risk Medicare 
ACO initiatives can participate under a one-sided model before entering 
relatively low levels of risk and asymmetrical potential reward for 
several years, concluding with the lowest level of risk and potential 
reward available under a current Medicare ACO initiative. We believe 
the opportunity for eligible ACOs to participate in a one-sided model 
for up to 2 years (3 performance years, in the case of an ACO entering 
at Level A of the BASIC track's glide path on July 1, 2019) could offer 
new ACOs a chance to become experienced with the accountable care model 
and program requirements before taking on risk. The proposed approach 
also recognizes that ACOs that gained experience with the program's 
requirements during prior participation under Track 1, would need less 
additional time under a one-sided model before making the transition to 
performance-based risk. However, we also believe the glide path should 
provide strong incentives for ACOs to quickly move along the 
progression towards higher performance-based risk, and therefore prefer 
an approach that significantly limits the amount of potential shared 
savings in the one-sided model years of the BASIC track's glide path, 
while offering incrementally higher potential reward in relation to 
each level of higher risk. Under this approach ACOs would have reduced 
incentive to enter or remain in the one-sided model of the BASIC 
track's glide path if they are prepared to take on risk, and we would 
anticipate that these ACOs would seek to accept greater performance-
based risk in exchange for the chance to earn greater reward.
    As described in detail in this section, we are proposing a similar 
asymmetrical two-sided risk design for the BASIC track as is available 
under the Track 1+ Model, with key distinguishing features based on 
early lessons learned from the Track 1+ Model. Unless indicated 
otherwise, we propose that savings would be calculated based on the 
same methodology used to determine shared savings under the program's 
existing tracks (see Sec.  425.604). The maximum amount of potential 
reward under the BASIC track would be the same as the upside of Track 1 
and the Track 1+ Model. The methodology for determining shared losses 
would be a bifurcated approach similar to the approach used under the 
Track 1+ Model, as discussed in more detail elsewhere in this section. 
In all years under performance-based risk, we propose to apply 
asymmetrical levels of risk and reward, where the maximum potential 
reward would be greater than the maximum level of performance-based 
risk.
    For the BASIC track's glide path, the phase-in schedule of levels 
of risk/reward by year would be as follows, and are summarized in 
comparison to the ENHANCED track in Table 2. This progression assumes 
an ACO enters the BASIC track's glide path under a one-sided model for 
2 years and follows the automatic progression of the glide path through 
each of the 5 years of its agreement period.
     Level A and Level B: Eligible ACOs entering the BASIC 
track would have the option of being under a one-sided model for up to 
2 consecutive performance years (3 consecutive performance years for 
ACOs that enter the BASIC track's glide path on July 1, 2019). As 
described elsewhere in this proposed rule, ACOs that previously 
participated in Track 1, or new ACOs identified as re-entering ACOs 
because more than 50 percent of their ACO participants have recent 
prior experience in a Track 1 ACO, would be ineligible to enter the 
glide path under Level A, although they could enter the under Level B. 
Under this proposed one-sided model, a final sharing rate not to exceed 
25 percent based on quality performance would apply to first dollar 
shared savings for ACOs that meet or

[[Page 41805]]

exceed their MSR. This sharing rate is one-half of the maximum sharing 
rate of 50 percent currently available under Track 1. Savings would be 
shared at this rate not to exceed 10 percent of the ACO's updated 
benchmark, consistent with the current policy for Track 1. For 
subsequent years, ACOs that wished to continue participating in the 
Shared Savings Program would be required to participate under 
performance-based risk.
     Level C risk/reward:
    ++ Shared Savings: a final sharing rate not to exceed 30 percent 
based on quality performance would apply to first dollar shared savings 
for ACOs that meet or exceed their MSR, not to exceed 10 percent of the 
ACO's updated historical benchmark.
    ++ Shared Losses: a loss sharing rate of 30 percent regardless of 
the quality performance of the ACO would apply to first dollar shared 
losses for ACOs with losses meeting or exceeding their MLR, not to 
exceed 2 percent of total Medicare Parts A and B FFS revenue for ACO 
participants. If the loss sharing limit as a percentage of total 
Medicare Parts A and B FFS revenue for ACO participants exceeds the 
amount that is 1 percent of the ACO's updated historical benchmark, 
then the loss sharing limit would be capped and set at 1 percent of the 
ACO's updated historical benchmark for the applicable performance year. 
This level of risk is not sufficient to meet the generally applicable 
nominal amount standard for Advanced APMs under the Quality Payment 
Program specified in Sec.  414.1415(c)(3)(i).
     Level D risk/reward:
    ++ Shared Savings: A final sharing rate not to exceed 40 percent 
based on quality performance would apply to first dollar shared savings 
for ACOs that meet or exceed their MSR, not to exceed 10 percent of the 
ACO's updated historical benchmark.
    ++ Shared Losses: A loss sharing rate of 30 percent regardless of 
the quality performance of the ACO would apply to first dollar shared 
losses for ACOs with losses meeting or exceeding their MLR, not to 
exceed 4 percent of total Medicare Parts A and B FFS revenue for ACO 
participants. If the loss sharing limit as a percentage of total 
Medicare Parts A and B FFS revenue for ACO participants exceeds the 
amount that is 2 percent of the ACO's updated historical benchmark, 
then the loss sharing limit would be capped and set at 2 percent of the 
ACO's updated historical benchmark for the applicable performance year. 
This level of risk is not sufficient to meet the generally applicable 
nominal amount standard for Advanced APMs under the Quality Payment 
Program specified in Sec.  414.1415(c)(3)(i).
     Level E risk/reward: The ACO would be under the highest 
level of risk and potential reward for this track, which is the same 
level of risk and potential reward being tested in the Track 1+ Model. 
Further, ACOs that are eligible to enter the BASIC track, but that are 
ineligible to enter the glide path (as discussed in section II.A.5 of 
this proposed rule) would enter and remain under Level E risk/reward 
for the duration of their BASIC track agreement period.
    ++ Shared Savings: A final sharing rate not to exceed 50 percent 
based on quality performance would apply to first dollar shared savings 
for ACOs that meet or exceed their MSR, not to exceed 10 percent of the 
ACO's updated historical benchmark. This is the same level of potential 
reward currently available under Track 1 and Track 1+ Model.
    ++ Shared Losses: A loss sharing rate of 30 percent regardless of 
the quality performance of the ACO would apply to first dollar shared 
losses for ACOs with losses meeting or exceeding their MLR. The 
percentage of ACO participants' total Medicare Parts A and B FFS 
revenue used to determine the revenue-based loss sharing limit would be 
set for each performance year consistent with the generally applicable 
nominal amount standard for an Advanced APM under Sec.  
414.1415(c)(3)(i)(A) to allow eligible clinicians participating in a 
BASIC track ACO subject to this level of risk the opportunity to earn 
the APM incentive payment and ultimately higher fee schedule updates 
starting in 2026, in the payment year corresponding to each performance 
year in which they attain QP status. For example, for performance years 
2019 and 2020, this would be 8 percent. However, if the loss sharing 
limit, as a percentage of the ACO participants' total Medicare Parts A 
and B FFS revenue exceeds the expenditure-based nominal amount 
standard, as a percentage of the ACO's updated historical benchmark, 
then the loss sharing limit would be capped at 1 percentage point 
higher than the expenditure-based nominal amount standard specified 
under Sec.  414.1415(c)(3)(i)(B), which is calculated as a percentage 
of the ACO's updated historical benchmark. For example, for performance 
years 2019 and 2020, the expenditure-based nominal amount standard is 3 
percent; therefore, the loss sharing limit for Level E of the BASIC 
track in these same years would be 4 percent of the ACO's updated 
historical benchmark. The proposed BASIC track at Level E risk/reward 
would meet all of the Advanced APM criteria and would be an Advanced 
APM. (See Table 2 and related notes for additional information and an 
overview of the Advanced APM criteria.)
    This approach initially maintains consistency between the level of 
risk and potential reward offered under Level E of the BASIC track and 
the popular Track 1+ Model. We believe this approach to determining the 
maximum amount of shared losses under Level E of the BASIC track 
strikes a balance between (1) placing ACOs under a higher level of risk 
to recognize the greater potential reward under this financial model 
and the additional tools and flexibilities available to BASIC track 
ACOs under performance-based risk and (2) establishing an approach to 
help ensure the maximum level of risk under the BASIC track remains 
moderate. Specifically, this approach differentiates the level of risk 
and potential reward under Level E compared to Levels C and D of the 
BASIC track, by requiring greater risk in exchange for the greatest 
potential reward under the BASIC track, while still offering more 
manageable levels of benchmark-based risk than currently offered under 
Track 2 (in which the loss sharing limit phase-in begins at 5 percent 
of the ACO's updated benchmark) and Track 3 (15 percent of the ACO's 
updated benchmark). Further this approach recognizes that eligible ACOs 
in Level E have the opportunity to earn the greatest share of savings 
under the BASIC track, and should therefore be accountable for a higher 
level of losses, particularly in light of their access to tools for 
care coordination and beneficiary engagement, including furnishing 
telehealth services in accordance with 1899(l) of the Act, the SNF 3-
day rule waiver (as discussed in section II.B of this proposed rule), 
and the opportunity to implement a CMS-approved beneficiary incentive 
program (as discussed in section II.C of this proposed rule).
    We propose that ACOs entering the BASIC track's glide path would be 
automatically advanced along the progression of risk/reward levels, at 
the start of each performance year over the course of the agreement 
period (except at the start of performance year 2020 for ACOs that 
start in the BASIC track on July 1, 2019), until they reach the track's 
maximum level of risk and potential reward. As discussed in section 
II.A.4.b, BASIC track ACOs in the glide path would also be permitted to 
elect to advance more quickly to higher levels of

[[Page 41806]]

risk and potential reward within their agreement period. The longest 
possible glide path would be 5 performance years for eligible new ACOs 
entering the BASIC track (6 performance years for ACOs beginning their 
participation in the BASIC track on July 1, 2019). The maximum allowed 
time in Levels A, B, C and D of the glide path would be one performance 
year (with the exception that ACOs beginning their participation in the 
BASIC track on July 1, 2019, would have the option to remain at their 
chosen level of risk and potential reward for their first 2 performance 
years in the BASIC track). Once the highest level of risk and potential 
reward is reached on the glide path (Level E), ACOs would be required 
to remain under the maximum level of risk/reward for all subsequent 
years of participation in the BASIC track, which includes all years of 
a subsequent agreement period under the BASIC track for eligible ACOs. 
Further, an ACO within the BASIC track's glide path could not elect to 
return to lower levels of risk/reward or the one-sided model within an 
agreement period under the glide path.
    To participate under performance-based risk in the BASIC track, an 
ACO would be required to establish a repayment mechanism and select a 
MSR/MLR to be applicable for the years of the agreement period under a 
two-sided model (as discussed in section II.A.6. of this proposed 
rule). We propose that an ACO that is unable to meet the program 
requirements for accepting performance-based risk would not be eligible 
to enter into a two-sided model under the BASIC track. If an ACO enters 
the BASIC track's glide path in a one-sided model and is unable to meet 
the requirements to participate under performance-based risk prior to 
being automatically transitioned to a performance year under risk, CMS 
would terminate the ACO's agreement under Sec.  425.218. For example, 
if an ACO is participating in the glide path in Level B and is unable 
to establish an adequate repayment mechanism before the start of its 
performance year under Level C, the ACO would not be permitted to 
continue its participation in the program.
    In section II.A.5.c of this proposed rule, we describe our proposed 
requirements for determining an ACO's eligibility for participation 
options in the BASIC track and ENHANCED track based on a combination of 
factors: ACO participants' Medicare FFS revenue (low revenue ACOs 
versus high revenue ACOs) and the experience of the ACO legal entity 
and its ACO participants with performance-based risk Medicare ACO 
initiatives. Tables 6 and 7 summarize the participation options 
available to ACOs under the BASIC track and ENHANCED track. As with 
current program policy, an ACO would apply to enter an agreement period 
under a specific track. If the ACO's application is accepted, the ACO 
would remain under that track for the duration of its agreement period.

                                       Table 2--Comparison of Risk and Reward Under Basic Track and Enhanced Track
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       BASIC Track's Glide Path
                                   ------------------------------------------------------------------------------------------------    ENHANCED track
                                      Level A & Level B       Level C  (risk/        Level D  (risk/                                  (current track 3)
                                      (one-sided model)           reward)                reward)           Level E  (risk/reward)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Shared Savings (once MSR met or     1st dollar savings at  1st dollar savings at  1st dollar savings at  1st dollar savings at a    No change. 1st
 exceeded).                          a rate of up to 25%    a rate of up to 30%    a rate of up to 40%    rate of up to 50% based    dollar savings at a
                                     based on quality       based on quality       based on quality       on quality performance,    rate of up to 75%
                                     performance; not to    performance, not to    performance, not to    not to exceed 10% of       based on quality
                                     exceed 10% of          exceed 10% of          exceed 10% of          updated benchmark.         performance, not to
                                     updated benchmark.     updated benchmark.     updated benchmark.                                exceed 20% of
                                                                                                                                     updated benchmark.
Shared Losses (once MLR met or      N/A..................  1st dollar losses at   1st dollar losses at   1st dollar losses at a     No change. 1st
 exceeded).                                                 a rate of 30%, not     a rate of 30%, not     rate of 30%, not to        dollar losses at a
                                                            to exceed 2% of ACO    to exceed 4% of ACO    exceed the percentage of   rate of 1 minus
                                                            participant revenue    participant revenue    revenue specified in the   final sharing rate
                                                            capped at 1% of        capped at 2% of        revenue-based nominal      (between 40%-75%),
                                                            updated benchmark.     updated benchmark.     amount standard under      not to exceed 15%
                                                                                                          the Quality Payment        of updated
                                                                                                          Program (for example, 8%   benchmark.
                                                                                                          of ACO participant
                                                                                                          revenue in 2019-2020),
                                                                                                          capped at a percentage
                                                                                                          of updated benchmark
                                                                                                          that is 1 percentage
                                                                                                          point higher than the
                                                                                                          expenditure-based
                                                                                                          nominal amount standard
                                                                                                          (for example, 4% of
                                                                                                          updated benchmark in
                                                                                                          2019-2020).
Annual choice of beneficiary        Yes..................  Yes..................  Yes..................  Yes......................  Yes.
 assignment methodology? (see
 section II.A.4.c).
Annual election to enter higher     Yes..................  Yes..................  No; ACO will           No; maximum level of risk/ No; highest level of
 risk? (see section II.A.4.b).                                                     automatically          reward under the BASIC     risk under Shared
                                                                                   transition to Level    track.                     Savings Program.
                                                                                   E at the start of
                                                                                   the next performance
                                                                                   year.
Advanced APM status under the       No...................  No...................  No...................  Yes......................  Yes.
 Quality Payment Program? \1\ \2\.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes: \1\ To be an Advanced APM, an APM must meet the following three criteria: 1. CEHRT criterion: Requires participants to use certified electronic
  health record technology (CEHRT); 2. Quality Measures criterion: Provides payment for covered professional services based on quality measures
  comparable to those used in the quality performance category of the Merit-based Incentive Payment System (MIPS); and 3. Financial Risk criterion:
  Either (1) be a Medical Home Model expanded under CMS Innovation Center authority; or (2) require participating APM Entities to bear more than a
  nominal amount of financial risk for monetary losses. See, for example Alternative Payment Models in the Quality Payment Program as of February 2018,
  available at https://www.cms.gov/Medicare/Quality-Payment-Program/Resource-Library/Comprehensive-List-of-APMs.pdf.
\2\ As proposed, BASIC track Levels A, B, C and D would not meet the Financial Risk criterion and therefore would not be Advanced APMs. BASIC track
  Level E and the ENHANCED track would meet all three Advanced APM criteria and thus would qualify as Advanced APMs. These preliminary assessments
  reflect the policies discussed in this proposed rule. CMS will make a final determination based on the policies adopted in the final rule.


[[Page 41807]]

    We propose to codify these policies in a new section of the Shared 
Savings Program regulations governing the BASIC track, at Sec.  
425.605. We seek comment on these proposals.
(3) Calculation of Loss Sharing Limit
    As we described earlier in this section, under the Track 1+ Model, 
either a revenue-based or a benchmark-based loss sharing limit is 
applied based on the Track 1+ Model ACO's self-reported composition of 
ACO participants as identified by TINs and CCNs, and the ownership of 
and operational interests in those ACO participants. We have concerns 
about use of self-reported information for purposes of determining the 
loss sharing limit in the context of the permanent, national program. 
The purpose of capturing information on the types of entities that are 
Track 1+ Model ACO participants and the ownership and operational 
interests of those ACO participants, as reported by ACOs applying to or 
participating in the Track 1+ Model, is to differentiate between those 
ACOs that are eligible for the lower level of risk potentially 
available under the revenue-based loss sharing limit and those that are 
subject to the benchmark-based loss sharing limit. For purposes of our 
proposal to establish the BASIC track in the permanent program, we 
reconsidered this method of identifying which ACOs are eligible for the 
revenue-based or benchmark-based loss sharing limits. One concern 
regarding the Track 1+ Model approach is the burden imposed on ACOs and 
CMS resulting from reliance on self-reported information. Under the 
Track 1+ Model, ACOs must collect information about their ACO 
participant composition and about ownership and operational interests 
from ACO participants, and potentially others in the TINs' and CCNs' 
ownership and operational chains, and assess this information to 
accurately answer questions as required by CMS.\14\ These questions are 
complex and ACOs' ability to respond accurately could vary. Self-
reported information is also more complex for CMS to audit. As a 
result, the use of ACOs' self-reported information in the permanent 
program could become burdensome for CMS to validate and monitor to 
ensure program integrity.
---------------------------------------------------------------------------

    \14\ See Medicare Shared Savings Program, Medicare ACO Track 1+ 
Model, and SNF 3-Day Rule Waiver, 2018 Application Reference Manual, 
version #3, July 2017 (herein 2018 Application Reference Manual), 
available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Downloads/MSSP-Reference-Table.pdf (see 
``Appendix F. Application Reference Table--For Medicare ACO Track 1+ 
Model Applicants'', including definitions for institutional 
providers and ownership and operational interests for the purpose of 
the Track 1+ Model).
---------------------------------------------------------------------------

    Based on CMS's experience with the initial application cycle for 
the Track 1+ Model, we believe a simpler approach that achieves similar 
results to the use of self-reported information would be to consider 
the total Medicare Parts A and B FFS revenue of ACO participants (TINs 
and CCNs) based on claims data, without directly considering their 
ownership and operational interests (or those of related entities). As 
part of the application cycle for the 2018 performance year under the 
Track 1+ Model, CMS gained experience with calculating estimates of ACO 
participant revenue to compare with estimates of ACO benchmark 
expenditures, for purposes of determining the repayment mechanism 
amounts for the Track 1+ Model (as described in section II.A.6.c of 
this proposed rule). The methodology for determining repayment 
mechanism amounts follows a similar bifurcated approach to the one used 
to determine the applicable loss sharing limit under the Track 1+ 
Model. Specifically, for ACOs eligible for a revenue-based loss sharing 
limit, when the specified percentage of estimated total Medicare Parts 
A and B FFS revenue for ACO participants exceeds a specified percentage 
of estimated historical benchmark expenditures, the benchmark-based 
methodology is applied to determine the ACO's loss sharing limit, which 
serves to cap the revenue-based amount (see Track 1+ Model Fact Sheet 
for a brief description of the repayment mechanism estimation 
methodology). Based on our calculations of repayment mechanism amounts 
for Track 1+ Model ACOs, we observed a high correlation between the 
loss sharing limits determined using an ACO's self-reported 
composition, and its ACO participants' total Medicare Parts A and B FFS 
revenue. For ACOs that reported including an ACO participant that was 
an IPPS hospital, cancer center or rural hospital with more than 100 
beds, or that was owned or operated by, in whole or in part, such a 
hospital or by an organization that owns or operates such a hospital, 
the estimated total Medicare Parts A and B FFS revenue for the ACO 
participants tended to exceed an estimate of the ACO's historical 
benchmark expenditures for assigned beneficiaries. For ACOs that 
reported that they did not include an ACO participant that met these 
ownership and operational criteria, the estimated total Medicare Parts 
A and B FFS revenue for the ACO participants tended to be less than an 
estimate of the ACO's historical benchmark expenditures.
    We recognize that this analysis was informed by the definitions for 
ownership and operational interests, and the definitions for IPPS 
hospital, cancer center and rural hospital with 100 or more beds, used 
in the Track 1+ Model. However, we believe these observations from the 
Track 1+ Model support a more generalizable principle about the extent 
to which ACOs can control total Medicare Parts A and B FFS expenditures 
for their assigned beneficiaries, and therefore their readiness to take 
on lower or higher levels of performance-based risk.
    In this proposed rule, we use the phrases ``ACO participants' total 
Medicare Parts A and B FFS revenue'' and ``total Medicare Parts A and B 
FFS expenditures for the ACO's assigned beneficiaries'' in the 
discussion of certain proposed policies. For brevity, we sometimes use 
shorter phrases instead. For instance, we may refer to ACO participant 
Medicare FFS revenue, or expenditures for the ACO's assigned 
beneficiaries.
    Based on our experience with the Track 1+ Model, we are proposing 
an approach under which the loss sharing limit for BASIC track ACOs 
would be determined as a percentage of ACO participants' total Medicare 
Parts A and B FFS revenue that is capped at a percentage of the ACO's 
updated historical benchmark expenditures when the amount that is a 
certain percentage of ACO participant FFS revenue (depending on the 
BASIC track risk/reward level) exceeds the specified percentage of the 
ACO's updated historical benchmark expenditures for the relevant BASIC 
track risk/reward level. Under our proposed approach, we would not 
directly consider the types of entities included as ACO participants or 
ownership and operational interests in ACO participants in determining 
the loss sharing limit that would apply to ACOs under Levels C, D, and 
E of the BASIC track. We believe that ACOs whose ACO participants have 
greater total Medicare Parts A and B FFS revenue relative to the ACO's 
benchmark are better financially prepared to move to greater levels of 
risk. Accordingly, this comparison of revenue to benchmark would 
provide a more accurate method for determining an ACO's preparedness to 
take on additional risk than an ACO's self-reported information 
regarding the composition of its ACO participants and any ownership and 
operational interests in those ACO participants.

[[Page 41808]]

    We also believe that ACOs that include a hospital billing through 
an ACO participant TIN are generally more capable of accepting higher 
risk given their control over a generally larger amount of their 
assigned beneficiaries' total Medicare Parts A and B FFS expenditures 
relative to their ACO participants' total Medicare Parts A and B FFS 
revenue. As a result, we believe that our proposed approach would tend 
to place ACOs that include hospitals under a benchmark-based loss 
sharing limit because their ACO participants typically have higher 
total Medicare Parts A and B FFS revenue compared to the ACO's 
benchmark. Less often, the ACO participants in an ACO that includes a 
hospital billing through an ACO participant TIN have low total Medicare 
Part A and B FFS revenue compared to the ACO's benchmark. Under a 
claims-based approach to determining the ACO's loss sharing limit, ACOs 
with hospitals billing through ACO participant TINs and relatively low 
ACO participant FFS revenue would be under a revenue-based loss sharing 
limit.
    To illustrate, Table 3 compares two approaches to determining loss 
liability: a claims-based approach (proposed approach) and self-
reported composition (approach used for the Track 1+ Model). The table 
summarizes information regarding ACO participant composition reported 
by the Track 1+ Model applicants for performance year 2018 and 
identifies the percentages of applicants whose self-reported 
composition would have placed the ACO under a revenue-based loss 
sharing limit or a benchmark-based loss sharing limit. The table then 
indicates the outcomes of a claims-based analysis applied to this same 
cohort of applicants. This analysis indicates the proposed claims-based 
method produces a comparable result to the self-reported composition 
method. Further, this analysis suggests that under a claims-based 
method, ACOs that include institutional providers with relatively low 
Medicare Parts A and B FFS revenue would be placed under a revenue-
based loss sharing limit, which may be more consistent with their 
capacity to assume risk than an approach that considers only the 
inclusion of certain institutional providers among the ACO participants 
and their providers/suppliers (TINs and CCNs).

      Table 3--Determination of Loss Sharing Limit by Self-Reported
 Composition Versus Claims-Based Approach for Track 1+ Model Applicants
------------------------------------------------------------------------
                                                            Benchmark-
                                          Revenue- based    based loss
 Approach to determining loss liability    loss sharing    sharing limit
                                             limit (%)          (%)
------------------------------------------------------------------------
Use of applicants' self-reported                      34              66
 composition (Track 1+ Model approach)..
Use of claims: percentage of ACO                      38              62
 participant revenue compared to
 percentage of ACO benchmark............
------------------------------------------------------------------------

    We believe that using ACO participant Medicare FFS revenue to 
determine the ACO's loss sharing limit balances several concerns. For 
one, it allows CMS to make a claims-based determination about the ACO's 
loss limit instead of depending on self-reported information from ACOs. 
This approach would also alleviate the burden on ACOs of gathering 
information from ACO participants about their ownership and operational 
interests and reporting that information to CMS, and would address 
CMS's concerns about the complexity of auditing the information 
reported by ACOs.
    We are proposing to establish the revenue-based loss sharing limit 
as the default for ACOs in the BASIC track and to phase-in the 
percentage of ACO participants' total Medicare Parts A and B FFS 
revenue as described in section II.A.3.b.2 of this proposed rule. 
However, if the amount that is the applicable percentage of ACO 
participants' total Medicare Parts A and B FFS revenue exceeds the 
amount that is the applicable percentage of the ACO's updated benchmark 
based on the previously described phase-in schedule, then the ACO's 
loss sharing limit would be capped and set at this percentage of the 
ACO's updated historical benchmark. We seek comment on this proposal.
    We considered issues related to the generally applicable nominal 
amount standard for Advanced APMs in our development of the revenue-
based loss sharing limit under Level E of the proposed BASIC track. 
Under Sec.  414.1415(c)(3)(i)(A), the revenue-based nominal amount 
standard is set at 8 percent of the average estimated total Medicare 
Parts A and B revenue of all providers and suppliers in a participating 
APM Entity for QP Performance Periods 2017, 2018, 2019, and 2020. We 
propose that, for the BASIC track, the percentage of ACO participants' 
FFS revenue used to determine the revenue-based loss sharing limit for 
the highest level of risk (Level E) would be set for each performance 
year consistent with the generally applicable nominal amount standard 
for an Advanced APM under Sec.  414.1415(c)(3)(i)(A), to allow eligible 
clinicians participating in a BASIC track ACO subject to the revenue-
based loss sharing limit the opportunity to earn the APM incentive 
payment when the ACO is participating under Level E. For example, for 
performance years 2019 and 2020, this would be 8 percent. As a result, 
the proposed BASIC track at Level E risk/reward would meet all of the 
criteria and be an Advanced APM.
    Further, in the CY 2018 Quality Payment Program final rule with 
comment period, we revised Sec.  414.1415(c)(3)(i)(A) to more clearly 
indicate that the revenue-based nominal amount standard is determined 
as a percentage of the revenue of all providers and suppliers in the 
participating APM Entity (see 82 FR 53836 through 53838). Under the 
Shared Savings Program, ACOs are composed of one or more ACO 
participant TINs, which include all providers and suppliers that bill 
Medicare for items and services that are participating in the ACO. See 
definitions at Sec.  425.20. In accordance with Sec.  425.116(a)(3), 
ACO participants must agree to ensure that each provider/supplier that 
bills through the TIN of the ACO participant agrees to participate in 
the Shared Savings Program and comply with all applicable requirements. 
Because all providers/suppliers billing through an ACO participant TIN 
must agree to participate in the program, for purposes of calculating 
ACO revenue under the nominal amount standard for Shared Savings 
Program ACOs, the FFS revenue of the ACO participant TINs is equivalent 
to the FFS revenue for all providers/suppliers participating in the 
ACO. Therefore, we intend to perform

[[Page 41809]]

these revenue calculations at the ACO participant level.
    We propose to calculate the loss sharing limit for BASIC track ACOs 
in generally the same manner that is used under the Track 1+ Model. 
However, as discussed elsewhere in this section, we would not rely on 
an ACO's self-reported composition as used in the Track 1+ Model to 
determine if the ACO is subject to a revenue-based or benchmark-based 
loss sharing limit. Instead, we would calculate a revenue-based loss 
sharing limit for all BASIC track ACOs, and cap this amount as a 
percentage of the ACO's updated historical benchmark. Generally, 
calculation of the loss sharing limit would include the following 
steps:
     Determine ACO participants' total Medicare FFS revenue, 
which includes total Parts A and B FFS revenue for all providers and 
suppliers that bill for items and services through the TIN, or a CCN 
enrolled in Medicare under the TIN, of each ACO participant in the ACO 
for the applicable performance year.
     Apply the applicable percentage under the proposed phase-
in schedule (described in section II.A.3.b.2. of this proposed rule) to 
this total Medicare Parts A and B FFS revenue for ACO participants to 
derive the revenue-based loss sharing limit.
     Use the applicable percentage of the ACO's updated 
benchmark, instead of the revenue-based loss sharing limit, if the loss 
sharing limit as a percentage of total Medicare Parts A and B FFS 
revenue for ACO participants exceeds the amount that is the specified 
percentage of the ACO's updated historical benchmark, based on the 
phase-in schedule. In that case, the loss sharing limit is capped and 
set at the applicable percentage of the ACO's updated historical 
benchmark for the applicable performance year.
    To illustrate, Table 4 provides a hypothetical example of the 
calculation of the loss sharing limit for an ACO participating under 
Level E of the BASIC track. This example would be relevant, under the 
proposed policies, for an ACO participating in BASIC track Level E for 
the performance years beginning on July 1, 2019, and January 1, 2020, 
based on the percentages of revenue and ACO benchmark expenditures 
specified in generally applicable nominal amount standards in the 
Quality Payment Program regulations. In this scenario, the ACO's loss 
sharing limit would be set at $1,090,479 (8 percent of ACO participant 
revenue) because this amount is less than 4 percent of the ACO's 
updated historical benchmark expenditures.

           Table 4--Hypothetical Example of Loss Sharing Limit Amounts for ACO in Basic Track Level E
----------------------------------------------------------------------------------------------------------------
                                                                [C] 8 percent of ACO
 [A] ACO's Total updated benchmark    [B] ACO Participants'      Participants' total     [D] 4 percent of ACO's
           expenditures              total medicare parts A    medicare parts A and B       updated benchmark
                                        and B FFS revenue      FFS revenue ([B] x .08)  expenditures ([A] x .04)
----------------------------------------------------------------------------------------------------------------
$93,411,313.......................              $13,630,983                $1,090,479                $3,736,453
----------------------------------------------------------------------------------------------------------------

    More specifically, ACO participants' total Medicare Parts A and B 
FFS revenue would be calculated as the sum of Medicare paid amounts on 
all non-denied claims associated with TINs on the ACO's certified ACO 
participant list, or the CCNs enrolled under an ACO participant TIN as 
identified in the Provider Enrollment, Chain, and Ownership System 
(PECOS), for all claim types used in program expenditure calculations 
that have dates of service during the performance year, using 3 months 
of claims run out. ACO participant Medicare FFS revenue would not be 
limited to claims associated with the ACO's assigned beneficiaries, and 
would instead be based on the claims for all Medicare FFS beneficiaries 
furnished services by the ACO participant. Further in calculating ACO 
participant Medicare FFS revenue, we would not truncate a beneficiary's 
total annual FFS expenditures or adjust to remove indirect medical 
education (IME), disproportionate share hospital (DSH), or 
uncompensated care payments or to add back in reductions made for 
sequestration. ACO participant Medicare FFS revenue would include any 
payment adjustments reflected in the claim payment amounts (for 
example, under MIPS or Hospital Value Based Purchasing Program) and 
would also include individually identifiable final payments made under 
a demonstration, pilot, or time-limited program, and would be 
determined using the same completion factor used for annual expenditure 
calculations.
    This approach to calculating ACO participant Medicare FFS revenue 
is different from our approach to calculating benchmark and performance 
year expenditures for assigned beneficiaries, which we truncate at the 
99th percentile of national Medicare FFS expenditures for assignable 
beneficiaries, and from which we exclude IME, DSH and uncompensated 
care payments (see subpart G of the program's regulations). We truncate 
expenditures to minimize variation from catastrophically large claims. 
We note that truncation occurs based on an assigned beneficiary's total 
annual Parts A and B FFS expenditures, and is not apportioned based on 
services furnished by ACO participant TINs. See Medicare Shared Savings 
Program, Shared Savings and Losses and Assignment Methodology 
Specifications (May 2018, version 6) available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/program-guidance-and-specifications.html (herein Shared Savings and Losses and 
Assignment Methodology Specifications, version 6). As discussed in 
earlier rulemaking, we exclude IME, DSH and uncompensated care payments 
from ACOs' assigned beneficiary expenditure calculations because we do 
not wish to incentivize ACOs to avoid the types of providers that 
receive these payments, and for other reasons described in earlier 
rulemaking (see 76 FR 67919 through 67922, and 80 FR 32796 through 
32799). But to accurately determine ACO participants' revenue for 
purposes of determining a revenue-based loss sharing limit, we believe 
it is important to include total revenue uncapped by truncation and to 
include IME, DSH and uncompensated care payments. These payments 
represent resources available to ACO participants to support their 
operations and offset their costs and potential shared losses, thereby 
increasing the ACO's capacity to bear performance-based risk, which we 
believe should be reflected in the ACO's loss sharing limit. Excluding 
such payments could undercount revenue and also could be challenging to 
implement, particularly truncation, since it likely would require

[[Page 41810]]

apportioning responsibility for large claims among the ACO participants 
and non-ACO participants from which the beneficiary may have received 
the services resulting in the large claims.
    Currently, for Track 2 and Track 3 ACOs, the loss sharing limit (as 
a percentage of the ACO's updated benchmark) is determined each 
performance year, at the time of financial reconciliation. Consistent 
with this approach, we would determine the loss sharing limit for BASIC 
track ACOs annually, at the time of financial reconciliation for each 
performance year. Further, under the existing policies for the Shared 
Savings Program, we adjust the historical benchmark annually for 
changes in the ACO's certified ACO participant list. See Sec. Sec.  
425.602(a)(8) and 425.603(b), (c)(8). See also the Shared Savings and 
Losses and Assignment Methodology Specifications, version 6. Similarly, 
the annual determination of a BASIC track ACO's loss sharing limit 
would reflect changes in ACO composition based on changes to the ACO's 
certified ACO participant list.
    We propose to codify these policies in a new section of the Shared 
Savings Program regulations governing the BASIC track, at Sec.  
425.605. We seek comment on these proposals.
4. Permitting Annual Participation Elections
a. Overview
    Background on our consideration of and stakeholders' interest in 
allowing ACOs the flexibility to elect different participation options 
within their current agreement period is described in section II.A.1 of 
this proposed rule. In this section, we propose policies to allow ACOs 
in the BASIC track's glide path to annually elect to take on higher 
risk and to allow ACOs in the BASIC track and ENHANCED track to 
annually elect their choice of beneficiary assignment methodology 
(either preliminary prospective assignment with retrospective 
reconciliation or prospective assignment).
b. Proposals for Permitting Election of Differing Levels of Risk Within 
the BASIC Track's Glide Path
    We are proposing to incorporate additional flexibility in 
participation options by allowing ACOs that enter an agreement period 
under the BASIC track's glide path an annual opportunity to elect to 
enter higher levels of performance-based risk within the BASIC track 
within their agreement period. We believe this flexibility would be 
important for ACOs entering the glide path under either the one-sided 
model (Level A or Level B) or the lowest level of risk (Level C) that 
may seek to transition more quickly to higher levels of risk and 
potential reward. (We note that an ACO entering the glide path at Level 
D would be automatically transitioned to Level E in the following year, 
and an ACO that enters the glide path at Level E must remain at this 
level for the duration of its agreement period.)
    In developing this proposal, we considered that an ACO under 
performance-based risk has the potential to induce more meaningful 
systematic change in providers' and suppliers' behavior. We also 
considered that an ACO's readiness for greater performance-based risk 
may vary depending on a variety of factors, including the ACO's 
experience with the program (for example, in relation to its elected 
beneficiary assignment methodology, composition of ACO participants, 
and benchmark value) and its ability to coordinate care and carry out 
other interventions to improve quality and financial performance. 
Lastly, we considered that an ACO may seek to more quickly take 
advantage of the features of higher levels of risk and potential reward 
within the BASIC track's glide path, including: Potential for greater 
shared savings; increased ability to use telehealth services as 
provided under section 1899(l) of the Act, use of a SNF 3-day rule 
waiver, and the opportunity to establish a CMS-approved beneficiary 
incentive program (described in sections II.B and II.C of this proposed 
rule); and the opportunity to participate in an Advanced APM under the 
Quality Payment Program after progressing to Level E of the BASIC 
track's glide path.
    We believe it would be protective of the Trust Funds to restrict 
ACOs from moving from the BASIC track to the ENHANCED track within 
their current agreement period. This would guard against selective 
participation in a financial model with the highest potential level of 
reward while the ACO remains subject to a benchmark against which it is 
very confident of its ability to generate shared savings. However, 
under the proposal to eliminate the sit-out period for re-entry into 
the program after termination (see discussion in section II.A.5.c of 
this proposed rule), an ACO (such as a BASIC track ACO) may terminate 
its participation agreement and quickly enter a new agreement period 
under a different track (such as the ENHANCED track).
    We propose to add a new section of the Shared Savings Program 
regulations at Sec.  425.226 to govern annual participation elections. 
Specifically, we propose to allow an ACO in the BASIC track's glide 
path to annually elect to accept higher levels of performance-based 
risk, available within the glide path, within its current agreement 
period. We propose that the annual election for a change in the ACO's 
level of risk and potential reward must be made in the form and manner, 
and according to the timeframe, established by CMS. We also propose 
that an ACO executive who has the authority to legally bind the ACO 
must certify the election to enter a higher level of risk and potential 
reward within the agreement period. We propose that the ACO must meet 
all applicable requirements for the newly selected level of risk, which 
in the case of ACOs transitioning from a one-sided model to a two-sided 
model include establishing an adequate repayment mechanism and electing 
the MSR/MLR that will apply for the remainder of their agreement period 
under performance-based risk. (See section II.A.6 for a detailed 
discussion of these requirements.) We propose that the ACO must elect 
to change its participation option before the start of the performance 
year in which the ACO wishes to begin participating under a higher 
level of risk and potential reward. We envision that the timing of an 
ACO's election would generally follow the timing of the Shared Savings 
Program's application cycle.
    The ACO's participation in the newly selected level of risk and 
potential reward, if approved, would be effective at the start of the 
next performance year. In subsequent years, the ACO may again choose to 
elect a still higher level of risk and potential reward (if a higher 
risk/reward option is available within the glide path). Otherwise, the 
automatic transition to higher levels of risk and potential reward in 
subsequent years would continue to apply to the remaining years of the 
ACO's agreement period in the glide path. We also propose related 
changes to Sec.  425.600 to reflect the opportunity for ACOs in the 
BASIC track's glide path to transition to higher risk and potential 
reward during an agreement period.
    For example, if an eligible ACO enters the glide path in year 1 at 
Level A (one-sided model) and elects to enter Level D (two-sided model) 
for year 2, the ACO would automatically transition to Level E (highest 
level of risk/reward under the BASIC track) for year 3, and would 
remain in Level E for year 4 and year 5 of the agreement period. We 
note that ACOs starting in the BASIC track's glide path for an 
agreement period beginning July 1, 2019 could elect to enter a higher 
level of risk/reward within the BASIC

[[Page 41811]]

track in advance of the performance year beginning January 1, 2020.
    In general, we wish to clarify that the proposal to allow ACOs to 
elect to transition to higher levels risk and potential reward within 
an agreement period in the BASIC track's glide path does not alter the 
timing of benchmark rebasing under the proposed new section of the 
regulations at Sec.  425.601. For example, if an ACO participating in 
the BASIC track's glide path transitions to a higher level of risk and 
potential reward during its agreement period, the ACO's historical 
benchmark would not be rebased as a result of this change. We would 
continue to assess the ACO's financial performance using the historical 
benchmark established at the start of the ACO's current agreement 
period, as adjusted and updated consistent with the benchmarking 
methodology under the proposed new provision at Sec.  425.601.
c. Proposals for Permitting Annual Election of Beneficiary Assignment 
Methodology
    Section 1899(c)(1) of the Act, as amended by section 50331 of the 
Bipartisan Budget Act of 2018, provides that the Secretary shall 
determine an appropriate method to assign Medicare FFS beneficiaries to 
an ACO based on utilization of primary care services furnished by 
physicians in the ACO and, in the case of performance years beginning 
on or after January 1, 2019, services provided by a FQHC or RHC. The 
provisions of section 1899(c) govern beneficiary assignment under all 
tracks of the Shared Savings Program. Although, to date, we have 
designated which beneficiary assignment methodology will apply for each 
track of the Shared Savings Program, section 1899(c) of the Act 
(including as amended by the Bipartisan Budget Act) does not expressly 
require that the beneficiary assignment methodology be determined by 
track.
    Under the Shared Savings Program regulations, we have established 
two claims-based beneficiary assignment methods (prospective assignment 
and preliminary prospective assignment with retrospective 
reconciliation) that currently apply to different program tracks, as 
well as a non-claims based process for voluntary alignment (discussed 
in section II.E.2 of this proposed rule) that applies to all program 
tracks and is used to supplement claims-based assignment. The 
regulations governing the assignment methodology under the Shared 
Savings Program are in 42 CFR part 425, subpart E. In the November 2011 
final rule, we adopted a claims-based hybrid approach (called 
preliminary prospective assignment with retrospective reconciliation) 
for assigning beneficiaries to an ACO (76 FR 67851 through 67870), 
which is currently applicable to ACOs participating under Track 1 or 
Track 2 of the Shared Savings Program (except for Track 1 ACOs that are 
also participating in the Track 1+ Model for which we use a prospective 
assignment methodology in accordance with our authority under section 
1115A of the Act). Under this approach, beneficiaries are preliminarily 
assigned to an ACO, based on a two-step assignment methodology, at the 
beginning of a performance year and quarterly thereafter during the 
performance year, but final beneficiary assignment is determined after 
the performance year based on where beneficiaries chose to receive the 
plurality of their primary care services during the performance year. 
Subsequently, in the June 2015 final rule, we implemented an option for 
ACOs to participate in a new performance-based risk track, Track 3 (80 
FR 32771 through 32781). Under Track 3, beneficiaries are prospectively 
assigned to an ACO at the beginning of the performance year using the 
same two-step methodology used in the preliminary prospective 
assignment approach, based on where the beneficiaries have chosen to 
receive the plurality of their primary care services during a 12-month 
assignment window offset from the calendar year that reflects the most 
recent 12 months for which data are available prior to the start of the 
performance year. The ACO is held accountable for beneficiaries who are 
prospectively assigned to it for the performance year. Under limited 
circumstances, a beneficiary may be excluded from the prospective 
assignment list, such as if the beneficiary enrolls in MA during the 
performance year or no longer lives in the United States or U.S. 
territories and possessions (as determined based on the most recent 
available data in our beneficiary records regarding residency at the 
end of the performance year).
    Finally, in the CY 2017 PFS final rule (81 FR 80501 through 80510), 
we augmented the claims-based beneficiary assignment methodology by 
finalizing a policy under which beneficiaries, beginning in 2017 for 
assignment for performance year 2018, may voluntarily align with an ACO 
by designating a ``primary clinician'' (referred to as a ``main 
doctor'' in the prior rulemaking) they believe is responsible for 
coordinating their overall care using MyMedicare.gov, a secure, online, 
patient portal. Notwithstanding the assignment methodology in Sec.  
425.402(b), beneficiaries who designate an ACO professional whose 
services are used in assignment as responsible for their overall care 
will be prospectively assigned to the ACO in which that ACO 
professional participates, provided the beneficiary meets the 
eligibility criteria established at Sec.  425.401(a) and is not 
excluded from assignment by the criteria in Sec.  425.401(b), and has 
had at least one primary care service during the assignment window with 
an ACO professional in the ACO who is a primary care physician or a 
physician with one of the primary specialty designations included in 
Sec.  425.402(c). Such beneficiaries will be added prospectively to the 
ACO's list of assigned beneficiaries for the subsequent performance 
year. See section II.E.2 of this proposed rule for a discussion of the 
new provisions regarding voluntary alignment added to section 1899(c) 
of the Act by section 50331 of the Bipartisan Budget Act, and our 
related proposed regulatory changes.
    Section 50331 of the Bipartisan Budget Act specifies that, for 
agreement periods entered into or renewed on or after January 1, 2020, 
ACOs in a track that provides for retrospective beneficiary assignment 
will have the opportunity to choose a prospective assignment 
methodology, rather than the retrospective assignment methodology, for 
the applicable agreement period. The Bipartisan Budget Act incorporates 
this requirement as a new provision at section 1899(c)(2)(A) of the 
Act.
    In this proposed rule, we are proposing to implement this provision 
of the Bipartisan Budget Act to provide all ACOs with a choice of 
prospective assignment for agreement periods beginning July 1, 2019 and 
in subsequent years. We are also proposing to incorporate additional 
flexibility into the beneficiary assignment methodology consistent with 
the Secretary's authority under section 1899(c)(1) of the Act to 
determine an appropriate beneficiary assignment methodology. We do not 
believe that section 1899(c) of the Act, as amended by the Bipartisan 
Budget Act, requires that we must continue to specify the applicable 
beneficiary assignment methodology for each track of the Shared Savings 
Program. Although section 1899(c)(2)(A) of the Act now provides that 
ACOs must be permitted to choose prospective assignment for each 
agreement period, we do not believe this requirement limits our 
discretion to allow ACOs the

[[Page 41812]]

additional flexibility to change beneficiary assignment methodologies 
more frequently during an agreement period. As summarized in section 
II.A.1 of this proposed rule and as described in detail in earlier 
rulemaking, commenters have urged us to allow greater flexibility for 
ACOs to select their assignment methodology. Accordingly, we are 
proposing an approach that separates the choice of beneficiary 
assignment methodology from the choice of participation track 
(financial model), and that allows ACOs to make an annual election of 
assignment methodology. Such an approach would afford greater 
flexibility for ACOs to choose between assignment methodologies for 
each year of the agreement period, without regard to their 
participation track. We believe we are able to begin offering all 
Shared Savings Program ACOs the opportunity to select their assignment 
methodology annually, starting with agreement periods beginning July 1, 
2019, while meeting the requirements of the Bipartisan Budget Act.
    As an approach to meeting the requirements of the Bipartisan Budget 
Act while building on them to offer greater flexibility, we propose to 
offer ACOs entering agreement periods in the BASIC track or ENHANCED 
track, beginning July 1, 2019 and in subsequent years, the option to 
choose either prospective assignment or preliminary prospective 
assignment with retrospective reconciliation, prior to the start of 
their agreement period (at the time of application). We also propose to 
provide an opportunity for ACOs to switch their selection of 
beneficiary assignment methodology on an annual basis. Under this 
approach, in addition to the requirement under the Bipartisan Budget 
Act that ACOs be permitted to change from retrospective assignment to 
prospective assignment, an ACO would have the added flexibility to 
change from prospective assignment to preliminary prospective 
assignment with retrospective reconciliation. As an additional 
flexibility that further builds on the Bipartisan Budget Act, ACOs 
would be allowed to retain the same beneficiary assignment methodology 
for an entire agreement period or to change the methodology annually. 
An individual ACO's preferred choice of beneficiary assignment 
methodology may vary depending on the ACO's experience with the two 
assignment methodologies used under the Shared Savings Program. 
Therefore, we believe this proposed approach implements the 
requirements of the Bipartisan Budget Act and will also be responsive 
to stakeholders' suggestions that we allow additional flexibility 
around choice of beneficiary assignment methodology to facilitate ACOs' 
transition to performance-based risk (as discussed earlier in this 
section). Further, allowing this additional flexibility for choice of 
beneficiary assignment methodology within the proposed BASIC track and 
ENHANCED track would enable ACOs to select a combination of 
participation options that would overlap with certain features of Track 
2, and thus lessen the need to maintain Track 2 as a separate 
participation option. Accordingly, as discussed in section II.A.2 of 
this proposed rule, we are proposing to discontinue Track 2. Finally, 
we believe it is appropriate and reasonable to start offering the 
choice of beneficiary assignment to ACOs in the BASIC track or ENHANCED 
track for agreement periods beginning July 1, 2019, in order to align 
with the availability of these two tracks under the proposed redesign 
of the Shared Savings Program.
    We propose that, in addition to choosing the track to which it is 
applying, an ACO would choose the beneficiary assignment methodology at 
the time of application to enter or re-enter the Shared Savings Program 
or to renew its participation for another agreement period. If the 
ACO's application is accepted, the ACO would remain under that 
beneficiary assignment methodology for the duration of its agreement 
period, unless the ACO chooses to change the beneficiary assignment 
methodology through the annual election process. We also propose that 
the ACO must indicate its desire to change assignment methodology 
before the start of the performance year in which it wishes to begin 
participating under the alternative assignment methodology. The ACO's 
selection of a different assignment methodology would be effective at 
the start of the next performance year, and for the remaining years of 
the agreement period, unless the ACO again chooses to change the 
beneficiary assignment methodology. For example, if an ACO selects 
preliminary prospective assignment with retrospective reconciliation at 
the time of its application to the program for an agreement period 
beginning July 1, 2019, this methodology would apply in the ACO's first 
performance year (6-month performance year from July 2019-December 
2019) and all subsequent performance years of its agreement period, 
unless the ACO selects prospective assignment in advance of the start 
of performance year 2020, 2021, 2022, 2023, or 2024. To continue this 
example, during its first performance year, the ACO would have the 
option to select prospective assignment to be applicable beginning with 
performance year 2020. If selected, this assignment methodology would 
continue to apply unless the ACO again selects a different methodology.
    We propose to incorporate the requirements governing the ACO's 
initial selection of beneficiary assignment methodology and the annual 
opportunity for an ACO to notify CMS that it wishes to change its 
beneficiary assignment methodology within its current agreement period, 
in a new section of the Shared Savings Program regulations at Sec.  
425.226 along with the other annual elections described elsewhere in 
this proposed rule. We propose that the initial selection of, and any 
annual selection for a change in, beneficiary assignment methodology 
must be made in the form and manner, and according to the timeframe, 
established by CMS. We also propose that an ACO executive who has the 
authority to legally bind the ACO must certify the selection of 
beneficiary assignment methodology for the ACO. We envision that the 
timing of this opportunity for an ACO to change assignment methodology 
would generally follow the Shared Savings Program's application cycle. 
For consistency, we also propose to make conforming changes to 
regulations that currently identify assignment methodologies according 
to program track. Specifically, we propose to revise Sec. Sec.  425.400 
and 425.401 (assignment of beneficiaries), Sec.  425.702 (aggregate 
reports) and Sec.  425.704 (beneficiary-identifiable claims data) to 
reference either preliminary prospective assignment with retrospective 
reconciliation or prospective assignment instead of referencing the 
track to which a particular assignment methodology applies (currently 
Track 1 and Track 2, or Track 3, respectively).
    We wish to clarify that this proposal would have no effect on the 
voluntary alignment process under Sec.  425.402(e). Because 
beneficiaries may voluntarily align with an ACO through their 
designation of a ``primary clinician,'' and eligible beneficiaries will 
be prospectively assigned to that ACO regardless of the ACO's track or 
claims-based beneficiary assignment methodology, an ACO's choice of 
claims-based assignment methodology under this proposal would not alter 
the voluntary alignment process.
    As part of the proposed approach to allow ACOs to elect to change 
their assignment methodology within their

[[Page 41813]]

agreement period, we also propose to adjust the ACO's historical 
benchmark to reflect the ACO's election of a different assignment 
methodology. Section 1899(d)(1)(B)(ii) of the Act addresses how ACO 
benchmarks are to be established. This provision specifies that the 
Secretary shall estimate a benchmark for each agreement period for each 
ACO using the most recent available 3 years of per beneficiary 
expenditures for Parts A and B services for Medicare FFS beneficiaries 
assigned to the ACO. Such benchmark shall be adjusted for beneficiary 
characteristics and such other factors as the Secretary determines 
appropriate.
    As we explained in earlier rulemaking, we currently use differing 
assignment windows to determine beneficiary assignment for the 
benchmark years and performance years, according to the ACO's track and 
the beneficiary assignment methodology used under that track. The 
assignment window for ACOs under prospective assignment is a 12-month 
period off-set from the calendar year, while for ACOs under preliminary 
prospective assignment with retrospective reconciliation, the 
assignment window is the 12-month period based on the calendar year 
(see 80 FR 32699, and 80 FR 32775 through 32776). However, for all 
ACOs, the claims used to determine the per capita expenditures for a 
benchmark or performance year are the claims for services furnished to 
assigned beneficiaries from January 1 through December 31 of the 
calendar year that corresponds to the applicable benchmark or 
performance year (see for example, 79 FR 72812 through 72813, see also 
80 FR 32776 through 32777). We explained that this approach removes 
actuarial bias between the benchmarking and performance years for 
assignment and financial calculations, since the same method would be 
used to determine assignment and the financial calculations for each 
benchmark and performance year. Further, basing the financial 
calculations on the calendar year is necessary to align with actuarial 
analyses with respect to risk score calculations and other data inputs 
based on national FFS expenditures used in program financial 
calculations, which are determined on a calendar year basis (79 FR 
72813). We continue to believe it is important to maintain symmetry 
between the benchmark and performance year calculations, and therefore 
believe it is necessary to adjust the benchmark for ACOs that change 
beneficiary assignment methodology within their current agreement 
period to reflect changes in beneficiary characteristics due to the 
change in beneficiary assignment methodology, as provided in section 
1899(d)(1)(B)(ii) of the Act. For example, if an ACO were to elect to 
change its applicable beneficiary assignment methodology during its 
initial agreement period from preliminary prospective assignment with 
retrospective reconciliation to prospective assignment, we would adjust 
the ACO's historical benchmark for the current agreement period to 
reflect the expenditures of beneficiaries that would have been assigned 
to the ACO during the benchmark period using the prospective assignment 
methodology, instead of the expenditures of the beneficiaries assigned 
under the preliminary prospective assignment methodology that were used 
to establish the benchmark at the start of the agreement period. 
Therefore, we propose to specify in the proposed new section of the 
regulations at Sec.  425.601 that would govern establishing, adjusting, 
and updating the benchmark for all agreement periods beginning July 1, 
2019 and in subsequent years that we will adjust an ACO's historical 
benchmark to reflect a change in the ACO's beneficiary assignment 
methodology within an agreement period. However, any adjustment to the 
benchmark to account for a change in the ACO's beneficiary assignment 
methodology would not alter the timing of benchmark rebasing under 
Sec.  425.601; the historical benchmark would not be rebased as a 
result of a change in the ACO's beneficiary assignment methodology.
    We seek comment on these proposals.
5. Determining Participation Options Based on Medicare FFS Revenue and 
Prior Participation
a. Overview
    In this section, we describe considerations related to, and 
proposed policies for, distinguishing among ACOs based on their degree 
of control over total Medicare Parts A and B FFS expenditures for their 
assigned beneficiaries by identifying low revenue versus high revenue 
ACOs, experience of the ACO's legal entity and ACO participants with 
the Shared Savings Program and performance-based risk Medicare ACO 
initiatives, and prior performance in the Shared Savings Program. Based 
on operational experience and considerations related to our proposal to 
extend the length of an agreement period under the program from 3 to 
not less than 5 years for agreement periods beginning on July 1, 2019 
and in subsequent years, we aim to strengthen the following 
programmatic areas by further policy development.
    First, we believe that differentiating between ACOs based on their 
degree of control over total Medicare Parts A and B FFS expenditures 
for their assigned beneficiaries would allow us to transition high 
revenue ACOs more quickly to higher levels of performance-based risk 
under the ENHANCED track, rather than remaining in a lower level of 
risk under the BASIC track. We aim to drive more meaningful systematic 
change in high revenue ACOs which have greater potential to control 
total Medicare Parts A and B FFS expenditures for their assigned 
beneficiaries and in turn the potential to drive significant change in 
spending and coordination of care for assigned beneficiaries across 
care settings. We also aim to encourage continued participation by low 
revenue ACOs, which control a smaller proportion of total Medicare 
Parts A and B FFS expenditures for their assigned beneficiaries, and 
thus may be encouraged to continue participation in the program by 
having additional time under the BASIC track's revenue-based loss 
sharing limits before transitioning to the ENHANCED track.
    Second, we believe that differentiating between ACOs that are 
experienced and inexperienced with performance-based risk Medicare ACO 
initiatives to determine their eligibility for participation options 
would allow us to prevent experienced ACOs from taking advantage of 
options designed for inexperienced ACOs, namely lower levels of 
performance-based risk.
    Third, we believe it is timely to clarify the differences between 
ACOs applying to renew their participation agreements and ACOs applying 
to re-enter the program after a break in participation, and to identify 
new ACOs as re-entering ACOs if greater than 50 percent of their ACO 
participants have recent prior participation in the same ACO in order 
to hold these ACOs accountable for their ACO participants' experience 
with the program. We aim to provide a more consistent evaluation of 
these ACOs' prior performance in the Shared Savings Program at the time 
of re-application. We also aim to update policies to identify the 
agreement period an ACO is entering into for purposes of benchmark 
calculations and quality performance requirements that phase-in as the 
ACO gains experience in the program, as appropriate for renewing ACOs, 
re-entering ACOs, and new program entrants.

[[Page 41814]]

    Fourth, and lastly, we believe it is appropriate to modify the 
evaluation criteria for prior quality performance to be relevant to 
ACOs' participation in longer agreement periods and introduce a 
monitoring approach for and evaluation criterion related to financial 
performance to prevent underperforming ACOs from remaining in the 
program.
b. Differentiating Between Low Revenue ACOs and High Revenue ACOs
    In this section, we propose to differentiate between the 
participation options available to low revenue ACOs and high revenue 
ACOs, through the following: (1) Proposals for defining ``low revenue 
ACO'' and ``high revenue ACO'' relative to a threshold of ACO 
participants' total Medicare Parts A and B FFS revenue compared to 
total Medicare Parts A and B FFS expenditures for the ACO's assigned 
beneficiaries for the same 12 month period; (2) proposals for 
establishing distinct participation options for low revenue ACOs and 
high revenue ACOs, with the availability of multiple agreement periods 
under the BASIC track as the primary distinction; and (3) consideration 
of approaches to allow greater potential for reward for low revenue 
ACOs, such as by reducing the MSR ACOs must meet to share in savings 
during one-sided model years of the BASIC track's glide path, or 
allowing higher sharing rates based on quality performance during the 
first 4 years in the glide path.
(1) Identifying Low Revenue ACOs and High Revenue ACOs
    To define low revenue ACOs and high revenue ACOs for purposes of 
determining ACO participation options, we believe it is important to 
consider the relationship between an ACO's degree of control over the 
Medicare Parts A and B FFS expenditures for its assigned beneficiaries 
and its readiness to accept higher or lower degrees of performance-
based risk. Elsewhere in this proposed rule, we explain that an ACO's 
ability to control the expenditures of its assigned beneficiary 
population can be gauged by comparing the total Medicare Parts A and B 
FFS revenue of its ACO participants to total Medicare Parts A and B FFS 
expenditures of its assigned beneficiary population. Thus, high revenue 
ACOs, which typically include a hospital billing through an ACO 
participant TIN, are generally more capable of accepting higher risk, 
given their control over a generally larger amount of their assigned 
beneficiaries' total Medicare Parts A and B FFS expenditures. In 
contrast, lower risk options could be more suitable for low revenue 
ACOs, which have control over a smaller amount of their assigned 
beneficiaries' total Medicare Parts A and B FFS expenditures.
    In the Regulatory Impact Analysis (section IV. of this proposed 
rule), we describe an approach for differentiating low revenue versus 
high revenue ACOs that reflects the amount of control ACOs have over 
total Medicare Parts A and B FFS expenditures for their assigned 
beneficiaries. Under this analysis, an ACO was identified as low 
revenue if its ACO participants' total Medicare Parts A and B FFS 
revenue for assigned beneficiaries was less than 10 percent of the 
ACO's assigned beneficiary population's total Medicare Parts A and B 
FFS expenditures. In contrast, an ACO was identified as high revenue if 
its ACO participants' total Medicare Parts A and B FFS revenue for 
assigned beneficiaries was at least 10 percent of the ACO's assigned 
beneficiary population's total Medicare Parts A and B FFS expenditures. 
As further explained in section IV, nationally, evaluation and 
management spending accounts for about 10 percent of total Parts A and 
B per capita spending. Because beneficiary assignment principally is 
based on allowed charges for primary care services, which are highly 
correlated with evaluation and management spending, we concluded that 
identifying low revenue ACOs by applying a 10 percent limit on the ACO 
participants' Medicare FFS revenue for assigned beneficiaries in 
relation to total Medicare Parts A and B expenditures for these 
beneficiaries would be likely to capture all ACOs that were solely 
comprised of ACO providers/suppliers billing for Medicare PFS services, 
and generally exclude ACOs with ACO providers/suppliers that bill for 
inpatient or other institutional services for their assigned 
beneficiaries. We considered this approach as an option for 
distinguishing between low revenue and high revenue ACOs.
    However, we are concerned that this approach does not sufficiently 
account for ACO participants' total Medicare Parts A and B FFS revenue 
(as opposed to their revenue for assigned beneficiaries), and therefore 
could misrepresent the ACO's overall risk bearing potential, which 
would diverge from other aspects of the proposed design of the BASIC 
track. We believe it is important to consider ACO participants' total 
Medicare Parts A and B FFS revenue for all FFS beneficiaries, not just 
assigned beneficiaries, as a factor in assessing an ACO's readiness to 
accept performance-based risk. The total Medicare Parts A and B FFS 
revenue of the ACO participants could be indicative of whether the ACO 
participants, and therefore potentially the ACO, are more or less 
capitalized. For example, ACO participants with high levels of total 
Medicare Parts A and B FFS revenue are presumed to be better 
capitalized, and may be better positioned to contribute to repayment of 
any shared losses owed by the ACO. Further, the proposed methodologies 
for determining the loss sharing limit under the BASIC track (see 
section II.A.3 of this proposed rule) and the estimated repayment 
mechanism values for BASIC track ACOs (see section II.A.6.c of this 
proposed rule), include a comparison of a specified percentage of ACO 
participants' total Medicare Parts A and B FFS revenue for all Medicare 
FFS beneficiaries to a percentage of the ACO's updated historical 
benchmark expenditures for its assigned beneficiary population.
    Accordingly, we propose that if ACO participants' total Medicare 
Parts A and B FFS revenue exceeds a specified threshold of total 
Medicare Parts A and B FFS expenditures for the ACO's assigned 
beneficiaries, the ACO would be considered high revenue, while ACOs 
with a percentage less than the threshold amount would be considered 
low revenue. In determining the appropriate threshold, we considered 
our claims-based analysis comparing estimated revenue and benchmark 
values for Track 1+ Model applicants, as described in section II.A.3. 
of this proposed rule. We believe setting the threshold at 25 percent 
would tend to categorize ACOs that include institutional providers as 
ACO participants or as ACO providers/suppliers billing through the TIN 
of an ACO participant, as high revenue because their ACO participants' 
total Medicare Parts A and B FFS revenue would likely significantly 
exceed 25 percent of total Medicare Parts A and B FFS expenditures for 
the ACO's assigned beneficiaries. Among Track 1+ Model ACOs that self-
reported as eligible for the Model's benchmark-based loss sharing limit 
because of the presence of an ownership or operational interest by an 
IPPS hospital, cancer center or rural hospital with more than 100 beds 
among their ACO participants, we compared estimated total Medicare 
Parts A and B FFS revenue for ACO participants to estimated total 
Medicare Parts A and B FFS expenditures for the ACO's assigned 
beneficiaries. We found that self-reported composition and high-revenue 
determinations made using the 25 percent threshold were in agreement

[[Page 41815]]

for 96 percent of ACOs. For two ACOs, the proposed approach would have 
categorized the ACOs as low revenue ACOs and therefore allowed for a 
potentially lower loss sharing limit than the self-reported method.
    We believe small, physician-only and rural ACOs would tend to be 
categorized as low revenue ACOs because their ACO participants' total 
Medicare Parts A and B FFS revenue would likely be significantly less 
than total Medicare Parts A and B FFS expenditures for the ACO's 
assigned beneficiaries. Among Track 1+ Model ACOs that self-reported to 
be eligible for the Model's revenue-based loss sharing limit because of 
the absence of an ownership or operational interest by the previously 
described institutional providers among their ACO participants, we 
compared estimated total Medicare Parts A and B FFS revenue for ACO 
participants to estimated total Medicare Parts A and B FFS expenditures 
for the ACO's assigned beneficiaries. We found the self-reported 
composition and low-revenue determinations made using the 25 percent 
threshold were in agreement for 88 percent of ACOs. The proposed 
approach would move ACOs with higher revenue to a higher loss sharing 
limit, while continuing to categorize low revenue ACOs, which are often 
composed of small physician practices, rural providers, and those 
serving underserved areas, as eligible for potentially lower loss 
sharing limits. Further, based on initial modeling with performance 
year 2016 program data, ACOs for which the total Medicare Parts A and B 
FFS revenue of their ACO participants was less than 25 percent of the 
total Medicare Parts A and B FFS expenditures for the ACO's assigned 
beneficiaries tended to have either no or almost no inpatient revenue 
and generally showed stronger than average financial results compared 
to higher revenue ACOs.
    We believe these observations are generalizable and suggest our 
proposal to use ACO participants' total Medicare Parts A and B FFS 
revenue to classify ACOs would serve as a proxy for ACO participant 
composition. The proposed approach generally would categorize ACOs that 
include hospitals, health systems or other providers and suppliers that 
furnish Part A services as ACO participants or ACO providers/suppliers 
as high revenue ACOs, while categorizing ACOs with ACO participants and 
ACO providers/suppliers that mostly furnish Part B services as low 
revenue ACOs. Accordingly, we propose to use a 25 percent threshold to 
determine low revenue versus high revenue ACOs by comparing total 
Medicare Parts A and B FFS revenue of ACO participants to the total 
Medicare Parts A and B FFS expenditures for the ACO's assigned 
beneficiaries. Consistent with this proposal, we also propose to add 
new definitions at Sec.  425.20 for ``low revenue ACO,'' and ``high 
revenue ACO.''
    We propose to define ``high revenue ACO'' to mean an ACO whose 
total Medicare Parts A and B FFS revenue of its ACO participants based 
on revenue for the most recent calendar year for which 12 months of 
data are available, is at least 25 percent of the total Medicare Parts 
A and B FFS expenditures for the ACO's assigned beneficiaries based on 
expenditures for the most recent calendar year for which 12 months of 
data are available.
    We propose to define ``low revenue ACO'' to mean an ACO whose total 
Medicare Parts A and B FFS revenue of its ACO participants based on 
revenue for the most recent calendar year for which 12 months of data 
are available, is less than 25 percent of the total Medicare Parts A 
and B FFS expenditures for the ACO's assigned beneficiaries based on 
expenditures for the most recent calendar year for which 12 months of 
data are available.
    We also considered using a lower or higher percentage as the 
threshold for determining low revenue ACOs and high revenue ACOs. 
Specifically, we considered instead setting the threshold for ACO 
participant revenue lower, for example at 15 percent or 20 percent of 
total Medicare Parts A and B FFS expenditures for the ACO's assigned 
beneficiaries. However, we are concerned a lower threshold could 
categorize ACOs with more moderate revenue as high revenue, for example 
because of the presence of multi-specialty physician practices or 
certain rural or safety net providers/suppliers (such as CAHs, FQHCs 
and RHCs). Categorizing these moderate revenue ACOs as high revenue, 
could require ACOs that have a smaller degree of control over the 
expenditures of their assigned beneficiaries, and ACOs that are not as 
adequately capitalized, to participate in a level of performance-based 
risk that the ACO would not be prepared to manage. We also considered 
setting the threshold higher, for example at 30 percent. We are 
concerned a higher threshold could inappropriately categorize ACOs as 
low revenue when their ACO participants have substantial total Medicare 
Parts A and B FFS revenue and therefore an increased ability to 
influence expenditures for their assigned beneficiaries and also 
greater access to capital to support participation under higher levels 
of performance-based risk. We seek comment on these alternative 
thresholds for defining ``low revenue ACO'' and ``high revenue ACO.''
    The proposed 12 month comparison period for determining whether an 
ACO is low revenue or high revenue is consistent with the proposed 12 
month period for determining repayment mechanism amounts (as described 
in section II.A.6.c of this proposed rule). Such an approach could 
allow us to use the same sources of revenue and expenditure data during 
the program's annual application cycle to estimate the ACO's repayment 
mechanism amount and to determine the ACO's participation options 
according to whether the ACO is categorized as a low revenue or high 
revenue ACO. Additionally, for ACOs with a participant agreement start 
date of July 1, 2019, we also propose to determine whether the ACO is 
low revenue or high revenue using expenditure data from the most recent 
calendar year for which 12 months of data are available.
    We note that under this proposed approach to using claims data to 
determine participation options, it would be difficult for ACOs to 
determine at the time of application submission whether they would be 
identified as a low revenue or high revenue ACO. However, after an 
ACO's application is submitted and before the ACO would be required to 
execute a participation agreement, we would determine how the ACO 
participants' total Medicare Parts A and B FFS revenue for the 
applicable calendar year compare to total Medicare Parts A and B FFS 
expenditures for the ACO's assigned Medicare beneficiaries in the same 
calendar year, provide feedback and then notify the applicant of our 
determination of its status as a low revenue ACO or high revenue ACO.
    We also considered using a longer look back period, for example, 
using multiple years of revenue and expenditure data to identify low 
revenue ACOs and high revenue ACOs. For example, instead of using a 
single year of data, we considered instead using 2 years of data (such 
as the 2 most recent calendar years for which 12 months of data are 
available). In evaluating ACOs applying to enter a new agreement period 
in the Shared Savings Program, the 2 most recent calendar years for 
which 12 months of data are available would align with the ACOs' first 
and second benchmark years. While this approach could allow us to take 
into account changes in the ACO's composition over multiple years, it 
could also make the policy more

[[Page 41816]]

complex because it could require determinations for each of the 2 
calendar years and procedures to decide how to categorize ACOs if there 
were different determinations for each year, for example, as a result 
of changes in ACO participants. We seek comment on the alternative of 
using multiple years of data in determining whether an ACO is a low 
revenue ACO or a high revenue ACO.
    ACO participant list changes during the agreement period could 
affect the categorization of ACOs, particularly for ACOs close to the 
threshold percentage. We considered that an ACO may change its 
composition of ACO participants each performance year, as well as 
experience changes in the providers/suppliers billing through ACO 
participants, during the course of its agreement period. Any approach 
under which we would apply different policies to ACOs based on a 
determination of ACO participant revenue would need to recognize the 
potential for an ACO to add or remove ACO participants, and for the 
providers/suppliers billing through ACO participants to change, which 
could affect whether an ACO meets the definition of a low revenue ACO 
or high revenue ACO. We are especially concerned about the possibility 
that an ACO may be eligible to continue for a second agreement period 
in the BASIC track because of a determination that it is a low revenue 
ACO at the time of application, and then quickly thereafter seek to add 
higher-revenue ACO participants, thereby avoiding the requirement under 
our proposed participation options to participate under the ENHANCED 
track.
    To protect against these circumstances, we propose to monitor low 
revenue ACOs experienced with performance-based risk Medicare ACO 
initiatives participating in the BASIC track, to determine if they 
continue to meet the definition of low revenue ACO. This is because 
high revenue ACOs experienced with performance-based risk Medicare ACO 
initiatives are restricted to participation in the ENHANCED track only. 
We propose to monitor these low revenue ACOs for changes in the revenue 
of ACO participants and assigned beneficiary expenditures that would 
cause an ACO to be considered a high revenue ACO and ineligible for 
participation in the BASIC track. We are less concerned about the 
circumstance where an ACO inexperienced with performance-based risk 
Medicare ACO initiatives enters an agreement period under the BASIC 
track and becomes a high revenue ACO during the course of its agreement 
because inexperienced, high revenue ACOs are also eligible for a single 
agreement period of participation in the BASIC track.
    We propose the following approach to ensuring continued compliance 
of ACOs with the proposed eligibility requirements for participation in 
the BASIC track, for an ACO that was accepted into the BASIC track's 
Level E because the ACO was experienced with performance-based risk 
Medicare ACO initiatives and determined to be low revenue at the time 
of application. If, during the agreement period, the ACO meets the 
definition of a high revenue ACO, we propose that the ACO would be 
permitted to complete the remainder of its current performance year 
under the BASIC track, but would be ineligible to continue 
participation in the BASIC track after the end of that performance year 
unless it takes corrective action, for example by changing its ACO 
participant list. We propose to take compliance action, up to and 
including termination of the participation agreement, as specified in 
Sec. Sec.  425.216 and 425.218, to ensure the ACO does not continue in 
the BASIC track for subsequent performance years of the agreement 
period. For example, we may take pre-termination actions as specified 
in Sec.  425.216, such as issuing a warning notice or requesting a 
corrective action plan. To remain in the BASIC track, the ACO would be 
required to remedy the issue. For example, if the ACO participants' 
total Medicare Parts A and B FFS revenue has increased in relation to 
total Medicare Parts A and B FFS expenditures for the ACO's assigned 
beneficiaries, the ACO could remove an ACO participant from its ACO 
participant list, so that the ACO can meet the definition of low 
revenue ACO. If corrective action is not taken, CMS would terminate the 
ACO's participation under Sec.  425.218. We propose to revise Sec.  
425.600 to include these requirements to account for changes in ACO 
participant revenue during an agreement period.
    We also considered two alternatives to the proposed claims-based 
approach to differentiating low revenue versus high revenue ACOs, 
which, as discussed, can also serve as a proxy for ACO participant 
composition. One alternative would be to differentiate ACOs based 
directly on ACO participant composition using Medicare provider 
enrollment data and certain other data. Under this option we could 
define ``physician-led ACO'' and ``hospital-based ACO'' based on an 
ACO's composition of ACO participant TINs, including any CCNs 
identified as billing through an ACO participant TIN, as determined 
using Medicare enrollment data and cost report data for rural 
hospitals. A second alternative to the claims-based approach to 
distinguishing between ACOs based on their revenue would be to 
differentiate between ACOs based on the size of their assigned 
population (that is, small versus large ACOs).
    First, we considered differentiating between physician-led and 
hospital-based ACOs by ACO composition, determined based on the 
presence or absence of certain institutional providers as ACO 
participants. This approach deviates from the Track 1+ Model design to 
determining ACO composition for the purposes of identifying whether the 
ACO is eligible to participate under a benchmark-based or a revenue-
based loss sharing limit (described elsewhere in this proposed rule) by 
using Medicare enrollment data and certain other data to determine ACO 
composition rather than relying on ACOs' self-reported information, and 
by using a different approach to identifying institutional providers 
than applies under the Track 1+ Model.
    Under this alternative approach, we could define a hospital-based 
ACO as an ACO that includes a hospital or cancer center, but excluding 
an ACO whose only hospital ACO participants are rural hospitals. As 
used in this definition, a hospital could be defined according to Sec.  
425.20. As defined under Sec.  425.20, ``hospital'' means a hospital as 
defined in section 1886(d)(1)(B) of the Act. A cancer center could be 
defined as a prospective payment system-exempt cancer hospital as 
defined under section 1886(d)(1)(B)(v) of the Act (see CMS website on 
PPS-exempt cancer hospitals, available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/PPS_Exc_Cancer_Hospasp.html). Rural hospital could be a hospital 
defined according to Sec.  425.20 that meets both of the following 
requirements: (1) The hospital is classified as being in a rural area 
for purposes of the CMS area wage index (as determined in accordance 
with section 1886(d)(2)(d) or section 1886(d)(8)(E) of the Act); and 
(2) The hospital reports total revenue of less than $30 million a year. 
We could determine total revenue based on the most recently available 
hospital 2552-10 cost report form or any successor form. In contrast, 
we could define physician-led ACO as an ACO that does not include a 
hospital or cancer center, except for a hospital that is a rural 
hospital (as we previously described). Physician-led ACOs therefore 
could also

[[Page 41817]]

include certain hospitals that are not cancer centers, such as CAHs.
    Under this alternative approach to differentiating between ACOs we 
would identify hospitals and cancer centers in our Medicare provider 
enrollment files based on their Medicare enrolled TINs and/or CCNs. We 
would include any CCNs identified as billing through an ACO participant 
TIN, as determined using PECOS enrollment data and claims data. We 
believe this alternative approach would provide increased transparency 
to ACOs because ACOs could work with their ACO participants to identify 
all facilities enrolled under their TINs to tentatively determine the 
composition of their ACO, and thus, the available participation options 
under the Shared Savings Program. However, this alternative approach to 
categorizing ACOs deviates from the proposed claims-based approaches to 
determining loss sharing limits and the repayment mechanism estimate 
amounts for ACOs in the BASIC track using ACO participant Medicare FFS 
revenue and expenditures for the ACO's assigned beneficiaries.
    Second, we also considered differentiating between ACOs based on 
the size of their assigned beneficiary population, as small versus 
large ACOs. Under this approach, we could determine an ACO's 
participation options based on the size of its assigned population. We 
recognize that an approach that distinguishes between ACOs based on 
population size would require that we set a threshold for determining 
small versus large ACOs as well as to determine the assignment data to 
use in making this determination (such as the assignment data used in 
determining an ACO's eligibility to participate in the program under 
the requirement that the ACO have at least 5,000 assigned beneficiaries 
under Sec.  425.110). For instance, we considered whether an ACO with 
fewer than 10,000 assigned beneficiaries could be defined as a small 
ACO whereas an ACO with 10,000 or more assigned beneficiaries could be 
defined as a large ACO. However, we currently have low revenue ACOs 
participating in the program that have well over 10,000 assigned 
beneficiaries, as well as high revenue ACOs that have fewer than 10,000 
assigned beneficiaries. As described in detail throughout this section 
of this proposed rule, we believe a revenue-based approach is a more 
accurate means to measure the degree of control that ACOs have over 
total Medicare Parts A and B FFS expenditures for their assigned 
beneficiaries compared to an approach that only considers the size of 
the ACO's assigned population.
    We seek comment on the proposed definitions of ``low revenue ACO'' 
and ``high revenue ACO''. We also seek comment on the alternatives 
considered. Specifically, we seek comment on the alternative of 
defining hospital-based ACO and physician-led ACO based on an ACO's 
composition of ACO participant TINs, including any CCNs identified as 
billing through an ACO participant TIN, as determined using Medicare 
enrollment data and cost report data for rural hospitals. In addition, 
we seek comment on the second alternative of differentiating between 
ACOs based on the size of their assigned population (that is, small 
versus large ACOs).
(2) Restricting ACOs' Participation in the BASIC Track Prior to 
Transitioning to Participation in the ENHANCED Track
    As discussed in section II.A.5.c of this proposed rule, we propose 
to use factors based on ACOs' experience with performance-based risk to 
determine their eligibility for the BASIC track's glide path, or to 
limit their participation options to either the highest level of risk 
and potential reward under the BASIC track (Level E) or the ENHANCED 
track. We also propose to differentiate between low revenue ACOs and 
high revenue ACOs with respect to the continued availability of the 
BASIC track as a participation option. This approach would allow low 
revenue ACOs, new to performance-based risk arrangements, additional 
time under the BASIC track's revenue-based loss sharing limits, while 
requiring high revenue ACOs to more rapidly transition to the ENHANCED 
track under which they would assume relatively higher, benchmark-based 
risk. We believe that all ACOs should ultimately transition to the 
ENHANCED track, the highest level of risk and potential reward under 
the program, which could drive ACOs to more aggressively pursue the 
program's goals of improving quality of care and lowering growth in FFS 
expenditures for their assigned beneficiary populations.
    We considered that some low revenue ACOs may need additional time 
to prepare to take on the higher levels of performance-based risk 
required under the ENHANCED track. Low revenue ACOs, which could 
include small, physician-only and rural ACOs, may be encouraged to 
enter and remain in the program based on the availability of lower-risk 
options. For example, small, physician-only and rural ACOs may have 
limited experience submitting quality measures or managing patient care 
under two-sided risk arrangements, which could deter their 
participation in higher-risk options. ACOs and other program 
stakeholders have suggested that the relatively lower levels of risk 
available under the Track 1+ Model (an equivalent level of risk and 
potential reward to the payment model available under Level E of the 
BASIC track) encourages transition to risk by providing a more 
manageable level of two-sided risk for small, physician-only, and rural 
ACOs, compared to the levels of risk and potential reward currently 
available under Track 2 and Track 3, and that would be offered under 
the proposed ENHANCED track.
    We also considered that, without limiting high revenue ACOs to a 
single agreement period under the BASIC track, they could seek to 
remain under a relatively low level of performance-based risk for a 
longer period of time, and thereby curtail their incentive to drive 
more meaningful and systematic changes to improve quality of care and 
lower growth in FFS expenditures for their assigned beneficiary 
populations. Further, high revenue ACOs, whose composition likely 
includes institutional providers, particularly hospitals and health 
systems, are expected generally to have greater opportunity to 
coordinate care for assigned beneficiaries across care settings among 
their ACO participants than low revenue ACOs. One approach to ensure 
high revenue ACOs accept a level of risk commensurate with their degree 
of control over total Medicare Parts A and B FFS expenditures for their 
assigned beneficiaries, and to further encourage these ACOs to more 
aggressively pursue the program's goals, is to require these ACOs to 
transition to higher levels of risk and potential reward.
    We propose to limit high revenue ACOs to, at most, a single 
agreement period under the BASIC track prior to transitioning to 
participation under the ENHANCED track. We believe an approach that 
allows high revenue ACOs that are inexperienced with the accountable 
care model the opportunity to become experienced with program 
participation within the BASIC track's glide path prior to undertaking 
the higher levels of risk and potential reward in the ENHANCED track 
offers an appropriate balance between allowing ACOs time to become 
experienced with performance-based risk and protecting the Medicare 
Trust Funds. This approach recognizes that high revenue ACOs control a 
relatively large share of assigned beneficiaries'

[[Page 41818]]

total Medicare Parts A and B FFS expenditures and generally are 
positioned to coordinate care for beneficiaries across care settings, 
and is protective of the Medicare Trust Funds by requiring high revenue 
ACOs to more quickly transition to higher levels of performance-based 
risk.
    In contrast, we propose to limit low revenue ACOs to, at most, two 
agreement periods under the BASIC track. These agreement periods would 
not be required to be sequential, which would allow low revenue ACOs 
that transition to the ENHANCED track after a single agreement period 
under the BASIC track the opportunity to return to the BASIC track if 
the ENHANCED track initially proves too high of risk. An experienced 
ACO may also seek to participate in a lower level of risk if, for 
example, it makes changes to its composition to include providers/
suppliers that are less experienced with the accountable care model and 
the program's requirements. Once an ACO has participated under the 
BASIC track's glide path (if eligible), a subsequent agreement period 
under the BASIC track would be required to be at the highest level of 
risk and potential reward (Level E), according to the proposed approach 
to identifying ACOs experienced with performance-based Medicare ACO 
initiatives as described in section II.A.5.c of this proposed rule.
    Therefore, we propose that in order for an ACO to be eligible to 
participate in the BASIC track for a second agreement period, the ACO 
must meet the requirements for participation in the BASIC track as 
described in this proposed rule (as determined based on whether an ACO 
is low revenue versus high revenue and inexperienced versus experienced 
with performance-based risk Medicare ACO initiatives) and either of the 
following: (1) The ACO is the same legal entity as a current or 
previous ACO that previously entered into a participation agreement for 
participation in the BASIC track only one time; or (2) for a new ACO 
identified as a re-entering ACO because at least 50 percent of its ACO 
participants have recent prior participation in the same ACO, the ACO 
in which the majority of the new ACO's participants were participating 
previously entered into a participation agreement for participation in 
the BASIC track only one time.
    Several examples illustrate this proposed approach. First, for an 
ACO legal entity with previous participation in the program, we would 
consider the ACO's current and prior participation in the program. For 
example, if a low revenue ACO enters the program in the BASIC track's 
glide path, and remains an eligible, low revenue ACO, it would be 
permitted to renew in Level E of the BASIC track for a second agreement 
period. Continuing this example, for the ACO to continue its 
participation in the program for a third or subsequent agreement 
period, it would need to renew its participation agreement under the 
ENHANCED track. As another example, a low revenue ACO that enters the 
program in the BASIC track's glide path could participate for a second 
agreement under the ENHANCED track, and enter a third agreement period 
under the Level E of the BASIC track before being required to 
participate in the ENHANCED track for its fourth and any subsequent 
agreement period.
    Second, for ACOs identified as re-entering ACOs because greater 
than 50 percent of their ACO participants have recent prior 
participation in the same ACO, we would determine the eligibility of 
the ACO to participate in the BASIC track based on the prior 
participation of this other entity. For example, if ACO A is identified 
as a re-entering ACO because more than 50 percent of its ACO 
participants previously participated in ACO B during the relevant look 
back period, we would consider ACO B's prior participation in the BASIC 
track in determining the eligibility of ACO A to enter a new 
participation agreement in the program under the BASIC track. For 
example, if ACO B had previously participated in two different 
agreement periods under the BASIC track, regardless of whether ACO B 
completed these agreement periods, ACO A would be ineligible to enter 
the program for a new agreement period under the BASIC track and would 
be limited to participating in the ENHANCED track. Changing the 
circumstances of this example, if ACO B had previously participated 
under the BASIC track during a single agreement period, ACO A may be 
eligible to participate in the BASIC track under Level E, the track's 
highest level of risk and potential reward, but would be ineligible to 
enter the BASIC track's glide path because ACO A would have been 
identified as experienced with performance-based risk Medicare ACO 
initiatives as described in section II.A.5.c of this proposed rule.
    We recognize that the difference in the level of risk and potential 
reward under the BASIC track, Level E compared to the payment model 
under the ENHANCED track could be substantial for low revenue ACOs. 
Therefore, we also considered and seek comment on an approach that 
would allow low revenue ACOs to gradually transition from the BASIC 
track's Level E up to the level of risk and potential reward under the 
ENHANCED track. For example, we seek comment on whether it would be 
helpful to devise a glide path that would be available to low revenue 
ACOs entering the ENHANCED track. We also considered, and seek comment 
on, whether such a glide path under the ENHANCED track should be 
available to all ACOs. As another alternative, we considered allowing 
low revenue ACOs to continue to participate in the BASIC track under 
Level E for longer periods of time, such as a third or subsequent 
agreement period. However, we believe that without a time limitation on 
participation in the BASIC track, ACOs may not prepare to take on the 
highest level of risk that could drive the most meaningful change in 
providers'/suppliers' behavior toward achieving the program's goals.
    As an alternative to the proposed approach for allowing low revenue 
ACOs to participate in the BASIC track in any two agreement periods 
(non-sequentially), we seek comment on an approach that would require 
participation in the BASIC track to occur over two consecutive 
agreement periods before the ACO enters the ENHANCED track. This 
approach would prevent low revenue ACOs that entered the ENHANCED track 
from participating in a subsequent agreement period under the BASIC 
track. That is, it would prevent an ACO from moving from a higher level 
of risk to a lower level of risk. However, given changes in ACO 
composition, among other potential factors, we believe it is important 
to offer low revenue ACOs some flexibility in their choice of level of 
risk from one agreement period to the next.
    We propose to specify these proposed requirements for low revenue 
ACOs and high revenue ACOs in revisions to Sec.  425.600, along with 
other requirements for determining participation options based on the 
experience of the ACO and its ACO participants, as discussed in section 
II.A.5.c of this proposed rule. We propose to use our determination of 
whether an ACO is a low revenue ACO or high revenue ACO in combination 
with our determination of whether the ACO is experienced or 
inexperienced with performance-based risk (which we propose to 
determine based on the experience of both the ACO legal entity and the 
ACO participant TINs with performance-based risk), in determining the 
participation options available to the ACO. We seek comment on these 
proposals.
    More generally, we note that the proposed approach to redesigning 
the

[[Page 41819]]

program's participation options maintains flexibility for ACOs to elect 
to enter higher levels of risk and potential reward more quickly than 
is required under the proposed participation options. Any ACO may 
choose to apply to enter the program under or renew its participation 
in the ENHANCED track. Further, ACOs eligible to enter the BASIC 
track's glide path may choose to enter at the highest level of risk and 
potential reward under the BASIC track (Level E), or advance to that 
level more quickly than is provided for under the automatic advancement 
along the glide path.
(3) Allowing Greater Potential for Reward for Low Revenue ACOs
    In this section, we describe and seek comment on several approaches 
to allowing for potentially greater access to shared savings for low 
revenue ACOs compared to high revenue ACOs, but do not make any 
specific proposals at this time. The approaches to rewarding low 
revenue ACOs discussed in this section recognize the performance trends 
of low revenue ACOs based on program results and the potential that low 
revenue ACOs would need additional capital, as a means of encouraging 
their continued participation in the program.
    Although low revenue ACOs generally have control over a smaller 
share of the total Medicare Parts A and B FFS expenditures for their 
assigned beneficiaries compared to high revenue ACOs, they have tended 
to perform better financially than high revenue ACOs, demonstrating 
their ability to more quickly meet the program's aim of lowering growth 
in expenditures. High revenue ACOs, in comparison, despite having the 
advantage of generally controlling a greater share of total Medicare 
Parts A and B FFS expenditures for their assigned beneficiaries, and 
having more institutional capacity to affect care processes and better 
manage care across settings, have demonstrated comparatively poor 
financial performance.
    As previously described in section I of this proposed rule, using 
the methodology for identifying low revenue and high revenue ACOs 
described in the Regulatory Impact Analysis (section IV. of this 
proposed rule), program results for performance year 2016 show that low 
revenue ACOs outperformed high revenue ACOs, as 41 percent of low 
revenue ACOs shared savings compared to 23 percent of high revenue 
ACOs. Among ACOs with four performance years of program results, low 
revenue ACOs in Track 1 outperformed high revenue ACOs, generating 
average gross savings of 2.9 percent compared to 0.5 percent for high 
revenue ACOs. Low revenue ACOs in Track 2 and Track 3 also outperformed 
high revenue ACOs. The four Track 3 ACOs that owed losses in 
performance year 2016 were all high revenue. These results suggest high 
revenue ACOs may be underperforming in containing growth in 
expenditures, while taking advantage of other aspects of program 
participation.
    We believe low revenue ACOs, identified as proposed previously in 
this section (that is, using a threshold of 25 percent of Medicare 
Parts A and B FFS expenditures for assigned beneficiaries), which may 
tend to be small, physician-only and rural ACOs, are likely less 
capitalized organizations and may be relatively risk-averse. These ACOs 
may be encouraged to participate and remain in the program under 
performance-based risk based on the availability of additional 
incentives, such as the opportunity to earn a greater share of savings.
    We believe that offering increased potential for low revenue ACOs 
to earn shared savings would support their success in meeting the 
program's goals by allowing these organizations to maximize their 
return on investment, which may be needed to support start-up and 
operational expenses, and to facilitate their participation in 
performance-based risk. For example, shared savings payments received 
by low revenue ACOs could be used to support funding of a repayment 
mechanism required for their participation in performance-based risk, 
support meeting the program's quality reporting requirements, or 
support, when eligible, implementation of an approved beneficiary 
incentive program as discussed in section II.C.2 of this proposed rule. 
Any additional incentive would complement previously described 
proposals that would provide low revenue ACOs a longer pathway to 
participation under the highest level of risk and potential reward in 
the ENHANCED track.
    One approach we considered would be to allow for a lower MSR for 
low revenue ACOs in the BASIC track. In section II.A.6.b of this 
proposed rule, we propose that under Level A and Level B of the BASIC 
track, under a one-sided model, ACOs with at least 5,000 assigned 
beneficiaries will have a MSR that varies between 2 percent and 3.9 
percent based on the size of the ACO's assigned beneficiary population 
(which is the same MSR methodology currently used in Track 1). In 
performance years under a two-sided model of either the BASIC track or 
the ENHANCED track, we propose to apply a symmetrical MSR/MLR, as 
chosen by the ACO prior to entering into performance-based risk. As an 
alternative, to provide a greater incentive for low revenue ACOs, we 
considered applying a lower MSR during the one-sided model years (Level 
A and B) for low revenue ACOs that have at least 5,000 assigned 
beneficiaries for the performance year. For example, we considered a 
policy under which we would apply a MSR that is a fixed 1 percent. We 
also considered setting the MSR at a fixed 2 percent, or effectively 
removing the threshold by setting the MSR at zero percent. However, we 
would apply a variable MSR based on the ACO's number of assigned 
beneficiaries in the event the ACO's population falls below 5,000 
assigned beneficiaries for the performance year, consistent with our 
proposal in section II.A.6.b of this proposed rule.
    A lower MSR (such as a fixed 1 percent) would reduce the threshold 
level of savings the ACO must generate to be eligible to share in 
savings. This would give low revenue ACOs greater confidence that they 
would be eligible to share in savings, once generated. This may be 
especially important for small ACOs, which would otherwise have MSRs 
towards the higher end of the range (closer to 3.9 percent, for an ACO 
with at least 5,000 assigned beneficiaries) for years in which the ACO 
participates under a one-sided model. However, we do not believe a 
lower MSR would be needed to encourage participation by high revenue 
ACOs. For one, high revenue ACOs are likely to have larger numbers of 
assigned beneficiaries and therefore more likely to have lower MSRs 
(ranging from 3 percent to 2 percent, for ACOs with 10,000 or more 
assigned beneficiaries). Further, their control over a significant 
percentage of the total Medicare Parts A and B FFS expenditures for 
their assigned beneficiaries may provide a sufficient incentive for 
participation as they would have an opportunity to generate significant 
savings.
    Another approach we considered is to allow for a relatively higher 
final sharing rate under the first four levels of the BASIC track's 
glide path for low revenue ACOs. For example, rather than the proposed 
approach under which the final sharing rate would phase in from a 
maximum of 25 percent in Level A to a maximum of 50 percent in Level E, 
we could allow a maximum 50 percent sharing rate based on quality 
performance to be available at all levels within the BASIC track's 
glide path for low revenue ACOs.

[[Page 41820]]

    For any policies that would apply differing levels of potential 
reward to ACOs based on factors such as ACO participants' revenue and 
expenditures for the ACO's assigned beneficiaries, we prefer an 
approach under which we would annually re-evaluate whether an ACO is 
low revenue or high revenue, taking into consideration any changes to 
the ACO's list of ACO participants or to the providers/suppliers 
billing through the TINs of the ACO participants that are made during 
the agreement period. This approach would help ensure, for example, 
that ACOs do not omit certain institutional providers or other high 
revenue providers/suppliers from their initial ACO participant list for 
the purpose of securing their participation in a more favorable 
financial model, only to subsequently add these organizations to their 
ACO in subsequent years of the same agreement period.
    We seek comment on these considerations. We will carefully consider 
the comments received regarding these options during the development of 
the final rule, and may consider adopting one or more of these options 
in the final rule.
c. Determining Participation Options Based on Prior Participation of 
ACO Legal Entity and ACO Participants
(1) Overview
    In this section of the proposed rule we describe proposed 
modifications to the regulations to address the following:
     Allowing flexibility for ACOs currently within a 3-year 
agreement period under the Shared Savings Program to transition quickly 
to a new agreement period that is not less than 5 years under the BASIC 
track or ENHANCED track.
     Establishing definitions to more clearly differentiate 
ACOs applying to renew for a second or subsequent agreement period and 
ACOs applying to re-enter the program after their previous Shared 
Savings Program participation agreement expired or was terminated 
resulting in a break in participation, and to identify new ACOs as re-
entering ACOs if greater than 50 percent of their ACO participants have 
recent prior participation in the same ACO in order to hold these ACO 
accountable for their ACO participants' experience with the program.
     Revising the criteria for evaluating an ACO's prior 
participation in the Shared Savings Program to determine the 
eligibility of ACOs seeking to renew their participation in the program 
for a subsequent agreement period, ACOs applying to re-enter the 
program after termination or expiration, and ACOs that are identified 
as re-entering ACOs based on their ACO participants' recent experience 
with the program.
     Establishing criteria for determining the participation 
options available to an ACO based on its experience with performance-
based risk Medicare ACO initiatives and on whether the ACO is low 
revenue or high revenue.
     Establishing policies that more clearly differentiate the 
participation options, and the applicability of program requirements 
that phase-in over time based on the ACO's and ACO participants' prior 
experience in the Shared Savings Program or with other Medicare ACO 
initiatives.
    The regulatory background for the proposed policies in this section 
of the proposed rule includes multiple sections of the program's 
regulations, as developed over several rulemaking cycles.
(2) Background on Re-Entry Into the Program After Termination
    In the initial rulemaking for the program, we specified criteria 
for terminated ACOs that are re-entering the program in Sec.  425.222 
(see 76 FR 67960 through 67961). In the June 2015 final rule, we 
revised this section to address eligibility for continued participation 
in Track 1 by previously terminated ACOs (80 FR 32767 through 32769). 
Currently, this section prohibits ACOs re-entering the program after 
termination from participating in the one-sided model beyond a second 
agreement period and from moving back to the one-sided model after 
participating in a two-sided model. This section also specifies that 
terminated ACOs may not re-enter the program until after the date on 
which their original agreement period would have ended if the ACO had 
not been terminated (the ``sit-out'' period). This policy was designed 
to restrict re-entry into the program by ACOs that voluntarily 
terminate their participation agreement, or have been terminated for 
failing to meet program integrity or other requirements (see 76 FR 
67960 and 67961). Under the current regulations, we only consider 
whether an ACO applying to the program is the same legal entity as a 
previously terminated ACO, as identified by TIN (see definition of ACO 
under Sec.  425.20), for purposes of determining whether the 
appropriate ``sit-out'' period of Sec.  425.222(a) has been observed 
and the ACO's eligibility to participate under the one-sided model. 
Section 425.222 also provides criteria to determine the applicable 
agreement period when a previously terminated ACO re-enters the 
program. We explained the rationale for these policies in prior 
rulemaking and refer readers to the November 2011 and June 2015 final 
rules for more detailed discussions.
    Additionally, under Sec.  425.204(b), the ACO must disclose to CMS 
whether the ACO or any of its ACO participants or ACO providers/
suppliers have participated in the Shared Savings Program under the 
same or a different name, or are related to or have an affiliation with 
another Shared Savings Program ACO. The ACO must specify whether the 
related participation agreement is currently active or has been 
terminated. If it has been terminated, the ACO must specify whether the 
termination was voluntary or involuntary. If the ACO, ACO participant, 
or ACO provider/supplier was previously terminated from the Shared 
Savings Program, the ACO must identify the cause of termination and 
what safeguards are now in place to enable the ACO, ACO participant, or 
ACO provider/supplier to participate in the program for the full term 
of the participation agreement (Sec.  425.204(b)(3)).
    The agreement period in which an ACO is placed upon re-entry into 
the program has ramifications not only for its risk track participation 
options, but also for the benchmarking methodology that is applied and 
the quality performance standard against which the ACO will be 
assessed. ACOs in a second or subsequent agreement period receive a 
rebased benchmark as currently specified under Sec.  425.603. For ACOs 
that renew for a second or subsequent agreement period beginning in 
2017 and subsequent years, the rebased benchmark incorporates regional 
expenditure factors, including a regional adjustment. The weight 
applied in calculating the regional adjustment depends in part on the 
agreement period for which the benchmark is being determined (see Sec.  
425.603(c)), with relatively higher weights applied over time. Further, 
for an ACO's first agreement period, the benchmark expenditures are 
weighted 10 percent in benchmark year 1, 30 percent in benchmark year 
2, and 60 percent in benchmark year 3 (see Sec.  425.602(a)(7)). In 
contrast, for an ACO's second or subsequent agreement period we equally 
weight each year of the benchmark (Sec.  425.603). With respect to 
quality performance, the quality performance standard for ACOs in the 
first performance year of their first agreement period is set at the 
level of complete and accurate reporting of all quality measures. Pay-
for-performance is phased in over the remaining years of the first 
agreement period, and

[[Page 41821]]

continues to apply in all subsequent performance years (see Sec.  
425.502(a)).
    We believe the regulations as currently written create 
flexibilities that allow more experienced ACOs to take advantage of the 
opportunity to re-form and re-enter the program under Track 1 or to re-
enter the program sooner or in a different agreement period than 
otherwise permissible. In particular, terminated ACOs may re-form as a 
different legal entity and apply to enter the program as a new 
organization to extend their time in Track 1 or enter Track 1 after 
participating in a two-sided model. These ACOs would effectively 
circumvent the requisite ``sit-out'' period (the remainder of the term 
of an ACO's previous agreement period), benchmark rebasing, including 
the application of equal weights to the benchmark years and the higher 
weighted regional adjustment that applies in later agreement periods, 
or the pay-for-performance quality performance standard that is phased 
in over an ACO's first agreement period in the program.
(3) Background on Renewal for Uninterrupted Program Participation
    In the June 2015 final rule, we established criteria in Sec.  
425.224 applicable to ACOs seeking to renew their agreements, including 
requirements for renewal application procedures and factors CMS uses to 
determine whether to renew a participation agreement (see 80 FR 32729 
through 32730). Under our current policies, we consider a renewing ACO 
to be an organization that continues its participation in the program 
for a consecutive agreement period, without interruption resulting from 
termination of the participation agreement by CMS or by the ACO (see 
Sec. Sec.  425.218 and 425.220). Therefore, to be considered for timely 
renewal, an ACO within its third performance year of an agreement 
period is required to meet the application requirements, including 
submission of a renewal application, by the deadline specified by CMS, 
during the program's typical annual application process. If the ACO's 
renewal application is approved by CMS, the ACO would have the 
opportunity to enter into a new participation agreement with CMS for 
the agreement period beginning on the first day of the next performance 
year (typically January 1 of the following year), and thereby to 
continue its participation in the program without interruption.
    In evaluating the application of a renewing ACO, CMS considers the 
ACO's history of compliance with program requirements generally, 
whether the ACO has established that it is in compliance with the 
eligibility and other requirements of the Shared Savings Program, 
including the ability to repay shared losses, if applicable, and 
whether it has a history of meeting the quality performance standard in 
its previous agreement period, as well as whether the ACO satisfies the 
criteria for operating under the selected risk track, including whether 
the ACO has repaid shared losses generated during the prior agreement 
period.
    Under Sec.  425.600(c), an ACO experiencing a net loss during a 
previous agreement period may reapply to participate under the 
conditions in Sec.  425.202(a), except the ACO must also identify in 
its application the cause(s) for the net loss and specify what 
safeguards are in place to enable the ACO to potentially achieve 
savings in its next agreement period. In the initial rulemaking 
establishing the Shared Savings Program, we proposed, but did not 
finalize, a requirement that would prevent an ACO from reapplying to 
participate in the Shared Savings Program if it previously experienced 
a net loss during its first agreement period. We explained that this 
proposed policy would ensure that under-performing organizations would 
not get a second chance (see 76 FR 19562, 19623). However, we were 
persuaded by commenters' suggestions that barring ACOs that demonstrate 
a net loss from continuing in the program could serve as a disincentive 
for ACO formation, given the anticipated high startup and operational 
costs of ACOs (see 76 FR 67908 and 67909). We finalized the provision 
at Sec.  425.600(c) that would allow for continued participation by 
ACOs despite their experience of a net loss.
(4) Proposals for Streamlining Regulations
    We seek to modify the requirements for ACOs applying to renew their 
participation in the program (Sec.  425.224) and re-enter the program 
after termination (Sec.  425.222) or expiration of their participation 
agreement by both eliminating regulations that would restrict our 
ability to ensure that ACOs quickly migrate to the redesigned tracks of 
the program and strengthening our policies for determining the 
eligibility of ACOs to renew their participation in the program (to 
promote consecutive and uninterrupted participation in the program) or 
to re-enter the program after a break in participation. We also seek to 
establish criteria to identify as re-entering ACOs new ACOs for which 
greater than 50 percent of ACO participants have recent prior 
participation in the same ACO, and to hold these ACO accountable for 
their ACO participants' experience in the program.
(a) Defining Renewing and Re-Entering ACOs
    We propose to define a renewing ACO and an ACO re-entering after 
termination or expiration of their participation agreement. Under the 
program's regulations, there is currently no definition of a renewing 
ACO, and based on our operational experience, this has caused some 
confusion among applicants. For example, there is confusion as to 
whether an ACO that has terminated from the program would be considered 
a first time applicant into the program or a renewing ACO. The 
definition of these terms is also important for identifying the 
agreement period that an ACO is applying to enter, which is relevant to 
determining the applicability of certain factors used in calculating 
the ACO's benchmark that phase-in over the span of multiple agreement 
periods as well as the phase-in of pay-for-performance under the 
program's quality performance standards. We believe having definitions 
that clearly distinguish renewing ACOs from ACOs that are applying to 
re-enter the program after a termination, or other break in 
participation will help us more easily differentiate between these 
organizations in our regulations and other programmatic material. We 
propose to define renewing ACO and re-entering ACO in new definitions 
in Sec.  425.20.
    We propose to define renewing ACO to mean an ACO that continues its 
participation in the program for a consecutive agreement period, 
without a break in participation, because it is either: (1) An ACO 
whose participation agreement expired and that immediately enters a new 
agreement period to continue its participation in the program; or (2) 
an ACO that terminated its current participation agreement under Sec.  
425.220 and immediately enters a new agreement period to continue its 
participation in the program. This proposed definition is consistent 
with current program policies for ACOs applying to timely renew their 
agreement under Sec.  425.224 to continue participation following the 
expiration of their participation agreement. This proposed definition 
would include a new policy that would consider an ACO to be renewing in 
the circumstance where the ACO voluntarily terminates its current 
participation agreement and enters a new agreement period under

[[Page 41822]]

the BASIC track or ENHANCED track, beginning immediately after the 
termination date of its previous agreement period thereby avoiding an 
interruption in participation. We would consider these ACOs to have 
effectively renewed their participation early. This part of the 
definition is consistent with the proposal to discontinue use of the 
``sit out'' period after termination under Sec.  425.222(a).
    We considered two possible scenarios in which an ACO might seek to 
re-enter the program. In one case, a re-entering ACO would be a 
previously participating ACO, identified by a TIN (see definition of 
ACO under Sec.  425.20), that applies to re-enter the program after its 
prior participation agreement expired without having been renewed, or 
after the ACO was terminated under Sec.  425.218 or Sec.  425.220 and 
did not immediately enter a new agreement period (that is, an ACO with 
prior participation in the program that does not meet the proposed 
definition of renewing ACO). In this case, it is clear that the ACO is 
a previous participant in the program. In the other scenario, an entity 
applies under a TIN that is not previously associated with a Shared 
Savings Program ACO, but the entity is composed of ACO participants 
that previously participated together in the same Shared Savings 
Program ACO in a previous performance year. Under the current 
regulations, there is no mechanism in place to prevent a terminated ACO 
from re-forming under a different TIN and applying to re-enter the 
program, or for a new legal entity to be formed from ACO participants 
in a currently participating ACO. Doing so could allow an ACO to avoid 
accountability for the experience and prior participation of its ACO 
participants, and to avoid the application of policies that phase-in 
over time (the application of equal weights to the benchmark years and 
the higher weighted regional adjustment that applies in later agreement 
periods, or the pay-for-performance quality performance standard that 
is phased in over an ACO's first agreement period in the program). We 
are also concerned that, under the current regulations, Track 1 ACOs 
would be able to re-form to take advantage of the BASIC track's glide 
path, which allows for 2 years under a one-sided model for new ACOs 
only. We are therefore interested in adopting an approach to better 
identify prior participation and to specify participation options and 
program requirements applicable to re-entering ACOs.
    We propose to define ``re-entering ACO'' to mean an ACO that does 
not meet the definition of a ``renewing ACO'' and meets either of the 
following conditions:
    (1) Is the same legal entity as an ACO, identified by TIN according 
to the definition of ACO in Sec.  425.20, that previously participated 
in the program and is applying to participate in the program after a 
break in participation, because it is either: (a) An ACO whose 
participation agreement expired without having been renewed; or (b) an 
ACO whose participation agreement was terminated under Sec.  425.218 or 
Sec.  425.220.
    (2) Is a new legal entity that has never participated in the Shared 
Savings Program and is applying to participate in the program and more 
than 50 percent of its ACO participants were included on the ACO 
participant list under Sec.  425.118, of the same ACO in any of the 5 
most recent performance years prior to the agreement start date.
    We note that a number of proposed policies depend on the prior 
participation of an ACO or the experience of its ACO participants. As 
discussed elsewhere in section II.A of this proposed rule, these 
include: (1) Using the ACO's and its ACO participants' experience or 
inexperience with performance-based risk Medicare ACO initiatives to 
determine the participation options available to the ACO (proposed in 
Sec.  425.600(d)); (2) identifying ACOs experienced with Track 1 to 
determine the amount of time an ACO may participate under a one-sided 
model of the BASIC track's glide path (proposed in Sec.  425.600(d)); 
(3) determining how many agreement periods an ACO has participated 
under the BASIC track as eligible ACOs are allowed a maximum of two 
agreement periods under the BASIC track (proposed in Sec.  425.600(d)); 
(4) assessing the eligibility of the ACO to participate in the program 
(proposed revisions to Sec.  425.224); and (5) determining the 
applicability of program requirements that phase-in over multiple 
agreement periods (proposed in Sec.  425.600(f)). The proposed 
revisions to the regulations to establish these requirements would 
apply directly to an ACO that is the same legal entity as a previously 
participating ACO. We also discuss throughout the preamble how these 
requirements would apply to new ACOs that are identified as re-entering 
ACOs because greater than 50 percent of their ACO participants have 
recent prior participation in the same ACO.
    Several examples illustrate the application of the proposed 
definition of re-entering ACO. For example, if ACO A is applying to the 
program for an agreement period beginning on July 1, 2019, and ACO A is 
the same legal entity as an ACO whose previous participation agreement 
expired without having been renewed (that is, ACO A has the same TIN as 
the previously participating ACO) we would treat ACO A as the 
previously participating ACO, regardless of what share of ACO A's ACO 
participants previously participated in the ACO. As another example, if 
ACO A were a different legal entity (identified by a different TIN) 
from any ACO that previously participated in the Shared Savings 
Program, we would also treat ACO A as if it were an ACO that previously 
participated in the program (ACO B) if more than 50 percent of ACO A's 
ACO participants participated in ACO B in any of the 5 most recent 
performance years (that is, performance year 2015, 2016, 2017, 2018, or 
the 6-month performance year from January 1, 2019 through June 30, 
2019), even though ACO A and ACO B are not the same legal entity.
    We believe that looking at the experience of the ACO participants, 
in addition to the ACO legal entity, would be a more robust check on 
prior participation. It would also help to ensure that ACOs re-entering 
the program are treated comparably regardless of whether they are 
returning as the same legal entity or have re-formed as a new entity. 
With ACOs allowed to make changes to their certified ACO participant 
list for each performance year, we have observed that many ACOs make 
changes to their ACO participants over time. For example, among ACOs 
that participated in the Shared Savings Program as the same legal 
entity in both PY 2014 and PY 2017, only around 60 percent of PY 2017 
ACO participants had also participated in the same ACO in PY 2014, on 
average. For this reason, we believe that the ACO legal entity alone 
does not always capture the ACO's experience in the program and 
therefore it is also important to look at the experience of ACO 
participants.
    We chose to propose a 5 performance year look back period for 
determining prior participation by ACO participants as it would align 
with the look back period for determining whether an ACO is experienced 
or inexperienced with performance-based risk Medicare ACO initiatives 
as discussed elsewhere in this section of this proposed rule. We wish 
to clarify that the threshold for prior participation by ACO 
participants is not cumulative when determining whether an ACO is a re-
entering ACO. For example, assume 22 percent of applicant ACO A's ACO 
participants participated in ACO C in the prior 5

[[Page 41823]]

performance years, 30 percent participated in ACO D, and the remaining 
48 percent did not participate in any ACO during this period. ACO A 
would not be considered a re-entering ACO (assuming that ACO A is a new 
legal entity), because more than 50 percent of its ACO participants did 
not participate in the same ACO during the 5-year look back period. 
Although unlikely, we recognize the possibility that an ACO could 
quickly re-form multiple times and therefore more than 50 percent of 
its ACO participants may have been included on the ACO participant list 
of more than one ACO in the 5 performance year look back period. In 
these cases we believe the most recent experience of the ACO 
participants in the new ACO is most relevant to determining the 
applicability of policies to the re-entering ACO. We therefore propose 
that the ACO in which more than 50 percent of the ACO participants most 
recently participated would be used in identifying the participation 
options available to the new ACO.
    We opted to propose a threshold of greater than 50 percent because 
we believe that it will identify ACOs with significant participant 
overlap and would allow us to more clearly identify a single, Shared 
Savings Program ACO in which at least the majority of ACO participants 
recently participated. We also considered whether to use a higher or 
lower threshold percentage threshold. A lower threshold, such as 20, 30 
or 40 percent, would further complicate the analysis for identifying 
the ACO or ACOs in which the ACO participants previously participated, 
and the ACO whose prior performance should be evaluated in determining 
the eligibility of the applicant ACO. On the other hand, using a higher 
percentage for the threshold would identify fewer ACOs that 
significantly resemble ACOs with experience participating in the Shared 
Savings Program.
    We considered alternate approaches to identifying prior 
participation other than the overall percentage of ACO participants 
that previously participated in the same ACO, including using the 
percentage of ACO participants weighted by the paid claim amounts, the 
percentage of individual practitioners (NPIs) that had reassigned their 
billing rights to ACO participants, or the percentage of assigned 
beneficiaries the new legal entity has in common with the assigned 
beneficiaries of a previously participating ACO. While we believe that 
these alternative approaches have merit, we concluded that they would 
be less transparent to ACOs than using a straight percentage of TINs, 
as well as more operationally complex to compute.
    We seek comment on these proposed definitions and on the 
alternatives considered.
(b) Eligibility Requirements and Application Procedures for Renewing 
and Re-Entering ACOs
    We believe it would be useful to revise our regulations to clearly 
set forth the eligibility requirements and application procedures for 
renewing ACOs and re-entering ACOs. Therefore, we propose to revise 
Sec.  425.222 to address limitations on the ability of re-entering ACOs 
to participate in the Shared Savings Program for agreement periods 
beginning before July 1, 2019. In addition, we propose to revise Sec.  
425.224 to address general application requirements and procedures for 
all re-entering ACOs and all renewing ACOs.
    In revising Sec.  425.222 (which consists of paragraphs (a) through 
(c)), we considered that removing the required ``sit-out'' period for 
terminated ACOs under Sec.  425.222(a) would facilitate transition of 
ACOs within current 3-year agreement periods to new agreements under 
the participation options proposed in this rule. As discussed elsewhere 
in this section, we propose to retain policies similar to those under 
Sec.  425.222(b) for evaluating the eligibility of ACOs to participate 
in the program after termination. Further, instead of the approach used 
for determining participation options for ACOs that re-enter the 
program after termination described in Sec.  425.222(c), our proposed 
approach to making these determinations is described in detail in 
section II.A.5.c.5 of this proposed rule.
    The ``sit-out'' period policy restricts the ability of ACOs in 
current agreement periods to transition to the proposed participation 
options under new agreements. For example, if left unchanged, the 
``sit-out'' period would prevent existing, eligible Track 1 ACOs from 
quickly entering an agreement period under the proposed BASIC track and 
existing Track 2 ACOs from quickly entering a new agreement period 
under either the BASIC track at the highest level of risk (Level E), if 
available to the ACO, or the ENHANCED track. Participating under Levels 
C, D, or E of the BASIC track or under the ENHANCED track could allow 
eligible physicians and practitioners billing under ACO participant 
TINs in these ACOs to provide telehealth services under section 1899(l) 
of the Act (discussed in section II.B.2.b. of this proposed rule), the 
ACO could apply for a SNF 3-day rule waiver (as proposed in section 
II.B.2.a. of this proposed rule), and the ACO could elect to offer 
incentive payments to beneficiaries under a CMS-approved beneficiary 
incentive program (as proposed in section II.C.2. of this proposed 
rule).
    The ``sit-out'' period also applies to ACOs that deferred renewal 
in a second agreement period under performance-based risk as specified 
in Sec.  425.200(e)(2)(ii), a participation option we propose to 
discontinue (as described in section II.A.2 of this proposed rule). 
Therefore, by eliminating the ``sit-out'' period, ACOs that deferred 
renewal may more quickly transition to the BASIC track (Level E), if 
available to the ACO, or the ENHANCED track. An ACO that deferred 
renewal and is currently participating in Track 2 or Track 3 may 
terminate its current agreement to enter a new agreement period under 
the BASIC track (Level E), if eligible, or the ENHANCED track. 
Similarly, an ACO that deferred renewal and is currently participating 
in Track 1 for a fourth performance year may terminate its current 
agreement and the participation agreement for its second agreement 
period under Track 2 or Track 3 that it deferred for 1 year. In either 
case, the ACO may immediately apply to re-enter the BASIC track (Level 
E), if eligible, or the ENHANCED track without having to wait until the 
date on which the term of its second agreement would have expired if 
the ACO had not terminated.
    We note that, to avoid interruption in program participation, an 
ACO that seeks to terminate its current agreement and enter a new 
agreement in the BASIC track or ENHANCED track beginning the next 
performance year should ensure that there is no gap in time between 
when it concludes its current agreement period and when it begins the 
new agreement period so that all related program requirements and 
policies would continue to apply. For an ACO that is completing a 12 
month performance year and is applying to enter a new agreement period 
beginning January 1 of the following year, the effective termination 
date of its current agreement should be the last calendar day of its 
current performance year, to avoid an interruption in the ACO's program 
participation. For instance, for a 2018 starter ACO applying to enter a 
new agreement beginning on January 1, 2020, the effective termination 
date of its current agreement should be December 31, 2019. For an ACO 
that starts a 12-month performance year on January 1, 2019, that is 
applying to enter a new agreement period beginning on July 1, 2019 (as 
discussed in section II.A.7 of this proposed rule), the effective 
termination date of its current agreement should be June 30, 2019.

[[Page 41824]]

    We propose to amend Sec.  425.224 to make certain policies 
applicable to both renewing ACOs and re-entering ACOs and to 
incorporate certain other technical changes, as follows:
    (1) Revisions to refer to the ACO's ``application'' more generally, 
instead of specifically referring to a ``renewal request,'' so that the 
requirements would apply to both renewing ACOs and re-entering ACOs.
    (2) Addition of a requirement, consistent with the current 
provision at Sec.  425.222(c)(3), for ACOs previously in a two-sided 
model to reapply to participate in a two-sided model. We further 
propose that a renewing or re-entering ACO that was previously under a 
one-sided model of the BASIC track's glide path may only reapply for 
participation in a two-sided model for consistency with our proposal to 
include the BASIC track within the definition of a performance-based 
risk Medicare ACO initiative. This includes a new ACO identified as a 
re-entering ACO because greater than 50 percent of its ACO participants 
have recent prior participation in the same ACO that was previously 
under a two-sided model or a one-sided model of the BASIC track's glide 
path (Level A or Level B).
    (3) Revision to Sec.  425.224(b)(1)(iv) (as redesignated from Sec.  
425.224(b)(1)(iii)) to cross reference the requirement that an ACO 
establish an adequate repayment mechanism under Sec.  425.204(f), to 
clarify our intended meaning with respect to the current requirement 
that an ACO demonstrate its ability to repay losses.
    (4) Modifications to the evaluation criteria specified in Sec.  
425.224(b) for determining whether an ACO is eligible for continued 
participation in the program in order to permit them to be used in 
evaluating both renewing ACOs and re-entering ACOs, to adapt some of 
these requirements to longer agreement periods (under the proposed 
approach allowing for agreement periods of at least 5 years rather than 
3-year agreements), and to prevent ACOs with a history of poor 
performance from participating in the program. As described in detail, 
as follows, we address: (1) Whether the ACO has a history of compliance 
with the program's quality performance standard; (2) whether an ACO 
under a two-sided model repaid shared losses owed to the program; (3) 
the ACO's history of financial performance; and (4) whether the ACO has 
demonstrated in its application that it has corrected the deficiencies 
that caused it perform poorly or to be terminated.
    First, we propose modifications to the criterion governing our 
evaluation of whether the ACO has a history of compliance with the 
program's quality performance standard. We propose to revise the 
existing provision at Sec.  425.224(b)(1)(iv), which specifies that we 
evaluate whether the ACO met the quality performance standard during at 
least 1 of the first 2 years of the previous agreement period, to 
clarify that this criterion is used in evaluating ACOs that entered 
into a participation agreement for a 3-year period. We propose to add 
criteria for evaluating ACOs that entered into a participation 
agreement for a period longer than 3 years by considering whether the 
ACO was terminated under Sec.  425.316(c)(2) for failing to meet the 
quality performance standard or whether the ACO failed to meet the 
quality performance standard for 2 or more performance years of the 
previous agreement period, regardless of whether the years were 
consecutive.
    In proposing this approach, we considered that the current policy 
is specified for ACOs with 3-year agreements. With the proposal to 
shift to agreement periods of not less than 5 years, additional years 
of performance data would be available at the time of an ACO's 
application to renew its agreement, and may also be available for 
evaluating ACOs re-entering after termination (depending on the timing 
of their termination) or the expiration of their prior agreement, as 
well as being available to evaluate new ACOs identified as re-entering 
ACOs because greater than 50 percent of their ACO participants have 
recent prior participation in the same ACO.
    Further, under the program's monitoring requirements at Sec.  
425.316(c), ACOs with 2 consecutive years of failure to meet the 
program's quality performance standard will be terminated. However, we 
are concerned about a circumstance where an ACO that fails to meet the 
quality performance standard for multiple, non-consecutive years may 
remain in the program by seeking to renew its participation for a 
subsequent agreement period, seeking to re-enter the program after 
termination or expiration of its prior agreement, or by re-forming to 
enter under a new legal entity (identified as a re-entering ACO based 
on the experience of its ACO participants).
    Second, we propose to revise the criterion governing the evaluation 
of whether an ACO under a two-sided model repaid shared losses owed to 
the program that were generated during the first 2 years of the 
previous agreement period (Sec.  425.224(b)(1)(v)), to instead consider 
whether the ACO failed to repay shared losses in full within 90 days in 
accordance with subpart G of the regulations for any performance year 
of the ACO's previous agreement period. In section II.A.7 we propose a 
6-month performance year for ACOs that started a first or second 
agreement period on January 1, 2016, that elect an extension of their 
agreement period by 6 months from January 1, 2019 through June 30, 
2019, and a 6-month first performance year for ACOs entering agreement 
periods beginning on July 1, 2019. We have also proposed to reconcile 
these ACOs, and ACOs that start a 12-month performance year on January 
1, 2019, and terminate their participation agreement with an effective 
date of termination of June 30, 2019, and enter a new agreement period 
beginning on July 1, 2019, separately for the 6-month periods from 
January 1, 2019, to June 30, 2019, and from July 1, 2019, to December 
31, 2019, as described in section II.A.7 of this proposed rule. In 
evaluating this proposed criterion on repayment of losses, we would 
consider whether the ACO timely repaid any shared losses for these 6-
month performance years, or the 6-month performance period for ACOs 
that elect to voluntarily terminate their existing participation 
agreement, effective June 30, 2019, and enter a new agreement period 
starting on July 1, 2019, which we propose would be determined 
according to the methodology specified under a new section of the 
regulations at Sec.  425.609.
    The current policy regarding repayment of shared losses is 
specified for ACOs with 3-year agreements. With the proposal to shift 
to agreement periods of at least 5 years, we believe it is appropriate 
to broaden our evaluation of the ACO's timely repayment of shared 
losses beyond the first 2 years of the ACO's prior agreement period. 
For instance, without modification, this criterion could have little 
relevance when evaluating the eligibility of ACOs in the BASIC track's 
glide path that elect to participate under a one-sided model for their 
first 2 performance years (or 3 performance years for ACOs that start 
an agreement period in the BASIC track's glide path on July 1, 2019).
    We note that timely repayment of shared losses is required under 
subpart G of the regulations (Sec. Sec.  425.606(h)(3) and 
425.610(h)(3)), and non-compliance with this requirement may be the 
basis for pre-termination actions or termination under Sec. Sec.  
425.216 and 425.218. A provision that permits us to consider more 
broadly whether an ACO failed to timely repay shared losses for any 
performance year in the previous agreement period would be relevant to 
all renewing and re-entering ACOs that may have unpaid shared losses, 
as well

[[Page 41825]]

as all re-entering ACOs that may have been terminated for non-
compliance with the repayment requirement. This includes ACOs that have 
participated under Track 2, Track 3, and ACOs that would participate 
under the BASIC track or ENHANCED track for a new agreement period. For 
ACOs that have participated in two-sided models authorized under 
section 1115A of the Act, including the Track 1+ Model, we also propose 
to consider whether an ACO failed to repay shared losses for any 
performance year under the terms of the ACO's participation agreement 
for such model.
    Third, we propose to add a financial performance review criterion 
to Sec.  425.224(b) to allow us to evaluate whether the ACO generated 
losses that were negative outside corridor for 2 performance years of 
the ACO's previous agreement period. We propose to use this criterion 
to evaluate the eligibility of ACOs to enter agreement periods 
beginning on July 1, 2019 and in subsequent years. For purposes of this 
proposal, an ACO is negative outside corridor when its benchmark minus 
performance year expenditures are less than or equal to the negative 
MSR for ACOs in a one-sided model, or the MLR for ACOs in a two-sided 
model. This proposed approach relates to our proposal to monitor for 
financial performance as described in section II.A.5.d of this proposed 
rule.
    Lastly, we propose to add a review criterion to Sec.  425.224(b), 
which would allow us to consider whether the ACO has demonstrated in 
its application that it has corrected the deficiencies that caused it 
to fail to meet the quality performance standard for 2 or more years, 
fail to timely repay shared losses, or to generate losses outside its 
negative corridor for 2 years, or any other factors that may have 
caused the ACO to be terminated from the Shared Savings Program. We 
propose to require that the ACO also demonstrate it has processes in 
place to ensure that it will remain in compliance with the terms of the 
new participation agreement.
    We propose to discontinue use of the requirement at Sec.  
425.600(c), under which an ACO with net losses during a previous 
agreement period must identify in its application the causes for the 
net loss and specify what safeguards are in place to enable it to 
potentially achieve savings in its next agreement period. We believe 
the proposed financial performance review criterion (discussed in this 
section of this proposed rule) would be more effective in identifying 
ACOs with a pattern of poor financial performance. An approach that 
accounts for financial performance year after year allows ACOs to 
understand if their performance is triggering a compliance concern and 
take action to remedy their performance during the remainder of their 
agreement period. Further, an approach that only considers net losses 
across performance years may not identify as problematic an ACO that 
generates losses in multiple years which in aggregate are canceled out 
by a single year with large savings. Although uncommon, such a pattern 
of performance, where an ACO's results change rapidly and dramatically, 
is concerning and warrants consideration in evaluating the ACO's 
suitability to continue its participation in the program.
    This proposed requirement is similar to the current provision at 
Sec.  425.222(b), which specifies that a previously terminated ACO must 
demonstrate that it has corrected deficiencies that caused it to be 
terminated from the program and has processes in place to ensure that 
it will remain in compliance with the terms of its new participation 
agreement. As we discussed previously, we propose to discontinue use of 
Sec.  425.222. We believe adding a similar requirement to Sec.  425.224 
would allow us to more consistently apply policies to renewing and re-
entering ACOs. Further, we believe applying this requirement to both 
re-entering and renewing ACOs would safeguard the program against 
organizations that have not met the program's goals or complied with 
program requirements and that may not be qualified to participate in 
the program, and therefore we believe this approach would be protective 
of the program, the Trust Funds, and Medicare FFS beneficiaries.
    For ACOs identified as re-entering ACOs because greater than 50 
percent of their ACO participants have recent prior participation in 
the same ACO, we would determine the eligibility of the ACO to 
participate in the program based on the past performance of this other 
entity. For example, if ACO A is identified as a re-entering ACO 
because more than 50 percent of its ACO participants previously 
participated in ACO B during the relevant look back period, we would 
consider ACO B's financial performance, quality performance, and 
compliance with other program requirements (as discussed in this 
section of this proposed rule) in determining the eligibility of ACO A 
to enter a new participation agreement in the program.
(5) Proposed Evaluation Criteria for Determining Participation Options
    We have a number of concerns about the vulnerability of certain 
program policies to gaming by ACOs seeking to continue in the program 
under the BASIC track's glide path, as well as the need to ensure that 
an ACO's participation options are commensurate with the experience of 
the organization and its ACO participants with the Shared Savings 
Program and other performance-based risk Medicare ACO initiatives.
    First, as the program matures and ACOs become more prevalent 
throughout the country, and as an increasing number of ACO participants 
become experienced in different Medicare ACO initiatives with differing 
levels of risk, we believe the regulations as currently written create 
flexibilities that would allow more experienced ACOs to take advantage 
of the opportunity to participate under the proposed BASIC track's 
glide path.
    There are many Medicare ACO initiatives in which organizations may 
gain experience, specifically: Shared Savings Program Track 1, Track 2 
and Track 3, as well as the proposed BASIC track and ENHANCED track, 
and the Track 1+ Model, Pioneer ACO Model, Next Generation ACO Model, 
and the Comprehensive End-Stage Renal Disease (ESRD) Care (CEC) Model. 
All but Shared Savings Program Track 1 ACOs and non-Large Dialysis 
Organization (LDO) End-Stage Renal Disease Care Organizations (ESCOs) 
participating in the one-sided risk track of the CEC Model participate 
in a degree of performance-based risk within an ACO's agreement period 
in the applicable program or model.
    As discussed elsewhere in this section (II.A.5.c of this proposed 
rule), we are proposing to discontinue application of the policies in 
Sec.  425.222(a). As a result of this change, we will allow ACOs 
currently participating in Track 1, Track 2, Track 3, or the Track 1+ 
Model, to choose whether to finish their current agreement or to 
terminate and apply to immediately enter a new agreement period through 
an early renewal. We are concerned that removing the existing safeguard 
under Sec.  425.222(a) without putting in place other policies that 
assess an ACO's experience with performance-based risk would enable 
ACOs to participate in the BASIC track's glide path in Level A and 
Level B, under a one-sided model, terminate, and enter a one-sided 
model of the glide path again.
    We are also concerned that existing and former Track 1 ACOs would 
have

[[Page 41826]]

the opportunity to gain additional time under a one-sided model of the 
BASIC track's glide path before accepting performance-based risk. Under 
the current regulations, Track 1 ACOs are limited to two agreement 
periods under a one-sided model before transitioning to a two-sided 
model beginning with their third agreement period (see Sec.  
425.600(b)). Without some restriction, Track 1 ACOs that would 
otherwise be required to assume performance-based risk at the start of 
their third agreement period in the program could end up continuing to 
participate under a one-sided model (BASIC track's Levels A and B) for 
2 additional performance years, or 3 additional performance years in 
the case of ACOs that enter the BASIC track's glide path for an 
agreement period of 5 years and 6 months beginning July 1, 2019. We 
believe the performance-based risk models within the BASIC track's 
glide path would offer former Track 1 ACOs an opportunity to continue 
participation within the program under relatively low levels of two-
sided risk and that these ACOs have sufficient experience with the 
program to begin the gradual transition to performance-based risk. 
Therefore we believe some restriction is needed to prevent all current 
and previously participating Track 1 ACOs from taking advantage of 
additional time under a one-sided model in the BASIC track's glide path 
and instead to encourage their more rapid progression to performance-
based risk. For similar reasons we also believe it is important to 
prevent new ACOs identified as re-entering ACOs because greater than 50 
percent of their ACO participants have recent prior participation in a 
Track 1 ACO from also taking advantage of additional time under a one-
sided model in the BASIC track's glide path. This restriction would 
help to ensure that ACOs do not re-form as new legal entities to 
maximize the time allowed under a one-sided model.
    We also considered that currently Sec.  425.202(b) of the program's 
regulations addresses application requirements for organizations that 
were previous participants in the Physician Group Practice (PGP) 
demonstration, which concluded in December 2012 with the completion of 
the PGP Transition Demonstration, and the Pioneer ACO Model, which 
concluded in December 2016, as described elsewhere in this section. We 
believe it is appropriate to propose to eliminate these provisions, 
while at the same time proposing criteria for identifying ACOs and ACO 
participants with previous experience in Medicare ACO initiatives as 
part of a broader approach to determining available participation 
options for applicants.
    Second, we believe that using prior participation by ACO 
participant TINs in Medicare ACO initiatives along with the prior 
participation of the ACO legal entity is important when gauging the 
ACO's experience, given the observed churn in ACO participants over 
time and our experience with determining eligibility to participate in 
the Track 1+ Model. ACOs are allowed to make changes to their certified 
ACO participant list for each performance year, and we have observed 
that, each year, about 80 percent of ACOs make ACO participant list 
changes. We also considered CMS's recent experience with determining 
the eligibility of ACOs to participate in the Track 1+ Model. The Track 
1+ Model is designed to encourage more group practices, especially 
small practices, to advance to performance-based risk. As such, it does 
not allow participation by current or former Shared Savings Program 
Track 2 or Track 3 ACOs, Pioneer ACOs, or Next Generation ACOs. As 
outlined in the Track 1+ Model Fact Sheet, the same legal entity that 
participated in any of these performance-based risk ACO initiatives 
cannot participate in the Track 1+ Model. Furthermore, an ACO would not 
be eligible to participate in the Track 1+ Model if 40 percent or more 
of its ACO participants had participation agreements with an ACO that 
was participating in one of these performance-based risk ACO 
initiatives in the most recent prior performance year.
    Third, any approach to determining participation options relative 
to the experience of ACOs and ACO participants must also factor in our 
proposals to differentiate between low revenue and high revenue ACOs, 
as previously discussed in this section.
    Fourth, and lastly, we believe the experience of ACOs and their ACO 
participants in Medicare ACO initiatives should be considered in 
determining which track (BASIC track or ENHANCED track) the ACO is 
eligible to enter as well as the applicability of policies that phase-
in over time, namely the equal weighting of benchmark year 
expenditures, the policy of adjusting the benchmark based on regional 
FFS expenditures (which, for example, applies different weights in 
calculating the regional adjustment depending upon the ACO's agreement 
period in the program) and the phase-in of pay-for-performance under 
the program's quality performance standards.
    Although Sec.  425.222(c) specifies whether a former one-sided 
model ACO can be considered to be entering its first or second 
agreement period under Track 1 if it is re-entering the program after 
termination, the current regulations do not otherwise address how we 
should determine the applicable agreement period for a previously 
participating ACO after termination or expiration of its previous 
participation agreement.
    We prefer an approach that would help to ensure that ACOs, whether 
they are initial applicants to the program, renewing ACOs or re-
entering ACOs, would be treated comparably. Any approach should also 
ensure eligibility for participation options reflects the ACO's and ACO 
participants' experience with the program and other Medicare ACO 
initiatives and be transparent. Therefore, we propose to identify the 
available participation options for an ACO (regardless of whether it is 
applying to enter, re-enter, or renew its participation in the program) 
by considering all of the following factors: (1) Whether the ACO is a 
low revenue ACO or a high revenue ACO; and (2) the level of risk with 
which the ACO or its ACO participants has experience based on 
participation in Medicare ACO initiatives in recent years.
    As a factor in determining an ACO's participation options, we 
propose to establish requirements for evaluating whether an ACO is 
inexperienced with performance-based risk Medicare ACO initiatives such 
that the ACO would be eligible to enter into an agreement period under 
the BASIC track's glide path or whether the ACO is experienced with 
performance-based risk Medicare ACO initiatives and therefore limited 
to participating under the higher-risk tracks of the Shared Savings 
Program (either an agreement period under the maximum level of risk and 
potential reward for the BASIC track (Level E), or the ENHANCED track).
    To determine whether an ACO is inexperienced with performance-based 
risk Medicare ACO initiatives, we propose that both of the following 
requirements would need to be met: (1) The ACO legal entity has not 
participated in any performance-based risk Medicare ACO initiative (for 
example, the ACO is a new legal entity identified as an initial 
applicant or the same legal entity as a current or previously 
participating Track 1 ACO); and (2) CMS determines that less than 40 
percent of the ACO's ACO participants participated in a performance-
based risk Medicare ACO initiative in each of the 5 most recent 
performance years prior to the agreement start date.

[[Page 41827]]

    We propose that CMS would determine that an ACO is experienced with 
performance-based risk Medicare ACO initiatives if either of the 
following criteria are met: (1) The ACO is the same legal entity as a 
current or previous participant in a performance-based risk Medicare 
ACO initiative; or (2) CMS determines that 40 percent or more of the 
ACO's ACO participants participated in a performance-based risk 
Medicare ACO initiative in any of the 5 most recent performance years 
prior to the agreement start date.
    We propose to specify these requirements in a new provision at 
Sec.  425.600(d). This provision would be used to evaluate eligibility 
for specific participation options for any ACO that is applying to 
enter the Shared Savings Program for the first time or to re-enter 
after termination or expiration of its previous participation 
agreement, or any ACO that is renewing its participation. As specified 
in the proposed definition of re-entering ACO, we also propose to apply 
the provisions at Sec.  425.600(d) to new ACOs identified as re-
entering ACOs because greater than 50 percent of their ACO participants 
have recent prior participation in the same ACO. Thus, the proposed 
provision at Sec.  425.600(d) would also apply in determining 
eligibility for these ACOs to enter the BASIC track's glide path for 
agreement periods beginning on July 1, 2019, and in subsequent years. 
Because the 40 percent threshold that we are proposing to use to 
identify ACOs as experienced or inexperienced with performance-based 
risk on the basis of their ACO participants' prior participation in 
certain Medicare ACO initiatives is lower than the 50 percent threshold 
that would be used to identify new legal entities as re-entering ACOs 
based on the prior participation of their ACO participants in the same 
ACO, this proposed policy would automatically capture new legal 
entities identified as re-entering ACOs that have experience with 
performance-based risk based on the experience of their ACO 
participants.
    We also propose to add new definitions at Sec.  425.20 for 
``Experienced with performance-based risk Medicare ACO initiatives'', 
``Inexperienced with performance-based risk Medicare ACO initiatives'' 
and ``Performance-based risk Medicare ACO initiative''.
    We propose to define ``performance-based risk Medicare ACO 
initiative'' to mean an initiative implemented by CMS that requires an 
ACO to participate under a two-sided model during its agreement period. 
We propose this would include Track 2, Track 3 or the ENHANCED track, 
and the proposed BASIC track (including Level A through Level E) of the 
Shared Savings Program. We also propose this would include the 
following Innovation Center ACO Models involving two-sided risk: The 
Pioneer ACO Model, Next Generation ACO Model, the performance-based 
risk tracks of the CEC Model (including the two-sided risk tracks for 
LDO ESCOs and non-LDO ESCOs), and the Track 1+ Model. The proposed 
definition also includes such other Medicare ACO initiatives involving 
two-sided risk as may be specified by CMS.
    We propose to define ``experienced with performance-based risk 
Medicare ACO initiatives'' to mean an ACO that CMS determines meets 
either of the following criteria:
    (1) The ACO is the same legal entity as a current or previous ACO 
that is participating in, or has participated in, a performance-based 
risk Medicare ACO initiative as defined under Sec.  425.20, or that 
deferred its entry into a second Shared Savings Program agreement 
period under Track 2 or Track 3 in accordance with Sec.  425.200(e).
    (2) 40 percent or more of the ACO's ACO participants participated 
in a performance-based risk Medicare ACO initiative as defined under 
Sec.  425.20, or in an ACO that deferred its entry into a second Shared 
Savings Program agreement period under Track 2 or Track 3 in accordance 
with Sec.  425.200(e), in any of the 5 most recent performance years 
prior to the agreement start date.
    As we previously discussed, we are proposing to discontinue use of 
the ``sit-out'' period under Sec.  425.222(a) as well as the related 
``sit-out'' period for ACOs that deferred renewal under Sec.  
425.200(e). Thus, we propose to identify all Track 1 ACOs that deferred 
renewal as being experienced with performance-based risk Medicare ACO 
initiatives. This includes ACOs that are within a fourth and final year 
of their first agreement period under Track 1 because they were 
approved to defer entry into a second agreement period under Track 2 or 
Track 3, and ACOs that have already entered their second agreement 
period under a two-sided model after a one year deferral. Under Sec.  
425.200(e)(2), in the event that a Track 1 ACO that has deferred its 
renewal terminates its participation agreement before the start of the 
first performance year of its second agreement period under a two-sided 
model, the ACO is considered to have terminated its participation 
agreement for its second agreement period under Sec.  425.220. In this 
case, when the ACO seeks to re-enter the program after termination, it 
would need to apply for a two-sided model. We believe our proposal to 
consider ACOs that deferred renewal to be experienced with performance-
based risk Medicare ACO initiatives and therefore eligible for either 
the BASIC track's Level E (if a low revenue ACO and certain other 
requirements are met) or the ENHANCED track, is necessary to ensure 
that ACOs that deferred renewal continue to be required to participate 
under a two-sided model in all future agreement periods under the 
program consistent with our current policy under Sec.  425.200(e)(2).
    We propose to define ``inexperienced with performance-based risk 
Medicare ACO initiatives'' to mean an ACO that CMS determines meets all 
of the following requirements:
    (1) The ACO is a legal entity that has not participated in any 
performance-based risk Medicare ACO initiative as defined under Sec.  
425.20, and has not deferred its entry into a second Shared Savings 
Program agreement period under Track 2 or Track 3 in accordance with 
Sec.  425.200(e); and
    (2) Less than 40 percent of the ACO's ACO participants participated 
in a performance-based risk Medicare ACO initiative as defined under 
Sec.  425.20, or in an ACO that deferred its entry into a second Shared 
Savings Program agreement period under Track 2 or Track 3 in accordance 
with Sec.  425.200(e), in each of the 5 most recent performance years 
prior to the agreement start date.
    Under our proposed approach, for an ACO to be eligible to enter an 
agreement period under the BASIC track's glide path, less than 40 
percent of its ACO participants can have participated in a performance-
based risk Medicare ACO initiative in each of the five prior 
performance years. This proposed requirement is modeled after the 
threshold currently used in the Track 1+ Model (see Track 1+ Model Fact 
Sheet), although with a longer look back period. Based on experience 
with the Track 1+ Model during the 2018 application cycle, we do not 
believe that the proposed parameters are excessively restrictive. We 
considered the following issues in developing our proposed approach: 
(1) Whether to consider participation of ACO participants in a 
particular ACO, or cumulatively across multiple ACOs, during the 5-year 
look back period; (2) whether to use a shorter or longer look back 
period; and (3) whether to use a threshold amount lower than 40 
percent.
    We propose that in applying this threshold, we would not limit our 
consideration to ACO participants that participated in the same ACO or 
the same performance-based risk Medicare ACO initiative during the look 
back

[[Page 41828]]

period. Rather, we would determine, cumulatively, what percentage of 
ACO participants were in any performance-based risk Medicare ACO 
initiative in each of the 5 most recent performance years prior to the 
agreement start date. We believe the following illustrations help to 
clarify the use of the proposed threshold for determining ACO 
participants' experience with performance-based risk Medicare ACO 
initiatives.
    For applicants applying to enter the BASIC track for an agreement 
period beginning on July 1, 2019, for example, we would consider what 
percentage of the ACO participants participated in any of the following 
during 2019 (January--June), 2018, 2017, 2016, and 2015: Track 2 or 
Track 3 of the Shared Savings Program, the Track 1+ Model, the Pioneer 
ACO Model, the Next Generation ACO Model, or the performance-based risk 
tracks of the CEC Model. In future years (in determining eligibility 
for participation options for agreement periods starting in 2020 and 
subsequent years), we would also consider prior participation in the 
BASIC track and ENHANCED track (which are proposed to become available 
for agreement periods beginning on July 1, 2019 and in subsequent 
years).
    An ACO would be ineligible for the BASIC track's glide path if, for 
example, in the performance year prior to the start of the agreement 
period, 20 percent of its ACO participants participated in a Track 3 
ACO and 20 percent of its ACO participants participated in a Next 
Generation ACO, even if the ACO did not meet or exceed the 40 percent 
threshold in any of the remaining 4 performance years of the 5-year 
look back period.
    We considered a number of alternatives for the length of the look 
back period for determining an ACO's experience or inexperience with 
performance-based risk Medicare ACO initiatives. For example, we 
considered using a single performance year look back period, as used 
under the Track 1+ Model. We also considered using a longer look back 
period, for example of greater than 5 performance years, or a shorter 
look back period that would be greater than 1 performance year, but 
less than 5 performance years, such as a 3 performance year look back 
period.
    A number of considerations informed our proposal to use a 5 
performance year look back period. For one, we believe a longer look 
back period would help to guard against a circumstance where an ACO 
enters the BASIC track's glide path, terminates its agreement after one 
or 2 performance years under a one-sided model and seeks to enter the 
program under the one-sided model of the glide path. Whether or not the 
ACO applies to enter the program as the same legal entity or a new 
legal entity, the proposed eligibility criteria would identify this ACO 
as experienced with performance-based risk Medicare ACO initiatives if 
the ACO's ACO participant list remains relatively unchanged. Second, we 
believe a longer look back period may reduce the incentive for 
organizations to wait out the period in an effort to re-form as a new 
legal entity with the same or very similar composition of ACO 
participants for purposes of gaming program policies. Third, we believe 
a longer look back period also recognizes that new ACOs composed of ACO 
participants that were in performance-based risk Medicare ACO 
initiatives many years ago (for instance more than 5 performance years 
prior to the ACO's agreement start date) may benefit from gaining 
experience with the program's current requirements under the glide path 
(if our proposal is finalized), prior to transitioning to higher levels 
of risk and reward. Fourth, and lastly, in using the 5 most recent 
performance years prior to the start date of an ACO's agreement period, 
for ACOs applying to enter an agreement period beginning on July 1, 
2019, we would consider the participation of ACO participants during 
the first 6 months of 2019. This would allow us to capture the ACO 
participants' most recent prior participation in considering an ACO's 
eligibility for participation options for an agreement period beginning 
July 1, 2019. An alternative approach that bases the look back period 
on prior calendar years would overlook this partial year of 
participation in 2019.
    We also considered using a threshold amount lower than 40 percent. 
Based on checks performed during the 2018 application cycle, for the 
average Track 1+ Model applicant, less than 2 percent of ACO 
participants had participated under performance-based risk in the prior 
year. The maximum percentage observed was 30 percent. In light of these 
findings, we considered whether to propose a lower threshold for 
eligibility to participate in the BASIC track's glide path. However, 
our goal is not to be overly restrictive, but rather to ensure that 
ACOs with significant experience with performance-based risk are 
appropriately placed. While we favor 40 percent for its consistency 
with the Track 1+ Model requirement, we also seek comment on other 
numeric thresholds.
    As previously discussed in this section, we believe some 
restriction is needed to prevent all current and previously 
participating Track 1 ACOs, and new ACOs identified as re-entering ACOs 
because of their ACO participants' prior participation in a Track 1 
ACO, from taking advantage of additional time under a one-sided model 
in the BASIC track's glide path. We believe an approach that restricts 
the amount of time a former Track 1 ACO or a new ACO, identified as a 
re-entering ACO because of its ACO participants' prior participation in 
a Track 1 ACO, may participate in the one-sided models of the BASIC 
track's glide path (Level A and Level B) would balance several 
concerns. Allowing Track 1 ACOs and eligible re-entering ACOs some 
opportunity to continue participation in a one-sided model within the 
BASIC track's glide path could smooth their transition to performance-
based risk. For example, it would provide these ACOs a limited time 
under a one-sided model in a new agreement period under the BASIC 
track, during which they could gain experience with their rebased 
historical benchmark, and prepare for the requirements of participation 
in a two-sided model (such as establishing a repayment mechanism 
arrangement). Limiting time in the one-sided models of the BASIC 
track's glide path for former Track 1 ACOs and new ACOs that are 
identified as re-entering ACOs because of their ACO participants' 
recent prior participation in the same Track 1 ACO would also allow 
these ACOs to progress more rapidly to performance-based risk, and 
therefore further encourage accomplishment of the program's goals.
    After weighing these considerations, we propose that ACOs that 
previously participated in Track 1 of the Shared Savings Program or new 
ACOs, for which the majority of their ACO participants previously 
participated in the same Track 1 ACO, that are eligible to enter the 
BASIC track's glide path, may enter a new agreement period under either 
Level B, C, D or E. Former Track 1 ACOs and new ACOs identified as re-
entering ACOs because of their ACO participants' prior participation in 
a Track 1 ACO would not be eligible to participate under Level A of the 
glide path. Therefore, if an ACO enters the glide path at Level B and 
is automatically transitioned through the levels of the glide path, the 
ACO would participate in Level E for the final 2 performance years of 
its agreement period. For a former Track 1 ACO or a new ACO identified 
as a re-entering ACO because of its ACO participants' prior 
participation in a Track 1 ACO that enters an agreement period in the

[[Page 41829]]

BASIC track's glide path beginning on July 1, 2019, the ACO could 
participate under Level B for a 6-month performance year from July 1, 
2019 through December 31, 2019 and the 12 month performance year 2020 
(as discussed in section II.A.7.c of this proposed rule). A former 
Track 1 ACO or a new ACO identified as a re-entering ACO because of its 
ACO participants' prior participation in a Track 1 ACO that begins an 
agreement period in the BASIC track's glide path in any subsequent year 
(2020 and onward) could participate in Level B for 1 performance year 
before advancing to a two-sided model within the glide path.
    We also considered a more aggressive approach to transitioning ACOs 
with experience in Track 1 to performance-based risk. Specifically, we 
considered whether the one-sided models of the BASIC track's glide path 
should be unavailable to current or previously participating Track 1 
ACOs and new ACOs identified as re-entering ACOs because of their ACO 
participants' prior participation in a Track 1 ACO. Under this 
alternative, ACOs that are experienced with Track 1, would be required 
to enter the BASIC track's glide path under performance-based risk at 
Level C, D or E. This alternative would more aggressively transition 
ACOs along the glide path. This approach would recognize that some of 
these ACOs may have already had the opportunity to participate under a 
one-sided model for 6 performance years (or 7 performance years for 
ACOs that elect to extend their agreement period for the 6-month 
performance year from January 1, 2019 through June 30, 2019), and 
should already have been taking steps to prepare to enter performance-
based risk to continue their participation in the program under the 
current requirements, and therefore should not be allowed to take 
advantage of additional time under a one-sided model. For ACOs that 
have participated in a single agreement period in Track 1, an approach 
that requires transition to performance-based risk at the start of 
their next agreement period would be more consistent with the proposed 
redesign of participation options, under which ACOs would be allowed 
only 2 years, or 2 years and 6 months in the case of July 1, 2019 
starters, under the one-sided models of the BASIC track's glide path. 
We seek comment on this alternative approach.
    In summary, in combination with determining an whether ACOs are low 
revenue versus high revenue, we propose to add a new paragraph (d) 
under Sec.  425.600, to provide that CMS will identify ACOs as 
inexperienced or experienced with performance-based risk Medicare ACO 
initiatives for purposes of determining an ACO's eligibility for 
certain participation options, as follows:
     If an ACO is identified as high revenue, the following 
options would apply:
    ++ If we determine the ACO is inexperienced with performance-based 
risk Medicare ACO initiatives, the ACO may enter the BASIC track's 
glide path, or the ENHANCED track. With the exception of ACOs that 
previously participated in Track 1 and new ACOs identified as re-
entering ACOs because of their ACO participants' prior participation in 
a Track 1 ACO, an ACO may enter the BASIC track's glide path at any 
level (Level A through Level E). Therefore, eligible ACOs that are new 
to the program, identified as initial applicants and not as re-entering 
ACOs, would have the flexibility to enter the glide path at any one of 
the five levels. An ACO that previously participated in Track 1 or a 
new ACO identified as a re-entering ACO because more than 50 percent of 
its ACO participants have recent prior experience in the same Track 1 
ACO may enter the glide path under either Level B, C, D or E.
    ++ If we determine the ACO is experienced with performance-based 
risk Medicare ACO initiatives, the ACO may only enter the ENHANCED 
track.
     If an ACO is identified as low revenue, the following 
options would apply:
    ++ If we determine the ACO is inexperienced with performance-based 
risk Medicare ACO initiatives, the ACO may enter the BASIC track's 
glide path, or the ENHANCED track. With the exception of ACOs that 
previously participated in Track 1 and new ACOs identified as re-
entering ACOs because of their ACO participants' prior participation in 
a Track 1 ACO, an ACO may enter the BASIC track's glide path at any 
level (Level A through Level E). Therefore, eligible ACOs that are new 
to the program, identified as initial applicants and not re-entering 
ACOs, would have the flexibility to enter the glide path at any one of 
the five levels. An ACO that previously participated in Track 1 or a 
new ACO identified as a re-entering ACO because more than 50 percent of 
its ACO participants have recent prior experience in the same Track 1 
ACO may enter the glide path under either Level B, C, D or E.
    ++ If we determine the ACO is experienced with performance-based 
risk Medicare ACO initiatives, the ACO may enter the BASIC track Level 
E (highest level of risk and potential reward) or the ENHANCED track. 
As discussed in section II.A.3.b of this proposed rule, low revenue 
ACOs are limited to two agreement periods of participation under the 
BASIC track.
    We propose to specify these requirements in revisions to the 
regulations under Sec.  425.600, which would be applicable for 
determining participation options for agreement periods beginning on 
July 1, 2019, and in subsequent years. We seek comment on these 
proposals for determining an ACO's participation options by evaluating 
the ACO legal entity's and ACO participants' experience or inexperience 
with performance-based risk Medicare ACO initiatives. In particular, we 
welcome commenters' input on our proposal to assess ACO participants' 
experience with performance-based risk Medicare ACOs using a 40 percent 
threshold, and the alternative of employing a threshold other than 40 
percent, for example, 30 percent. We welcome comments on the proposed 5 
performance year look back period for determining whether an ACO is 
experienced or inexperienced with performance-based risk Medicare ACO 
initiatives, and our consideration of a shorter look back period, such 
as 3 performance years. We also welcome comments on our proposal to 
limit former Track 1 ACOs and new ACOs identified as re-entering ACOs 
because more than 50 percent of their ACO participants have recent 
prior experience in a Track 1 ACO to a single performance year under 
the one-sided models of the BASIC track's glide path (two performance 
years, in the case of an ACO starting its agreement period under the 
BASIC track on July 1, 2019), and the alternative approach that would 
preclude such ACOs from participating in one-sided models of the BASIC 
track's glide path.
    We also believe it is appropriate to consider an ACO's experience 
with the program or other performance-based risk Medicare ACO 
initiatives in determining which agreement period an ACO should be 
considered to be entering for purposes of applying policies that phase-
in over the course of the ACO's first agreement period and subsequent 
agreement periods: (1) The weights applied to benchmark year 
expenditures (equal weighting in second or subsequent agreement periods 
instead of weighting the 3 benchmark years (BYs) at 10 percent (BY1), 
30 percent (BY2), and 60 percent (BY3)); (2) the weights used in 
calculating the regional adjustment to an ACO's historical benchmark, 
which phase in over multiple agreement periods; and (3) the quality 
performance standard, which phases in from complete and

[[Page 41830]]

accurate reporting of all quality measures in the first performance 
year of an ACO's first agreement period to pay-for-performance over the 
remaining years of the ACO's first agreement period, and ACOs continue 
to be assessed on performance in all subsequent performance years under 
the program (including subsequent agreement periods). We note that for 
purposes of this discussion, we consider agreement periods to be 
sequential and consecutive. For instance, after an ACO participates in 
its first agreement period, the ACO would enter a second agreement 
period, followed by a third agreement period, and so on.
    We propose to specify under Sec.  425.600(f)(1) that an ACO 
entering the program for the first time (an initial entrant) would be 
considered to be entering a first agreement period in the Shared 
Savings Program for purposes of applying program requirements that 
phase-in over time, regardless of its experience with performance-based 
risk Medicare ACO initiatives. Under this approach, in determining the 
ACO's historical benchmark, we would weight the benchmark year 
expenditures as follows: 10 percent (BY1), 30 percent (BY2), and 60 
percent (BY3). We would apply a weight of either 25 percent or 35 
percent in determining the regional adjustment amount (depending on 
whether the ACO is higher or lower spending compared to its regional 
service area) under the proposed approach to applying factors based on 
regional FFS expenditures beginning with the ACO's first agreement 
period (see section II.D of this proposed rule). Further, under Sec.  
425.502, an initial entrant would be required to completely and 
accurately report all quality measures to meet the quality performance 
standard (referred to as pay-for-reporting) in the first performance 
year of its first agreement period, and for subsequent years of the 
ACO's first agreement period the pay-for-performance quality 
performance standard would phase-in.
    We propose to divide re-entering ACOs into three categories in 
order to determine which agreement period an ACO will be considered to 
be entering for purposes of applying program requirements that phase-in 
over time, and to specify this policy at Sec.  425.600(f)(2). For an 
ACO whose participation agreement expired without having been renewed, 
we propose the ACO would re-enter the program under the next 
consecutive agreement period. For example, if an ACO completed its 
first agreement period and did not renew, upon re-entering the program, 
the ACO would participate in its second agreement period.
    For an ACO whose participation agreement was terminated under Sec.  
425.218 or Sec.  425.220, we propose the ACO re-entering the program 
would be treated as if it is starting over in the same agreement period 
in which it was participating at the time of termination, beginning 
with the first performance year of the new agreement period. For 
instance, if an ACO terminated at any time during its second agreement 
period, the ACO would be considered participating in a second agreement 
period upon re-entering the program, beginning with the first 
performance year of their new agreement period. Alternatively, we 
considered determining which performance year a terminated ACO should 
re-enter within the new agreement period, in relation to the amount of 
time the ACO participated during its most recent prior agreement 
period. For example, under this approach, an ACO that terminated its 
participation in the program in the third performance year of an 
agreement period would be treated as re-entering the program in 
performance year three of the new agreement period. However, we believe 
this alternative approach could be complicated given the proposed 
transition from 3-year agreements to agreement periods of at least 5 
years.
    For a new ACO identified as a re-entering ACO because greater than 
50 percent of its ACO participants have recent prior participation in 
the same ACO, we would consider the prior participation of the ACO in 
which the majority of the ACO participants in the new ACO were 
participating in order to determine the agreement period in which the 
new ACO would be considered to be entering the program. That is, we 
would determine the applicability of program policies to the new ACO 
based on the number of agreement periods the other entity participated 
in the program. If the participation agreement of the other ACO was 
terminated or expired, the previously described rules for re-entering 
ACOs would also apply. For example, if ACO A is identified as a re-
entering ACO because more than 50 percent of its ACO participants 
previously participated in ACO B during the relevant look back period, 
we would consider ACO B's prior participation in the program. For 
instance, if ACO B terminated during its second agreement period in the 
program, we would consider ACO A to be entering a second agreement 
period in the program, beginning with the first performance year of 
that agreement period. However, if the other ACO is currently 
participating in the program, the new ACO would be considered to be 
entering into the same agreement period in which this other ACO is 
currently participating, beginning with the first performance year of 
that agreement period. For example, if ACO A is identified as a re-
entering ACO because more than 50 percent of its ACO participants 
previously participated in ACO C during the relevant look back period, 
and ACO C is actively participating in its third agreement period in 
the program, ACO A would be considered to be participating in a third 
agreement period, beginning with the first performance year of that 
agreement period.
    We propose to specify at Sec.  425.600(f)(3) that renewing ACOs 
would be considered to be entering the next consecutive agreement 
period for purposes of applying program requirements that phase-in over 
time. This proposed approach is consistent with current program 
policies for ACOs whose participation agreements expire and that 
immediately enter a new agreement period to continue their 
participation in the program. For example, an ACO that entered its 
first participation agreement on January 1, 2017, and concludes this 
participation agreement on December 31, 2019, would renew to enter its 
second agreement period beginning on January 1, 2020. Further, under 
the proposed definition of ``Renewing ACO'', an ACO that terminates its 
current participation agreement under Sec.  425.220 and immediately 
enters a new agreement period to continue its participation in the 
program would also be considered to be entering the next consecutive 
agreement period. For example, an ACO that entered its first 
participation agreement on January 1, 2018, and terminates its 
agreement effective June 30, 2019, to enter a new participation 
agreement beginning on July 1, 2019, would be considered to be a 
renewing ACO that is renewing early to enter its second agreement 
period beginning on July 1, 2019. This approach would ensure that an 
ACO that terminates from a first agreement period and immediately 
enters a new agreement period in the program could not take advantage 
of program flexibilities aimed at ACOs that are completely new to the 
Shared Savings Program, such as the pay-for-reporting quality 
performance standard available to ACOs in their first performance year 
of their first agreement period under the program. We would therefore 
apply a consistent approach among renewing ACOs by

[[Page 41831]]

placing these ACOs in the next agreement period in sequential order.
    This proposed approach would replace the current approach to 
determining which agreement period an ACO is considered to be entering 
into, for a subset of ACOs, as specified in the provision at Sec.  
425.222(c), which we are proposing to discontinue using. We believe 
this proposed approach ensures that ACOs that are experienced with the 
program or with performance-based risk Medicare ACO initiatives are not 
participating under policies designed for ACOs inexperienced with the 
program's requirements or similar requirements under other Medicare ACO 
initiatives, and also helps to preserve the intended phase-in of 
requirements over time by taking into account ACOs' prior participation 
in the program.
    The proposed approach would help to ensure that ACOs that are new 
to the program are distinguished from renewing ACOs and ACOs that are 
re-entering the program, and would also ensure that program 
requirements are applied in a manner that reflects ACOs' prior 
participation in the program, which we believe would limit the 
opportunity for more experienced ACOs to seek to take advantage of 
program policies. These policies protect against ACOs terminating or 
discontinuing their participation, and potentially re-forming as a new 
legal entity, simply to be able to apply to re-enter the program in a 
way that could allow for the applicability of lower weights used in 
calculating the regional adjustment to the benchmark or to avoid moving 
to performance-based risk more quickly on the BASIC track's glide path 
or under the ENHANCED track.
    We believe the proposed approach to determining ACO participation 
options and the proposal to limit access the BASIC track's glide path 
to ACOs that are inexperienced with performance-based risk, in 
combination with the rebasing of ACO benchmarks at the start of each 
new agreement period, mitigate our concerns regarding ACO gaming. We 
believe that the requirement that ACOs' benchmarks are rebased at the 
start of each new agreement period, in combination with the proposed 
new requirements governing ACO participation options, would be 
sufficiently protective of the Trust Funds to guard against undesirable 
ACO gaming behavior. Under the policies discussed elsewhere in this 
section of the proposed rule for identifying ACOs that are experienced 
with performance-based risk Medicare ACOs initiatives, ACOs that 
terminate from the BASIC track's glide path (for example) and seek to 
re-enter the program, and renewing ACOs (including ACOs renewing early 
for a new agreement period beginning July 1, 2019) that are identified 
as experienced with performance-based risk Medicare ACO initiatives 
could only renew under the BASIC track Level E (if an otherwise 
eligible low revenue ACO) or the ENHANCED track. This mitigates our 
concerns about ACOs re-forming and re-entering the program, or serially 
terminating and immediately participating again as a renewing ACO, 
since there would be consequences for the ACO's ability to continue 
participation under lower-risk options that may help to deter these 
practices.
    We acknowledge that under our proposals regarding early renewals 
(that is, our proposal that ACOs that terminate their current agreement 
period and immediately enter a new agreement period without 
interruption qualify as renewing ACOs), it is possible for ACOs to 
serially enter a participation agreement, terminate from it and enter a 
new agreement period, to be considered entering the next consecutive 
agreement period in order to more quickly take advantage of the higher 
weights used in calculating the regional adjustment to the benchmark. 
However, we note that these ACOs' benchmarks would be rebased, which we 
believe would help to mitigate this concern. We seek comment on 
possible approaches that would prevent ACOs from taking advantage of 
participation options to delay or hasten the phase-in of higher weights 
used in calculating the regional adjustment to the historical 
benchmark, while still maintaining the flexibility for existing ACOs to 
quickly move from a current 3-year agreement period to a new agreement 
period under either the BASIC track or ENHANCED track.
    In the June 2016 final rule, we established the phase-in of the 
weights used in calculating the regional adjustment to the ACO's 
historical benchmark, for second or subsequent agreement periods 
beginning in 2017 and subsequent years. As discussed in section II.D of 
this proposed rule, we propose to use factors based on regional FFS 
expenditures in calculating an ACO's historical benchmark beginning 
with an ACO's first agreement period for agreement periods beginning on 
July 1, 2019, and in subsequent years. We would maintain the phase-in 
for the regional adjustment weights for ACOs with start dates in the 
program before July 1, 2019, according to the structure established in 
the earlier rulemaking (such as using these factors for the first time 
in resetting benchmarks for the third agreement period for 2012 and 
2013 starters). Table 5 includes examples of the phase-in of the 
proposed regional adjustment weights based on agreement start date and 
applicant type (initial entrant, renewing ACO, or re-entering ACO). 
This table illustrates the weights that would be used in determining 
the regional adjustment to the ACO's historical benchmark under this 
proposed approach to differentiating initial entrants, renewing ACOs 
(including ACOs that renew early), and re-entering ACOs for purposes of 
policies that phase-in over time.

     Table 5--Examples of Phase-In of Proposed Regional Adjustment Weights Based on Agreement Start Date and
                                                 Applicant Type
----------------------------------------------------------------------------------------------------------------
                                         First time regional      Second time regional
                                         adjustment used: 35      adjustment used: 50      Third and subsequent
            Applicant type              percent or 25 percent    percent or 35 percent        time regional
                                          (if spending above       (if spending above      adjustment used: 50
                                               region)                  region)               percent weight
----------------------------------------------------------------------------------------------------------------
New entrant with start date on July    Applicable to first      Applicable to second     Applicable to third
 1, 2019.                               agreement period         agreement period         agreement period
                                        starting on July 1,      starting in 2025.        starting in 2030 and
                                        2019.                                             all subsequent
                                                                                          agreement periods.
Renewing ACO for agreement period      Applicable to third      Applicable to fourth     Applicable to fifth
 starting on July 1, 2019, with         (2012/2013) or second    (2012/2013) or third     (2012/2013) or fourth
 initial start date in 2012, 2013, or   (2016) agreement         (2016) agreement         (2016) agreement
 2016.                                  period starting on       period starting in       period starting in
                                        July 1, 2019.            2025.                    2030 and all
                                                                                          subsequent agreement
                                                                                          periods.

[[Page 41832]]

 
Early renewal for agreement period     Currently applies to     Applicable to third      Applicable to fourth
 starting on July 1, 2019, ACO with     second agreement         agreement period         agreement period
 initial start date in 2014 that        period starting in       starting on July 1,      starting in 2025 and
 terminates effective June 30, 2019.    2017.                    2019.                    all subsequent
                                                                                          agreement periods.
Re-entering ACO with initial start     Applicable to second     Applicable to third      Applicable to fourth
 date in 2014 whose agreement expired   agreement period         agreement period         agreement period
 December 31, 2016 (did not renew)      starting on July 1,      starting in 2025.        starting in 2030 and
 and re-enters second agreement         2019 (ACO considered                              all subsequent
 period starting on July 1, 2019.       to be re-entering a                               agreement periods.
                                        second agreement
                                        period).
Re-entering ACO with second agreement  Applicable to second     Applicable to third      Applicable to fourth
 period start date in 2017 terminated   agreement period         agreement period         agreement period
 during performance year 2 (2018) and   starting on July 1,      starting in 2025.        starting in 2030 and
 re-enters second agreement period      2019 (ACO considered                              all subsequent
 starting on July 1, 2019.              to be re-entering a                               agreement periods.
                                        second agreement
                                        period).
----------------------------------------------------------------------------------------------------------------

    As part of the development of these proposals, we also revisited 
our current policy that allows certain organizations with experience in 
Medicare ACO initiatives to use a condensed application form to apply 
to the Shared Savings Program. Under Sec.  425.202(b), we allow for use 
of a condensed Shared Savings Program application form by organizations 
that participated in the PGP demonstration. Former Pioneer Model ACOs 
may also use a condensed application form if specified criteria are met 
(including that the applicant is the same legal entity as the Pioneer 
ACO and the ACO is not applying to participate in the one-sided model). 
For the background on this policy, we refer readers to discussions in 
earlier rulemaking. (See 76 FR 67833 through 67834, and 80 FR 32725 
through 32728.)
    The PGP demonstration ran for 5 years from April 2005 through March 
2010, and the PGP transition demonstration began in January 2011 and 
concluded in December 2012.\15\ The Pioneer ACO Model began in 2012 and 
concluded in December 2016.\16\ Many former PGP demonstration sites and 
Pioneer ACOs have already transitioned to other Medicare ACO 
initiatives including the Shared Savings Program and the Next 
Generation ACO Model. Accordingly, we believe it is no longer necessary 
to maintain the provision permitting these entities to use condensed 
application forms. First, since establishing this policy, we have 
modified the program's application to reduce burden on all applicants. 
See 82 FR 53217 through 53222. Second, our proposed approach for 
identifying ACOs experienced with performance-based risk Medicare ACO 
initiatives for purposes of determining an ACO's participation options 
would require former Pioneer Model ACOs to participate under the higher 
levels of risk: Either the highest level of risk and potential reward 
in the BASIC track (Level E), or the ENHANCED track. This includes, for 
example, a former Pioneer ACO that applies to the Shared Savings 
Program using the same legal entity, or if 40 percent or more of the 
ACO's ACO participants are determined to be experienced with the 
Pioneer ACO Model or other two-sided model Medicare ACO initiatives 
within the 5 performance year look back period prior to the start date 
of the ACO's agreement period in the Shared Savings Program.
---------------------------------------------------------------------------

    \15\ See Fact Sheet on Physician Group Practice Transition 
Demonstration (August 2012), available at https://innovation.cms.gov/Files/Migrated-Medicare-Demonstration-x/PGP_TD_Fact_Sheet.pdf.
    \16\ See Pioneer ACO Model web page, available at https://innovation.cms.gov/initiatives/Pioneer-aco-model/.
---------------------------------------------------------------------------

    Under the proposed approach described in this section, we would 
identify these experienced, former Pioneer Model ACOs entering the 
program for the first time as participating in a first agreement period 
for purposes of the applicability of the program policies that phase-in 
over time. On the other hand, if an ACO terminated its participation in 
the Shared Savings Program, entered the Next Generation ACO Model, and 
then re-enters the Shared Savings Program, under the proposed approach 
we would consider the ACO to be entering either: (1) Its next 
consecutive agreement period in the Shared Savings Program, if the ACO 
had completed an agreement period in the program before terminating its 
prior participation; or (2) the same agreement period in which it was 
participating at the time of program termination. We note that 
commenters in earlier rulemaking suggested we apply the benchmark 
rebasing methodology that incorporates factors based on regional FFS 
expenditures to former Pioneer ACOs and Next Generation ACOs entering 
their first agreement period under the Shared Savings Program (see 81 
FR 37990). We believe that our proposal, as discussed in section II.D 
of this proposed rule, to apply factors based on regional FFS 
expenditures to ACOs' benchmarks in their first agreement periods 
addresses these stakeholder concerns.
    However, we also considered an alternative approach that would 
allow ACOs formerly participating in these Medicare ACO models to be 
considered to be entering a second agreement period for the purpose of 
applying policies that phase-in over time. We decline to propose this 
approach at this time, because ACOs entering the Shared Savings Program 
after participation in another Medicare ACO initiative may need time to 
gain experience with program's policies. Therefore, we prefer the 
proposed approach that would allow ACOs new to the Shared Savings 
Program to gain experience with the program's requirements, by entering 
the program in a first agreement period.
    Therefore, we propose to amend Sec.  425.202(b) to discontinue the 
option for certain applicants to use a condensed application when 
applying to participate in the Shared Savings Program for agreement 
periods beginning on July 1, 2019 and in subsequent years.

[[Page 41833]]

    We seek comment on the proposals described in this section and the 
alternatives considered. The participation options available to ACOs 
based on the policies proposed in this section are summarized in Table 
6 (low revenue ACOs) and Table 7 (high revenue ACOs).

                          Table 6--Participation Options for Low Revenue ACOs Based on Applicant Type and Experience With Risk
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                   Participation options \1\
                                                            ----------------------------------------------------------------------
                                       ACO experienced or                            BASIC track's Level E      ENHANCED track      Agreement period for
                                       inexperienced with      BASIC track's glide      (track's highest      (program's highest    policies that phase-
           Applicant type            performance-based risk     path (option for      level of risk/reward   level of risk/reward       in over time
                                          Medicare ACO       incremental transition      applies to all         applies to all         (benchmarking
                                           initiatives       from one-sided to two-    performance years      performance years       methodology and
                                                               sided models during      during agreement       during agreement    quality  performance)
                                                                agreement period)           period)                period)
--------------------------------------------------------------------------------------------------------------------------------------------------------
New legal entity...................  Inexperienced.........  Yes--glide path Levels  Yes..................  Yes..................  First agreement
                                                              A through E.                                                          period.
New legal entity...................  Experienced...........  No....................  Yes..................  Yes..................  First agreement
                                                                                                                                    period.
Re-entering ACO....................  Inexperienced--former   Yes--glide path Levels  Yes..................  Yes..................  Either: (1) The next
                                      Track 1 ACOs or new     B through E.                                                          consecutive
                                      ACOs identified as re-                                                                        agreement period if
                                      entering ACOs because                                                                         the ACO's prior
                                      more than 50 percent                                                                          agreement expired;
                                      of their ACO                                                                                  (2) the same
                                      participants have                                                                             agreement period in
                                      recent prior                                                                                  which the ACO was
                                      experience in a Track                                                                         participating at the
                                      1 ACO.                                                                                        time of termination;
                                                                                                                                    or (3) applicable
                                                                                                                                    agreement period for
                                                                                                                                    new ACO identified
                                                                                                                                    as re-entering
                                                                                                                                    because of ACO
                                                                                                                                    participants'
                                                                                                                                    experience in the
                                                                                                                                    same ACO.
Re-entering ACO....................  Experienced--including  No....................  Yes..................  Yes..................  Either: (1) The next
                                      former Track 1 ACOs                                                                           consecutive
                                      that deferred renewal                                                                         agreement period if
                                      under a two-sided                                                                             the ACO's prior
                                      model.                                                                                        agreement expired;
                                                                                                                                    (2) the same
                                                                                                                                    agreement period in
                                                                                                                                    which the ACO was
                                                                                                                                    participating at the
                                                                                                                                    time of termination;
                                                                                                                                    or (3) applicable
                                                                                                                                    agreement period for
                                                                                                                                    new ACO identified
                                                                                                                                    as re-entering
                                                                                                                                    because of ACO
                                                                                                                                    participants'
                                                                                                                                    experience in the
                                                                                                                                    same ACO.
Renewing ACO.......................  Inexperienced--former   Yes--glide path Levels  Yes..................  Yes..................  Subsequent
                                      Track 1 ACOs.           B through E.                                                          consecutive
                                                                                                                                    agreement period.
Renewing ACO.......................  Experienced--including  No....................  Yes..................  Yes..................  Subsequent
                                      former Track 1 ACOs                                                                           consecutive
                                      that deferred renewal                                                                         agreement period.
                                      under a two-sided
                                      model.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes: \1\ Low revenue ACOs may operate under the BASIC track for a maximum of two agreement periods.


                          Table 7--Participation Options for High Revenue ACOs Based on Applicant Type and Experience With Risk
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                   Participation Options \1\
                                                            ----------------------------------------------------------------------
                                       ACO experienced or                            BASIC track's Level E      ENHANCED track      Agreement period for
                                       inexperienced with      BASIC track's glide      (track's highest      (program's highest    policies that phase-
           Applicant type            performance-based risk     path (option for      level of risk/reward   level of risk/reward       in over time
                                          Medicare ACO       incremental transition      applies to all         applies to all         (benchmarking
                                           initiatives       from one-sided to two-    performance years      performance years       methodology and
                                                               sided models during      during agreement       during agreement     quality performance)
                                                                agreement period)           period)                period)
--------------------------------------------------------------------------------------------------------------------------------------------------------
New legal entity...................  Inexperienced.........  Yes--glide path Levels  Yes..................  Yes..................  First agreement
                                                              A through E.                                                          period.
New legal entity...................  Experienced...........  No....................  No...................  Yes..................  First agreement
                                                                                                                                    period.

[[Page 41834]]

 
Re-entering ACO....................  Inexperienced--former   Yes--glide path Levels  Yes..................  Yes..................  Either: (1) The next
                                      Track 1 ACOs or new     B through E.                                                          consecutive
                                      ACOs identified as re-                                                                        agreement period if
                                      entering ACOs because                                                                         the ACO's prior
                                      more than 50 percent                                                                          agreement expired;
                                      of their ACO                                                                                  (2) the same
                                      participants have                                                                             agreement period in
                                      recent prior                                                                                  which the ACO was
                                      experience in a Track                                                                         participating at the
                                      1 ACO.                                                                                        time of termination;
                                                                                                                                    or (3) applicable
                                                                                                                                    agreement period for
                                                                                                                                    new ACO identified
                                                                                                                                    as re-entering
                                                                                                                                    because of ACO
                                                                                                                                    participants'
                                                                                                                                    experience in the
                                                                                                                                    same ACO.
Re-entering ACO....................  Experienced--including  No....................  No...................  Yes..................  Either: (1) The next
                                      former Track 1 ACOs                                                                           consecutive
                                      that deferred renewal                                                                         agreement period if
                                      under a two-sided                                                                             the ACO's prior
                                      model.                                                                                        agreement expired;
                                                                                                                                    (2) the same
                                                                                                                                    agreement period in
                                                                                                                                    which the ACO was
                                                                                                                                    participating at the
                                                                                                                                    time of termination;
                                                                                                                                    or (3) applicable
                                                                                                                                    agreement period for
                                                                                                                                    new ACO identified
                                                                                                                                    as re-entering
                                                                                                                                    because of ACO
                                                                                                                                    participants'
                                                                                                                                    experience in the
                                                                                                                                    same ACO.
Renewing ACO.......................  Inexperienced--former   Yes--glide path Levels  Yes..................  Yes..................  Subsequent
                                      Track 1 ACOs.           B through E.                                                          consecutive
                                                                                                                                    agreement period.
Renewing ACO.......................  Experienced--including  No....................  No...................  Yes..................  Subsequent
                                      former Track 1 ACOs                                                                           consecutive
                                      that deferred renewal                                                                         agreement period.
                                      under a two-sided
                                      model.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes: \1\ High revenue ACOs that have participated in the BASIC track are considered experienced with performance-based risk Medicare ACO initiatives
  and are limited to participating under the ENHANCED track for subsequent agreement periods.

d. Monitoring for Financial Performance
(1) Background
    The program regulations at Sec.  425.316 enable us to monitor the 
performance of ACOs. In particular, Sec.  425.316 authorizes monitoring 
for performance related to two statutory provisions regarding ACO 
performance: Avoidance of at-risk beneficiaries (section 1899(d)(3) of 
the Act) and failure to meet the quality performance standard (section 
1899(d)(4) of the Act). If we discover that an ACO has engaged in the 
avoidance of at-risk beneficiaries or has failed to meet the quality 
performance standard, we can impose remedial action or terminate the 
ACO (see Sec.  425.316(b), (c)).
    In monitoring the performance of ACOs, we can analyze certain 
financial data (see Sec.  425.316(a)(2)(i)), but the regulations do not 
specifically authorize termination or remedial action for poor 
financial performance. Similarly, there are no provisions that 
specifically authorize non-renewal of a participation agreement for 
poor financial performance, although we had proposed issuing such 
provisions in prior rules.
    In the December 2014 proposed rule (79 FR 72802 through 72806), we 
proposed to allow Track 1 ACOs to renew their participation in the 
program for a second agreement period in Track 1 if in at least one of 
the first 2 performance years of the previous agreement period they did 
not generate losses in excess of their negative MSR, among other 
criteria. We refer readers to the June 2015 final rule for a detailed 
discussion of the proposal and related comments (80 FR 32764 through 
32767). Ultimately, we did not adopt a financial performance criterion 
to determine the eligibility of ACOs to continue in Track 1 in the June 
2015 final rule. Although some commenters supported an approach for 
evaluating an ACO's financial performance for determining its 
eligibility to remain in a one-sided model, many commenters expressed 
opposition, citing concerns that this approach could be premature and 
could disadvantage ACOs that need more time to implement their care 
management strategies, and could discourage participation. At the time 
of the June 2015 final rule, we were persuaded by commenters' concerns 
that application of the additional proposed financial performance 
criterion for continued participation in Track 1 was premature for ACOs 
that initially struggled to demonstrate cost savings in their first 
years in the program. Instead, we

[[Page 41835]]

explained our belief that our authority to monitor ACOs (Sec.  425.316) 
allows us to take action to address ACOs that are outliers on financial 
performance by placing poorly performing ACOs on a special monitoring 
plan. Furthermore, if our monitoring reveals that an ACO is out of 
compliance with any of the requirements of the Shared Savings Program, 
we may request a corrective action plan and, if the required corrective 
action plan is not submitted or is not satisfactorily implemented, we 
may terminate the ACO's participation in the program (80 FR 32765).
    Now that we have additional experience with monitoring ACO 
financial performance, we believe that the current regulations are 
insufficient to address recurrent poor financial performance, 
particularly for ACOs that may be otherwise in compliance with program 
requirements. Consequently, some ACOs may not have sufficient incentive 
to remain accountable for the expenditures of their assigned 
beneficiaries. This may leave the program, the Trust Funds, and 
Medicare FFS beneficiaries vulnerable to organizations that may be 
participating in the program for reasons other than meeting the 
program's goals.
    We believe that a financial performance requirement is necessary to 
ensure that the program promotes accountability for the cost of the 
care furnished to an ACO's assigned patient population, as contemplated 
by section 1899(b)(2)(A) of the Act. We believe there is an inherent 
financial performance requirement that is embedded within the third 
component of the program's three-part aim: (1) Better care for 
individuals; (2) better health for populations; and (3) lower growth in 
Medicare Parts A and B expenditures. Therefore, just as poor quality 
performance can subject an ACO to remedial action or termination, an 
ACO's failure to lower growth in Medicare FFS expenditures should be 
the basis for CMS to take pre-termination actions under Sec.  425.216, 
including a request for corrective action by the ACO, or termination of 
the ACO's participation agreement under Sec.  425.218.
(2) Proposed Revisions
    We propose to modify Sec.  425.316 to add a provision for 
monitoring ACO financial performance. Specifically, we propose to 
monitor for whether the expenditures for the ACO's assigned beneficiary 
population are ``negative outside corridor,'' meaning that the 
expenditures for assigned beneficiaries exceed the ACO's updated 
benchmark by an amount equal to or exceeding either the ACO's negative 
MSR under a one-sided model, or the ACO's MLR under a two-sided 
model.\17\ If the ACO is negative outside corridor for a performance 
year, we propose that we may take any of the pre-termination actions 
set forth in Sec.  425.216. If the ACO is negative outside corridor for 
another performance year of the ACO's agreement period, we propose that 
we may immediately or with advance notice terminate the ACO's 
participation agreement under Sec.  425.218.
---------------------------------------------------------------------------

    \17\ For purposes of this proposed rule, an ACO is considered to 
have shared savings when its benchmark minus performance year 
expenditures are greater than or equal to the MSR. An ACO is 
``positive within corridor'' when its benchmark minus performance 
year expenditures are greater than zero, but less than the MSR. An 
ACO is ``negative within corridor'' when its benchmark minus 
performance year expenditures are less than zero, but greater than 
the negative MSR for ACOs in a one-sided model or the MLR for ACOs 
in a two-sided model. An ACO is ``negative outside corridor'' when 
its benchmark minus performance year expenditures are less than or 
equal to the negative MSR for ACOs in a one-sided model or the MLR 
for ACOs in a two-sided model.
---------------------------------------------------------------------------

    We propose that financial performance monitoring would be 
applicable for performance years beginning in 2019 and subsequent 
years. Specifically, we would apply this proposed approach for 
monitoring financial performance results for performance years 
beginning on January 1, 2019, and July 1, 2019, and for subsequent 
performance years. Financial and quality performance results are 
typically made available to ACOs in the summer following the conclusion 
of the calendar year performance year. For example, we anticipate that 
the financial performance results for performance years beginning on 
January 1, 2019 and July 1, 2019, will be available for CMS review in 
the summer of 2020 and will be made available to ACOs when that review 
is complete. The one-sided model monitoring (relative to the ACO's 
negative MSR) would apply to ACOs in Track 1 or the first 2 years of 
the BASIC track's glide path, and the two-sided model monitoring 
(relative to the ACO's MLR) would apply to ACOs under performance-based 
risk in the BASIC track (including the glide path) and the ENHANCED 
track, as well as Track 2.
    Generally, based on our experience, ACOs in two-sided models tend 
to terminate their participation after sharing in losses for a single 
year in Track 2 or Track 3. We have observed that a small, but not 
insignificant, number of Track 1 ACOs are negative outside corridor in 
their first 2 performance years in the program. Among 194 Track 1 ACOs 
that renewed for a second agreement period under Track 1, 19 were 
negative outside corridor in their first 2 performance years in their 
first agreement period. This includes 14 of 127 Track 1 ACOs that 
started their first agreement period in either 2012 or 2013 and renewed 
for a second agreement period in Track 1 beginning January 1, 2016, as 
well as 5 of 67 Track 1 ACOs that started their first agreement period 
in 2014 and renewed for a second agreement period in Track 1 beginning 
January 1, 2017. Moreover, the majority of these organizations have 
thus far failed to achieve shared savings in subsequent performance 
years. For example, of the 14 2012/2013 starters in Track 1 that were 
negative outside corridor for the first 2 consecutive performance years 
in their first agreement period, only 2 ACOs achieved shared savings in 
their third performance year, while 10 were still negative outside 
corridor and 2 were negative within corridor. All 14 ACOs entered a 
second agreement period in Track 1 starting on January 1, 2016: In 
performance year 2016, 5 shared savings, 4 were positive within 
corridor, 4 were negative within corridor, and 1 was negative outside 
corridor. While some of these ACOs appeared to show improvement, the 
2016 results do not take into account ACO participant list changes for 
these ACOs or rebasing of the ACOs' historical benchmarks for their 
second agreement period. Because the benchmark years for the second 
agreement period correspond to the performance years of the first 
agreement period, ACOs that had losses in their initial years are 
likely to receive a higher rebased benchmark than those that shared 
savings. We observed similar trends following the first 2 performance 
years for ACOs that started their first agreement period in 2014 and 
2015. Therefore, while experience does not suggest that a large share 
of ACOs would be affected, we believe that the proposed policy, if 
adopted, will help to ensure that ACOs are not allowed multiple years 
of losses without being held accountable for their performance.
    Alternatively, we considered an approach under which we would 
monitor ACOs for generating any losses, beginning with first dollar 
losses, including monitoring for ACOs that are negative inside corridor 
and negative outside corridor. However, we prefer the proposed approach 
previously described, because the corridor (MLR threshold above the 
benchmark) is established to protect ACOs against sharing losses that 
result from random variation.
    As described briefly in section II.A.2 of this proposed rule, ACOs 
that

[[Page 41836]]

continue in the program despite poor financial performance may provide 
little benefit to the Medicare program while taking advantage of the 
potential benefits of program participation, such as receipt of program 
data and the opportunity to enter into certain contracting arrangements 
with ACO participants and ACO providers/suppliers. The redesign of the 
program includes a number of features that may encourage continued 
participation by poor performing ACOs under performance-based risk: The 
relatively lower levels of risk under the BASIC track, the additional 
features available to eligible ACOs under performance-based risk (the 
opportunity for physicians and other practitioners participating in 
eligible two-sided model ACOs to furnish telehealth services under 
section 1899(l) of the Act, availability of a SNF 3-day rule waiver, 
and the ability to offer incentive payments to beneficiaries under a 
CMS-approved beneficiary incentive program), and the opportunity to 
participate in an Advanced APM for purposes of the Quality Payment 
Program. We are concerned that ACOs may seek to obtain reinsurance to 
help offset their liability for shared losses as a way of enabling 
their continued program participation while undermining the program's 
goals. Although we considered prohibiting ACOs from obtaining 
reinsurance to mitigate their performance-based risk, we believe that 
such a requirement could be overly restrictive and that the proposed 
financial monitoring approach would be effective in removing from the 
program ACOs with a history of poor financial performance. We seek 
comment on this issue, and on ACOs' use of reinsurance, including their 
ability to obtain viable reinsurance products covering a Medicare FFS 
population.
    We seek comment on these proposals and related considerations.
6. Requirements for ACO Participation in Two-Sided Models
a. Overview
    In this section, we address requirements related to an ACO's 
participation in performance-based risk. We propose technical changes 
to the program's policies on election of the MSR/MLR for ACOs in the 
BASIC track's glide path, and to address the circumstance of ACOs in 
two-sided models that elected a fixed MSR/MLR that have fewer than 
5,000 assigned beneficiaries for a performance year. We propose changes 
to the repayment mechanism requirement to update these policies to 
address the new participation options included in this proposed rule, 
including the BASIC track's glide path under which participating ACOs 
must transition from a one-sided model to performance-based risk within 
a single agreement period. We propose to add a provision that could 
lower the required repayment mechanism amount for BASIC track ACOs in 
Levels C, D, or E. In addition, we propose to add provisions to permit 
recalculation of the estimated amount of the repayment mechanism each 
performance year to account for changes in ACO participant composition, 
to codify requirements on the duration of repayment mechanism 
arrangements, to grant a renewing ACO (as defined in proposed Sec.  
425.20) the flexibility to maintain a single, existing repayment 
mechanism arrangement to support its ability to repay shared losses in 
the new agreement period so long as it is sufficient to cover an 
increased repayment mechanism amount during the new agreement period 
(if applicable), and to establish requirements regarding the issuing 
institutions for a repayment mechanism arrangement. In this section, we 
also propose new policies to hold ACOs participating in two-sided 
models accountable for sharing in losses when they terminate, or CMS 
terminates, their agreement before the end of a performance year, while 
also reducing the amount of advance notice required for early 
termination.
b. Election of MSR/MLR by ACOs
(1) Background
    As discussed in earlier rulemaking, the MSR and MLR protect against 
an ACO earning shared savings or being liable for shared losses when 
the change in expenditures represents normal, or random, variation 
rather than an actual change in performance (see 76 FR 67927 through 
67929; and 76 FR 67936 through 67937). The MSR and MLR are calculated 
as a percentage of the ACO's updated historical benchmark (see 
Sec. Sec.  425.604(b) and (c), 425.606(b), 425.610(b)).
    In the June 2015 final rule, we finalized an approach to offer 
Track 2 and Track 3 ACOs the opportunity to select the MSR/MLR that 
will apply for the duration of the ACO's 3-year agreement period from 
several symmetrical MSR/MLR options (see 80 FR 32769 through 32771, and 
80 FR 32779 through 32780; Sec. Sec.  425.606(b)(1)(ii) and 
425.610(b)(1)). We explained our belief that offering ACOs a choice of 
MSR/MLR will encourage ACOs to move to two-sided risk, and that ACOs 
are best positioned to determine the level of risk they are prepared to 
accept. For instance, ACOs that are more hesitant to enter a 
performance-based risk arrangement may choose a higher MSR/MLR, to have 
the protection of a higher threshold before the ACO would become liable 
to repay shared losses, thus mitigating downside risk, although the ACO 
would in turn have a higher threshold to meet before being eligible to 
receive shared savings. ACOs that are comfortable with a lower 
threshold of protection from risk of shared losses may select a lower 
MSR/MLR to benefit from a corresponding lower threshold for eligibility 
for shared savings. We also explained our belief that applying the same 
MSR/MLR methodology in both of the risk-based tracks reduces complexity 
for CMS's operations and establishes more equal footing between the 
risk models. ACOs applying to the Track 1+ Model are also allowed the 
same choice of MSR/MLR to be applied for the duration of the ACO's 
agreement period under the Model.
    ACOs applying to a two-sided model (currently, Track 2, Track 3 or 
the Track 1+ Model) may select from the following options:
     Zero percent MSR/MLR.
     Symmetrical MSR/MLR in a 0.5 percent increment between 
0.5-2.0 percent.
     Symmetrical MSR/MLR that varies based on the ACO's number 
of assigned beneficiaries according to the methodology established 
under the one-sided model under Sec.  425.604(b). The MSR is the same 
as the MSR that would apply in the one-sided model, and the MLR is 
equal to the negative MSR.
(2) Proposals for Timing and Selection of MSR/MLR
    We considered what MSR/MLR options should be available for the 
BASIC track's glide path, as well as the timing of selection of the 
MSR/MLR for ACOs entering the glide path under a one-sided model and 
transitioning to a two-sided model during their agreement period under 
the BASIC track.
    We propose that ACOs under the BASIC track would have the same MSR/
MLR options as are currently available to ACOs under one-sided and two-
sided models of the Shared Savings Program, as applicable to the model 
under which the ACO is participating along the BASIC track's glide 
path. We believe these thresholds continue to have importance to 
protect against savings and losses resulting from random variation, 
although we describe in section II.A.5.b of this proposed rule our 
consideration of an alternate approach

[[Page 41837]]

that would lower the MSR for low revenue ACOs. Further, providing the 
same MSR/MLR options for BASIC track ACOs under two-sided risk as 
ENHANCED track ACOs would be consistent with our current policy for 
Track 2 and Track 3 that allows ACOs to determine the level of risk 
they will accept while reducing complexity for CMS's operations and 
establishing more equal footing between the risk models.
    Specifically, we propose that ACOs in a one-sided model of the 
BASIC track's glide path would have a variable MSR based on the ACO's 
number of assigned beneficiaries. We propose to apply the same variable 
MSR methodology as is used under Sec.  425.604(b) for Track 1. We 
propose to specify this variable MSR methodology in a proposed new 
section of the regulations at Sec.  425.605(b). We also propose to 
specify in Sec.  425.605(b) the MSR/MLR options for ACOs under two-
sided models of the BASIC track, consistent with previously described 
symmetrical MSR/MLR options currently available to ACOs in two-sided 
models of the Shared Savings Program and the Track 1+ Model (for 
example, as specified in Sec.  425.610(b)).
    Because we are proposing to discontinue Track 1, we believe it is 
necessary to update the provision governing the symmetrical MSR/MLR 
options for the ENHANCED track at Sec.  425.610(b), which currently 
references the variable MSR methodology under Track 1. We propose to 
revise Sec.  425.610(b)(1)(iii) to reference the requirements at Sec.  
425.605(b)(1) for a variable MSR under the BASIC track's glide path 
rather than the variable MSR under Track 1. Because we are also 
proposing to discontinue Track 2, concurrently with our proposal to 
discontinue Track 1, we do not believe it is necessary to revise the 
cross-reference in Sec.  425.606(b)(1)(ii)(C) to the variable MSR 
methodology under Track 1.
    We continue to believe that an ACO should select its MSR/MLR before 
assuming performance-based risk, and this selection should apply for 
the duration of its agreement period under risk. We believe that a 
policy that allows more frequent selection of the MSR/MLR within an 
agreement period under two-sided risk (such as prior to the start of 
each performance year) could leave the program vulnerable to gaming. 
For example, ACOs could revise their MSR/MLR selections once they have 
experience under performance-based risk in their current agreement 
period to maximize shared savings or to avoid shared losses.
    However, in light of our proposal to require ACOs to move between a 
one-sided model (Level A or Level B) and a two-sided model (Level C, D, 
or E) during an agreement period in the BASIC track's glide path, we 
believe it is appropriate to allow ACOs to make their MSR/MLR selection 
during the application cycle preceding their first performance year in 
a two-sided model, generally during the calendar year before entry into 
risk. ACOs that enter the BASIC track's glide path under a one-sided 
model would still be inexperienced with performance-based risk, 
although they will have the opportunity to gain experience with the 
program, prior to making this selection. This approach would be another 
means for BASIC ACOs in the glide path to control their level of risk 
exposure.
    Therefore, we propose to include a policy in the proposed new 
section of the regulations at Sec.  425.605(b)(2) to allow ACOs under 
the BASIC track's glide path in Level A or Level B to choose the MSR/
MLR to be applied before the start of their first performance year in a 
two-sided model. This selection would occur before the ACO enters Level 
C, D or E of the BASIC track's glide path, depending on whether the ACO 
is automatically transitioned to a two-sided model (Level C) or elects 
to more quickly transition to a two-sided model within the glide path 
(Level C, D, or E).
(3) Proposals for Modifying the MSR/MLR To Address Small Population 
Sizes
    As discussed in the introduction to this section, the MSR and MLR 
protect against an ACO earning shared savings or being liable for 
shared losses when the change in expenditures represents normal, or 
random, variation rather than an actual change in performance. ACOs in 
two-sided risk models that have opted for a fixed MSR/MLR can choose a 
MSR/MLR of zero percent or a symmetrical MSR/MLR equal to 0.5 percent, 
1.0 percent, 1.5 percent, or 2.0 percent. As discussed elsewhere in 
this proposed rule, we are proposing that ACOs in a two-sided model of 
the new BASIC track would have the same options in selecting their MSR/
MLR, including the option of a variable MSR/MLR based on the number of 
beneficiaries assigned to the ACO.
    Under the current regulations, for all ACOs in Track 1 and any ACO 
in a two-sided risk model that has elected a variable MSR/MLR, we 
determine the MSR and MLR (if applicable) for the performance year 
based on the number of beneficiaries assigned to the ACO for the 
performance year. For ACOs with at least 5,000 assigned beneficiaries 
in the performance year, the variable MSR can range from a high of 3.9 
percent (for ACOs with at least 5,000 assigned beneficiaries) to a low 
of 2.0 percent (for ACOs with approximately 60,000 or more assigned 
beneficiaries). See Sec.  425.604(b). For two-sided model ACOs under a 
variable MSR/MLR, the MLR is equal to the negative of the MSR.
    Under section 1899(b)(2)(D) of the Act, in order to be eligible to 
participate in the Shared Savings Program an ACO must have at least 
5,000 assigned beneficiaries. In earlier rulemaking, we established the 
requirements under Sec.  425.110 to address situations in which an ACO 
met the 5,000 assigned beneficiary requirement at the start of its 
agreement period, but later falls below 5,000 assigned beneficiaries 
during a performance year. We refer readers to the November 2011 and 
June 2015 final rules and the CY 2017 PFS final rule for a discussion 
of the relevant background and related considerations (see 76 FR 67807 
and 67808, 67959; 80 FR 32705 through 32707; 81 FR 80515 and 80516). 
CMS deems an ACO to have initially satisfied the requirement to have at 
least 5,000 assigned beneficiaries if 5,000 or more beneficiaries are 
historically assigned to the ACO participants in each of the 3 
benchmark years, as calculated using the program's assignment 
methodology (Sec.  425.110(a)). CMS initially makes this assessment at 
the time of an ACO's application to the program. As specified in Sec.  
425.110(b), if at any time during the performance year, an ACO's 
assigned population falls below 5,000, the ACO may be subject to the 
pre-termination actions described in Sec.  425.216 and termination of 
the participation agreement by CMS under Sec.  425.218. As a pre-
termination action, CMS may require the ACO to submit a corrective 
action plan (CAP) to CMS for approval (Sec.  425.216). While under a 
CAP for having an assigned population below 5,000 assigned 
beneficiaries, an ACO remains eligible for shared savings and losses 
(Sec.  425.110(b)(1)). If the ACO's assigned population is not at least 
5,000 by the end of the performance year specified by CMS in its 
request for a CAP, CMS terminates the ACO's participation agreement and 
the ACO is not eligible to share in savings for that performance year 
(Sec.  425.110(b)(2)).
    As specified in Sec.  425.110(b)(1), if an ACO's performance year 
assigned beneficiary population falls below 5,000, the ACO remains 
eligible for shared savings/shared losses, but the following policies 
apply with respect to the ACO's MSR/MLR: (1) For ACOs subject to a 
variable MSR and MLR (if applicable), the MSR and MLR (if applicable) 
will be set at a level consistent with the number of assigned

[[Page 41838]]

beneficiaries; (2) For ACOs with a fixed MSR/MLR, the MSR/MLR will 
remain fixed at the level consistent with the choice of MSR and MLR 
that the ACO made at the start of the agreement period.
    To implement the requirement for the variable MSR and MLR (if 
applicable) to be set at a level consistent with the number of assigned 
beneficiaries, the CMS Office of the Actuary (OACT) calculates the MSR 
ranges for populations smaller than 5,000 assigned beneficiaries. The 
following examples are based on our operational experience: If an ACO's 
assigned beneficiary population drops to 3,000, the MSR would be set at 
5 percent; if the population falls to 1,000 or 500, the MSR would 
correspondingly rise to 8.7 percent or 12.2 percent, respectively. 
These sharp increases in the MSR reflect the greater random variation 
that can occur when expenditures are calculated across a small number 
of assigned beneficiaries.
    To date, the number of ACOs that have fallen below the 5,000-
beneficiary threshold for a performance year has been relatively small. 
Among 432 ACOs that were reconciled in PY 2016, there were 12 ACOs with 
fewer than 5,000 assigned beneficiaries. In PY 2015 there were 15 (out 
of 392 ACOs) below the threshold and in PY 2014 there were 14 (out of 
333 ACOs). While the majority of these ACOs had between 4,000 and 5,000 
beneficiaries, we observed the performance year population fall as low 
as 513 for one ACO. Based on data available from fourth quarter 2017 
program reports, which tend to provide a close approximation of final 
performance year assignment counts, over 4 percent of ACOs 
participating in PY 2017 are likely to fall below 5,000 assigned 
beneficiaries for the performance year, with several likely to be under 
1,000.
    Consistent with overall program participation trends, most ACOs 
that have fallen below the 5,000-beneficiary threshold in prior 
performance years, or that are anticipated to do so for PY 2017, have 
been in Track 1. These ACOs have thus automatically been subject to a 
variable MSR. With increased participation in performance-based risk 
models, however, we anticipate an increased likelihood of observing 
ACOs below the 5,000-beneficiary threshold that have a fixed MSR/MLR of 
plus or minus 2 percent or less.
    Indeed, program data have demonstrated the popularity of the fixed 
MSR/MLR among ACOs in two-sided models. In PY 2016, the first year that 
ACOs in two-sided models were allowed to choose their MSR/MLR, 21 of 22 
eligible ACOs selected one of the fixed options. Among the 42 Track 2 
and Track 3 ACOs participating in PY 2017, 38 selected a MSR/MLR that 
does not vary with the ACO's number of assigned beneficiaries, 
including 11 that are subject to a MSR or MLR of zero percent. Among 
101 ACOs participating in two-sided models in PY 2018, 80 are subject 
to one of the fixed options, including 18 with a MSR and MLR of zero 
percent.
    While we continue to believe that ACOs operating under performance-
based risk models should have flexibility in determining their exposure 
to risk through the MSR/MLR selection, we are concerned about the 
potential for rewarding ACOs with a static MSR/MLR that are unable to 
maintain a minimum population of 5,000 beneficiaries through the 
payment of shared savings, for expenditure variation that is likely the 
result of normal expenditure fluctuations, rather than the performance 
of the ACO. If the ACO's minimum population falls below 5,000, the ACO 
is no longer in compliance with program requirements. The reduction in 
the size of the ACO's assigned beneficiary population would also raise 
concerns that any shared savings payments made to the ACO would not 
reward true cost savings, but instead would pay for normal expenditure 
fluctuations. We note, however, that an ACO under performance-based 
risk potentially would be at greater risk of being liable for shared 
losses, also stemming from such normal expenditure variation. If an 
ACO's assigned population falls below the minimum requirement of 5,000 
beneficiaries, a solution to improve the confidence that shared savings 
and shared losses do not represent normal variation, but meaningful 
changes in expenditures, would be to apply a symmetrical MSR/MLR that 
varies based on the number of beneficiaries assigned to the ACO.
    The values for the variable MSR are shown in Table 8. As previously 
described, the MLR is equal to the negative MSR. In this table, the MSR 
ranges for population sizes varying between from 5,000 to over 60,000 
assigned beneficiaries are consistent with the current approach to 
determining a variable MSR based on the size of the ACO's population 
(see Sec.  425.604(b)), and the corresponding variable MLR. We have 
also added new values, calculated by the CMS OACT, for population sizes 
varying from one to 4,999, as shown in Table 8. For ACOs with 
populations between 500-4,999 beneficiaries, the MSR would range 
between 12.2 percent (for ACOs with 500 assigned beneficiaries) and 3.9 
percent (for ACOs with 4,999 assigned beneficiaries). For ACOs with 
populations of 499 assigned beneficiaries or fewer, we would calculate 
the MSR to be equal to or greater than 12.2 percent, with the MSR value 
increasing as the ACO's assigned population decreases.

                        Table 8--Determination of MSR by Number of Assigned Beneficiaries
----------------------------------------------------------------------------------------------------------------
                                                                    MSR (low end of          MSR (high end of
                    Number of beneficiaries                     assigned beneficiaries)  assigned beneficiaries)
                                                                       (percent)                (percent)
----------------------------------------------------------------------------------------------------------------
1-499.........................................................                       >=12.2
                                                               -------------------------------------------------
500-999.......................................................                     12.2                      8.7
1,000-2,999...................................................                      8.7                      5.0
3,000-4,999...................................................                      5.0                      3.9
5,000-5,999...................................................                      3.9                      3.6
6,000-6,999...................................................                      3.6                      3.4
7,000-7,999...................................................                      3.4                      3.2
8,000-8,999...................................................                      3.2                      3.1
9,000-9,999...................................................                      3.1                      3.0
10,000-14,999.................................................                      3.0                      2.7
15,000-19,999.................................................                      2.7                      2.5
20,000-49,999.................................................                      2.5                      2.2
50,000-59,999.................................................                      2.2                      2.0

[[Page 41839]]

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

    Therefore, we are proposing to modify Sec.  425.110(b) to provide 
that we will use a variable MSR/MLR when performing shared savings and 
shared losses calculations if an ACO's assigned beneficiary population 
falls below 5,000 for the performance year, regardless of whether the 
ACO selected a fixed or variable MSR/MLR. We propose to use this 
approach beginning with performance years starting in 2019. The 
variable MSR/MLR would be determined using the same approach based on 
number of assigned beneficiaries that is currently used for two-sided 
model ACOs that have selected the variable option. If the ACO's 
assigned beneficiary population increases to 5,000 or more for 
subsequent performance years in the agreement period, the MSR/MLR would 
revert to the fixed level selected by the ACO at the start of the 
agreement period (or before moving to risk for ACOs on the BASIC 
track's glide path), if applicable.
    While we believe this proposal would have a fairly limited reach in 
terms of number of ACOs impacted, we believe it is nonetheless 
important for protecting the integrity of the Trust Funds and better 
ensuring that the program is rewarding or penalizing ACOs for actual 
performance. The policy, if finalized, would make it more difficult for 
an ACO under performance-based risk that falls below the 5,000-
beneficiary threshold to earn shared savings, but would also provide 
greater protection against owing shared losses.
    We also propose to revise the regulations at Sec.  425.110 to 
reorganize the provisions in paragraph (b), so that all current and 
proposed policies for determining the MSR and MLR would apply to all 
ACOs whose population fall below the 5,000-beneficiaries threshold 
which are reconciled for shared savings or losses, as opposed to being 
limited to ACOs under a CAP as provided in the existing provision at 
Sec.  425.110(b)(1). Specifically we propose to move the current 
provisions on the determination of the MSR/MLR at paragraphs (b)(1)(i) 
and (ii) to a new provision at paragraph (b)(3) where we will also 
distinguish between the policies applicable to determining the MSR/MLR 
for performance years starting before January 1, 2019, and those that 
we are proposing to apply for performance years starting in 2019 and 
subsequent years.
    We propose to specify the additional ranges for the MSR (when the 
ACO's population falls below 5,000 assigned beneficiaries) through 
revisions to the table at Sec.  425.604(b), for use in determining an 
ACO's eligibility for shared savings for a performance year starting on 
January 1, 2019, and any remaining years of the current agreement 
period for ACOs under Track 1. We note these ranges are consistent with 
the program's current policy for setting the MSR and MLR (in the event 
a two-sided model ACO elected the variable MSR/MLR) when the population 
falls below 5,000 assigned beneficiaries, and therefore similar ranges 
would be applied in determining the MSR/MLR for performance year 2017 
and 2018. These ranges in Sec.  425.604(b) are cross-referenced in the 
regulations for Track 2 at Sec.  425.606(b)(1)(ii)(C) and therefore 
would also apply to Track 2 ACOs if their population falls below 5,000 
assigned beneficiaries. Further, as discussed in section II.A.6.b.2 of 
this proposed rule, we propose to specify under a new section of the 
regulations at Sec.  425.605(b)(1) the range of MSR values that apply 
under the one-sided model of the BASIC track's glide path, which would 
also be used in determining the variable MSR/MLR for ACOs participating 
in two-sided models under the BASIC track and ENHANCED track. We seek 
comment on these proposals and specifically on the proposed MSR ranges 
for ACOs with fewer than 5,000 assigned beneficiaries, including the 
application of a MSR/MLR in excess of 12 percent, in the case of ACOs 
that have failed to meet the requirement to maintain a population of at 
least 5,000 assigned beneficiaries and have very small population 
sizes. In particular, we seek commenters' feedback on whether the 
proposed approach described in this section could improve 
accountability of ACOs.
    We also note that the requirement of section 1899(b)(2)(D) of the 
Act, for an ACO to have at least 5,000 assigned beneficiaries, 
continues to apply. The additional consequences for ACOs with fewer 
than 5,000 assigned beneficiaries, as specified in Sec.  425.110(b)(1) 
and (2) would also continue to apply. Under Sec.  425.110(b)(2), ACOs 
are not eligible to share savings for a performance year in which they 
are terminated for noncompliance with the requirement to maintain a 
population of at least 5,000 assigned beneficiaries. As discussed in 
II.A.6.d of this proposed rule, we are proposing to revise our 
regulations governing the payment consequences of early termination to 
include policies applicable to involuntarily terminated ACOs. Under 
this proposed approach, two-sided model ACOs would be liable for a pro-
rated share of any shared losses determined for the performance year 
during which a termination under Sec.  425.110(b)(2) becomes effective.
c. ACO Repayment Mechanisms
(1) Background
    We discussed in earlier rulemaking the requirement for ACOs 
applying to enter a two-sided model to demonstrate they have 
established an adequate repayment mechanism to provide CMS assurance of 
their ability to repay shared losses for which they may be liable upon 
reconciliation for each performance year.\18\ The requirements for an 
ACO to establish and maintain an adequate repayment mechanism are 
described in Sec.  425.204(f), and we have provided additional program 
guidance on repayment mechanism arrangements.\19\ Section 425.204(f) 
addresses various requirements for repayment mechanism arrangements: 
The nature of the repayment mechanism; when documentation of the 
repayment mechanism must be submitted to CMS; the amount of the 
repayment mechanism; replenishment of the repayment mechanism funds 
after their use; and the duration of the repayment mechanism 
arrangement.
---------------------------------------------------------------------------

    \18\ See 76 FR 67937 through 67940 (establishing the requirement 
for Track 2 ACOs). See also 80 FR 32781 through 32785 (adopting the 
same general requirements for Track 3 ACOs with respect to the 
repayment mechanism and discussing modifications to reduce burden of 
the repayment requirements on ACOs).
    \19\ Medicare Shared Savings Program & Medicare ACO Track 1+ 
Model, Repayment Mechanism Arrangements, Guidance Document (July 
2017, version #6), available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Downloads/Repayment-Mechanism-Guidance.pdf (herein Repayment Mechanism 
Arrangements Guidance).

---------------------------------------------------------------------------

[[Page 41840]]

    Consistent with the requirements set forth in Sec.  425.204(f)(2), 
in establishing a repayment mechanism for participation in a two-sided 
model of the Shared Savings Program, ACOs must select from one or more 
of the following three types of repayment arrangements: Funds placed in 
escrow; a line of credit as evidenced by a letter of credit that the 
Medicare program could draw upon; or a surety bond. Currently, our 
regulations do not specify any requirements regarding the institutions 
that may administer an escrow account or issue a line of credit or 
surety bond. Our regulations require an ACO to submit documentation of 
its repayment mechanism arrangement during the application or 
participation agreement renewal process and upon request thereafter.
    The arrangement must be adequate to repay at least the minimum 
dollar amount specified by CMS, which is determined based on an 
estimation methodology that uses historical Medicare Parts A and B FFS 
expenditures for the ACO's assigned population. For Track 2 and Track 3 
ACOs, the repayment mechanism must be equal to at least 1 percent of 
the total per capita Medicare Parts A and B FFS expenditures for the 
ACO's assigned beneficiaries, as determined based on expenditures used 
to establish the ACO's benchmark for the applicable agreement period, 
as estimated by CMS at the time of application or participation 
agreement renewal (see Sec.  425.204(f)(1)(ii), see also Repayment 
Mechanism Arrangements Guidance). In the Repayment Mechanism 
Arrangements Guidance, we describe in detail our approach to estimating 
the repayment mechanism amount for Track 2 and Track 3 ACOs and our 
experience with the magnitude of the dollar amounts.
    More generally, program stakeholders have continued to identify the 
repayment mechanism requirement as a potential barrier for some ACOs to 
enter into performance-based risk tracks, particularly small, 
physician-only and rural ACOs that may lack access to the capital that 
is needed to establish a repayment mechanism with a large dollar 
amount. We revised the Track 1+ Model design in July 2017 (See Track 1+ 
Model Fact Sheet (Updated July 2017)), to allow for potentially lower 
repayment mechanism amounts for participating ACOs under a revenue-
based loss sharing limit (that is, ACOs that do not include an ACO 
participant that is either (i) an IPPS hospital, cancer center, or 
rural hospital with more than 100 beds; or (ii) an ACO participant that 
is owned or operated by such a hospital or by an organization that owns 
or operates such a hospital). This policy provides greater consistency 
between the repayment mechanism amount and the level of risk assumed by 
revenue-based or benchmark-based ACOs and helps alleviate the burden of 
securing a higher repayment mechanism amount based on the ACO's 
benchmark expenditures, as required for Track 2 and Track 3 ACOs. We 
believe this approach is appropriate for this subset of Track 1+ Model 
ACOs because they are generally at risk for repaying a lower amount of 
shared losses than other ACOs that are subject to a benchmark-based 
loss sharing limit (that is, ACOs that include the types of ACO 
participants previously identified in this proposed rule). Therefore, 
under the Track 1+ Model, a bifurcated approach is used to determine 
the estimated amount of an ACO's repayment mechanism for consistency 
with the bifurcated approach to determining the loss sharing limit 
under the Track 1+ Model. For Track 1+ Model ACOs, CMS estimates the 
amount of the ACO's repayment mechanism as follows:
     ACOs subject to the benchmark-based loss sharing limit: 
The repayment mechanism amount is 1 percent of the total per capita 
Medicare Parts A and B FFS expenditures for the ACO's assigned 
beneficiaries, as determined based on expenditures used to establish 
the ACO's benchmark for the applicable agreement period.
     ACOs subject to the revenue-based loss sharing limit: The 
repayment mechanism amount is the lower of (1) 2 percent of the ACO 
participants' total Medicare Parts A and B FFS revenue, or (2) 1 
percent of the total per capita Medicare Parts A and B FFS expenditures 
for the ACO's assigned beneficiaries, as determined based on 
expenditures used to establish the ACO's benchmark.
    Under Sec.  425.204(f)(3), an ACO must replenish the amount of 
funds available through the repayment mechanism within 90 days after 
the repayment mechanism has been used to repay any portion of shared 
losses owed to CMS. In addition, our regulations require a repayment 
mechanism arrangement to remain in effect for a sufficient period of 
time after the conclusion of the agreement period to permit CMS to 
calculate and to collect the amount of shared losses owed by the ACO. 
As noted in our Repayment Mechanism Arrangements Guidance, we believe 
that this standard would be satisfied by an arrangement that terminates 
24 months following the end of the agreement period.
(2) Proposals Regarding Repayment Mechanism Amounts
    As previously noted, an ACO that is seeking to participate in a 
two-sided model must submit for CMS approval documentation supporting 
the adequacy of a mechanism for repaying shared losses, including 
demonstrating that the value of the arrangement is at least the minimum 
amount specified by CMS. We propose to modify Sec.  425.204(f) to 
address concerns regarding the amount of the repayment mechanism, to 
specify the data used by CMS to determine the repayment mechanism 
amount, and to permit CMS to specify a new repayment mechanism amount 
annually based on changes in ACO participants.
    In general, we believe that, like other ACOs participating in two-
sided risk tracks, ACOs applying to participate in the BASIC track 
under performance-based risk should be required to provide CMS 
assurance of their ability to repay shared losses by establishing an 
adequate repayment mechanism. Consistent with the approach used under 
the Track 1+ Model, we believe the amount of the repayment mechanism 
should be potentially lower for BASIC track ACOs compared to the 
repayment mechanism amounts required for ACOs in Track 2 or the 
ENHANCED track. We would calculate a revenue-based repayment mechanism 
amount and a benchmark-based repayment mechanism amount for each BASIC 
track ACO and require the ACO to obtain a repayment mechanism for the 
lower of the two amounts described previously. We believe this aligns 
with our proposed approach for determining the loss sharing limit for 
ACOs participating in the BASIC track, described in section II.A.3.b. 
of this proposed rule. In addition, this approach balances concerns 
about the ability of ACOs to take on performance-based risk and repay 
any shared losses for which they may be liable with concerns about the 
burden imposed on ACOs seeking to enter and continue their 
participation in the BASIC track.
    Previously, we have used historical data to calculate repayment 
mechanism amounts, typically using the same reference year to calculate 
the estimates consistently for all applicants to a two-sided model. As 
a basis for the estimate, we have typically used assignment and 
expenditure data from the most recent prior year for which 12 months of 
data are available, which tends to be benchmark year 2 for ACOs 
applying to enter the program or renew their participation agreement 
(for example, calendar year 2016 data for ACOs applying to enter 
participation

[[Page 41841]]

agreements beginning January 1, 2018). The Repayment Mechanism 
Arrangements Guidance includes a detailed description of how we have 
previously estimated 1 percent of the total per capita Medicare Parts A 
and B FFS expenditures for an ACO's assigned beneficiaries based on the 
expenditures used to establish the ACO's benchmark. To continue 
calculating the estimates with expenditures used to calculate the 
benchmark, we would need to use different sets of historical data for 
ACOs applying to enter or renew an agreement and those transitioning to 
a performance-based risk track. That is because ACOs applying to start 
a new agreement period under the program and ACOs transitioning to risk 
within different years of their current agreement period will have 
different benchmark years. To avoid undue operational burden, we 
propose to use the most recent calendar year, for which 12 months of 
data is available to calculate repayment mechanism estimates for all 
ACOs applying to enter, or transitioning to, performance-based risk for 
a particular performance year. We believe this approach to using more 
recent historical data to estimate the repayment mechanism amount would 
more accurately approximate the level of losses for which the ACO could 
be liable regardless of whether the ACO is subject to a benchmark-based 
or revenue-based loss sharing limit.
    Therefore, we are proposing to amend Sec.  425.204(f)(4) to specify 
the methodologies and data used in calculating the repayment mechanism 
amounts for BASIC track, Track 2, and ENHANCED track ACOs. For an ACO 
in Track 2 or the ENHANCED track, we propose that the repayment 
mechanism amount must be equal to at least 1 percent of the total per 
capita Medicare Parts A and B FFS expenditures for the ACO's assigned 
beneficiaries, based on expenditures for the most recent calendar year 
for which 12 months of data are available. For a BASIC track ACO, the 
repayment mechanism amount must be equal to the lesser of (i) 1 percent 
of the total per capita Medicare Parts A and B FFS expenditures for its 
assigned beneficiaries, based on expenditures for the most recent 
calendar year for which 12 months of data are available; or (ii) 2 
percent of the total Medicare Parts A and B FFS revenue of its ACO 
participants, based on revenue for the most recent calendar year for 
which 12 months of data are available. For ACOs with a participant 
agreement start date of July 1, 2019, we also propose to calculate the 
repayment mechanism amount using expenditure data from the most recent 
calendar year for which 12 months of data are available.
    Currently, we generally do not revise the estimated repayment 
mechanism amount for an ACO during its agreement period. For example, 
we typically do not revise the repayment mechanism amount during an 
ACO's agreement period to reflect annual changes in the ACO's certified 
ACO participant list. However, in the Track 1+ Model, CMS may require 
the ACO to adjust the repayment mechanism amount if changes in an ACO's 
participant composition occur within the ACO's agreement period that 
result in the application of relatively higher or lower loss sharing 
limits. As explained in the Track 1+ Model Fact Sheet, if the estimated 
repayment mechanism amount increases as a result of the ACO's change in 
composition, CMS would require the Track 1+ ACO to demonstrate its 
repayment mechanism is equal to this higher amount. If the estimated 
amount decreases as a result of its change in composition, CMS may 
permit the ACO to decrease the amount of its repayment mechanism (for 
example, if CMS also determines the ACO does not owe shared losses from 
the prior performance year under the Track 1+ Model).
    We believe a similar approach may be appropriate to address changes 
in the ACO's composition over the course of an agreement period and to 
ensure the adequacy of an ACO's repayment mechanism as it enters higher 
levels of risk within the ENHANCED track or the BASIC track's glide 
path. During an agreement period, an ACO's composition of ACO 
participant TINs and the providers/suppliers enrolled in the ACO 
participant TINs may change. The repayment mechanism estimation 
methodology we previously described in this section uses data based on 
the ACO participant list, including estimated expenditures for the 
ACO's assigned population, and in the case of the proposed BASIC track, 
estimated revenue for ACO participant TINs. See for example, Repayment 
Mechanism Arrangements Guidance (describing the calculation of the 
repayment mechanism amount estimate). As a result, over time the 
initial repayment mechanism amount calculated by CMS may no longer 
represent the expenditure trends for the ACO's assigned population or 
ACO participant revenue and therefore may not be sufficient to ensure 
the ACO's ability to repay losses. For this reason, we believe it would 
be appropriate to periodically recalculate the amount of the repayment 
mechanism arrangement.
    For agreement periods beginning on or after July 1, 2019, we 
propose to recalculate the estimated amount of the ACO's repayment 
mechanism arrangement before the second and each subsequent performance 
year in which the ACO is under a two-sided model in the BASIC track or 
ENHANCED track. If we determine the estimated amount of the ACO's 
repayment mechanism has increased, we may require the ACO to 
demonstrate the repayment mechanism arrangement covers at least an 
amount equal to this higher amount.
    We propose to make this determination as part of the ACO's annual 
certification process, in which it finalizes changes to its ACO 
participant list prior to the start of each performance year. We would 
recalculate the estimate for the ACO's repayment mechanism based on the 
certified ACO participant list each year after the ACO begins 
participation in a two-sided model in the BASIC track or ENHANCED 
track. If the amount has increased substantially (for example, by at 
least 10 percent or $100,000, whichever is the lesser value), we would 
notify the ACO in writing and require the ACO to submit documentation 
for CMS approval to demonstrate that the funding for its repayment 
mechanism has been increased to reflect the recalculated repayment 
mechanism amount. We would require the ACO to make this demonstration 
within 90 days of being notified by CMS of the required increase.
    We recognize that in some cases, the estimated amount may change 
insignificantly. Requiring an amendment to the ACO's arrangement (such 
as the case would be with a letter of credit or surety bond) would be 
overly burdensome and not necessary for reassuring CMS of the adequacy 
of the arrangement. Therefore, we propose to evaluate the amount of 
change in the ACO's repayment mechanism, comparing the newly estimated 
amount and the amount estimated for the most recent prior performance 
year. If this amount has increased by equal to or greater than either 
10 percent or $100,000, whichever is the lesser value, we would require 
the ACO to demonstrate that it has increased the dollar amount of its 
arrangement to the recalculated amount. We solicit comments on whether 
a higher or lower change in the repayment mechanism estimate should 
trigger the ACO's obligation to increase its repayment mechanism 
amount.
    However, unlike the Track 1+ Model, we propose that if the 
estimated amount decreases as a result of the ACO's

[[Page 41842]]

change in composition, we will not permit the ACO to decrease the 
amount of its repayment mechanism. The ACO repayment mechanism estimate 
does not account for an ACO's maximum liability amount and it is 
possible for an ACO to owe more in shared losses than is supported by 
the repayment mechanism arrangement. Because of this, we believe it is 
more protective of the Trust Funds to not permit decreases in the 
repayment mechanism amount, during an ACO's agreement period under a 
two-sided model, based on composition changes.
    We believe the requirements for repayment mechanism amounts should 
account for the special circumstances of renewing ACOs, which would 
otherwise have to maintain two separate repayment mechanisms for 
overlapping periods of time. As discussed in section II.A.5.c.4, we 
propose to define ``renewing ACO'' to mean an ACO that continues its 
participation in the program for a consecutive agreement period, 
without a break in participation, because it is either: (1) An ACO 
whose participation agreement expired and that immediately enters a new 
agreement period to continue its participation in the program; or (2) 
an ACO that terminated its current participation agreement under Sec.  
425.220 and immediately enters a new agreement period to continue its 
participation in the program. We propose at Sec.  425.204(f)(3)(iv) 
that a renewing ACO can use its existing repayment mechanism to 
demonstrate that it has the ability to repay losses that may be 
incurred for performance years in the next agreement period, as long as 
the ACO submits documentation that the term of the repayment mechanism 
has been extended and the amount of the repayment mechanism has been 
updated, if necessary. However, depending on the circumstances, a 
renewing ACO may have greater potential liability for shared losses 
under its existing agreement period compared to its potential liability 
for shared losses under a new agreement period. Therefore, we propose 
that if an ACO wishes to use its existing repayment mechanism to 
demonstrate its ability to repay losses in the next agreement period, 
the amount of the existing repayment mechanism must be equal to the 
greater of the following: (1) The amount calculated by CMS in 
accordance with the benchmark-based methodology or revenue-based 
methodology, as applicable by track (see proposed Sec.  
425.204(f)(4)(iv)); or (2) the repayment mechanism amount that the ACO 
was required to maintain during the last performance year of its 
current agreement. This proposal protects the financial integrity of 
the program by ensuring that a renewing ACO will remain capable of 
repaying losses incurred under its old agreement period.
    We propose to consolidate at Sec.  425.204(f)(4) all of our 
proposed policies, procedures, and requirements related to the amount 
of an ACO's repayment mechanism, including provisions regarding the 
calculation and recalculation of repayment mechanism amounts. We also 
propose to revise the regulations at Sec.  425.204 to streamline and 
reorganize the provisions in paragraph (f), which we believe is 
necessary to incorporate these and other proposed requirements 
discussed in this proposed rule.
(3) Proposals Regarding Submission of Repayment Mechanism Documentation
    Currently, ACOs applying to enter a performance-based risk track 
under the Shared Savings Program must meet the eligibility 
requirements, including demonstrating they have established an adequate 
repayment mechanism under Sec.  425.204(f). We believe modifications to 
the existing repayment mechanism requirements are necessary to address 
circumstances that could arise if our proposed approach to allowing 
ACOs to enter or change risk tracks during the current agreement period 
is finalized. Specifically, we believe modifications would be necessary 
to reflect the possibility that an ACO that initially entered into an 
agreement period under the one-sided model years of the BASIC track's 
glide path will transition to performance-based risk within their 
agreement period, and thereby would become subject to the requirement 
to establish a repayment mechanism.
    The current regulations specify that an ACO participating under a 
two-sided model must demonstrate the adequacy of its repayment 
mechanism prior to the start of each agreement period in which it takes 
risk and upon request thereafter (Sec.  425.204(f)(3)). We are 
revisiting this policy in light of our proposal to automatically 
transition ACOs in the BASIC track's glide path from a one-sided model 
to a two-sided model beginning in their third performance year, and 
also under our proposal that would allow BASIC ACOs to elect to 
transition to performance-based risk beginning in their second 
performance year of the glide path.
    We believe ACOs participating in the BASIC track's glide path 
should be required to demonstrate they have established an adequate 
repayment mechanism, consistent with the requirement for ACOs applying 
to enter an agreement period under performance-based risk. Therefore, 
we are proposing to amend the regulations to provide that an ACO 
entering an agreement period in Levels C, D, or E of the BASIC track's 
glide path must demonstrate the adequacy of its repayment mechanism 
prior to the start of its agreement period and at such other times as 
requested by CMS. In addition, we are proposing that an ACO entering an 
agreement period in Level A or Level B of the BASIC track's glide path 
must demonstrate the adequacy of its repayment mechanism prior to the 
start of any performance year in which it either elects to participate 
in, or is automatically transitioned to a two-sided model (Level C, 
Level D, or Level E) of the BASIC track's glide path, and at such other 
times as requested by CMS.
    We seek comment on these proposals.
(4) Proposal for Repayment Mechanism Duration
    We acknowledge that the proposed change to an agreement period of 
at least 5 years will affect the term for the repayment mechanism. 
Under the program's current requirements, the repayment mechanism must 
be in effect for a sufficient period of time after the conclusion of 
the agreement period to permit CMS to calculate the amount of shared 
losses owed and to collect this amount from the ACO (Sec.  
425.204(f)(4)).
    We point readers to the June 2015 final rule for a discussion of 
the requirement for ACOs to demonstrate that they would be able to 
repay shared losses incurred at any time within the agreement period, 
and for a reasonable period of time after the end of each agreement 
period (the ``tail period''). We explained that this tail period must 
be sufficient to permit CMS to calculate the amount of any shared 
losses that may be owed by the ACO and to collect this amount from the 
ACO (see 80 FR 32783). This is necessary, in part, because financial 
reconciliation results are not available until the summer following the 
conclusion of the performance year. We have interpreted this 
requirement to be satisfied if the repayment mechanism arrangement will 
remain in effect for 24 months after the end of the agreement period 
(see Repayment Mechanism Arrangements Guidance). Once ACOs are notified 
of shared losses, based on financial reconciliation, they have 90 days 
to make payment in full (see Sec. Sec.  425.606(h) and 425.610(h)).
    We propose to specify at Sec.  425.204(f)(6) the general rule that 
a repayment mechanism must be in effect for the duration of the ACO's

[[Page 41843]]

participation in a two-sided model plus 24 months after the conclusion 
of the agreement period. Based on our experience with repayment 
mechanisms, we believe ACOs will be able to work with financial 
institutions to establish repayment mechanism arrangements that will 
cover a 5-year agreement period plus a 24-month tail period. This 
proposed approach is consistent with the program's current guidance.
    We propose some exceptions to this general rule. First, we propose 
that CMS may require an ACO to extend the duration of its repayment 
mechanism beyond the 24-month tail period if necessary to ensure that 
the ACO will repay CMS any shared losses for each of the performance 
years of the agreement period. We believe this may be necessary in rare 
circumstances to protect the financial integrity of the program.
    Second, we believe the duration requirement should account for the 
special circumstances of renewing ACOs, which would otherwise have to 
maintain two separate repayment mechanisms for overlapping periods of 
time. As previously noted, we propose at Sec.  425.204(f)(3)(iv) that a 
renewing ACO can choose to use its existing repayment mechanism to 
demonstrate that it has the ability to repay losses that may be 
incurred for performance years in the next agreement period, as long as 
the ACO submits documentation that the term of the repayment mechanism 
has been extended and the amount of the repayment mechanism has been 
increased, if necessary. We propose at Sec.  425.204(f)(6) that the 
term of the existing repayment mechanism must be extended in these 
cases and that it must periodically be extended thereafter upon notice 
from CMS.
    We are considering the amount of time by which we would require the 
existing repayment mechanism to be extended. As discussed in section 
II.A.5 of this proposed rule, renewing ACOs (as we propose to define 
that term at Sec.  425.20) may have differing numbers of years 
remaining under their current repayment mechanism arrangements 
depending on whether the ACO is renewing at the conclusion of its 
existing agreement period or if the ACO is an early renewal 
(terminating its current agreement to enter a new agreement period 
without interruption in participation). We recognize that it may be 
difficult for ACOs that are completing the term of their current 
agreement period to extend an existing repayment mechanism by 7 years 
(that is, for the full 5-year agreement term plus 24 months). 
Therefore, we are considering whether the program would be adequately 
protected if we permitted the existing repayment mechanism to be 
extended long enough to cover the first 2 or 3 performance years of the 
new agreement period (that is, an extension of 4 or 5 years, 
respectively, including the 24-month tail period). We solicit comment 
on whether we should require a longer or shorter extension.
    If we permit an ACO to extend its existing repayment mechanism for 
less than 7 years, we would require the ACO to extend the arrangement 
periodically upon notice from CMS. Under this approach, the ACO would 
eventually have a repayment mechanism arrangement that would not expire 
until at least 24 months after the end of the new agreement period. We 
seek comment on whether this approach should also apply to an ACO 
entering two-sided risk for the first time (that is, an ACO that is not 
renewing its participation agreement). We would continue to permit a 
renewing ACO to maintain two separate repayment mechanisms (one for the 
current agreement period and one for the new agreement period).
    Under our proposal, if CMS notifies a renewing ACO that its 
repayment mechanism amount will be higher for the new agreement period, 
the ACO may either (i) establish a second repayment mechanism 
arrangement in the higher amount for 7 years (or for a lesser duration 
that we may specify in the final rule), or (ii) increase the amount of 
its existing repayment mechanism to the amount specified by CMS and 
extend the term of the repayment mechanism arrangement for an amount of 
time specified by CMS (7 years or for a lesser duration that we may 
specify in the final rule). On the other hand, if CMS notifies a 
renewing ACO that the repayment mechanism amount for its new agreement 
period is equal to or lower than its existing repayment mechanism 
amount, the ACO may similarly choose to extend the duration of its 
existing repayment mechanism instead of obtaining a second repayment 
mechanism for the new agreement period. However, in that case, the ACO 
would be required to maintain the repayment mechanism at the existing 
higher amount.
    Third, we believe that the term of a repayment mechanism may 
terminate earlier than 24 months after the agreement period if it is no 
longer needed. Under certain conditions, we permit early termination of 
a repayment mechanism and release of the arrangement's remaining funds 
to the ACO. These conditions are specified in the Repayment Mechanism 
Arrangements Guidance, and we propose to include similar requirements 
at Sec.  425.204(f)(6). Specifically, we propose that the repayment 
mechanism may be terminated at the earliest of the following 
conditions:
     The ACO has fully repaid CMS any shared losses owed for 
each of the performance years of the agreement period under a two-sided 
model;
     CMS has exhausted the amount reserved by the ACO's 
repayment mechanism and the arrangement does not need to be maintained 
to support the ACO's participation under the Shared Savings Program; or
     CMS determines that the ACO does not owe any shared losses 
under the Shared Savings Program for any of the performance years of 
the agreement period. For example, if a renewing ACO opts to establish 
a second repayment mechanism for its new agreement period, it may 
request to cancel the first repayment mechanism after reconciliation 
for the final performance year of its previous agreement period if it 
owes no shared losses for the final performance year and it has repaid 
all shared losses, if any, incurred during the previous agreement 
period.
    We solicit comments on whether the provisions proposed at Sec.  
425.204(f)(6) are adequate to protect the financial integrity of the 
Shared Savings Program, to provide greater certainty to ACOs and 
financial institutions, and to facilitate the establishment of 
repayment mechanism arrangements.
(5) Proposals Regarding Institutions Issuing Repayment Mechanism 
Arrangements
    We are also proposing additional requirements related to the 
financial institutions through which ACOs establish their repayment 
mechanism arrangements that would be applicable to all ACOs 
participating in a performance-based risk track. With the proposed 
changes to offer only the BASIC track and ENHANCED track for agreement 
periods beginning on July 1, 2019 and in subsequent years, we 
anticipate an increase in the number of repayment mechanism 
arrangements CMS will review with each annual application cycle. We 
believe the proposed new requirements regarding the financial 
institutions with which ACOs establish their repayment mechanisms would 
provide CMS greater certainty about the adequacy of repayment mechanism 
arrangements and ultimately ease the process for reviewing and 
approving the ACO's repayment mechanism arrangement documentation.

[[Page 41844]]

    Currently, as described in the program's Repayment Mechanism 
Arrangements Guidance, CMS will accept an escrow account arrangement 
established with a bank that is insured by the Federal Deposit 
Insurance Corporation (FDIC), a letter of credit established at a FDIC-
insured institution, and a surety bond issued by a company included on 
the U.S. Department of Treasury's list of certified (surety bond) 
companies (available at https://www.fiscal.treasury.gov/fsreports/ref/suretyBnd/c570_a-z.htm). We have found that arrangements issued by 
these institutions tend to be more conventional arrangements that 
conform to the program's requirements. However, we recognize that some 
ACOs may work with other types of financial institutions that may offer 
similarly acceptable products, but which may not conform to the 
standards described in our existing Repayment Mechanism Arrangements 
Guidance. For example, some ACOs may prefer to use a credit union to 
establish an escrow account or a letter of credit for purposes of 
meeting the repayment mechanism arrangements requirement, but credit 
unions are insured under the National Credit Union Share Insurance Fund 
program, rather than by the FDIC. Although the insuring entity is 
different, credit unions typically are insured up to the same insurance 
limit as FDIC-insured banks, and are otherwise capable of offering 
escrow accounts and letters of credit that meet program requirements. 
We also believe that incorporating more complete standards for 
repayment mechanisms into the regulations would provide additional 
clarity for ACOs regarding acceptable repayment mechanisms and will 
help to avoid situations where an ACO may obtain a repayment mechanism 
arrangement from an entity that ultimately is unable to pay CMS the 
value of the repayment mechanism in the event CMS seeks to use the 
arrangement to recoup shared losses for which the ACO is liable.
    Since the June 2015 final rule, several ACO applicants have 
requested use of arrangements from entities other than those described 
in our Repayment Mechanism Arrangements Guidance, such as a letter of 
credit issued by the parent corporation of an ACO, and funds held in 
escrow by an attorney's office. In reviewing these requests, we found a 
similar level of complexity resulting from the suggested arrangements 
as we did with our earlier experiences reviewing alternative repayment 
arrangements, which were permitted during the initial years of the 
Shared Savings Program until the regulations were revised in the June 
2015 final rule to remove the option to establish an appropriate 
alternative repayment mechanism. In proposing to eliminate this option, 
we explained that a request to use an alternative repayment mechanism 
increases administrative complexity for both ACOs and CMS during the 
application process and is more likely to be declined by CMS (see 79 FR 
72832). Although our program guidance (as specified in Repayment 
Mechanism Arrangements Guidance, version 6, July 2017) encourages ACOs 
to obtain a repayment mechanism from a financial institution, these 
recent requests for approval of more novel repayment arrangements have 
alerted CMS to the potential risk that ACOs may seek approval of 
repayment mechanism arrangements from organizations other than those 
that CMS has determined are likely to be most financially sound and 
able to offer products that CMS can readily verify as appropriate 
repayment mechanisms that ensure the ACO's ability to repay any shared 
losses.
    Therefore, we propose to revise Sec.  425.204(f)(2) to specify the 
following requirements about the institution issuing the repayment 
mechanism arrangement: an ACO may demonstrate its ability to repay 
shared losses by placing funds in escrow with an insured institution, 
obtaining a surety bond from a company included on the U.S. Department 
of Treasury's List of Certified Companies, or establishing a line of 
credit (as evidenced by a letter of credit that the Medicare program 
can draw upon) at an insured institution. We anticipate updating the 
Repayment Mechanism Arrangements Guidance to specify the types of 
institutions that would meet these new requirements. For example, in 
the case of funds placed in escrow and letters of credit, the repayment 
mechanism could be issued by an institution insured by either the 
Federal Deposit Insurance Corporation or the National Credit Union 
Share Insurance Fund. The proposed revisions would bring clarity to the 
program's requirements, which will assist ACOs in selecting, and reduce 
burden on CMS in reviewing and approving, repayment mechanism 
arrangements. We welcome commenters' suggestions on these proposed 
requirements for ACOs regarding the issuing institution for repayment 
mechanism arrangements.
d. Advance Notice for and Payment Consequences of Termination
(1) Background
    Sections 425.218 and 425.220 of the regulations describe the Shared 
Savings Program's termination policies. Section 425.221, added by the 
June 2015 final rule, specifies the close-out procedures and payment 
consequences of early termination. Under Sec.  425.218, CMS can 
terminate the participation agreement with an ACO when the ACO fails to 
comply with any of the requirements of the Shared Savings Program. As 
described in Sec.  425.220, an ACO may also voluntarily terminate its 
participation agreement. The ACO must provide at least 60 days advance 
written notice to CMS and its ACO participants of its decision to 
terminate the participation agreement and the effective date of its 
termination.
    The November 2011 final rule establishing the Shared Savings 
Program indicated at Sec.  425.220(b) (although this provision was 
subsequently revised) that ACOs that voluntarily terminated during a 
performance year would not be eligible to share in savings for that 
year (76 FR 67980). The June 2015 final rule revised this policy to 
specify in Sec.  425.221(b)(1) that if an ACO voluntarily terminates 
with an effective termination date of December 31st of the performance 
year, the ACO may share in savings only if it has completed all 
required close-out procedures by the deadline specified by CMS and has 
satisfied the criteria for sharing savings for the performance year. 
ACOs that voluntarily terminate with an effective date of termination 
prior to December 31st of a performance year and ACOs that are 
involuntarily terminated under Sec.  425.218 are not eligible to share 
in savings for the performance year.
    The current regulations also do not impose any liability for shared 
losses on two-sided model ACOs that terminate from the program prior to 
December 31 of a given performance year. As explained in the June 2015 
final rule, the program currently has no methodology for partial year 
reconciliation (80 FR 32817). As a result, ACOs that voluntarily 
terminate before the end of the performance year are neither eligible 
to share in savings nor accountable for any shared losses.
    The existing policies on termination and the payment consequences 
of early termination raise concerns for both stakeholders and CMS. 
First, stakeholders have raised concerns that the current requirement 
for 60 days advance notice of a voluntary termination is too long 
because it does not allow ACOs to make timely, informed decisions about 
their continued participation in the program. Further, we are concerned 
that under the current policy, ACOs in two-sided models that are 
projecting losses have an incentive to leave the program prior

[[Page 41845]]

to the end of a performance year, whereas ACOs that are projecting 
savings are likely to stay. Absent a change in our current policies on 
early termination, these incentives could have a detrimental effect on 
the Medicare Trust Funds.
(2) Proposals for Advance Notice of Voluntary Termination
    We are sympathetic to stakeholder concerns that the existing 
requirement for a 60-day notification period may hamper ACOs' ability 
to make timely and informed decisions about their continued 
participation in the program. A key factor in the timing of ACOs' 
participation decisions is the availability of program reports. 
Financial reconciliation reports (showing CMS's determination of the 
ACO's eligibility for shared savings or losses) are typically made 
available in the summer following the conclusion of the calendar year 
performance year (late July--August of the subsequent calendar year). 
Due to the timing of the production of quarterly reports (with 
information on the ACO's assigned beneficiary population, and 
expenditure and utilization trends), an ACO contemplating a year-end 
termination typically only has two quarters of feedback for the current 
performance year to consider in its decision-making process. This is 
because quarterly reports are typically made available approximately 6 
weeks after the end of the applicable calendar year quarter. For 
example, quarter 3 reports would be made available to ACOs in 
approximately mid-November of each performance year. These dates for 
delivery of program reports also interact with the application cycle 
timeline (with ACOs typically required to notify CMS of their intent to 
apply in May, typically before quarter 1 reports are available, and 
submit applications during the month of July, prior to receiving 
quarter 2 reports), as applicants seek to use financial reconciliation 
data for the prior performance year and quarterly report data for the 
current performance year to make participation decisions about their 
continued participation, particularly ACOs applying to renew their 
participation for a subsequent agreement period.
    We believe that adopting a shorter notice requirement would provide 
ACOs with more flexibility to consider their options with respect to 
their continued participation in the program. We are therefore 
proposing to revise Sec.  425.220 to reduce the minimum notification 
period from 60 to 30 days. Reducing the notice requirement to 30 days 
would typically allow ACOs considering a year-end termination to base 
their decision on three quarters of feedback reports instead of two, 
given current report production schedules.
(3) Proposals for Payment Consequences of Termination
    In this section, we discuss payment consequences of early 
termination of an ACO's participation agreement. We reconsidered the 
program's current policies on payment consequences of termination under 
Sec.  425.221 in light of our proposal to reduce the amount of advance 
notice from ACOs of their voluntarily termination of participation 
under Sec.  425.220. While we believe that the proposal to shorten the 
notice period for voluntary termination under Sec.  425.220 from 60 to 
30 days would be beneficial to ACOs, we recognize that it may increase 
gaming among risk-bearing ACOs facing losses, as ACOs would have more 
time and information to predict their financial performance with 
greater accuracy.
    To deter gaming while still providing flexibility for ACOs in two-
sided models to make decisions about their continued participation in 
the program, we considered several policy alternatives to hold these 
ACOs accountable for some portion of the shared losses generated during 
the performance year in which they terminate their participation in the 
program.
    We first considered a policy similar to that used in the Next 
Generation ACO (NGACO) Model whereby ACOs may terminate without penalty 
if they do so by providing notice to CMS on or before February 28, with 
an effective date 30 days after the date of the notice (March 30). ACOs 
that terminate after that date are subject to financial reconciliation. 
These ACOs are liable for any shared losses determined and are also 
eligible to share in savings. The NGACO Model adopted March 30 as the 
deadline for the effective termination date in order to align with 
timelines for the Quality Payment Program. Specifically, this date 
ensures that clinicians affiliated with a terminating NGACO will not be 
included in the March 31 snapshot date for QP determinations. However, 
while we acknowledge the merit of reducing provider uncertainty around 
Quality Payment Program eligibility, we also recognize that in the 
early part of the performance year, ACOs have a limited amount of 
information on which to base termination decisions. We are especially 
concerned that holding ACOs accountable for full shared losses may lead 
many organizations to leave the program early in the performance year, 
including those that would have ultimately been eligible for shared 
savings had they continued their participation. Post-termination, 
Shared Savings Program ACOs no longer have access to the same program 
resources that can help to facilitate care management, such as 
beneficiary-identifiable claims data or payment rule waivers, such as 
the SNF 3-day rule waiver. This could make it more challenging for 
these entities to reduce costs, possibly offsetting any benefits to the 
Medicare Trust Funds from reduced gaming.
    Given the drawbacks of setting an early deadline for ACOs to 
withdraw without financial risk, we also considered a policy under 
which risk-bearing ACOs that voluntarily terminate with an effective 
date after June 30 of a performance year would be liable for a portion 
of any shared losses determined for the performance year. We believe 
that June 30 is a reasonable deadline for the effective date of 
termination as it allows ACOs time to accumulate more information and 
make decisions regarding their continued participation in the program. 
As is the case under current policy, clinicians affiliated with ACOs 
that terminate with an effective date between March 31 and June 30 
would be captured in one or more QP determination snapshots. Clinicians 
determined to have QP status would lose their status as a result of the 
termination, and would instead be scored under MIPS using the APM 
scoring standard.
    We propose to conduct financial reconciliation for all ACOs in two-
sided models that voluntarily terminate after June 30. We propose to 
use the full 12 months of performance year expenditure data in 
performing reconciliation for terminated ACOs with partial year 
participation. For those ACOs that generate shared losses, we will pro-
rate the shared loss amount by the number of months during the year in 
which the ACO was in the program. To calculate the pro-rated share of 
losses, CMS will multiply the amount of shared losses calculated for 
the performance year by the quotient equal to the number of months of 
participation in the program during the performance year, including the 
month in which the termination was effective, divided by 12. We would 
count any month in which the ACO had at least one day of participation. 
Therefore, an ACO with an effective date of termination any time in 
July would be liable for 7/12 of any shared losses determined, while an 
ACO with an effective date of termination any time in August would be 
liable for 8/12, and so forth. An ACO with an effective date of

[[Page 41846]]

termination in December would be liable for the entirety of shared 
losses. Terminated ACOs would continue to receive aggregate data 
reports following termination, but, as under current policy, would lose 
access to beneficiary-level claims data and any payment rule waivers.
    We believe this approach provides an incentive for ACOs to continue 
to control growth in expenditures and report quality for the relevant 
performance year even after they leave the program, as both can reduce 
the amount of shared losses owed. Increasing the proportion of shared 
losses owed with the number of months in the year that the ACO remains 
in the program also helps to counteract the potential for gaming, as 
ACOs that wait to base their termination decision on additional 
information are liable for a higher portion of any shared losses that 
are incurred. This approach also reflects the fact that later-
terminating ACOs may have enjoyed program flexibilities (for example, 
the SNF 3-day rule waiver) for a longer period of time.
    We also considered the payment consequences of early termination 
for ACOs that are involuntarily terminated by CMS under Sec.  425.218. 
Although these ACOs are not choosing to leave the program of their own 
accord and thus are not using termination as a means of avoiding their 
responsibility for shared losses, we believe they should not be excused 
from responsibility for some portion of shared losses simply because 
they failed to comply with program requirements. Further, we believe it 
is more appropriate to hold involuntarily terminated ACOs accountable 
for a portion of shared losses during any portion of the performance 
year. Since involuntary terminations can occur throughout the 
performance year, establishing a cut-off date for determining the 
payment consequences for these ACOs could allow some ACOs to avoid 
accountability for their losses. Therefore, we propose to pro-rate 
shared losses for ACOs in two-sided models that are involuntarily 
terminated by CMS under Sec.  425.218 for any portion of the 
performance year during which the termination becomes effective. We 
propose the same methodology as previously described for pro-rating 
shared losses for voluntarily terminated ACOs would also apply to 
involuntarily terminated ACOs.
    We considered whether to allow ACOs voluntarily terminating after 
June 30 but before December 31 an opportunity to share in a portion of 
any shared saving earned. However, we decided to limit the proposed 
changes to shared losses. While we recognize that this approach may 
appear to favor CMS, we believe that ACOs expecting to generate savings 
are less likely to terminate early in the first place. Under the 
program's current regulations at Sec.  425.221(b)(1), ACOs that 
voluntarily terminate effective December 31 and that meet the current 
criteria in Sec.  425.221 may still share in savings.
    We propose to amend Sec.  425.221 to provide that ACOs in two-sided 
models that are terminated by CMS under Sec.  425.218 or certain ACOs 
that voluntarily terminate under Sec.  425.220 will be liable for a 
pro-rated amount of any shared losses determined, with the pro-rated 
amount reflecting the number of months during the performance year that 
the ACO was in the program. We propose to apply this policy to ACOs in 
two-sided models for performance years beginning in 2019 and subsequent 
performance years.
    We also propose to specify in the regulations at Sec.  425.221 the 
payment consequences of termination during calendar year 2019 for ACOs 
preparing to enter or participating under agreements beginning July 1, 
2019 (see section II.A.7 of this proposed rule).
    First, as discussed in detail in section II.A.7 of this proposed 
rule, we would reconcile ACOs based on the respective 6-month 
performance year methodology for their participation during a 6-month 
portion of 2019 in which they are either under a current agreement 
period beginning prior to 2019, or under a new agreement period 
beginning July 1, 2019. We propose an ACO would be eligible to receive 
shared savings for a 6-month performance year during 2019, if they 
complete the term of this performance year, regardless of whether they 
choose to continue their participation in the program. That is, we 
would reconcile: ACOs that started a first or second agreement period 
January 1, 2016 that extend their agreement period for a fourth 
performance year, and complete this performance year (concluding June 
30, 2019); and ACOs that enter an agreement period July 1, 2019 and 
terminate December 31, 2019, the final calendar day of their first 
performance year (defined as a 6-month period).
    For an ACO that participates for a portion of a 6-month performance 
year during 2019 (January 1, 2019 through June 30, 2019, July 1, 2019 
through December 31, 2019) we propose the following: (1) If the ACO 
terminates its participation agreement effective before the end of the 
performance year, we would not reconcile the ACO for shared savings or 
shared losses (if a two-sided model ACO); (2) if CMS terminates a two-
sided model ACO's participation agreement effective before the end of 
the performance year, the ACO would not be eligible for shared savings 
and we would reconcile the ACO for shared losses and pro-rate the 
amount reflecting the number of months during the performance year that 
the ACO was in the program.
    To determine pro-rated shared losses for a portion of the 6-month 
performance year, we would determine shared losses incurred during 
calendar year 2019 and multiply this amount by the quotient equal to 
the number of months of participation in the program during the 
performance year, including the month in which the termination was 
effective, divided by 12. We would count any month in which the ACO had 
at least one day of participation. Therefore, if an ACO that started a 
first or second agreement period January 1, 2016 extended its agreement 
period for a 6-month performance year from January 1, 2019 through June 
30, 2019, and was terminated by CMS with an effective date of 
termination of May 1, 2019 the ACO would be liable for 5/12 of any 
shared losses determined. If a July 1, 2019 starter was terminated by 
CMS with an effective date of termination of November 1, 2019, the ACO 
would also be liable for 5/12 of any shared losses determined. An ACO 
with an effective date of termination in December would be liable for 
the entirety of shared losses.
    Second, ACOs that are starting a 12-month performance year in 2019 
would have the option to participate for the first 6 months of the year 
prior to terminating their current agreement and enter a new agreement 
period beginning July 1, 2019. This includes ACOs that would be 
starting their 2nd or 3rd performance year of an agreement period in 
2019, as well as ACOs that deferred renewal under Sec.  425.200(e). We 
propose that ACOs with an effective date of termination of June 30, 
2019 that enter a new agreement period beginning July 1, 2019, are 
eligible for pro-rated shared savings or shared losses for the 6-month 
period from January 1, 2019 through June 30, 2019 determined according 
to Sec.  425.609.
    We believe some ACOs may act quickly to enter one of the new 
participation options made available under the proposed redesign of the 
program (if finalized). ACOs that complete the 6-month period of 
participation in 2019 should have the opportunity to share in the 
savings or be accountable for the losses for this period. However, 
certain ACOs may ultimately realize they are not yet prepared to 
participate under a new

[[Page 41847]]

agreement beginning July 1, 2019 and seek to terminate quickly. 
Although we would encourage ACOs to consider making the transition to 
one of the newly available participation options in 2019 in order to 
more quickly enter a participation agreement based on the proposed 
polices (if finalized), we also do not want to unduly bind ACOs that 
aggressively pursue these new options. We believe the proposed approach 
provides a means for ACOs to terminate their participation prior to 
renewing their participation for an agreement period beginning July 1, 
2019 or to quickly terminate from a new agreement period beginning July 
1, 2019 without the concern of liability for shared losses for a 
portion of the year.
    We also propose to revise the regulations at Sec.  425.221 to 
streamline and reorganize the provisions in paragraph (b), which we 
believe is necessary to incorporate these proposed requirements. We 
seek comment on these proposals and the alternative policies discussed 
in this section.
7. Participation Options for Agreement Periods Beginning in 2019
a. Overview
    In the November 2011 final rule establishing the Shared Savings 
Program, we implemented an approach for accepting and reviewing 
applications from ACOs for participation in the program on an annual 
basis, with agreement periods beginning January 1 of each calendar 
year. We also finalized an approach to offer two application periods 
for the first year of the program, allowing for an April 1, 2012 start 
date and July 1, 2012 start date. In establishing these alternative 
start dates for the program's first year, we explained that the statute 
does not prescribe a particular application period or specify a start 
date for ACO agreement periods (see 76 FR 67835 through 67837). We 
considered concerns raised by commenters about a January 1, 2012 start 
date, which would have closely followed the November 2011 publication 
of the final rule. Specifically, commenters were concerned about the 
ability of potential ACOs to organize, complete, and submit an 
application in time to be accepted into the first cohort as well as our 
ability to effectively review applications by January 1, 2012. Comments 
also suggested that larger integrated health care systems would be able 
to meet the application requirements on short notice while small and 
rural entities might find this timeline more difficult and could be 
unable to meet the newly-established application requirements for a 
January 1 start date (76 FR 67836).
    We believe the considerations that informed our decision to 
establish alternative start dates at the inception of the Shared 
Savings Program also are relevant in determining the timing for making 
the proposed new participation options available. We believe postponing 
the start date for agreement periods under these new participation 
options until later in 2019 would allow ACOs time to consider the new 
participation options and prepare for program changes; make investments 
and other business decisions about participation; obtain buy-in from 
their governing bodies and executives; complete and submit an 
application that conforms to the new participation options if our 
proposals are finalized; and resolve any deficiencies and provider 
network issues that may be identified, including as a result of program 
integrity and law enforcement screening. Postponing the start date for 
new agreement periods would also allow both new applicants and ACOs 
currently participating in the program an opportunity to make any 
changes to the structure and composition of their ACO as may be 
necessary to comply with the new program requirements for the ACO's 
preferred participation option, if changes to the participation options 
are finalized as proposed.
    Therefore, we propose to offer a July 1, 2019 start date as the 
initial opportunity for ACOs to enter an agreement period under the 
BASIC track or the ENHANCED track. We anticipate the application cycle 
for the July 1, 2019 start date would begin in early 2019. We are 
forgoing the application cycle that otherwise would take place during 
calendar year 2018 for a January 1, 2019 start date for new Shared 
Savings Program participation agreements, initial use of the SNF 3-day 
rule waiver (as further discussed in section II.A.7.c.1 of this 
proposed rule), and entry into the Track 1+ Model (as further discussed 
in section II.F of this proposed rule). Although several ACOs that 
entered initial agreements beginning in 2015 deferred renewal into a 
second agreement period by 1 year in accordance with Sec.  425.200(e) 
and will begin participating in a new 3-year agreement period beginning 
January 1, 2019 under a performance-based risk track, applications 
would not be accepted from other ACOs for a new agreement period 
beginning on January 1, 2019. We propose the July 1, 2019 start date as 
a one-time opportunity, and thereafter we would resume our typical 
process of offering an annual application cycle that allows for review 
and approval of applications in advance of a January 1 agreement start 
date. We would therefore anticipate also offering an application cycle 
in 2019 for a January 1, 2020 start date for new, 5-year participation 
agreements, and continuing to offer an annual start date of January 1 
thereafter. We are aware that a delayed application due date for an 
agreement period beginning in 2019 could affect parties that plan to 
participate in the Shared Savings Program for performance year 2019 and 
are relying on the pre-participation waiver. Guidance for affected 
parties will be posted on the CMS website.
    Under the current Shared Savings Program regulations, the policies 
for determining financial and quality performance are based on an 
expectation that a performance year will have 12 months that correspond 
to the calendar year. Beneficiary assignment also depends on use of a 
12-month assignment window, with retrospective assignment based on the 
12-month calendar year performance year, and prospective assignment 
based on an offset assignment window before the start of the 
performance year. Given the calendar year basis for performance years 
under the current regulations, we considered how to address (1) the 
possible 6-month lapse in participation that could result for ACOs that 
entered a first or second 3-year agreement period beginning on January 
1, 2016, due to the lack of availability of an application cycle for a 
January 1, 2019 start date, and (2) the July 1 start date for agreement 
periods starting in 2019.
    To address the implications of a midyear start date on program 
participation and applicable program requirements, we considered our 
previous experience with the program's initial entrants, April 1, 2012 
starters and July 1, 2012 starters. In particular, we considered our 
approach for determining these ACOs' first performance year results 
(see Sec.  425.608). The first performance year for April 1 and July 1 
starters was defined as 21 and 18 months respectively (see Sec.  
425.200(c)(2)). The methodology we used to determine shared savings and 
losses for these ACOs' first performance year consisted of an optional 
interim payment calculation based on the ACO's first 12 months of 
participation and a final reconciliation occurring at the end of the 
ACO's first performance year. This final reconciliation took into 
account the 12 months covered by the interim payment period as well as 
the remaining 6 or 9 months of the performance year, thereby allowing 
us to determine the overall savings or losses for the ACO's first 
performance

[[Page 41848]]

year. All ACOs opting for an interim payment reconciliation, including 
ACOs participating under Track 1, were required to assure CMS of their 
ability to repay monies determined to be owed upon final first year 
reconciliation. For Track 2 ACOs, the adequate repayment mechanism 
required for entry into a performance-based risk arrangement was 
considered to be sufficient to also assure return of any overpayment of 
shared savings under the interim payment calculation. Track 1 ACOs 
electing interim payment were similarly required to demonstrate an 
adequate repayment mechanism for this purpose. (See 76 FR 67942 through 
67944).
    This interim payment calculation approach used in the program's 
first year resulted in relatively few ACOs being eligible for payment 
based on their first twelve months of program participation. Few Track 
1 ACOs established the required repayment mechanism in order to be able 
to receive an interim payment of shared savings, if earned. Not all 
Track 2 ACOs, which were required to establish repayment mechanisms as 
part of their participation in a two-sided model, elected to receive 
payment for shared savings or to be held accountable for shared losses 
based on an interim payment calculation. Of the 114 ACOs reconciled for 
a performance year beginning on April 1 or July 1, 2012, only 16 
requested an interim payment calculation in combination with having 
established the required repayment mechanism. Of these 16 ACOs, 9 were 
eligible for an interim payment of shared savings, of which one Track 1 
ACO was required to return the payment based on final results for the 
performance year. One Track 2 ACO repaid interim shared losses which 
were ultimately returned to the ACO based on its final results for the 
performance year.
    This approach to interim and final reconciliation was developed for 
the first two cohorts of ACOs, beginning in the same year and to which 
the same program requirements applied. The program has since evolved to 
include different benchmarking methodologies (depending on whether an 
ACO is in its first agreement period, or second agreement period 
beginning in 2016 or in 2017 and subsequent years) and different 
assignment methodologies (prospective assignment and preliminary 
prospective assignment with retrospective reconciliation), among other 
changes. We are concerned about introducing further complexity into 
program calculations by proposing to follow a similar approach of 
offering an extended performance year with the option for an interim 
payment calculation with final reconciliation for ACOs affected by the 
delayed application cycle for agreement periods starting in 2019.
    Instead, we propose to use an approach that would maintain 
financial reconciliation and quality performance determinations based 
on a 12-month calendar year period, but would pro-rate shared savings/
shared losses for each potential 6-month period of participation during 
2019, as described in this section. See section II.A.7.b. of this 
proposed rule for a detailed discussion of this methodology.
    Accordingly, our proposed approach for implementing the proposed 
July 1, 2019 start date would include the following opportunities for 
ACOs, based on their agreement period start date:
    ACOs entering an agreement period beginning on July 1, 2019, would 
be in a participation agreement for a term of 5 years and 6 months, of 
which the first performance year would be defined as 6 months (July 1, 
2019 through December 31, 2019), and the 5 remaining performance years 
of the agreement period would each consist of a 12-month calendar year.
    ACOs that entered a first or second agreement period with a start 
date of January 1, 2016, may elect to extend their agreement period for 
an optional fourth performance year, defined as the 6-month period from 
January 1, 2019 through June 30, 2019. This election to extend the 
agreement period is voluntary and an ACO could choose not to make this 
election and therefore conclude its participation in the program with 
the expiration of its current agreement period on December 31, 2018.
    We propose that the ACO's voluntary election to extend its 
agreement period must be made in the form and manner and according to 
the timeframe established by CMS, and that an ACO executive who has the 
authority to legally bind the ACO must certify the election. If 
finalized, we anticipate this election process would begin in 2018 
following the publication of the final rule, as part of the annual 
certification process in advance of 2019 (described in section 
II.A.7.c.2. of this proposed rule). We note that this optional 6-month 
agreement period extension is a one-time exception for ACOs with 
agreements expiring on December 31, 2018 and would not be available to 
other ACOs that are currently participating in a 3-year agreement in 
the program, or to future program entrants.
    Under the existing provision at Sec.  425.210, the ACO must provide 
a copy of its participation agreement with CMS to all ACO participants, 
ACO providers/suppliers, and other individuals and entities involved in 
ACO governance. Further, all contracts or arrangements between or among 
the ACO, ACO participants, ACO providers/suppliers, and other 
individuals or entities performing functions or services related to ACO 
activities must require compliance with the requirements and conditions 
of the program's regulations, including, but not limited to, those 
specified in the participation agreement with CMS. An ACO that elects 
to extend its participation agreement by 6 months must notify its ACO 
participants, ACO providers/suppliers and other individuals or entities 
performing functions or services related to ACO activities of this 
continuation of participation and must require their continued 
compliance with the program's requirements for the 6-month performance 
year from January 1, 2019 through June 30, 2019.
    An existing ACO that wants to quickly move to a new participation 
agreement under the BASIC track or the ENHANCED track could voluntarily 
terminate its participation agreement with an effective date of 
termination of June 30, 2019, and apply to enter a new agreement period 
with a July 1, 2019 start date to continue its participation in the 
program. This includes 2017 starters, 2018 starters, and 2015 starters 
that deferred renewal by 1 year, and entered into a second agreement 
period under Track 2 or Track 3 beginning on January 1, 2019. If the 
ACO's application is approved by CMS, the ACO could enter a new 
agreement period beginning July 1, 2019. (As discussed in section 
II.A.5. of this proposed rule, we would consider these ACOs to be early 
renewals.) ACOs currently in an agreement period that includes a 12-
month performance year 2019 that choose to terminate their current 
participation agreement effective June 30, 2019, and enter a new 
agreement period beginning on July 1, 2019, would be reconciled for 
their performance during the first 6 months of 2019. As described in 
section II.A.5 of this proposed rule, an ACO's participation options 
for the July 1, 2019 start date would depend on whether the ACO is a 
low revenue or high revenue ACO and the ACO's experience with 
performance-based risk Medicare ACO initiatives. An early renewal ACO 
would be considered to be entering its next consecutive agreement 
period for purposes of the applicability of policies that phase-in over 
time (the weight used in the regional benchmark adjustment,

[[Page 41849]]

equal weighting of the benchmark years, and the quality performance 
standard).
    As discussed in section II.A.2. of this proposed rule, the proposed 
modifications to the definition of ``agreement period'' in Sec.  425.20 
are intended to broaden the definition to generally refer to the term 
of the participation agreement. We propose to add a provision at Sec.  
425.200(b)(2) specifying that the term of the participation agreement 
is 3 years and 6 months for an ACO that entered an agreement period 
starting on January 1, 2016 that elects to extend its agreement period 
until June 30, 2019, and this election is made in the form and manner 
and according to the timeframe established by CMS, and certified by an 
ACO executive who has the authority to legally bind the ACO. For 
consistency, we also propose minor formatting changes to the existing 
provision at Sec.  425.200(b)(2) to italicize the header text. We note 
that as described in section II.A.2. of this proposed rule, we are 
proposing modifications to Sec.  425.200(b)(3) as part of discontinuing 
the deferred renewal participation option. In addition, we propose to 
add a provision at Sec.  425.200(b)(4) to specify that, for agreement 
periods beginning in 2019 the start date is--(1) January 1, 2019 and 
the term of the participation agreement is 3 years for ACOs whose first 
agreement period began in 2015 and who deferred renewal of their 
participation agreement under Sec.  425.200(e); or (2) July 1, 2019, 
and the term of the participation agreement is 5 years and 6 months. We 
propose to add a provision at Sec.  425.200(b)(5) specifying that, for 
agreement periods beginning in 2020 and subsequent years, the term of 
the participation agreement is 5 years.
    We also propose to revise the definition of ``performance year'' in 
Sec.  425.20 to mean the 12-month period beginning on January 1 of each 
year during the agreement period, unless otherwise specified in Sec.  
425.200(c) or noted in the participation agreement. We therefore also 
propose revisions to Sec.  425.200(c) to make necessary formatting 
changes and specify additional exceptions to the definition of 
performance year as a 12-month period. Specifically, we propose to add 
a provision specifying that for an ACO that entered a first or second 
agreement period with a start date of January 1, 2016, and that elects 
to extend its agreement period by a 6-month period, the ACO's fourth 
performance year is the 6-month period between January 1, 2019, and 
June 30, 2019. Similarly, we propose to add a provision specifying that 
for an ACO that entered an agreement period with a start date of July 
1, 2019, the ACO's first performance year of the agreement period is 
defined as the 6-month period between July 1, 2019, and December 31, 
2019.
    In light of the proposed modifications to Sec.  425.200(c) to 
establish two 6-month performance years during calendar year 2019, we 
believe it is also appropriate to revise the regulation at Sec.  
425.200(d), which reiterates an ACO's obligation to submit quality 
measures in the form and manner required by CMS for each performance 
year of the agreement period, to address the quality reporting 
requirements for ACOs participating in a 6-month performance year 
during calendar year 2019.
    As an alternative to the proposal to offer an agreement period of 5 
years and 6 months beginning July 1, 2019 (made up of 6 performance 
years, the first of which is 6 months in duration), we considered 
whether to offer instead an agreement period of five performance years 
(including a first performance year of 6 months). Under this 
alternative the agreement period would be 4 years and 6 months in 
duration. As previously described, in section II.A.2 of this proposed 
rule in connection with our proposal to extend the agreement period 
from 3 years to 5 years, program results have shown that ACOs tend to 
perform better the longer they are in the program and longer agreement 
periods provide additional time for ACOs to perform against a benchmark 
based on historical data from the 3 years prior to their start date. 
Further, the proposed changes to the benchmarking methodology would 
result in more accurate benchmarks and mitigate the effects of reliance 
on increasingly older historical data as the agreement period 
progresses. We believe these considerations are also relevant to the 
proposed one-time exception to allow for a longer agreement period of 5 
years and 6 months for ACOs that enter a new agreement period on July 
1, 2019.
    We also considered forgoing an application cycle for a 2019 start 
date altogether and allowing ACOs to enter agreement periods for the 
BASIC track and ENHANCED track for the first time beginning in January 
1, 2020. This approach would allow ACOs additional time to consider the 
redesign of the program, make organizational and operational plans, and 
implement business and investment decisions, and would avoid the 
complexity of needing to determine performance based on 6-month 
performance years during calendar year 2019. However, our proposed 
approach of offering an application cycle during 2019 for an agreement 
period start date of July 1, 2019, would allow for a more rapid 
progression of ACOs to the redesigned participation options, starting 
in mid-2019. Further, under this alternative, we would also want to 
offer ACOs that started a first or second agreement period on January 
1, 2016, a means to continue their participation between the conclusion 
of their current 3-year agreement (December 31, 2018) and the start of 
their next agreement period (January 1, 2020), should the ACO wish to 
continue in the program. Under an alternative that would postpone the 
start date for the new participation options to January 1, 2020, we 
would allow ACOs that started a first or second agreement period on 
January 1, 2016, to elect a 12-month extension of their current 
agreement period to cover the duration of calendar year 2019.
    We seek comment on these proposals and the related considerations, 
as well as the alternatives considered.
b. Methodology for Determining Financial and Quality Performance for 
the 6-Month Performance Years During 2019
(1) Overview
    In this section we describe the proposed methodology for 
determining financial and quality performance for the two 6-month 
performance years during calendar year 2019: The 6-month performance 
year from January 1, 2019, to June 30, 2019; and the 6-month 
performance year from July 1, 2019, to December 31, 2019. We propose to 
specify the methodologies for reconciling these 6-month performance 
years during 2019 in a new section of the regulations at Sec.  425.609. 
Although we propose to use the same overall approach to determining ACO 
financial and quality performance for these two periods, the specific 
policies used to calculate factors used in making these determinations 
would differ based on the ACO's track, its agreement period start date, 
and the agreement period in which the ACO participates (for factors 
that phase-in over multiple agreement periods).
    We note that ACOs in an agreement period that includes a 12-month 
performance year 2019 would have the option to terminate their current 
participation agreements with an effective date of termination of June 
30, 2019, and enter a new agreement period beginning on July 1, 2019. 
We propose to reconcile the performance of these ACOs during the first 
6 months of 2019 using the same approach that we are proposing to use 
to determine performance for the 6-month performance year from January 
1, 2019,

[[Page 41850]]

through June 30, 2019, for ACOs that started a first or second 
agreement period on January 1, 2016, that elect to extend their current 
agreement periods for this 6-month performance year. We propose to 
specify this approach to determining performance for these ACOs in a 
new section of the regulations at Sec.  425.609 and in revisions to 
Sec.  425.221 describing the payment consequences of early termination 
for ACOs that terminate their participation agreement with an effective 
termination date of June 30, 2019, and enter a new agreement period 
beginning July 1, 2019.
    After the conclusion of calendar year 2019, CMS would reconcile the 
financial and quality performance of ACOs that participated in the 
Shared Savings Program during 2019. For ACOs that extended their 
agreement period for the 6-month performance year from January 1, 2019, 
through June 30, 2019, or ACOs that terminated their agreement period 
early on June 30, 2019, and entered a new agreement period beginning on 
July 1, 2019, CMS would first reconcile the ACO based on its 
performance during the entire 12-month calendar year, and then as 
discussed elsewhere in this section, pro-rate the calendar year shared 
savings or shared losses to reflect the ACO's participation in that 6-
month period. In a separate calculation, CMS would reconcile an ACO 
that participated for a 6-month performance year from July 1, 2019, 
through December 31, 2019, for the 12-month calendar year in a similar 
manner, and pro-rate the shared savings or shared losses to reflect the 
ACO's participation during that 6-month performance year. We discuss 
these calculations in detail in section II.A.7.b.2. (for the 6-month 
period from January 1, 2019 through June 30, 2019) and section 
II.A.7.b.3. (for the 6-month period from July 1, 2019 through December 
31, 2019). Further, we note that this proposed approach to reconciling 
ACO performance for a 6-month performance year (or performance period) 
during 2019 would not alter the methodology that would be applied to 
determine financial performance for ACOs that complete a 12 month 
performance year corresponding to calendar year 2019.
    We note that in discussing these 6-month periods, we use two 
references, ``6-month performance year'' and ``performance period.'' 
According to our proposed revisions to Sec.  425.200(c), we use the 
term ``6-month performance year'' to refer to the following: (1) The 
fourth performance year from January 1, 2019 through June 30, 2019 for 
ACOs that started a first or second agreement period January 1, 2016 
and extend their current agreement period for this 6-month period; and 
(2) the first performance year from July 1, 2019 through December 31, 
2019, for ACOs that enter an agreement period beginning on July 1, 
2019. For an ACO starting a 12-month performance year on January 1, 
2019, that terminates its participation agreement with an effective 
date of termination of June 30, 2019, and enters a new agreement period 
beginning on July 1, 2019, we refer to the 6-month period from January 
1, 2019 through June 30, 2019, as a ``performance period''.
    Under the proposed policies, we would calculate shared savings or 
shared losses applicable to an ACO, by comparing the expenditures for 
the ACO's performance year assigned beneficiaries for calendar year 
2019 to the ACO's historical benchmark updated to calendar year 2019. 
If the difference is positive and is greater than or equal to the MSR 
and the ACO has met the quality performance standard, the ACO would be 
eligible for shared savings. If the ACO is in a two-sided model and the 
difference between the updated benchmark and assigned beneficiary 
expenditures is negative and is greater than or equal to the MLR (in 
absolute value terms), the ACO would be liable for shared losses. ACOs 
would share in first dollar savings and losses based on the applicable 
final sharing rate or loss sharing rate according to their track of 
participation for the applicable agreement period, and taking into 
account the ACO's quality performance for 2019. We would adjust the 
amount of shared savings for sequestration. We would cap the amount of 
shared savings at the applicable performance payment limit for the 
ACO's track and cap the amount of shared losses at the applicable loss 
sharing limit for the ACO's track. We would then pro-rate shared 
savings or shared losses by multiplying by one-half, which represents 
the fraction of the calendar year covered by the 6-month performance 
year (or performance period). This pro-rated amount would be the final 
amount of shared savings earned or shared losses owed by the ACO for 
the applicable 6-month performance year (or performance period).
    We believe this proposed approach would allow continuity in program 
operations (including operations that occur on a calendar year basis) 
for ACOs that have either one or two 6-month performance years (or 
performance period) within calendar year 2019. Specifically, the 
proposed approach would allow for payment reconciliation to remain on a 
calendar year basis, which would be most consistent with the calendar 
year-based methodology for calculating benchmark expenditures, trend 
and update factors, risk adjustment, county expenditures and regional 
adjustments. Deviating from a 12 month reconciliation calculation by 
using fewer than 12 months of performance year expenditures could 
interject actuarial biases relative to the benchmark expenditures, 
which are based on 12 month benchmark years. As a result, we believe 
this approach to reconciling ACOs based on a 12 month period would 
protect the actuarial soundness of the financial reconciliation 
methodology. We also believe the alignment of the proposed approach 
with the standard methodology used to perform the same calculations for 
12 month performance years that correspond to a calendar year will make 
it easier for ACOs and other program stakeholders to understand the 
proposed methodology.
    As is the case with typical calendar year reconciliations in the 
Shared Savings Program, we anticipate results with respect to 
participation during calendar year 2019 would be made available to ACOs 
in summer 2020. This would allow those ACOs that are eligible to share 
in savings as a result of their participation in the program during 
calendar year 2019 to receive payment of shared savings following the 
conclusion of the calendar year consistent with the standard process 
and timing for annual payment reconciliation under the program. As 
discussed in detail in section II.A.7.c.6. of this proposed rule, we 
propose to provide separate reconciliation reports for each 6-month 
performance year (or performance period) and would pay shared savings 
or recoup shared losses separately for each 6-month performance year 
(or performance period) during 2019 based on these results.
    Furthermore, this approach would avoid a more burdensome interim 
payment process that could accompany an alternative proposal to instead 
implement, for example, an 18-month performance year from July 1, 2019 
to December 31, 2020. Consistent with the 18- and 21-month performance 
years offered for the first cohorts of Shared Savings Program ACOs, 
such a policy could require ACOs to establish a repayment mechanism 
that otherwise might not be required, create uncertainty over whether 
the ACO may ultimately need to repay CMS based on final results for the 
extended performance year, and delay ACOs seeing a return on their 
investment in

[[Page 41851]]

program participation if eligible for shared savings.
    We believe the proposals to determine shared savings and shared 
losses for the 6-month performance years starting on January 1, 2019, 
and July 1, 2019 (or the 6-month performance period from January 1, 
2019, through June 30, 2019, for ACOs that elect to voluntarily 
terminate their existing participation agreement, effective June 30, 
2019, and enter a new agreement period starting on July 1, 2019), using 
expenditures for the entire calendar year 2019 and then pro-rating 
these amounts to reflect the shorter performance year, require the use 
of our authority under section 1899(i)(3) of the Act to use other 
payment models. Section 1899(d)(1)(B)(i) of the Act specifies that, in 
each year of the agreement period, an ACO is eligible to receive 
payment for shared savings only if the estimated average per capita 
Medicare expenditures under the ACO for Medicare FFS beneficiaries for 
Parts A and B services, adjusted for beneficiary characteristics, is at 
least the percent specified by the Secretary below the applicable 
benchmark under section 1899(d)(1)(B)(ii) of the Act. We believe the 
proposed approach to calculating the expenditures for assigned 
beneficiaries over the full calendar year, comparing this amount to the 
updated benchmark for 2019, and then pro-rating any shared savings (or 
shared losses, which already are implemented using our authority under 
section 1899(i)(3) of the Act) for the 6-month performance year (or 
performance period) involves an adjustment to the estimated average per 
capita Medicare Part A and Part B FFS expenditures determined under 
section 1899(d)(1)(B)(i) of the Act that is not based on beneficiary 
characteristics. Such an adjustment is not contemplated under the plain 
language of section 1899(d)(1)(B)(i) of the Act. As a result, we 
believe it is necessary to use our authority under section 1899(i)(3) 
of the Act to calculate performance year expenditures and determine the 
final amount of any shared savings (or shared losses) for a 6-month 
performance year (or performance period) during 2019, in the proposed 
manner.
    In order to use our authority under section 1899(i)(3) of the Act 
to adopt an alternative payment methodology to calculate shared savings 
and shared losses for the proposed 6-month performance years (or 
performance period) during 2019, we must determine that the alternative 
payment methodology will improve the quality and efficiency of items 
and services furnished to Medicare beneficiaries, without additional 
program expenditures. We believe the proposed approach of allowing ACOs 
that started a first or second agreement period on January 1, 2016, to 
extend their agreement period for a 6-month performance year and of 
allowing entry into the program's redesigned participation options 
beginning on July 1, 2019, if finalized, would support continued 
participation by current ACOs that must renew their agreements, while 
also resulting in more rapid progression to two-sided risk by ACOs 
within current agreement periods and ACOs entering the program for an 
initial agreement period. As discussed in the Regulatory Impact 
Analysis (section IV. of this proposed rule), we believe this approach 
would continue to allow for lower growth in Medicare FFS expenditures 
based on projected participation trends. Therefore, we do not believe 
that the proposed methodology for determining shared savings or shared 
losses for ACOs in a 6-month performance year (or performance period) 
during 2019 would result in an increase in spending beyond the 
expenditures that would otherwise occur under the statutory payment 
methodology in section 1899(d) of the Act. Further, we believe that the 
proposed approach to measuring ACO quality performance for a 6-month 
performance year (or performance period) based on quality data reported 
for calendar year 2019 maintains accountability for the quality of care 
ACOs provide to their assigned beneficiaries. Participating ACOs would 
also have an incentive to perform well on the quality measures in order 
to maximize the shared savings they may receive and minimize any shared 
losses they must pay in tracks where the loss sharing rate is 
determined based on the ACO's quality performance. Therefore, we 
believe this proposed approach to reconciling ACOs for a 6-month 
performance year (or performance period) during 2019 would continue to 
lead to improvement in the quality of care furnished to Medicare FFS 
beneficiaries.
(2) Proposals for Determining Performance for the 6-Month Performance 
Year From January 1, 2019, Through June 30, 2019
    In this section, we describe our proposed approach to determining 
an ACO's performance for the 6-month performance year from January 1, 
2019, through June 30, 2019. These proposed policies would also apply 
to ACOs that begin a 12-month performance year on January 1, 2019, but 
elect to terminate their participation agreement with an effective date 
of termination of June 30, 2019, in order to enter a new agreement 
period starting on July 1, 2019 (early renewals). Our proposed policies 
address the following: (1) The ACO participant list that will be used 
to determine beneficiary assignment; (2) the approach to assigning 
beneficiaries; (3) the quality reporting period; (4) the benchmark year 
assignment methodology and the methodology for calculating, adjusting 
and updating the ACO's historical benchmark; and (5) the methodology 
for determining shared savings and shared losses. We propose to specify 
these policies for reconciling the 6-month period from January 1, 2019, 
through June 30, 2019 in paragraph (b) of a new section of the 
regulations at Sec.  425.609.
    We propose to use the ACO participant list for the performance year 
beginning January 1, 2019, to determine beneficiary assignment as 
specified in Sec. Sec.  425.402 and 425.404, and according to the ACO's 
track as specified in Sec.  425.400. As discussed in section II.A.7.c 
of this proposed rule, we propose to allow all ACOs, including ACOs 
entering a 6-month performance year, to make changes to their ACO 
participant list in advance of the performance year beginning January 
1, 2019.
    To determine beneficiary assignment, we propose to consider the 
allowed charges for primary care services furnished to the beneficiary 
during a 12 month assignment window, allowing for a 3 month claims run 
out. For the 6-month performance year from January 1, 2019 through June 
30, 2019, we propose to determine the assigned population using the 
following assignment windows:
     For ACOs under preliminary prospective assignment with 
retrospective reconciliation, the assignment window would be calendar 
year 2019.
     For ACOs under prospective assignment, Medicare FFS 
beneficiaries would be prospectively assigned to the ACO based on the 
beneficiary's use of primary care services in the most recent 12 months 
for which data are available. For example, in determining prospective 
beneficiary assignment for the January 1, 2019 through June 30, 2019 
performance year we could use an assignment window from October 1, 
2017, through September 30, 2018, to align with the off-set assignment 
window typically used to determine prospective assignment prior to the 
start of a calendar year performance year. Beneficiaries would remain 
prospectively assigned to the ACO at the end of calendar year 2019 
unless they

[[Page 41852]]

meet any of the exclusion criteria under Sec.  425.401(b) during the 
calendar year.
    We note that this is the same approach that is used to determine 
assignment under the program's current regulations. Therefore, it would 
also be used to determine assignment for the performance year beginning 
on January 1, 2019, for ACOs that terminate their agreement effective 
June 30, 2019, and enter a new agreement period starting on July 1, 
2019, for purposes of determining their performance during the 
performance period from January 1, 2019 through June 30, 2019.
    As discussed in section II.A.7.c. of this proposed rule, to 
determine ACO performance during a 6-month performance year, we propose 
to use the ACO's quality performance for the 2019 reporting period, and 
to calculate the ACO's quality performance score as provided in Sec.  
425.502. For early renewal ACOs that terminate their agreement 
effective June 30, 2019, and enter a new agreement period starting on 
July 1, 2019, we would determine quality performance for the 
performance period from January 1, 2019, through June 30, 2019, in the 
same manner as for ACOs with a 6-month performance year from January 1, 
2019, through June 30, 2019, that enter a new agreement period 
beginning on July 1, 2019. As described in section II.A.7.c.4. of this 
proposed rule, we propose using a different quality measure sampling 
methodology depending on whether an ACO participates in both a 6-month 
performance year (or performance period) beginning January 1, 2019 and 
a 6-month performance year beginning July 1, 2019, or only participates 
in a 6-month performance year from January 1, 2019 through June 30, 
2019.
    Consistent with current program policy, we would determine 
assignment for the benchmark years based on the most recent certified 
ACO participant list for the ACO effective for the performance year 
beginning January 1, 2019. This would be the participant list the ACO 
certified prior to the start of its agreement period unless the ACO has 
made changes to its ACO participant list during its agreement period as 
provided in Sec.  425.118(b). If the ACO has made subsequent changes to 
its ACO participant list, we would recalculate the historical benchmark 
using the most recent certified ACO participant list. See the Medicare 
Shared Savings Program, ACO Participant List and Participant Agreement 
Guidance (July 2018, version 5), available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Downloads/ACO-Participant-List-Agreement.pdf.
    For the 6-month performance year from January 1, 2019, through June 
30, 2019, we would calculate the benchmark and assigned beneficiary 
expenditures as though the performance year were the entire calendar 
year. The ACO's historical benchmark would be determined according to 
the methodology applicable to the ACO based on its agreement period in 
the program. We would apply the methodology for establishing, updating 
and adjusting the ACO's historical benchmark as specified in Sec.  
425.602 (for ACOs in a first agreement period) or Sec.  425.603 (for 
ACOs in a second agreement period), except that data from calendar year 
2019 would be used in place of data for the 6-month performance year in 
certain calculations, as follows:
     The benchmark would be adjusted for changes in severity 
and case mix between benchmark year 3 and calendar year 2019 using the 
methodology that accounts separately for newly and continuously 
assigned beneficiaries using prospective HCC risk scores and 
demographic factors as described under Sec. Sec.  425.604(a)(1) through 
(3), 425.606(a)(1) through (3), and 425.610(a)(1) through (3).
     The benchmark would be updated to calendar year 2019 
according to the methodology for using growth in national Medicare FFS 
expenditures for assignable beneficiaries described under Sec.  
425.602(b) (for ACOs in a first agreement period) and Sec.  425.603(b) 
(for ACOs in a second agreement period beginning January 1, 2016), or 
the methodology for using growth in regional Medicare FFS expenditures 
described under Sec.  425.603(d) (for ACOs in a second agreement period 
beginning January 1 of 2017, 2018, or 2019).
    We note this approach is already used to adjust and update the 
historical benchmark each performance year under the program's current 
regulations. Therefore we would use this same approach to determine the 
benchmark for the performance period from January 1, 2019, through June 
30, 2019, for ACOs that terminate their agreement effective June 30, 
2019, and enter a new agreement period starting on July 1, 2019.
    For determining performance during the 6-month performance year (or 
performance period) from January 1, 2019 through June 30, 2019, we 
would apply the methodology for determining shared savings and shared 
losses according to the approach specified for the ACO's track under 
the terms of the participation agreement that was in effect on January 
1, 2019: Sec.  425.604 (Track 1), Sec.  425.606 (Track 2) or Sec.  
425.610 (Track 3) and, as applicable, the terms of the ACO's 
participation agreement for the Track 1+ Model authorized under section 
1115A of the Act. (See discussion in section II.F of this proposed rule 
concerning applicability of proposed policies to Track 1+ Model ACOs). 
However, some exceptions to the otherwise applicable methodology are 
needed because we are proposing to calculate the expenditures for 
assigned beneficiaries over the full calendar year 2019 for purposes of 
determining shared savings and shared losses for the 6-month 
performance year (or performance period) from January 1, 2019, through 
June 30, 2019. We propose to use the following steps to calculate 
shared savings and shared losses:
     Average per capita Medicare expenditures for Parts A and B 
services for calendar year 2019 would be calculated for the ACO's 
performance year assigned beneficiary population.
     We would compare these expenditures to the ACO's updated 
benchmark determined for the calendar year as previously described.
     We would apply the MSR and MLR (if applicable).
    ++ The ACO's assigned beneficiary population for the performance 
year starting on January 1, 2019, would be used to determine the MSR 
for Track 1 ACOs and the variable MSR/MLR for ACOs in a two-sided model 
that selected this option at the start of their agreement period. In 
the event a two-sided model ACO selected a fixed MSR/MLR at the start 
of its agreement period, and the ACO's performance year assigned 
population is below 5,000 beneficiaries, the MSR/MLR would be 
determined based on the number of assigned beneficiaries as proposed in 
section II.A.6.b. of this proposed rule.
    ++ To qualify for shared savings, the ACO's average per capita 
Medicare expenditures for its performance year assigned beneficiaries 
during calendar year 2019 must be below its updated benchmark for the 
year by at least the MSR established for the ACO.
    ++ To be responsible for sharing losses with the Medicare program, 
the ACO's average per capita Medicare expenditures for its performance 
year assigned beneficiaries during calendar year 2019 must be above its 
updated benchmark for the year by at least the MLR established for the 
ACO.
     We would determine the shared savings amount if we 
determine the ACO met or exceeded the MSR, and if the ACO met the 
minimum quality performance standards established under Sec.  425.502 
and as described in this section of this proposed rule, and

[[Page 41853]]

otherwise maintained its eligibility to participate in the Shared 
Savings Program. We would determine the shared losses amount if we 
determine the ACO met or exceeded the MLR. To determine these amounts, 
we would do the following:
    ++ We would apply the final sharing rate or loss sharing rate to 
first dollar savings or losses.
    ++ For ACOs that generated savings that met or exceeded the MSR, we 
would multiply the difference between the updated benchmark 
expenditures and performance year assigned beneficiary expenditures by 
the applicable final sharing rate based on the ACO's track and its 
quality performance under Sec.  425.502.
    ++ For ACOs that generated losses that met or exceeded the MLR, we 
would multiply the difference between the updated benchmark 
expenditures and performance year assigned beneficiary expenditures by 
the applicable shared loss rate based on the ACO's track and its 
quality performance under Sec.  425.502 (for ACOs in tracks where the 
loss sharing rate is determined based on the ACO's quality 
performance).
     We would adjust the shared savings amount for 
sequestration by reducing by 2 percent and compare the sequestration-
adjusted shared savings amount to the applicable performance payment 
limit based on the ACO's track.
     We would compare the shared losses amount to the 
applicable loss sharing limit based on the ACO's track.
     We would pro-rate any shared savings amount, as adjusted 
for sequestration and the performance payment limit, or any shared 
losses amount, as adjusted for the loss sharing limit, by multiplying 
by one half, which represents the fraction of the calendar year covered 
by the 6-month performance year (or performance period). This pro-rated 
amount would be the final amount of shared savings that would be paid 
to the ACO for the 6-month performance year (or performance period) or 
the final amount of shared losses that would be owed by the ACO for the 
6-month performance year (or performance period).
    We seek comment on these proposals.
(3) Proposals for Determining Performance for the 6-Month Performance 
Year From July 1, 2019, Through December 31, 2019
    In this section, we describe our proposed approach to determining 
an ACO's performance for the 6-month performance year from July 1, 
2019, through December 31, 2019. Our proposed policies address the 
following: (1) The ACO participant list that will be used to determine 
beneficiary assignment; (2) the approach to assigning beneficiaries for 
the 6-month performance year; (3) the quality reporting period for the 
6-month performance year; (4) the benchmark year assignment methodology 
and the methodology for calculating, adjusting and updating the ACO's 
historical benchmark; and (5) the methodology for determining shared 
savings and shared losses for the ACO for the performance year. We 
propose to specify the methodology for reconciling the 6-month 
performance year from July 1, 2019, through December 31, 2019, in 
paragraph (c) of a new section of the regulations at Sec.  425.609.
    We note that in determining performance for the 6-month performance 
year from July 1, 2019 through December 31, 2019, we would follow the 
same general methodological steps for calculating pro-rated shared 
savings and shared losses as described in section II.A.7.b.2 of this 
proposed rule for the 6-month performance year from January 1, 2019 
through June 30, 2019. However, for example, the applicable 
benchmarking methodology, which is based on the ACO's agreement period 
in the program, and financial model, which is based on the track in 
which the ACO is participating, would be different.
    We propose to use the ACO participant list for the performance year 
beginning July 1, 2019, to determine beneficiary assignment, consistent 
with the assignment methodology the ACO selected at the start of its 
agreement period under proposed Sec.  425.400(a)(4)(ii). As discussed 
in section II.A.7.c of this proposed rule, this would be the ACO 
participant list that was certified as part of the ACO's application to 
enter an agreement period beginning on July 1, 2019.
    To determine beneficiary assignment, we propose to consider the 
allowed charges for primary care services furnished to the beneficiary 
during a 12 month assignment window, allowing for a 3 month claims run 
out. For the 6-month performance year from July 1, 2019 through 
December 31, 2019, we propose to determine the assigned population 
using the following assignment windows:
     For ACOs under preliminary prospective assignment with 
retrospective reconciliation, the assignment window would be calendar 
year 2019.
     For ACOs under prospective assignment, Medicare FFS 
beneficiaries would be prospectively assigned to the ACO based on the 
beneficiary's use of primary care services in the most recent 12 months 
for which data are available. We would use an assignment window before 
the start of the agreement period on July 1, 2019. For example, we 
could use an assignment window from April 30, 2018, through March 31, 
2019. The 3 month gap between the end of the assignment window and the 
start of the performance year would be consistent with the typical gap 
for calendar year performance years that begin on January 1. 
Beneficiaries would remain prospectively assigned to the ACO at the end 
of calendar year 2019 unless they meet any of the exclusion criteria 
under Sec.  425.401(b) during the calendar year.
    As discussed in section II.A.7.c of this proposed rule, to 
determine ACO performance during either 6-month performance year, we 
propose to use the ACO's quality performance for the 2019 reporting 
period, and to calculate the ACO's quality performance score as 
provided in Sec.  425.502.
    Consistent with current program policy, we would determine 
assignment for the benchmark years based on the ACO's certified ACO 
participant list for the agreement period beginning July 1, 2019.
    For the 6-month performance year from July 1, 2019, through 
December 31, 2019, we would calculate the benchmark and assigned 
beneficiary expenditures as though the performance year were the entire 
calendar year. The ACO's historical benchmark would be determined 
according to the methodology applicable to the ACO based on its 
agreement period in the program. We would apply the methodology for 
establishing, updating and adjusting the ACO's historical benchmark as 
specified in proposed Sec.  425.601, except that data from calendar 
year 2019 would be used in place of data for the 6-month performance 
year in certain calculations, as follows:
     The benchmark would be adjusted for changes in severity 
and case mix between benchmark year 3 and calendar year 2019 based on 
growth in prospective HCC risk scores, subject to a symmetrical cap of 
positive or negative 3 percent that would apply for the agreement 
period such that the adjustment between BY3 and any performance year in 
the agreement period would never be more than 3 percent in either 
direction. See discussion in section II.D.2 of this proposed rule.
     The benchmark would be updated to calendar year 2019 
according to the methodology described under proposed Sec.  425.601(b) 
using a blend of national and regional growth rates.

[[Page 41854]]

    For determining performance during the 6-month performance year 
from July 1, 2019, through December 31, 2019, we would apply the 
methodology for determining shared savings and shared losses according 
to the approach specified for the ACO's track under its agreement 
period beginning on July 1, 2019: The proposed BASIC track (Sec.  
425.605) or ENHANCED track (Sec.  425.610). However, some exceptions to 
the otherwise applicable methodology are needed because we are 
proposing to calculate the expenditures for assigned beneficiaries over 
the full calendar year 2019 for purposes of determining shared savings 
and shared losses for the 6-month performance year from July 1, 2019 
through December 31, 2019. We propose to use the following steps to 
calculate shared savings and shared losses:
     Average per capita Medicare expenditures for Parts A and B 
services for calendar year 2019 would be calculated for the ACO's 
performance year assigned beneficiary population. Additionally, when 
calculating calendar year 2019 expenditures to be used in determining 
performance for the July 1, 2019 through December 31, 2019 performance 
year, we would include expenditures for all assigned beneficiaries that 
are alive as of January 1, 2019, including those with a date of death 
prior to July 1, 2019, except prospectively assigned beneficiaries that 
are excluded under Sec.  425.401(b). The inclusion of beneficiaries 
with a date of death before July 1, 2019, is necessary to maintain 
consistency with benchmark year and regional expenditure adjustments 
and associated trend and update factor calculations.
     We would compare these expenditures to the ACO's updated 
benchmark determined for the calendar year as previously described.
     We would apply the MSR and MLR (if applicable).
    ++ The ACO's assigned beneficiary population for the performance 
year starting on July 1, 2019, would be used to determine the MSR for 
one-sided model ACOs (under Level A or Level B of the BASIC track) and 
the variable MSR/MLR for ACOs in a two-sided model that selected this 
option at the start of their agreement period. In the event a two-sided 
model ACO selected a fixed MSR/MLR at the start of its agreement 
period, and the ACO's performance year assigned population is below 
5,000 beneficiaries, the MSR/MLR would be determined based on the 
number of assigned beneficiaries as proposed in section II.A.6.b. of 
this proposed rule.
    ++ To qualify for shared savings, the ACO's average per capita 
Medicare expenditures for its performance year assigned beneficiaries 
during calendar year 2019 must be below its updated benchmark for the 
year by at least the MSR established for the ACO.
    ++ To be responsible for sharing losses with the Medicare program, 
the ACO's average per capita Medicare expenditures for its performance 
year assigned beneficiaries during calendar year 2019 must be above its 
updated benchmark for the year by at least the MLR established for the 
ACO.
     We would determine the shared savings amount if we 
determine the ACO met or exceeded the MSR, and if the ACO met the 
minimum quality performance standards established under Sec.  425.502 
and as described in this section of this proposed rule, and otherwise 
maintained its eligibility to participate in the Shared Savings 
Program. We would determine the shared losses amount if we determine 
the ACO met or exceeded the MLR. To determine these amounts, we would 
do the following:
    ++ We would apply the final sharing rate or loss sharing rate to 
first dollar savings or losses.
    ++ For ACOs that generated savings that met or exceeded the MSR, we 
would multiply the difference between the updated benchmark 
expenditures and performance year assigned beneficiary expenditures by 
the applicable final sharing rate based on the ACO's track and its 
quality performance under Sec.  425.502.
    ++ For ACOs that generated losses that met or exceeded the MLR, we 
would multiply the difference between the updated benchmark 
expenditures and performance year assigned beneficiary expenditures by 
the applicable shared loss rate based on the ACO's track and its 
quality performance under Sec.  425.502 (for ACOs in the ENHANCED track 
where the loss sharing rate is determined based on the ACO's quality 
performance).
     We would adjust the shared savings amount for 
sequestration by reducing by 2 percent and compare the sequestration-
adjusted shared savings amount to the applicable performance payment 
limit based on the ACO's track.
     We would compare the shared losses amount to the 
applicable loss sharing limit based on the ACO's track.
     We would pro-rate any shared savings amount, as adjusted 
for sequestration and the performance payment limit, or any shared 
losses amount, as adjusted for the loss sharing limit, by multiplying 
by one half, which represents the fraction of the calendar year covered 
by the 6-month performance year. This pro-rated amount would be the 
final amount of shared savings that would be paid to the ACO for the 6-
month performance year or the final amount of shared losses that would 
be owed by the ACO for the 6-month performance year.
    We seek comment on these proposals.
c. Applicability of Program Policies to ACOs Participating in a 6-Month 
Performance Year
    In general, unless otherwise stated, we are proposing that program 
requirements under 42 CFR part 425 that are applicable to the ACO under 
the ACO's chosen participation track and based on the ACO's agreement 
start date would be applicable to an ACO participating in a 6-month 
performance year. This would allow routine program operations to 
continue to apply for ACOs participating under these shorter 
performance years. Further, it would ensure consistency in the 
applicability and implementation of our requirements across all program 
participants, including ACOs participating in 6-month performance 
years. As we described in section II.A.7.b of this proposed rule, 
limited exceptions to our policies for determining financial and 
quality performance are necessary to ensure calculations can continue 
to be performed on a calendar year basis and using the most relevant 
data.
    In this section, we describe our consideration of program 
participation options affected by our decision to forgo an application 
cycle in calendar year 2018 for a January 1, 2019 start date, and the 
proposal to offer instead an application cycle in calendar year 2019 
for a July 1, 2019 start date. We discuss program policies that would 
need to be modified to allow for the proposed 6-month performance years 
within calendar year 2019, and related proposals to revise the 
program's regulations to allow for these modifications.
(1) Unavailability of an Application Cycle for Use of a SNF 3-Day Rule 
Waiver Beginning January 1, 2019
    Eligible ACOs may apply for use of a SNF 3-day rule waiver at the 
time of application for an initial agreement or to renew their 
participation. Further, ACOs within a current agreement period under 
Track 3, or the Track 1+ Model as described in sections II.B.2.a and 
II.F of this proposed rule, may apply for a SNF 3-day rule waiver, 
which if approved would begin at the start of their next performance 
year. As discussed in section II.B.2.a of this proposed rule, we 
propose to allow the

[[Page 41855]]

SNF 3-day rule waiver under the Shared Savings Program to be more 
broadly available to BASIC track ACOs (under a two-sided model) and 
ENHANCED track ACOs, regardless of their choice of beneficiary 
assignment methodology.
    In light of our decision to forgo an application cycle in calendar 
year 2018 for a January 1, 2019 agreement start date, we also would not 
offer an opportunity for ACOs to apply for a start date of January 1, 
2019, for initial use of a SNF 3-day rule waiver. The application cycle 
for the July 1, 2019 start date would be the next opportunity for 
eligible ACOs to begin use of a waiver, if they apply for and are 
approved to use the waiver as part of the application cycle for the 
July 1, 2019 start date. This would extend to ACOs within existing 
agreement periods in Track 3 that would, under 12 month performance 
years, not otherwise have the opportunity to apply to begin use of the 
waiver until January 1, 2020. We believe the existing regulation at 
Sec.  425.612(b), which requires applications for waivers to be 
submitted to CMS in the form and manner and by a deadline specified by 
CMS, provides the flexibility to accommodate a July 1, 2019 SNF 3-day 
rule waiver start date for eligible ACOs in a performance year 
beginning on January 1, 2019. As a result, we are not proposing any 
corresponding revisions to this provision at this time.
(2) Annual Certifications and ACO Participant List Modifications
    At the end of each performance year, ACOs complete an annual 
certification process. At the same time as this annual certification 
process, CMS also requires ACOs to review, certify and electronically 
sign official program documents to support the ACO's participation in 
the upcoming performance year.
    Requirements for this annual certification, and other 
certifications that occur on an annual basis, continue to apply to all 
currently participating ACOs in advance of the performance year 
beginning on January 1, 2019. In the case of ACOs that participate for 
a portion of calendar year 2019 under one agreement and enter a new 
agreement period starting on July 1, 2019, the certifications made in 
advance of the performance year starting on January 1, 2019, would have 
relevance only for the 6-month period from January 1, 2019, to June 30, 
2019. These ACOs would need to complete another certification as part 
of completing the requirements to enter a new agreement period 
beginning on July 1, 2019, which would be applicable for the duration 
of their first performance year under the new agreement period, 
spanning July 1, 2019 to December 31, 2019.
    Each ACO certifies its list of ACO participant TINs before the 
start of its agreement period, before every performance year 
thereafter, and at such other times as specified by CMS in accordance 
with Sec.  425.118(a). The addition of ACO participants must occur 
prior to the start of the performance year in which these additions 
become effective. ACO participant must be deleted from the ACO 
participant list within 30 days after termination of the ACO 
participant agreement, and such deletion is effective as of the 
termination date of the ACO participant agreement. Absent unusual 
circumstances, the ACO participant list that was certified prior to the 
start of the performance year is used for the duration of the 
performance year. An ACO's certified ACO participant list for a 
performance year is used, for example, to determine beneficiary 
assignment for the performance year and therefore also the ACO's 
quality reporting samples and financial performance. See Sec.  
425.118(b)(3) and see also Medicare Shared Savings Program ACO 
Participant List and Participant Agreement Guidance (July 2018, version 
5), available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Downloads/ACO-Participant-List-Agreement.pdf. These policies would apply for ACOs participating in a 
6-month performance year consistent with the terms of the existing 
regulations.
    ACOs that started a first or second agreement period on January 1, 
2016, that extend their agreement period for a 6-month performance year 
beginning on January 1, 2019, would have the opportunity during 2018 to 
make changes to their ACO participant list to be effective for the 6-
month performance year from January 1, 2019, to June 30, 2019. If these 
ACOs elect to continue their participation in the program for a new 
agreement period starting on July 1, 2019, they would have an 
opportunity to submit a new ACO participant list as part of their 
renewal application for the July 1, 2019 start date.
    An ACO that enters a new agreement period beginning on July 1, 
2019, would submit and certify its ACO participant list for the 
agreement period beginning on July 1, 2019, according to the 
requirements in Sec.  425.118(a). The ACO's approved ACO participant 
list would remain in effect for the full performance year from July 1, 
2019, to December 31, 2019. These ACOs would have the opportunity to 
add or delete ACO participants prior to the start of the next 
performance year. Any additions to the ACO participant list that are 
approved by CMS would become effective at the start of performance year 
2020.
    The program's current regulations prevent duplication of shared 
savings payments. Under Sec.  425.114, ACOs may not participate in the 
Shared Savings Program if they include an ACO participant that 
participates in another Medicare initiative that involves shared 
savings. In addition, under Sec.  425.306(b)(2), each ACO participant 
that submits claims for services used to determine the ACO's assigned 
population must be exclusive to one Shared Savings Program ACO. If, 
during a benchmark or performance year (including the 3-month claims 
run out for such benchmark or performance year), an ACO participant 
that participates in more than one ACO submits claims for services used 
in assignment, then: (i) CMS will not consider any services billed 
through the TIN of the ACO participant when performing assignment for 
the benchmark or performance year; and (ii) the ACO may be subject to 
the pre-termination actions set forth in Sec.  425.216, termination 
under Sec.  425.218, or both.
    We note the following examples, regarding ACO participants that 
submit claims for services that are used assignment, and that are 
participating in a Shared Savings Program ACO for a 12-month 
performance year during 2019 (such as a 2017 starter, 2018 starter, or 
2015 starter that deferred renewal until 2019).
    If the ACO remains in the program under its current agreement past 
June 30, 2019, these ACO participants would not be eligible to be 
included on the ACO participant list of another ACO applying to enter a 
new agreement period under the program beginning on July 1, 2019. An 
ACO participant in these circumstances could be added to the ACO 
participant list of a July 1, 2019 starter effective for the 
performance year beginning on January 1, 2020, if it is no longer 
participating in the other Shared Savings Program ACO and is not 
participating in another initiative identified in Sec.  425.114(a).
    If an ACO starting a 12-month performance year on January 1, 2019, 
terminates its participation agreement with an effective date of 
termination of June 30, 2019, the effective end date of the ACO 
participants' participation would also be June 30, 2019. Such ACOs that 
elect to enter a new agreement period beginning on July 1, 2019, can 
make ACO participant list

[[Page 41856]]

changes that would be applicable for their new agreement period. This 
means that the ACO participants of the terminating ACO could choose to 
be added to the ACO participant list of another July 1, 2019 starter, 
effective for the performance year beginning July 1, 2019.
(3) Repayment Mechanism Requirements
    ACOs must demonstrate that they have in place an adequate repayment 
mechanism prior to entering a two-sided model. The repayment mechanism 
must be in effect for the duration of an ACO's participation in a two-
sided model and for 24 months following the conclusion of the agreement 
period. (See discussion in section II.A.6.c of this proposed rule.)
    We note that ACOs that started a first or second agreement period 
January 1, 2016 in a two-sided model would have in place under current 
program policies a repayment mechanism arrangement that would cover the 
3 years between January 1, 2016 and December 31, 2018 plus a 24-month 
tail period until December 31, 2020. In the case of an ACO with an 
agreement period ending December 31, 2018, that extends its agreement 
for the 6-month performance year from January 1, 2019 through June 30, 
2019, we would require the ACO to extend the term of its repayment 
mechanism so that it would be in effect for the duration of the ACO's 
participation in a two-sided model plus 24 months following the 
conclusion of the agreement period (that is, until June 30, 2021). This 
will allow us sufficient time to perform financial calculations for the 
6-month performance year from January 1, 2019 through June 30, 2019 and 
to use the arrangement to collect shared losses for that performance 
year, if necessary. This policy is consistent with the policy proposed 
in section II.A.6.c and at Sec.  425.204(f)(6)(i), which provides that 
a repayment mechanism must be in effect for the duration of the ACO's 
participation in a two-sided model plus 24 months following the 
conclusion of the agreement period.
    Consistent with our proposed policy described in section II.A.6.c 
and Sec.  425.204(f)(4)(iv), a renewing ACO that is under a two-sided 
model and entering a new agreement period beginning July 1, 2019 would 
be permitted to use its existing repayment mechanism to establish its 
ability to repay shared losses incurred for performance years in its 
new agreement period. As previously described, we would require the ACO 
to extend the term of the existing repayment mechanism by an amount of 
time specified by CMS and, if necessary, to increase the amount of the 
repayment mechanism to reflect the new repayment mechanism amount.
    We are proposing that, for agreement periods beginning on or after 
July 1, 2019, we would recalculate the amount of the ACO's repayment 
mechanism before the second and each subsequent performance year in the 
agreement period, based on the ACO's certified ACO participant list for 
the relevant performance year. Therefore, for an ACO that enters a new 
agreement period beginning July 1, 2019, we would calculate the amount 
of the repayment mechanism for the new agreement period in accordance 
with our proposed regulation at Sec.  425.204(f)(4). Before the start 
of performance year 2020, we would recalculate the amount of the ACO's 
repayment mechanism. Depending on how much the recalculated amount 
exceeds the existing repayment mechanism amount, we would require the 
ACO to increase its repayment mechanism amount, consistent with our 
proposed approach described in section II.A.6.c of this proposed rule 
and Sec.  425.204(f)(4)(iii).
(4) Proposals for Quality Reporting and Quality Measure Sampling
    In order to determine an ACO's quality performance during either 6-
month performance year during 2019, we propose to use the ACO's quality 
performance for the 2019 reporting period as determined under Sec.  
425.502. For ACOs that participate in only one of the 6-month 
performance years (such as ACOs that started a first or second 
agreement period on January 1, 2016 that extend their agreement period 
by 6 months and do not continue in the program past June 30, 2019, or 
ACOs that enter an initial agreement period beginning on July 1, 2019), 
we would also account for the ACO's quality performance using quality 
measure data reported for the 12-month calendar year. As we previously 
described in section II.A.7.b.2 of this proposed rule, ACOs that 
terminate their agreement effective June 30, 2019, and enter a new 
agreement period starting on July 1, 2019, would also be required to 
complete quality reporting for the 2019 reporting period, and we would 
determine quality performance for the performance period from January 
1, 2019, through June 30, 2019, in the same manner as for ACOs with a 
6-month performance year from January 1, 2019 through June 30, 2019, 
that enter a new agreement period beginning on July 1, 2019.
    We believe the following considerations support this proposed 
approach. For one, use of a 12 month period for quality measure 
assessment maintains alignment with the program's existing quality 
measurement approach, and aligns with the proposed use of 12 months of 
expenditure data (for calendar year 2019) in determining the ACO's 
financial performance. Also, this approach would continue to align the 
program's quality reporting period with policies under the Quality 
Payment Program. ACO professionals that are MIPS eligible clinicians 
(not QPs based on their participation in an Advanced APM or otherwise 
excluded from MIPS) would continue to be scored under MIPS using the 
APM scoring standard that covers all of 2019. Second, the measure 
specifications for the quality measures used under the program require 
12 months of data. See for example, the Shared Savings Program ACO 2018 
Quality Measures, Narrative Specification Document (January 20, 2018), 
available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Downloads/2018-reporting-year-narrative-specifications.pdf. Third, in light of our proposal to use 12 months of 
expenditures (based on calendar year 2019) in determining shared 
savings and shared losses for a 6-month performance year, we believe it 
is also appropriate to hold ACOs accountable for the quality of the 
care furnished to their assigned beneficiaries during this same time 
frame. Fourth, and lastly, using an annual quality reporting cycle for 
the 6-month performance year would avoid the need to introduce new 
reporting requirements, and therefore potential additional burden on 
ACOs, that would arise from a requirement that ACOs report quality 
separately for each 6-month performance year during calendar year 2019.
    The ACO participant list is used to determine beneficiary 
assignment for purposes of generating the quality reporting samples. 
Beneficiary assignment is performed using the applicable assignment 
methodology under Sec.  425.400, either preliminary prospective 
assignment or prospective assignment, with excluded beneficiaries 
removed under Sec.  425.401(b), as applicable. The samples for claims-
based measures are typically determined based on the assignment list 
for calendar year quarter 4. The sample for quality measures reported 
through the CMS web interface is typically determined based on the 
beneficiary assignment list for calendar year quarter 3. The CAHPS for 
ACOs survey sample is typically determined based on the beneficiary 
assignment list for calendar year quarter 2.
    As described in section II.A.7.c.2. of this proposed rule, ACOs in 
either 6-

[[Page 41857]]

month performance year during 2019 may use a different ACO participant 
list for each performance year (for example, in the case of an ACO that 
started a first or second agreement period on January 1, 2016, that 
extends its current agreement period by 6 months, and then makes 
changes to its ACO participant list as part of its renewal application 
for a July 1, 2019 start date). As discussed in sections II.A.7.b.2 
(January 2019-June 2019) and II.A.7.b.3 (July 2019-December 2019), 
different assignment methodologies and assignment windows would be used 
to assign beneficiaries to ACOs for the two 6-month performance years 
during 2019. Therefore, we considered which ACO participant list and 
assignment methodology to use to identify the samples of beneficiaries 
for quality reporting for the entire 2019 reporting period for ACOs 
participating in one or both of the 6-month performance years during 
2019 (or performance period for ACOs that elect to voluntarily 
terminate their existing participation agreement, effective June 30, 
2019, and enter a new agreement period starting on July 1, 2019).
    For purposes of determining the quality reporting samples for the 
2019 reporting period, we propose to use the ACO's most recent 
certified ACO participant list available at the time the quality 
reporting samples are generated, and the assignment methodology most 
recently applicable to the ACO for a 2019 performance year. We believe 
the use of the ACO's most recent ACO participant list to assign 
beneficiaries according to the assignment methodology applicable based 
on the ACO's most recent participation in the program during 2019 would 
result in the most relevant beneficiary samples for 2019 quality 
reporting. For instance, for purposes of measures reported by ACOs 
through the CMS web interface, ACOs must work together with their ACO 
participants and ACO providers/suppliers to abstract data from medical 
records for reporting. In the case of an ACO that started a new 
agreement period on July 1, 2019, basing assignment for the CMS web 
interface quality reporting sample on the most recent ACO participant 
list would allow this coordination to occur between the ACO and its 
current ACO participant TINs, rather than requiring the ACO to 
coordinate with ACO participants from a prior performance year that may 
no longer be included on the ACO participant list for the agreement 
period beginning on July 1, 2019. Further, basing the sample for the 
CAHPS for ACOs survey on the most recent ACO participant list could 
ensure the ACO receives feedback from the ACO's assigned beneficiaries 
on their experience of care with ACO participants and ACO providers/
suppliers based on the ACO's current participant list, rather than 
based on its prior ACO participant list. This could allow for more 
meaningful care coordination improvements by the ACO in response to the 
feedback from the survey. Additionally, we believe this proposed 
approach to determining the ACO's quality reporting samples is also 
appropriate for an ACO that participates in only one 6-month 
performance year during 2019, because the most recent certified ACO 
participant list applicable for the performance year, would also be the 
certified ACO participant list that is used to determine financial 
performance.
    We propose to specify the ACO participant lists that would be used 
in determining the quality reporting samples for measuring quality 
performance for the 6-month performance years in a new section of the 
regulations at Sec.  425.609. Specifically we propose to use the 
following approach to determine the ACO participant list, assignment 
methodology and assignment window that would be used to generate the 
quality reporting samples for measuring quality performance of ACOs 
participating in a 6-month performance year (or performance period) 
during 2019.
    For ACOs that enter an agreement period beginning on July 1, 2019, 
including new ACOs, ACOs that extended their prior participation 
agreement for the 6-month performance year from January 1, 2019, to 
June 30, 2019, and ACOs that start a 12-month performance year on 
January 1, 2019, and terminate their participation agreement with an 
effective date of termination of June 30, 2019, and enter a new 
agreement period beginning on July 1, 2019, we propose to use the 
certified ACO participant list for the performance year starting on 
July 1, 2019, to determine the quality reporting samples for the 2019 
reporting period. This most recent certified ACO participant list would 
therefore be used to determine the quality reporting samples for the 
2019 reporting year, which would be used to determine performance for 
the 6-month performance year from January 1, 2019, to June 30, 2019 (or 
performance period for ACOs that elect to voluntarily terminate their 
existing participation agreement, effective June 30, 2019, and enter a 
new agreement period starting on July 1, 2019) and the 6-month 
performance year from July 1, 2019, to December 31, 2019.
    Beneficiary assignment for purposes of generating the quality 
reporting samples would be based on the assignment methodology 
applicable to the ACO during its 6-month performance year from July 1, 
2019, through December 31, 2019, under Sec.  425.400, either 
preliminary prospective assignment or prospective assignment, with 
excluded beneficiaries removed under Sec.  425.401(b), as applicable. 
We anticipate the assignment windows for the quality reporting samples 
would be as follows based on our operational experience: (1) Samples 
for claims-based measures would be determined based on the assignment 
list for calendar year quarter 4; (2) the sample for CMS web interface 
measures would be determined based on the assignment list for calendar 
year quarter 3, which equates to the ACO's first quarter of it is 6-
month performance year beginning on July 1, 2019; and (3) the sample 
for the CAHPS for ACOs survey would be determined based on the initial 
prospective or preliminary prospective assignment list for the 6-month 
performance year beginning on July 1, 2019.
    We believe it is necessary to use the initial assignment list for 
the CAHPS for ACOs survey sample, to make use of the most recent 
available prospective assignment list data and quarterly preliminary 
prospective assignment data for ACOs for the 6-month performance year 
beginning on July 1, 2019. Further, for CMS web interface measures and 
claims-based measures, the proposed approach would be consistent with 
the current methodology for determining the samples.
    If an ACO extends its participation to the first 6 months of 2019, 
but does not enter a new agreement period beginning on July 1, 2019, we 
propose to use the ACO's latest certified participant list (the ACO 
participant list effective on January 1, 2019) to determine the quality 
reporting samples for the 2019 reporting period. Beneficiary assignment 
for purpose of generating the quality reporting samples would be based 
on the assignment methodology applicable to the ACO during its 6-month 
performance year from January 1, 2019, through June 30, 2019, under 
Sec.  425.400, either preliminary prospective assignment or prospective 
assignment, with excluded beneficiaries removed under Sec.  425.401(b), 
as applicable. We anticipate the assignment windows for the quality 
reporting samples would be as follows based on our operational 
experience: (1) Samples for claims-based measures

[[Page 41858]]

would be determined based on the assignment list for calendar year 
quarter 4; (2) the sample for CMS web interface measures would be 
determined based on the assignment list for calendar year quarter 3; 
and (3) the sample for the CAHPS for ACOs survey would be determined 
based on the assignment list for calendar year quarter 2. This approach 
maintains alignment with the assignment windows currently used for 
establishing quality reporting samples for these measures.
(5) Proposals for Applicability of Extreme and Uncontrollable 
Circumstances Policies
    We propose in section II.E.4 of this proposed rule to extend the 
policies for addressing the impact of extreme and uncontrollable 
circumstances on ACO financial and quality performance results for 
performance year 2017 to performance year 2018 and subsequent years. As 
specified in section II.E.4, if this proposal is finalized, these 
policies would apply to ACOs participating in each of the 6-month 
performance years during 2019 (or the 6-month performance period for 
ACOs that elect to voluntarily terminate their existing participation 
agreement, effective June 30, 2019, and enter a new agreement period 
starting on July 1, 2019). We also propose that for ACOs that are 
involuntarily terminated during a 6-month performance year, pro-rated 
shared losses for the 6-month performance year would be determined 
based on assigned beneficiary expenditures for the full calendar year 
2019 and then would be pro-rated to account for the partial year of 
participation prior to the involuntary termination (according to 
section II.A.6.d of this proposed rule) and the impact of extreme and 
uncontrollable circumstances on the ACO (if applicable).
(6) Proposals for Payment and Recoupment for 6-Month Performance Years
    We propose to provide separate reconciliation reports for each 6-
month performance year, and we would pay shared savings or recoup 
shared losses separately for each 6-month performance year. Since we 
propose to perform financial reconciliation for both 6-month 
performance years during 2019 after the end of calendar year 2019, we 
anticipate that financial performance reports for both of these 6-month 
performance years would be available in Summer 2020, similar to the 
expected timeframe for issuing financial performance reports for the 
12-month 2019 performance year (and for 12-month performance years 
generally).
    We propose to apply the same policies regarding notification of 
shared savings payment and shared losses, and the timing of repayment 
of shared losses, to ACOs in 6-month performance years that apply under 
our current regulations to ACOs in 12-month performance years. We 
propose to specify in a new regulation at Sec.  425.609 that CMS would 
notify the ACO of shared savings or shared losses for each 
reconciliation, consistent with the notification requirements specified 
in Sec.  425.604(f), proposed Sec.  425.605(e), Sec.  425.606(h), and 
Sec.  425.610(h). Specifically, we propose that: (1) CMS notifies an 
ACO in writing regarding whether the ACO qualifies for a shared savings 
payment, and if so, the amount of the payment due; (2) CMS provides 
written notification to an ACO of the amount of shared losses, if any, 
that it must repay to the program; (3) if an ACO has shared losses, the 
ACO must make payment in full to CMS within 90 days of receipt of 
notification.
    Because we anticipate results for both 6-month performance years 
would be available at approximately the same time, there is a 
possibility that an ACO could be eligible for shared savings for one 6-
month performance year and liable for shared losses for the other 6-
month performance year. Although the same 12-month period would be used 
to determine performance, the outcome for each partial calendar year 
performance year could be different because of differences in the ACO's 
assigned population (for example, resulting from potentially different 
ACO participant lists and the use of different assignment 
methodologies), different benchmark amounts resulting from the 
different benchmarking methodologies applicable to each agreement 
period, and/or differences in the ACO's track of participation.
    In earlier rulemaking, we considered the circumstance where, over 
the course of its participation in the Shared Savings Program, an ACO 
may earn shared savings in some years and incur losses in other years. 
We considered whether the full amount of shared savings payments should 
be paid in the year in which they accrue, or whether some portion 
should be withheld to offset potential future losses. However, we did 
not finalize a withhold from shared savings. See 76 FR 67941 through 
67942. Instead, an ACO's repayment mechanism provides a possible source 
of recoupment for CMS should the ACO fail to timely pay shared losses 
within the 90 day repayment window.
    We revisited these considerations about withholding shared savings 
payments in light of our proposed approach to determining ACO 
performance for the two 6-month performance years at approximately the 
same time following the conclusion of calendar year 2019. We propose to 
conduct reconciliation for each 6-month performance year at the same 
time. After reconciliation for both 6-month performance years is 
complete, we would furnish notice of shared savings or shared losses 
due for each performance year at the same time, either in a single 
notice or two separate notices. For ACOs that have mixed results for 
the two 6-month performance years of 2019, being eligible for a shared 
savings payment for one performance year and owing shared losses for 
the other performance year, we propose to reduce the shared savings 
payment for one 6-month performance year by the amount of any shared 
losses owed for the other 6-month performance year. This approach would 
guard against CMS making a payment to an organization that has an 
unpaid debt to the Medicare program, and therefore would be protective 
of the Trust Funds. We believe this approach would also be less 
burdensome for ACOs, for example, in the event that the ACO's shared 
losses are completely offset by the ACO's shared savings. We note that 
this approach to offsetting shared losses against any shared savings 
could result in a balance of either unpaid shared losses that must be 
repaid, or a remainder of shared savings that the ACO would be eligible 
to receive.
    We propose to specify these policies on payment and recoupment for 
ACOs in 6-month performance years within calendar year 2019 in a new 
section of the regulations at Sec.  425.609(e).
(7) Proposals for Automatic Transition of ACOs Under the BASIC Track's 
Glide Path
    Under our proposed design of the BASIC track's glide path, ACOs 
that enter the glide path at Levels A through D would be automatically 
advanced to the next level of the glide path at the start of each 
subsequent performance year of the agreement period. The five levels of 
the glide path would phase-in over the duration of an ACO's agreement 
period. The design of the BASIC track's glide path is therefore tied to 
the duration of the agreement period.
    With our proposal to offer agreement periods of 5 years and 6 
months to ACOs with July 2019 start dates, we believe it is necessary 
to address how we would apply the policy for moving

[[Page 41859]]

ACOs along the glide path in an agreement period with a duration of 
more than 5 years. We propose a one-time exception to be specified in 
Sec.  425.600, whereby the automatic advancement policy would not apply 
to the second performance year for an ACO entering the BASIC track's 
glide path for an agreement period beginning July 1, 2019. For 
performance year 2020, the ACO would remain in the same level of the 
BASIC track's glide path it entered for the 6-month performance year 
beginning July 1, 2019, unless the ACO uses the proposed flexibility to 
advance to a higher level of risk and potential reward more quickly. 
The ACO would automatically advance to the next level of the BASIC 
track's glide path at the start of performance year 2021 and all 
subsequent performance years of the agreement period, unless the ACO 
chooses to advance more quickly. This proposed approach would allow a 
modest increase in the amount of time initial entrants in the BASIC 
track's glide path could remain under a particular level, including a 
one-sided model.
(8) Interactions With the Quality Payment Program
    We took into consideration how the proposed July 1, 2019 start date 
could interact with other Medicare initiatives, particularly the 
Quality Payment Program timelines relating to participation in APMs. In 
the CY 2018 Quality Payment Program final rule with comment period, we 
finalized a policy for APMs that start or end during the QP Performance 
Period. Specifically, under Sec.  414.1425(c)(7)(i), for Advanced APMs 
that start during the QP Performance Period and are actively tested for 
at least 60 continuous days during a QP Performance Period, CMS will 
make QP determinations and Partial QP determinations for eligible 
clinicians in the Advanced APM using claims data for services furnished 
during those dates on which the Advanced APM is actively tested. This 
means that an APM (such as a two-sided model of the Shared Savings 
Program) would need to begin operations by July 1 of a given 
performance year in order to be actively tested for at least 60 
continuous days before August 31--the last date on which QP 
determinations are made during a QP Performance Period (as specified in 
Sec.  414.1425(b)(1)). We therefore believe that our proposed July 1, 
2019 start date for the proposed new participation options under the 
Shared Savings Program would align with Quality Payment Program rules 
and requirements for participation in Advanced APMs.
(9) Proposals for Sharing CY 2019 Aggregate Data With ACOs in 6-month 
Performance Year From January 2019 Through June 2019
    Under the program's current regulations in Sec.  425.702, we share 
aggregate data with ACOs during the agreement period. This includes 
providing data at the beginning of each performance year and quarterly 
during the agreement period. For ACOs that started a first or second 
agreement period on January 1, 2016, that extend their agreement for an 
additional 6-month performance year from January 1, 2019, through June 
30, 2019, and ACOs that participate in the first 6 months of a 12-month 
performance year 2019 but then terminate their participation agreement 
with an effective date of termination of June 30, 2019, and enter a new 
agreement period beginning July 1, 2019, we propose to continue to 
deliver aggregate reports for all four quarters of calendar year 2019 
based on the ACO participant list in effect for the first 6 months of 
the year. This would allow ACOs a more complete understanding of the 
Medicare FFS beneficiary population that is the basis for 
reconciliation for the first 6 months of the year. This would allow 
ACOs to receive data including demographic characteristics and 
expenditure/utilization trends for their assigned population. We 
believe this proposed approach would allow us to maintain transparency 
by providing ACOs with data that relates to the entire period for which 
the expenditures for the beneficiaries who are assigned to the ACO for 
the 6-month performance year (or performance period) would be compared 
to the ACO's benchmark (before pro-rating any shared savings or shared 
losses to reflect the length of the performance year), and maintain 
consistency with the reports delivered to ACOs that participate in a 
12-month performance year 2019. Otherwise, we could be limited to 
providing ACOs with aggregate reports only for the first and second 
quarters of 2019, even though the proposed reconciliation would involve 
consideration of expenditures occurring outside this period during 
2019. We propose to specify this policy in revisions to Sec.  425.702.
(10) Proposals for Technical or Conforming Changes To Allow for 6-Month 
Performance Years
    We propose to make certain technical, conforming changes to the 
following provisions, including additional changes to provisions 
discussed elsewhere in this proposed rule, to reflect our proposal to 
add a new provision at Sec.  425.609 to govern the calculation of the 
financial results for 6-month performance years within calendar year 
2019.
    We propose that the policies on reopening determinations of shared 
savings and shared losses to correct financial reconciliation 
calculations (Sec.  425.315) would apply with respect to applicable 
program determinations for performance years within calendar year 2019. 
We propose to amend Sec.  425.315 to incorporate references to the 
methodology for determining performance for 6-month performance years 
within calendar year 2019, as specified in Sec.  425.609.
    We propose to add a reference to Sec.  425.609 in Sec.  425.100 in 
order to include ACOs that participate in a 6-month performance year 
during 2019 in the general description of ACOs that are eligible to 
receive payments for shared savings under the program.
    In Sec.  425.204(g), we propose to add a reference to Sec.  425.609 
to allow for consideration of claims billed under merged and acquired 
entities' TINs for purposes of establishing an ACO's benchmark for an 
agreement period that includes a 6-month performance year.
    In Sec.  425.400(a)(1)(ii), describing the step-wise process for 
determining beneficiary assignment for each performance year, we 
propose to also specify that this process would apply to ACOs 
participating in a 6-month performance year within calendar year 2019, 
and that assignment would be determined based on the beneficiary's 
utilization of primary care services during the entirety of calendar 
year 2019, as specified in Sec.  425.609.
    In Sec.  425.400(c)(1)(iv), on the use of certain Current 
Procedural Terminology (CPT) codes and Healthcare Common Procedure 
Coding System (HCPCS) codes in determining beneficiary assignment, as 
proposed to be revised in section II.E.3 of this proposed rule, we 
propose to further revise the provision to specify that it will be used 
in determining assignment for performance years starting on January 1, 
2019, and subsequent years.
    In Sec.  425.401(b), describing the exclusion of beneficiaries from 
an ACO's prospective assignment list at the end of a performance year 
or benchmark year and quarterly each performance year, we propose to 
specify that these exclusions would occur at the end of calendar year 
2019 for purposes of determining assignment to an ACO in a 6-month 
performance year in accordance with Sec. Sec.  425.400(a)(3)(ii) and 
425.609.

[[Page 41860]]

    As part of the proposed revisions to Sec.  425.402(e)(2), which, as 
described in section II.E.2 of this proposed rule, specifies that 
beneficiaries who have designated a provider or supplier outside the 
ACO as responsible for coordinating their overall care will not be 
added to the ACO's list of assigned beneficiaries for a performance 
year under the claims-based assignment methodology, we propose to allow 
the same policy to apply to ACOs participating in a 6-month performance 
year during calendar year 2019.
    In Sec.  425.404(b), on the special assignment conditions for ACOs 
including FQHCs and RHCs that are used determining beneficiary 
assignment, we propose to revise the provision to specify its 
applicability in determining assignment for performance years starting 
on January 1, 2019, and subsequent performance years.
    We also propose to incorporate references to Sec.  425.609 in the 
regulations that govern establishing, adjusting, and updating the 
benchmark, including proposed Sec.  425.601, and the existing 
provisions at Sec.  425.602, and Sec.  425.603, to specify that the 
annual risk adjustment and update to the ACO's historical benchmark for 
the 6-month performance years during 2019 would use factors based on 
the entirety of calendar year 2019. For clarity and simplicity, we 
propose to add a paragraph to each of these sections to explain the 
following: (1) Regarding the annual risk adjustment applied to the 
historical benchmark, when CMS adjusts the benchmark for the 6-month 
performance years described in Sec.  425.609, the adjustment will 
reflect the change in severity and case mix between benchmark year 3 
and calendar year 2019; (2) Regarding the annual update to the 
historical benchmark, when CMS updates the benchmark for the 6-month 
performance years described in Sec.  425.609, the update to the 
benchmark will be based on growth between benchmark year 3 and calendar 
year 2019.
    We propose to incorporate references to Sec.  425.609 in the 
following provisions regarding the calculation of shared savings and 
shared losses, Sec.  425.604, proposed Sec.  425.605, Sec.  425.606, 
and Sec.  425.610. For clarity and simplicity, we propose to add a 
paragraph to each of these sections explaining that shared savings or 
shared losses for the 6-month performance years are calculated as 
described in Sec.  425.609. That is, all calculations will be performed 
using calendar year 2019 data in place of performance year data.

B. Fee-for-Service Benefit Enhancements

1. Background
    As discussed in earlier rulemaking (for example, 80 FR 32759) and 
previously in this proposed rule, we believe that models where ACOs 
bear a degree of financial risk have the potential to induce more 
meaningful systematic change than one-sided models. We believe that 
two-sided performance-based risk provides stronger incentives for ACOs 
to achieve savings and, as discussed in detail in the Regulatory Impact 
Analysis (see section IV. of this proposed rule), our experience with 
the program indicates that ACOs in two-sided models generally perform 
better than ACOs that participate under a one-sided model. We believe 
that ACOs that bear financial risk have a heightened incentive to 
restrain wasteful spending by their ACO participants and ACO providers/
suppliers. This, in turn, may reduce the likelihood of over-utilization 
of services. We believe that relieving these ACOs of the burden of 
certain statutory and regulatory requirements may provide ACOs with 
additional flexibility to innovate further, which could in turn lead to 
even greater cost savings, without inappropriate risk to program 
integrity.
    In the December 2014 proposed rule (79 FR 72816 through 72826), we 
discussed in detail a number of specific payment rules and other 
program requirements for which we believed waivers could be necessary 
under section 1899(f) of the Act to permit effective implementation of 
two-sided performance-based risk models in the Shared Savings Program. 
We invited comments on how these waivers could support ACOs' efforts to 
increase quality and decrease costs under two-sided risk arrangements. 
Based on review of these comments, in the June 2015 final rule (80 FR 
32800 through 32808), we finalized a waiver of the requirement in 
section 1861(i) of the Act for a 3-day inpatient hospital stay prior to 
the provision of Medicare-covered post-hospital extended care services 
for beneficiaries who are prospectively assigned to ACOs that 
participate in Track 3 (Sec.  425.612). We refer to this waiver as the 
SNF 3-day rule waiver. We established the SNF 3-day rule waiver to 
provide an additional incentive for ACOs to take on risk by offering 
greater flexibility for ACOs that have accepted the higher level of 
performance-based risk under Track 3 to provide necessary care for 
beneficiaries in the most appropriate care setting.
    Section 50324 of the Bipartisan Budget Act added section 1899(l) of 
the Act (42 U.S.C. 1395jjj(l)) to provide certain Shared Savings 
Program ACOs the ability to provide telehealth services. Specifically, 
beginning January 1, 2020, for telehealth services furnished by a 
physician or practitioner participating in an applicable ACO, the home 
of a beneficiary is treated as an originating site described in section 
1834(m)(4)(C)(ii) and the geographic limitation under section 
1834(m)(4)(C)(i) of the Act does not apply with respect to an 
originating site described in section 1834(m)(4)(C)(ii), including the 
home of the beneficiary.
    In this proposed rule, we propose modifications to the existing SNF 
3-day rule waiver and propose to establish regulations to govern 
telehealth services furnished in accordance with section 1899(l) of the 
Act to prospectively assigned beneficiaries by physicians and 
practitioners participating in certain applicable ACOs. We also propose 
to use our authority under section 1899(f) to waive the requirements of 
section 1834(m)(4)(C)(i) and (ii) as necessary to provide for a 90-day 
grace period to allow for payment for telehealth services furnished to 
a beneficiary who was prospectively assigned to an applicable ACO, but 
was subsequently excluded from assignment to the ACO. We also propose 
to require that ACO participants hold beneficiaries financially 
harmless for telehealth services that are not provided in compliance 
with section 1899(l) of the Act or during the 90-day grace period, as 
discussed below.
2. Proposed Revisions
a. Shared Savings Program SNF 3-Day Rule Waiver
(1) Background
    The SNF 3-day rule waiver under Sec.  425.612 allows for Medicare 
payment for otherwise covered SNF services when ACO providers/suppliers 
participating in eligible Track 3 ACOs admit eligible prospectively 
assigned beneficiaries, or certain excluded beneficiaries during a 
grace period, to an eligible SNF affiliate without a 3-day prior 
inpatient hospitalization. All other provisions of the statute and 
regulations regarding Medicare Part A post-hospital extended care 
services continue to apply. This waiver became available starting 
January 1, 2017, and all ACOs participating under Track 3 or applying 
to participate under Track 3 are eligible to apply for the waiver.
    We limited the waiver to ACOs that elect to participate under Track 
3 because these ACOs are participating under two-sided risk and, under 
the prospective assignment methodology

[[Page 41861]]

used in Track 3, beneficiaries are assigned to the ACO at the start of 
the performance year and remain assigned for the entire year, unless 
they are excluded. Thus it is clearer to the ACO which beneficiaries 
are eligible to receive services under the waiver than it would be to 
an ACO under Track 1 or Track 2, which use a preliminary prospective 
assignment methodology with retrospective reconciliation (80 FR 32804). 
We continue to believe that it is appropriate to limit the waiver to 
ACOs participating under a two-sided risk model because, as discussed 
in the background to this section, models under which ACOs bear a 
degree of financial risk hold greater potential than one-sided models 
to induce more meaningful systematic change, promote accountability for 
a patient population and coordination of patient medical care, and 
encourage investment in redesigned care processes. As a result, models 
under which ACOs bear a degree of financial risk provide a stronger 
incentive for ACOs not to over utilize services than do one-sided 
models. We also continue to believe it is important to establish clear 
policies as to the availability of the SNF 3-day rule waiver for 
coverage of SNF services furnished to a particular beneficiary without 
a prior 3 day inpatient stay to permit the ACOs and their SNF 
affiliates to comply with the conditions of the waiver and to 
facilitate our ability to monitor for misuse. However, we now believe 
it would also be feasible to establish such clarity for ACOs electing 
to participate in a two-sided risk model under a preliminary 
prospective assignment methodology with retrospective reconciliation.
    Under preliminary prospective assignment with retrospective 
reconciliation, ACOs are given up-front information about their 
preliminarily assigned FFS beneficiary population. This information is 
updated quarterly to help ACOs refine their care coordination 
activities. Under the expanded criteria for sharing data with ACOs 
finalized in the June 2015 final rule, beginning with performance year 
2016, we have provided ACOs under preliminary prospective assignment 
with quarterly and annual assignment lists that identify the 
beneficiaries who are preliminarily prospectively assigned, as well as 
beneficiaries who have received at least one primary care service in 
the most recent 12-month period from an ACO participant that submits 
claims for services used in the assignment methodology (see Sec.  
425.702(c)(1)(ii)(A), and related discussion in 80 FR 32734 through 
32737). The specific beneficiaries preliminarily assigned to an ACO 
during each quarter can vary.
(2) Proposals
    As described in section II.A.4.c. of this proposed rule, we propose 
to allow ACOs to select the beneficiary assignment methodology to be 
applied at the start of their agreement period (prospective assignment 
or preliminary prospective assignment with retrospective 
reconciliation) and the opportunity to elect to change this selection 
prior to the start of each performance year. Further, as described in 
sections II.A.3 and II.A.4.b of this proposed rule, we propose that 
BASIC track ACOs entering the track's glide path under a one-sided 
model will be automatically transitioned to a two-sided model during 
their agreement period and may elect to enter two-sided risk more 
quickly (prior to the start of their agreement period or as part of an 
annual election to move to a higher level of risk within the BASIC 
track).
    In light of these proposed flexibilities for program participation, 
as well as our experience in providing ACOs under preliminary 
prospective assignment with data on populations of beneficiaries, we 
now believe it would be appropriate to expand eligibility for the SNF 
3-day rule waiver to include ACOs participating in a two-sided model 
under preliminary prospective assignment. As explained in this section, 
we originally excluded Track 2 ACOs, which participate under two-sided 
risk, from eligibility for the SNF 3-day rule waiver because 
beneficiaries are assigned to Track 2 ACOs using a preliminary 
prospective assignment methodology with retrospective reconciliation 
and thus it could be unclear to ACOs which beneficiaries would be 
eligible to receive services under the waiver. We now believe risk-
bearing ACOs selecting preliminary prospective assignment with 
retrospective reconciliation should be offered the same tools and 
flexibility to increase quality and decrease costs that are available 
to ACOs electing prospective assignment, to the maximum extent 
possible. We believe it would be possible to provide ACOs that select 
preliminary prospective assignment with retrospective reconciliation 
with more clarity regarding which beneficiaries may be eligible to 
receive services under the waiver if we were to establish a cumulative 
list of beneficiaries preliminarily assigned to the ACO during the 
performance year. We believe it would be appropriate to establish such 
a cumulative list because the beneficiaries preliminarily assigned to 
an ACO may vary during each quarter of a performance year.
    Under preliminary prospective assignment with retrospective 
reconciliation, once a beneficiary receives at least one primary care 
service furnished by an ACO participant, the ACO has an incentive to 
coordinate care of the Medicare beneficiary, including SNF services, 
for the remainder of the performance year because of the potential for 
the beneficiary to be assigned to the ACO for the performance year. 
Under our proposed approach, we would not remove preliminarily 
prospectively assigned beneficiaries from the list of beneficiaries 
eligible to receive SNF services under the waiver on a quarterly basis. 
Instead, once a beneficiary is listed as preliminarily prospectively 
assigned to an eligible ACO for the performance year, according to the 
assignment lists provided by CMS to an ACO at the beginning of each 
performance year and for quarters 1, 2, and 3 of each performance year, 
then the SNF 3-day rule waiver would remain available with respect to 
otherwise covered SNF services furnished to that beneficiary by a SNF 
affiliate of the ACO, consistent with the requirements of Sec.  
425.612(a), for the remainder of the performance year.
    We propose that the waiver would be limited to SNF services 
provided after the beneficiary first appeared on the preliminary 
prospective assignment list for the performance year, and that a 
beneficiary would no longer be eligible to receive covered services 
under the waiver if he or she subsequently enrolls in a Medicare group 
(private) health plan or is otherwise no longer enrolled in Part A and 
Part B. In other words, ACOs participating in a performance-based risk 
track and under preliminary prospective assignment with retrospective 
reconciliation would receive an initial performance year assignment 
list followed by assignment lists for quarters 1, 2, and 3 of each 
performance year, and the SNF 3-day rule waiver would be available with 
respect to all beneficiaries who have been identified as preliminarily 
prospectively assigned to the ACO on one or more of these four 
assignment lists, unless they enroll in a Medicare group health plan or 
are no longer enrolled in both Part A and Part B. Providers and 
suppliers are expected to confirm a beneficiary's health insurance 
coverage to determine if they are eligible for FFS benefits. In 
addition, we note that under existing Medicare payment policies, 
services furnished to Medicare beneficiaries outside the U.S. are not

[[Page 41862]]

payable except under very limited circumstances. Therefore, in general, 
a waiver-eligible beneficiary who resides outside the U.S. during a 
performance year would technically remain eligible to receive SNF 
services furnished in accordance with the waiver, but SNF services 
furnished to the beneficiary outside the U.S. would not be payable.
    We note that our proposal to allow preliminarily prospectively 
assigned beneficiaries to remain eligible for the SNF 3-day rule waiver 
until the end of the performance year may include beneficiaries who 
ultimately are excluded from assignment to the ACO based upon their 
assignment to another Shared Savings Program ACO or their alignment 
with an entity participating in another shared savings initiative. 
Thus, a beneficiary may be eligible for admission under a SNF 3-day 
rule waiver based on being preliminarily prospectively assigned to more 
than one ACO during a performance year. As previously discussed, we 
believe ACOs that bear a degree of financial risk have a strong 
incentive to manage the care for all beneficiaries who appear on any 
preliminary prospective assignment list during the year and to continue 
to focus on furnishing appropriate levels of care because they do not 
know which beneficiaries ultimately will be assigned to the ACO for the 
performance year. Further, because there remains the possibility that a 
beneficiary could be preliminarily prospectively assigned to an ACO at 
the beginning of the year, not preliminarily assigned in a subsequent 
quarter, but then retrospectively assigned to the ACO at the end of the 
performance year, we believe it is appropriate that preliminarily 
prospectively assigned beneficiaries remain eligible to receive 
services under the SNF 3-day rule waiver for the remainder of the 
performance year to aid ACOs in coordinating the care of their entire 
beneficiary population. Because the ACO will ultimately be held 
responsible for the quality and costs of the care furnished to all 
beneficiaries who are assigned at the end of the performance year, we 
believe the ACO should have the flexibility to use the SNF 3-day rule 
waiver to permit any beneficiary who has been identified as 
preliminarily prospectively assigned to the ACO during the performance 
year to receive covered SNF services without a prior 3 day hospital 
stay when clinically appropriate. For this reason, we do not believe it 
is necessary to extend the 90-day grace period that applies to 
beneficiaries assigned to waiver-approved ACOs participating under the 
prospective assignment methodology to include beneficiaries who are 
preliminarily prospectively assigned to a waiver-approved ACO. Rather, 
beneficiaries who are preliminarily prospectively assigned a to waiver-
approved ACO will remain eligible to receive services furnished in 
accordance with the SNF 3-day rule waiver for the remainder of that 
performance year unless they enroll in a Medicare group health plan or 
are otherwise no longer enrolled in Part A and Part B. In addition, in 
order to help protect beneficiaries from incurring significant 
financial liability for SNF services received without a prior 3-day 
inpatient stay after an ACO's termination date, we would also like to 
clarify that an ACO must include, as a part of the notice of 
termination to ACO participants under Sec.  425.221(a)(1)(i), a 
statement that its ACO participants, ACO providers/suppliers, and SNF 
affiliates may no longer use the SNF 3-day rule waiver after the ACO's 
date of termination. We would also like to clarify that if a 
beneficiary is admitted to a SNF prior to an ACO's termination date, 
and all requirements of the SNF 3-day rule waiver are met, the SNF 
services furnished without a prior 3-day stay would be covered under 
the SNF 3-day rule waiver.
    In summary, we propose to revise the regulations at Sec.  
425.612(a)(1) to expand eligibility for the SNF 3-day rule waiver to 
include ACOs participating in a two-sided model under preliminary 
prospective assignment with retrospective reconciliation. The SNF 3-day 
rule waiver would be available for such ACOs with respect to all 
beneficiaries who have been identified as preliminarily prospectively 
assigned to the ACO on the initial performance year assignment list or 
on one or more assignment lists for quarters 1, 2, and 3 of the 
performance year, for SNF services provided after the beneficiary first 
appeared on one of the assignment lists for the applicable performance 
year. The beneficiary would remain eligible to receive SNF services 
furnished in accordance with the waiver unless he or she is no longer 
eligible for assignment to the ACO because he or she is no longer 
enrolled in both Part A and Part B or has enrolled in a Medicare group 
health plan.
    Finally, stakeholders representing rural health providers have 
pointed out that the SNF 3-day rule waiver is not currently available 
for SNF services furnished by critical access hospitals and other 
small, rural hospitals operating under a swing bed agreement. Section 
1883 of the Act permits certain small, rural hospitals to enter into a 
swing bed agreement, under which the hospital can use its beds, as 
needed, to provide either acute or SNF care. As defined in the 
regulations at 42 CFR 413.114, a swing bed hospital is a hospital or 
CAH participating in Medicare that has CMS approval to provide post-
hospital SNF care and meets certain requirements. These stakeholders 
indicate that because there are fewer SNFs in rural areas, there are 
fewer opportunities for rural ACOs to enter into agreements with SNF 
affiliates. These stakeholders also believe that the current policy may 
disadvantage beneficiaries living in rural areas who may not be in 
close proximity to a SNF and would need to travel longer distances to 
benefit from the SNF 3-day rule waiver. The stakeholders requested that 
we revise the regulations to permit providers that furnish SNF services 
under a swing bed agreement to be eligible to partner with ACOs for 
purposes of the SNF 3-day rule waiver.
    In order to furnish SNF services under a swing bed agreement, 
hospitals must be substantially in compliance with the SNF 
participation requirements specified at 42 CFR 482.58(b), whereas CAHs 
must be substantially in compliance with the SNF participation 
requirements specified at 42 CFR 485.645(d). However, currently, 
providers furnishing SNF services under a swing bed agreement are not 
eligible to partner and enter into written agreements with ACOs for 
purposes of the SNF 3-day rule waiver because: (1) The SNF 3-day rule 
waiver under the Shared Savings Program regulations at Sec.  
425.612(a)(1) waives the requirement for a 3-day prior inpatient 
hospitalization only with respect to otherwise covered SNF services 
furnished by an eligible SNF and does not extend to otherwise covered 
post-hospital extended care services furnished by a provider under a 
swing bed agreement; and (2) CAHs and other rural hospitals furnishing 
SNF services under swing bed agreements are not included in the CMS 5-
star Quality Rating System and, therefore, cannot meet the requirement 
at Sec.  425.612(a)(1)(iii)(A) that, to be eligible to partner with an 
ACO for purposes of the SNF 3-day rule waiver, the SNF must have and 
maintain an overall rating of 3 or higher under the CMS 5-star Quality 
Rating System.
    For the reasons described in the June 2015 final rule (80 FR 
32804), we believe it is necessary to offer ACOs participating under 
two-sided risk models additional tools and flexibility to manage and 
coordinate care for their assigned beneficiaries, including the 
flexibility to admit a beneficiary for

[[Page 41863]]

SNF-level care without a prior 3-day inpatient hospital stay. We agree 
with stakeholders that there are fewer SNFs in rural areas. Therefore, 
we agree with rural stakeholders that risk-bearing ACOs in rural areas 
would be better able to coordinate and manage care, and thus to control 
unnecessary costs, if the SNF 3-day rule waiver extended to otherwise 
covered SNF services provided by a hospital or CAH under a swing bed 
agreement. We believe this proposal would primarily benefit ACOs 
located in rural areas because most CAHs and hospitals that are 
approved to furnish post-acute SNF-level care via a swing bed agreement 
are located in rural areas. Consistent with this proposal, we also 
propose to revise the regulations governing the SNF 3-day rule waiver 
at Sec.  425.612(a)(1) to indicate that, for purposes of determining 
eligibility to partner with an ACO for the SNF 3-day rule waiver, SNFs 
include providers furnishing SNF services under swing bed arrangements. 
In addition, we propose to revise Sec.  425.612(a)(1)(iii)(A) to 
specify that the minimum 3-star rating requirement applies only if the 
provider furnishing SNF services is eligible to be included in the CMS 
5-star Quality Rating System. We do not have a comparable data element 
to the CMS 5-star Quality Rating System for hospitals and CAHs under 
swing bed agreements; however, under Sec.  425.612(d)(2), we monitor 
and audit the use of payment waivers in accordance with Sec.  425.316. 
We will continue to monitor the use of the SNF 3-Day Rule Waiver and 
reserve the right to terminate an ACO's SNF 3-day rule waiver if the 
waiver is used inappropriately or beneficiaries are not receiving 
appropriate care.
    Additionally, we note the possibility that a beneficiary could be 
admitted to a hospital or CAH, have an inpatient stay of less than 3 
days, and then be admitted to the same hospital or CAH under its swing 
bed agreement. As previously discussed, we believe ACOs that bear a 
degree of financial risk have a stronger incentive not to over utilize 
services and have an incentive to recommend a beneficiary for admission 
to a SNF only when it is medically appropriate. We also note this 
scenario could occur when a beneficiary meets the generally applicable 
3-day stay requirement. Thus, we do not believe extending the SNF 3-day 
rule waiver to include services furnished by a hospital or CAH under a 
swing bed agreement would create a new gaming opportunity.
    To reduce burden and confusion for eligible ACOs not currently 
approved for a SNF 3-day rule waiver, we are proposing that these 
revisions would be applicable for SNF 3-day rule waivers approved for 
performance years beginning on July 1, 2019, and in subsequent years. 
This would allow for one, as opposed to multiple, application deadlines 
thus reducing the overall burden for ACOs applying for the waiver and 
prevent confusion over ACO outreach and communication materials related 
to application deadlines. Because we are forgoing the application cycle 
for a January 1, 2019 start date, we are proposing to apply the 
revisions to ACOs approved to use the SNF 3-day rule waiver for 
performance years beginning on July 1, 2019, and in subsequent years. 
This includes both ACOs that start a new agreement period under the 
proposed new participation options on July 1, 2019, and those ACOs that 
are applying for a waiver during the term of an existing participation 
agreement. For ACOs currently participating in the Shared Savings 
Program with an agreement period beginning in 2017 or 2018, that have 
previously been approved for a SNF 3-day rule waiver, the proposed 
revisions to the SNF 3-day rule waiver would be applicable starting on 
July 1, 2019, and for all subsequent performance years. ACOs with an 
approved SNF 3-day rule waiver would be able to modify their 2019 SNF 
affiliate list for the performance year beginning on January 1, 2019; 
however, they would not be able to add a hospital or CAH operating 
under a swing bed agreement to their SNF affiliate list until the July 
1, 2019 change request review cycle. CMS would notify all ACOs, 
including ACOs with a 12 month performance year 2019, of the schedule 
for this change request review cycle.
    Consistent with these proposed revisions to the SNF 3-day rule 
waiver, we are proposing to add a new provision at Sec.  
425.612(a)(1)(vi) to allow ACOs participating in performance-based risk 
within the BASIC track or ACOs participating in Track 3 or the ENHANCED 
track to request to use the SNF 3-day rule waiver. We are not proposing 
to make the revisions to the SNF 3-day rule waiver applicable for Track 
2 ACOs because we are proposing to phase out Track 2, as discussed at 
section II.A.2 of this proposed rule. ACOs currently participating 
under Track 2 that choose to terminate their existing participation 
agreement and reapply to the Shared Savings Program under the ENHANCED 
track or BASIC track, at the highest level of risk and potential 
reward, as described under II.A.2 of this proposed rule, would be 
eligible to apply for the SNF 3-day rule waiver.
    For the reasons discussed in this section, we believe that the 
proposed modifications of the SNF 3-day rule waiver would provide 
additional incentives for ACOs to participate in the Shared Savings 
Program under performance-based risk and are necessary to support ACO 
efforts to increase quality and decrease costs under performance-based 
risk arrangements. We invite comments on these proposals and related 
issues.
b. Billing and Payment for Telehealth Services
(1) Background
    Under section 1834(m) of the Act, Medicare pays for certain Part B 
telehealth services furnished by a physician or practitioner under 
certain conditions, even though the physician or practitioner is not in 
the same location as the beneficiary. As of 2018, the telehealth 
services must be furnished to a beneficiary located in one of the types 
of originating sites specified in section 1834(m)(4)(C)(ii) of the Act 
and the originating site must satisfy at least one of the requirements 
of section 1834(m)(4)(C)(i)(I) through (III) of the Act. An originating 
site is the location at which a beneficiary who is eligible to receive 
a telehealth service is located at the time the service is furnished 
via a telecommunications system.
    Generally, for Medicare payment to be made for telehealth services 
under the PFS, several conditions must be met (Sec.  410.78(b)). 
Specifically, the service must be on the Medicare list of telehealth 
services and must meet all of the following requirements for payment:
     The telehealth service must be furnished via an 
interactive telecommunications system, as defined at Sec.  
410.78(a)(3). CMS pays for telehealth services provided through 
asynchronous (that is, store and forward) technologies, defined at 
Sec.  410.78(a)(1), only for Federal telemedicine demonstration 
programs conducted in Alaska or Hawaii.
     The service must be furnished to an eligible beneficiary 
by a physician or other practitioner specified at Sec.  410.78(b)(2) 
who is licensed to furnish the service under State law as specified at 
Sec.  410.78(b)(1).
     The eligible beneficiary must be located at an originating 
site at the time the service being furnished via a telecommunications 
system occurs. The eligible originating sites are specified in section 
1834(m)(4)(C)(ii) of the Act and Sec.  410.78(b)(3) and, for telehealth 
services furnished during 2018, include the following: the office of a 
physician or practitioner, a CAH, RHC, FQHC,

[[Page 41864]]

hospital, hospital-based or CAH-based renal dialysis center (including 
satellites), SNF, and community mental health center.
     As of 2018, the originating site must be in a location 
specified in section 1834(m)(4)(C)(i) of the Act and Sec.  
410.78(b)(4). The site must be located in a health professional 
shortage area that is either outside of a Metropolitan Statistical Area 
(MSA) or within a rural census tract of an MSA, located in a county 
that is not included in an MSA, or be participating in a Federal 
telemedicine demonstration project that has been approved by, or 
receives funding from, the Secretary of Health and Human Services as of 
December 31, 2000.
    When these conditions are met, Medicare pays a facility fee to the 
originating site and provides separate payment to the distant site 
practitioner for the service.
    Section 1834(m)(4)(F)(i) of the Act defines Medicare telehealth 
services to include professional consultations, office visits, office 
psychiatry services, and any additional service specified by the 
Secretary, when furnished via a telecommunications system. A list of 
Medicare telehealth services is available through the CMS website (at 
https://www.cms.gov/Medicare/Medicare-General-Information/Telehealth/Telehealth-Codes.html). Under section 1834(m)(4)(F)(ii) of the Act, CMS 
has an annual process to consider additions to and deletions from the 
list of telehealth services. CMS does not include any services as 
telehealth services when Medicare does not otherwise make a separate 
payment for them.
    Under the Next Generation ACO Model, the Innovation Center has been 
testing a Telehealth Expansion Benefit Enhancement under which CMS has 
waived the geographic and originating site requirements for services 
that are on the list of telehealth services when furnished to aligned 
beneficiaries by eligible telehealth practitioners (see the CMS website 
at https://innovation.cms.gov/Files/x/nextgenaco-telehealthwaiver.pdf). 
The purpose of this waiver is to test whether giving participating ACOs 
the flexibility to furnish telehealth services in more geographic areas 
and from the beneficiary's home will lower costs, improve quality, and 
better engage beneficiaries in their care.
    Next Generation ACOs encouraged CMS to broaden the telehealth 
waiver under the Next Generation ACO Model to test the use of 
asynchronous technologies to increase access to care and further 
support coordination of care for certain dermatology and ophthalmology 
services. Therefore, effective for 2018, the Telehealth Expansion 
Benefit Enhancement under the Next Generation ACO Model has been 
amended to include a waiver of the requirement under section 1834(m)(1) 
and Sec.  410.78(b) that telehealth services be furnished via a 
``interactive telecommunications system'' as that term is defined under 
Sec.  410.78(a)(3) in order to permit coverage of certain 
teledermatology and teleophthalmology services furnished using 
asynchronous technologies.
(2) Provisions of the Bipartisan Budget Act for Telehealth in the 
Shared Savings Program
    Section 50324 of the Bipartisan Budget Act of 2018 amends section 
1899 of the Act to add a new subsection (l) to provide certain ACOs the 
ability to expand the use of telehealth. The Bipartisan Budget Act 
provides that, with respect to telehealth services for which payment 
would otherwise be made that are furnished on or after January 1, 2020 
by a physician or practitioner participating in an applicable ACO to a 
Medicare FFS beneficiary prospectively assigned to the applicable ACO, 
the following shall apply: (1) The home of a beneficiary shall be 
treated as an originating site described in section 1834(m)(4)(C)(ii) 
of the Act, and (2) the geographic limitation under section 
1834(m)(4)(C)(i) of the Act shall not apply with respect to an 
originating site, including the home of a beneficiary, subject to State 
licensing requirements. The Bipartisan Budget Act defines the home of a 
beneficiary as the place of residence used as the home of a Medicare 
FFS beneficiary.
    The Bipartisan Budget Act defines an ``applicable ACO'' as an ACO 
participating in a two-sided model of the Shared Savings Program (as 
described in Sec.  425.600(a)) or a two-sided model tested or expanded 
under section 1115A of the Act, for which FFS beneficiaries are 
assigned to the ACO using a prospective assignment method.
    The Bipartisan Budget Act also provides that, in the case where the 
home of the beneficiary is the originating site, there shall be no 
facility fee paid to the originating site. It further provides that no 
payment may be made for telehealth services furnished in the home of 
the beneficiary when such services are inappropriate to furnish in the 
home setting, such as services that are typically furnished in 
inpatient settings such as a hospital.
    Lastly, the Bipartisan Budget Act requires the Secretary to conduct 
a study on the implementation of section 1899(l) of the Act that 
includes an analysis of the utilization of, and expenditures for, 
telehealth services under section 1899(l). No later than January 1, 
2026, the Secretary must submit a report to Congress containing the 
results of the study, together with recommendations for legislation and 
administrative action as the Secretary determines appropriate.
(3) Proposals
    We propose to add a new section of the Shared Savings Program 
regulations at Sec.  425.613 to govern the payment for certain 
telehealth services furnished, in accordance with section 1899(l) of 
the Act, as added by the Bipartisan Budget Act. As required by section 
1899(l) of the Act, we propose to treat the beneficiary's home as an 
originating site and not to apply the originating site geographic 
restrictions under section 1834(m)(4)(C)(i) of the Act for telehealth 
services furnished by a physician or practitioner participating in an 
applicable ACO. Thus, we propose to make payment to a physician or 
practitioner billing though the TIN of an ACO participant in an 
applicable ACO for furnishing otherwise covered telehealth services to 
beneficiaries prospectively assigned to the applicable ACO, including 
when the originating site is the beneficiary's home and without regard 
to the geographic limitations under section 1834(m)(4)(C)(i) of the 
Act. As we note in section II.A.4 of this proposed rule, the Shared 
Savings Program offers two similar, but distinct, assignment 
methodologies, prospective assignment and preliminary prospective 
assignment with retrospective reconciliation. We propose to apply these 
policies regarding payment for telehealth services to ACOs under a two-
sided model that participate under the prospective assignment method. 
We believe that these ACOs meet the definition of applicable ACO under 
section 1899(l)(2)(A) of the Act. Because final assignment is not 
performed under the preliminary prospective assignment methodology 
until after the end of the performance year, we do not believe it is 
``a prospective assignment method'' as required under section 
1899(l)(2)(A)(ii). Although we do not believe that ACOs that 
participate under the preliminary prospective assignment with 
retrospective reconciliation method meet the definition of an 
applicable ACO, we welcome comments on our interpretation of this 
provision.
    We propose that the policies governing telehealth services 
furnished in accordance with section 1899(l) of the Act would be 
effective for telehealth

[[Page 41865]]

services furnished in performance years beginning in 2020 and 
subsequent years by physicians or practitioners participating in ACOs 
that are operating under a two-sided model with a prospective 
assignment methodology for the applicable performance year. This would 
include physicians and practitioners participating in ACOs with a 
prospective assignment method for a performance year in the ENHANCED 
track (including Track 3 ACOs with an agreement period starting in 2018 
or on January 1, 2019), or in levels C, D, or E of the BASIC track. 
Because ACOs participating in the Track 1+ Model are participating in a 
two-sided model tested under section 1115A and use prospective 
assignment, we note that physicians and practitioners participating in 
Track 1+ ACOs would also be able to furnish and be paid for telehealth 
services in accordance with section 1899(l) of the Act. Physicians and 
practitioners participating in Track 2 ACOs would not be able to 
furnish and be paid for telehealth services in accordance with section 
1899(l) of the Act because Track 2 ACOs do not participate under a 
prospective assignment methodology. Additionally, the ability to 
furnish and be paid for telehealth services in accordance with section 
1899(l) of the Act would not extend beyond the term of the ACO's 
participation agreement. If CMS terminates an ACO's participation 
agreement under Sec.  [thinsp]425.218, then the ability of physicians 
and other practitioners billing through the TIN of an ACO participant 
to furnish and be paid for telehealth services in accordance with 
section 1899(l) of the Act will end on the date specified in the notice 
of termination. Further, to help protect beneficiaries from potential 
exposure to significant financial responsibility. We would also like to 
clarify that an ACO must include, as a part of its notice of 
termination to ACO participants under Sec.  425.221(a)(1)(i), a 
statement that physicians and other practitioners who bill through the 
TIN of an ACO participant can no longer furnish and be paid for 
telehealth services in accordance with section 1899(l) of the Act after 
the ACO's date of termination.
    As discussed in section II.A.4 of this proposed rule, we propose to 
allow ACOs in the BASIC and ENHANCED tracks the opportunity to change 
their beneficiary assignment methodology on an annual basis. As a 
result, the ability of physicians and other practitioners billing 
through the TIN of an ACO participant in these ACOs to furnish and be 
paid for telehealth services in accordance with section 1899(l) of the 
Act could change from year to year depending on the ACO's choice of 
assignment methodology. Should an ACO in the BASIC track or ENHANCED 
track change from the prospective assignment methodology to preliminary 
prospective assignment methodology with retrospective reconciliation 
for a performance year, the ACO would no longer satisfy the 
requirements to be an applicable ACO for that year and physicians and 
other practitioners billing through the TIN of an ACO participant in 
that ACO could only furnish and be paid for telehealth services if the 
services meet all applicable requirements, including the originating 
site requirements, under section 1834(m)(4)(C) of the Act.
    We propose that the beneficiary's home would be a permissible 
originating site type for telehealth services furnished by a physician 
or practitioner participating in an applicable ACO. Under this 
proposal, in addition to being eligible for payment for telehealth 
services when the originating site is one of the types of originating 
sites specified in section 1834(m)(4)(C)(ii) of the Act, a physician or 
other practitioner billing through the TIN of an ACO participant in an 
applicable ACO could also furnish and be paid for such services when 
the originating site is the beneficiary's home (assuming all other 
requirements are met). As discussed earlier, section 1899(l)(1)(A) of 
the Act, as added by section 50324 of the Bipartisan Budget Act, 
defines a beneficiary's home to be the place of residence used as the 
home of the beneficiary. In addition, we propose that Medicare would 
not pay a facility fee when the originating site for a telehealth 
service is the beneficiary's home.
    Further, we propose that the geographic limitations under section 
1834(m)(4)(C)(i) of the Act would not apply to any originating site, 
including a beneficiary's home, for telehealth services furnished by a 
physician or practitioner billing through the TIN of an ACO participant 
in an applicable ACO. This would mean that a physician or practitioner 
billing through the TIN of an ACO participant in an applicable ACO 
could furnish and be paid for telehealth services when the beneficiary 
receives those services while located at an originating site in an 
urban area that is within an MSA, assuming all other requirements are 
met. We also propose to require that, consistent with section 
1899(l)(1)(B) of the Act, the originating site must comply with State 
licensing requirements.
    We propose that the treatment of the beneficiary's home as an 
originating site and the non-application of the originating site 
geographic restrictions would be applicable only to payments for 
services on the list of Medicare telehealth services. The approved list 
of telehealth services is maintained on our website and is subject to 
annual updates (https://www.cms.gov/Medicare/Medicare-General-Information/Telehealth/Telehealth-Codes.html). However, as provided in 
section 1899(l)(3)(B) of the Act, in the case where the beneficiary's 
home is the originating site, Medicare will not pay for telehealth 
services that are inappropriate to be furnished in the home even if the 
services are on the approved list of telehealth services. Therefore, we 
propose that ACO participants must not submit claims for services 
specified as inpatient only when the service is furnished as a 
telehealth service and the beneficiary's home is the originating site. 
For example, CPT codes G0406, G0407, G0408, G0425, G0426, and G0427 are 
used for reporting inpatient hospital visits and are included on the 
2018 approved telehealth list. As described in Chapter 12, section 
190.3.1, of the Medicare Claims Processing Manual,\20\ Medicare pays 
for inpatient or emergency department telehealth services furnished to 
beneficiaries located in a hospital or SNF; therefore, consistent with 
the current FFS telehealth requirements, we believe it would be 
inappropriate for an ACO participant to submit a claim for an inpatient 
telehealth visit when the originating site is the beneficiary's home.
---------------------------------------------------------------------------

    \20\ https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c12.pdf.
---------------------------------------------------------------------------

    We are concerned about potential beneficiary financial liability 
for telehealth services provided to beneficiaries excluded from 
assignment under the Shared Savings Program. A beneficiary 
prospectively assigned to an applicable ACO at the beginning of a 
performance year can subsequently be excluded from assignment if he or 
she meets the exclusion criteria specified under Sec.  425.401(b). To 
address delays in communicating beneficiary exclusions from the 
assignment list, the Telehealth Expansion Benefit Enhancement under the 
Next Generation ACO Model provides for a 90-day grace period that 
functionally acts as an extension of beneficiary eligibility to receive 
services under the Benefit Enhancement and permits some additional time 
for the ACO to receive quarterly exclusion lists

[[Page 41866]]

from CMS and communicate beneficiary exclusions to its participants. We 
also provide for a 90-day grace period with respect to the Shared 
Savings Program SNF 3-day rule waiver under Sec.  425.612(a)(1), which 
allows for coverage of qualifying SNF services furnished to a 
beneficiary who was prospectively assigned to an ACO that has been 
approved for the waiver at the beginning of the performance year, but 
was excluded in the most recent quarterly update to the ACO's 
prospective assignment list.
    Based upon the experience in the Next Generation ACO Model, we 
believe it would be inadvisable not to provide some protection for 
beneficiaries who are prospectively assigned to an applicable ACO at 
the start of the year, but are subsequently excluded from assignment. 
It is not operationally feasible for CMS to notify the ACO and for the 
ACO, in turn, to notify its ACO participants and ACO providers/
suppliers immediately of the beneficiary's exclusion. The lag in 
communication may then cause a physician or practitioner billing under 
the TIN of an ACO participant to unknowingly furnish a telehealth 
service to a beneficiary who no longer qualifies to receive telehealth 
services under section 1899(l) of the Act. Therefore, we are proposing 
to use our waiver authority under section 1899(f) of the Act to waive 
the originating site requirements in section 1834(m)(4)(C) of the Act 
as necessary to provide for a 90-day grace period for payment of 
otherwise covered telehealth services, to allow sufficient time for CMS 
to notify an applicable ACO of any beneficiary exclusions, and for the 
ACO then to inform its ACO participants and ACO providers/suppliers of 
those exclusions. We believe it is necessary, to protect beneficiaries 
from potential financial liability related to use of telehealth 
services furnished by physicians and other practitioners billing 
through the TIN of an ACO participant in an applicable ACO, to 
establish this 90-day grace period in the case of a prospectively 
assigned beneficiary who is later excluded from assignment to an 
applicable ACO.
    More specifically, we propose to waive the originating site 
requirements in section 1834(m)(4)(C) of the Act to allow for coverage 
of telehealth services furnished by a physician or practitioner billing 
through the TIN of an ACO participant in an applicable ACO to an 
excluded beneficiary within 90 days following the date that CMS 
delivers the relevant quarterly exclusion list under Sec.  425.401(b). 
We propose to amend Sec.  425.612 to add a new paragraph (f) 
establishing the terms and conditions of this waiver. This waiver would 
permit us to make payment for otherwise covered telehealth services 
furnished during a 90 day grace period to beneficiaries who were 
initially on an applicable ACO's list of prospectively assigned 
beneficiaries for the performance year, but were subsequently excluded 
during the performance year. Under the terms of this waiver, CMS would 
make payments for telehealth services furnished to such a beneficiary 
as if they were telehealth services authorized under section 1899(l) of 
the Act if the following conditions are met:
     The beneficiary was prospectively assigned to an 
applicable ACO at the beginning of the relevant performance year, but 
was excluded in the most recent quarterly update to the assignment list 
under Sec.  425.401(b);
     The telehealth services are furnished to the beneficiary 
by a physician or practitioner billing through the TIN of an ACO 
participant in an applicable ACO within 90 days following the date that 
CMS delivers the quarterly exclusion list to the applicable ACO.
     But for the beneficiary's exclusion from the applicable 
ACO's assignment list, CMS would have made payment to the ACO 
participant for such services under section 1899(l) of the Act.
    In addition, we are concerned that there could be scenarios where a 
beneficiary could be charged for non-covered telehealth services that 
were a result of an inappropriate attempt to furnish and be paid for 
telehealth services under section 1899(l) of the Act by a physician or 
practitioner billing through the TIN of an ACO participant in an 
applicable ACO. Specifically, we are concerned that a beneficiary could 
be charged for non-covered telehealth services if a physician or 
practitioner billing through the TIN of an ACO participant in an 
applicable ACO were to attempt to furnish a telehealth service that 
would be otherwise covered under section 1899(l) of the Act to a FFS 
beneficiary who is not prospectively assigned to the applicable ACO, 
and payment for the telehealth service is denied because the 
beneficiary is not eligible to receive telehealth services furnished 
under section 1899(l) of the Act. We believe this situation could occur 
as a result of a breakdown in one or more processes of the applicable 
ACO and its ACO participants. For example, the ACO participant may not 
verify that the beneficiary appears on the ACO's prospective assignment 
list, as required under section 1899(l) of the Act, prior to furnishing 
a telehealth service. In this scenario, Medicare would deny payment of 
the telehealth service claim because the beneficiary did not meet the 
requirement of being prospectively assigned to an applicable ACO. We 
are concerned that, once the claim is rejected, the beneficiary may not 
be protected from financial liability, and thus could be charged by the 
ACO participant for non-covered telehealth services that were a result 
of an inappropriate attempt to furnish telehealth services under 
section 1899(l), potentially subjecting the beneficiary to significant 
financial liability. In this circumstance, we propose to assume that 
the physician or other practitioner's intent was to rely upon section 
1899(l) of the Act. We believe this is a reasonable assumption because, 
as a physician or practitioner billing under the TIN of an ACO 
participant in an applicable ACO, the healthcare provider should be 
well aware of the rules regarding furnishing telehealth services and, 
by submitting the claim, demonstrated an expectation that CMS would pay 
for telehealth services that would otherwise have been rejected for 
lack of meeting the originating site requirements in section 
1834(m)(4)(C) of the Act. We believe that in this scenario, the 
rejection of the claim could easily have been avoided if the ACO and 
the ACO participant had procedures in place to confirm that the 
requirements for furnishing such telehealth services were satisfied. 
Because each of these entities is in a better position than the 
beneficiary to know the requirements of the Shared Savings Program and 
to ensure that they are met, we believe that the applicable ACO and/or 
its ACO participants should be accountable for such denials and the ACO 
participant should be prevented from charging the beneficiary for the 
non-covered telehealth service. Therefore, we propose that in the event 
that CMS makes no payment for telehealth services furnished to a FFS 
beneficiary and billed through the TIN of an ACO participant in an 
applicable ACO and the only reason the claim was non-covered is because 
the beneficiary was not prospectively assigned to the ACO or was not in 
the 90 day grace period, all of the following beneficiary protections 
would apply:
     The ACO participant must not charge the beneficiary for 
the expenses incurred for such services;
     The ACO participant must return to the beneficiary any 
monies collected for such services; and
     The ACO may be subject to compliance actions, including 
being required to submit a corrective action plan (CAP) under Sec.  
425.216(b) for CMS

[[Page 41867]]

approval. If the ACO is required to submit a CAP and, after being given 
an opportunity to act upon the CAP, the ACO fails to implement the CAP 
or demonstrate improved performance upon completion of the CAP, we may 
terminate the participation agreement as specified under Sec.  
425.216(b)(2). These proposed beneficiary protections are reflected in 
the proposed new regulation at Sec.  425.613, which implements the 
requirements of section 1899(l) of the Act and establishes the policies 
governing the use of telehealth services by applicable ACOs and their 
ACO participants and ACO providers/suppliers.
    We note that we are not proposing at this time to establish any 
waiver of section 1834(m)(1) to permit payment for telehealth services 
delivered through asynchronous technologies because we do not have 
sufficient experience with the waiver that is being tested under the 
Next Generation ACO Model, to inform whether such a waiver would be 
necessary for purposes of implementing the Shared Savings Program. We 
may consider this issue further through future rulemaking after we gain 
additional experience with the use of asynchronous technologies through 
the Next Generation ACO Model. We welcome comments on these proposals 
for implementing the requirements of section 1899(l) of the Act, as 
added by the Bipartisan Budget Act, and related issues.
    Our proposed policies concerning the applicability of the SNF 3-day 
rule waiver and expanded use of telehealth services in accordance with 
section 1899(l) of the Act by track are summarized in Table 9.

                                     Table 9--Availability of Proposed Payment and Program Policies to ACOs by Track
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                        ENHANCED  track
                                        Policy        Track 1 (One-sided  Track 2 (Two-sided    Track 1+  model      BASIC  track         (proposed;
             Policy                   description       model;  propose     model;  propose    (two-sided model)    (proposed  new     current  track 3
                                                       to  discontinue)    to  discontinue)                             track)         financial  model)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Telehealth Services furnished in  Removes geographic  N/A (because this   N/A (because under  Proposed            Proposed            Proposed
 accordance with Sec.   1899(l)    limitations and     is a one-sided      preliminary         requirements for    requirements for    requirements for
 of the Act.                       allows the          model under         prospective         performance year    performance year    performance year
                                   beneficiary's       preliminary         assignment).        2020 and onward     2020 and onward,    2020 and onward
                                   home to serve as    prospective                             (prospective        applicable for      (prospective
                                   originating site    assignment).                            assignment) \1\.    performance years   assignment)
                                   for prospectively                                                               under a two-sided
                                   assigned                                                                        model
                                   beneficiaries.                                                                  (prospective
                                                                                                                   assignment).
SNF 3-Day Rule Waiver \2\.......  Waives the          N/A (unavailable    N/A (unavailable    Current policy      Proposed for        Proposed for
                                   requirement for a   under current       under current       (prospective        performance years   performance years
                                   3-day inpatient     policy).            policy).            assignment).        beginning on July   beginning on July
                                   stay prior to                                                                   1, 2019 and         1, 2019 and
                                   admission to a                                                                  subsequent years,   subsequent years
                                   SNF affiliate.                                                                  eligible for        (prospective or
                                                                                                                   performance years   preliminary
                                                                                                                   under a two-sided   prospective
                                                                                                                   model               assignment)
                                                                                                                   (prospective or
                                                                                                                   preliminary
                                                                                                                   prospective
                                                                                                                   assignment).
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes: \1\ An amendment to the Track 1+ Model Participation Agreement would be required to apply the proposed policies regarding the use of telehealth
  services under Sec.   1899(l) to Track 1+ Model ACOs as described in section II.F of this proposed rule.
\2\ As discussed in section II.A.7.c and II.F of this proposed rule, Track 3 ACOs and Track 1+ Model ACOs participating in a performance year beginning
  on January 1, 2019, may apply for a SNF 3-day rule waiver effective on July 1, 2019. We expect this application cycle would coincide with the
  application cycle for new agreement periods beginning on July 1, 2019.

C. Providing Tools To Strengthen Beneficiary Engagement

1. Background on Beneficiary Engagement
    Section 1899(b)(2)(G) of the Act requires an ACO to ``define 
processes to promote . . . patient engagement.'' Strengthening 
beneficiary engagement is one of the agency's goals to help transform 
our health care system into one that delivers better care, smarter 
spending and healthier people, and that puts the beneficiary at the 
center of care. We stated in the November 2011 final rule that the term 
``patient engagement'' means the active participation of patients and 
their families in the process of making medical decisions (76 FR 
67828). The regulation at Sec.  425.112 details the patient-
centeredness criteria for the Shared Savings Program, and requires that 
ACOs implement processes to promote patient engagement (Sec.  
425.112(b)(2)).
    In addition, Congress recently passed section 50341 of the 
Bipartisan Budget Act of 2018, which amends section 1899 of the Act, to 
allow certain ACOs to each establish a beneficiary incentive program 
for assigned beneficiaries who receive qualifying primary-care services 
in order to encourage Medicare FFS beneficiaries to obtain medically 
necessary primary care services. In order to implement the amendments 
to section 1899 of the Act, and consistent with our goal to strengthen 
beneficiary engagement, we are proposing policies to allow any ACO in 
Track 2, levels C, D, or E of the BASIC track, or the ENHANCED track to 
establish a CMS-approved beneficiary incentive program to provide 
incentive payments to

[[Page 41868]]

eligible beneficiaries who receive qualifying services.
    Furthermore, we are proposing to revise policies related to 
beneficiary notifications. Specifically, we propose to require 
additional content for beneficiary notifications and that beneficiaries 
receive such notices at the first primary care visit of each 
performance year. Finally, we are seeking comment on whether we should 
create an alternative beneficiary assignment methodology, in order to 
promote beneficiary free choice, under which a beneficiary would be 
assigned to an ACO if the beneficiary has ``opted-in'' to assignment to 
the ACO.
2. Beneficiary Incentives
a. Overview
    We believe that patient engagement is an important part of 
motivating and encouraging more active participation by beneficiaries 
in their health care. We believe ACOs that engage beneficiaries in the 
management of their health care may experience greater success in the 
Shared Savings Program. In the November 2011 final rule (see 76 FR 
67958), we noted that some commenters had suggested that beneficiary 
engagement and coordination of care could be enhanced by providing 
additional incentives to beneficiaries that would potentially motivate 
and encourage beneficiaries to become actively involved in their care. 
One commenter gave the example of supplying scales to beneficiaries 
with congestive heart failure to help them better manage this chronic 
disease. Other commenters were concerned that certain beneficiary 
incentives such as gifts, cash, or other remuneration could be 
inappropriate incentives for receiving services or remaining assigned 
to an ACO or with a particular ACO participant or ACO provider/
supplier.
    In the November 2011 final rule, we finalized a provision at Sec.  
425.304(a)(1) that prohibits ACOs, ACO participants, ACO providers/
suppliers, and other individuals or entities performing functions or 
services related to ACO activities from providing gifts or other 
remuneration to beneficiaries as incentives for (i) receiving items and 
services from or remaining in an ACO or with ACO providers/suppliers in 
a particular ACO, or (ii) receiving items or services from ACO 
participants or ACO providers/suppliers. However, in response to 
comments, we finalized a provision at Sec.  425.304(a)(2) to provide 
that, subject to compliance with all other applicable laws and 
regulations, an ACO, ACO participants, and ACO providers/suppliers, and 
other individuals or entities performing functions or services related 
to ACO activities may provide in-kind items or services to 
beneficiaries if there is a reasonable connection between the items or 
services and the medical care of the beneficiary, and the items or 
services are preventive care items or services, or advance a clinical 
goal of the beneficiary, including adherence to a treatment regime; 
adherence to a drug regime; adherence to a follow-up care plan; or 
management of a chronic disease or condition. For example, an ACO 
provider may give a blood pressure monitor to a beneficiary with 
hypertension in order to encourage regular blood pressure monitoring 
and thus educate and engage the beneficiary to be more proactive in his 
or her disease management. In this instance, such a gift would not be 
considered an improper incentive to encourage the beneficiary to remain 
with an ACO, ACO participant, or ACO provider/supplier.
    We note that nothing precludes ACOs, ACO participants, or ACO 
providers/suppliers from offering a beneficiary an incentive to promote 
his or her clinical care if the incentive does not violate the Federal 
anti-kickback statute (section 1128B(b) of the Act), the civil monetary 
penalties law provision relating to beneficiary inducements (section 
1128A(a)(5) of the Act, known as the Beneficiary Inducements CMP), or 
other applicable law. For additional information on beneficiary 
incentives that may be permissible under the Federal anti-kickback 
statute and the Beneficiary Inducements CMP, see the final rule 
published by the Office of Inspector General (OIG) on December 7, 2016 
titled ``Medicare and State Health Care Programs: Fraud and Abuse; 
Revisions to the Safe Harbors Under the Anti-Kickback Statute and Civil 
Monetary Penalty Rules Regarding Beneficiary Inducements'' (81 FR 
88368), as well as other resources that can be found on the OIG website 
at oig.hhs.gov.
    We believe that the regulation at Sec.  425.304(a)(2) already 
provides ACOs with a considerable amount of flexibility to offer 
beneficiary incentives to encourage patient engagement, promote care 
coordination, and achieve the objectives of the Shared Savings Program. 
Further, ACOs, ACO participants, and ACO providers/suppliers need not 
furnish beneficiary incentives under Sec.  425.304(a)(2) to every 
beneficiary; they have the flexibility to offer incentives on a 
targeted basis to beneficiaries who, for example, are most likely to 
achieve the clinical goal that the incentive is intended to advance. 
Although the appropriateness of any in-kind beneficiary incentives must 
be determined on a case-by-case basis, we believe a wide variety of 
incentives could be acceptable under Sec.  425.304, including, for 
example, the following:
     Vouchers for over-the-counter medications recommended by a 
health care provider.
     Prepaid, non-transferable vouchers that are redeemable for 
transportation services solely to and from an appointment with a health 
care provider.
     Items and services to support management of a chronic 
disease or condition, such as home air-filtering systems or bedroom 
air-conditioning for asthmatic patients, and home improvements such as 
railing installation or other home modifications to prevent re-injury.
     Wellness program memberships, seminars, and classes.
     Electronic systems that alert family caregivers when a 
family member with dementia wanders away from home.
     Vouchers for those with chronic diseases to access chronic 
disease self-management, pain management and falls prevention programs.
     Vouchers for those with malnutrition to access meals 
programs.
     Phone applications, calendars or other methods for 
reminding patients to take their medications and promote patient 
adherence to treatment regimes.
    As the previously mentioned examples indicate, we consider 
vouchers, that is, certificates that can be exchanged for particular 
goods or services (for example, a certificate for one free gym class at 
a local gym), to be ``in-kind items or services'' under Sec.  
425.304(a)(2). Accordingly, an ACO may offer vouchers as beneficiary 
incentives under Sec.  425.304(a)(2) so long as the vouchers meet all 
the other requirements of Sec.  425.304(a)(2).
    In addition, for purposes of the Shared Savings Program, we 
consider gift cards that are in the nature of a voucher, that is, gift 
cards that can be used only for particular goods or services, to be 
``in-kind items or services'' that can be offered under Sec.  
425.304(a)(2), provided that the requirements of Sec.  425.304(a)(2) 
are satisfied. A gift card that is not in the nature of a voucher, 
however, such as a gift card to a general store, would not meet the 
requirements for ``in-kind item or service'' under Sec.  425.304(a)(2). 
Furthermore, we consider a gift card that can be used like cash, for 
example, a VISA or Amazon ``gift card,'' to be a ``cash equivalent'' 
that can be offered only as an incentive payment under an approved 
beneficiary incentive program,

[[Page 41869]]

provided that all of the criteria set forth in Sec.  425.304(c), as 
proposed, are satisfied. We emphasize that, as previously stated, the 
determination and appropriateness of any in-kind beneficiary incentive 
must be determined on a case-by-case basis.
    Although we believe that ACOs, ACO participants, ACO providers/
suppliers and other individuals or entities performing functions or 
services related to ACO activities are already permitted to furnish a 
broad range of beneficiary incentives under Sec.  425.304(a)(2) 
(including the previously mentioned examples), stakeholders have 
advocated that ACOs be permitted to offer a more flexible, expanded 
range of beneficiary incentives that are not currently allowable under 
Sec.  425.304. In particular, stakeholders seek to offer monetary 
incentives that beneficiaries could use to purchase retail items, which 
would not qualify as in-kind items or services under Sec.  425.304.
b. Provisions of the Bipartisan Budget Act for ACO Beneficiary 
Incentive Programs
    As previously noted, in order to encourage Medicare FFS 
beneficiaries to obtain medically necessary primary care services, the 
recent amendments to section 1899 of the Act permit certain ACOs to 
establish beneficiary incentive programs to provide incentive payments 
to assigned beneficiaries who receive qualifying primary care services. 
We believe that such amendments will empower individuals and caregivers 
in care delivery. Specifically, the Bipartisan Budget Act adds section 
1899(m)(1)(A) of the Act, which allows ACOs to apply to operate an ACO 
beneficiary incentive program. The Bipartisan Budget Act also adds a 
new subsection (m)(2) to section 1899 of the Act, which provides 
clarification regarding the general features, implementation, duration, 
and scope of approved ACO beneficiary incentive programs. In addition, 
the Bipartisan Budget Act adds section 1899(b)(2)(I) of the Act, which 
requires ACOs that seek to operate a beneficiary incentive program to 
apply to operate the program at such time, in such manner, and with 
such information as the Secretary may require.
    Section 1899(m)(1)(A) of the Act, as added by the Bipartisan Budget 
Act, allows ACOs participating in certain payment models described in 
section 1899(m)(2)(B) of the Act to apply to establish an ACO 
beneficiary incentive program to provide incentive payments to Medicare 
FFS beneficiaries who are furnished qualifying services. Section 
1899(m)(1)(A) of the Act also specifies that the Secretary shall permit 
an ACO to establish such a program at the Secretary's discretion and 
subject to such requirements, including program integrity requirements, 
as the Secretary determines necessary.
    Section 1899(m)(1)(B) of the Act requires the Secretary to 
implement the ACO beneficiary incentive program provisions under 
section 1899(m) of the Act on a date determined appropriate by the 
Secretary, but no earlier than January 1, 2019 and no later than 
January 1, 2020. In addition, section 1899(m)(2)(A) of the Act, as 
added by the Bipartisan Budget Act, specifies that an ACO beneficiary 
incentive program shall be conducted for a period of time (of not less 
than 1 year) as the Secretary may approve, subject to the termination 
of the ACO beneficiary incentive program by the Secretary.
    Section 1899(m)(2)(H) of the Act provides that the Secretary may 
terminate an ACO beneficiary incentive program at any time for reasons 
determined appropriate by the Secretary. In addition, the Bipartisan 
Budget Act amended section 1899(g)(6) of the Act to provide that there 
shall be no administrative or judicial review under section 1869 or 
1878 of the Act, or otherwise, of the termination of an ACO beneficiary 
incentive program.
    Section 1899(m)(2)(B) of the Act requires that an ACO beneficiary 
incentive program provide incentive payments to all of the following 
Medicare FFS beneficiaries who are furnished qualifying services by the 
ACO: (1) Medicare FFS beneficiaries who are preliminarily prospectively 
or prospectively assigned (or otherwise assigned, as determined by the 
Secretary) to an ACO in a Track 2 or Track 3 payment model described in 
Sec.  425.600(a) (or in any successor regulation) and (2) Medicare FFS 
beneficiaries who are assigned to an ACO, as determined by the 
Secretary, in any future payment models involving two-sided risk.
    Section 1899(m)(2)(C) of the Act, as added by the Bipartisan Budget 
Act, defines a qualifying service, for which incentive payments may be 
made to beneficiaries, as a primary care service, as defined in Sec.  
425.20 (or in any successor regulation), with respect to which 
coinsurance applies under Medicare part B. Section 1899(m)(2)(C) of the 
Act also provides that a qualifying service is a service furnished 
through an ACO by: (1) An ACO professional described in section 
1899(h)(1)(A) of the Act who has a primary care specialty designation 
included in the definition of primary care physician under Sec.  425.20 
(or any successor regulation) (2) an ACO professional described in 
section 1899(h)(1)(B) of the Act; or (3) a FQHC or RHC (as such terms 
are defined in section 1861(aa) of the Act).
    As added by the Bipartisan Budget Act, section 1899(m)(2)(D) of the 
Act provides that an incentive payment made by an ACO under an ACO 
beneficiary incentive program shall be in an amount up to $20, with the 
maximum amount updated annually by the percentage increase in the 
consumer price index for all urban consumers (United States city 
average) for the 12-month period ending with June of the previous year. 
Section 1899(m)(2)(D) of the Act also requires that an incentive 
payment be in the same amount for each Medicare FFS beneficiary 
regardless of the enrollment of the beneficiary in a Medicare 
supplemental policy (described in section 1882(g)(1) of the Act), in a 
State Medicaid plan under Title XIX or a waiver of such a plan, or in 
any other health insurance policy or health benefit plan. Finally, 
section 1899(m)(2)(D) of the Act requires that an incentive payment be 
made for each qualifying service furnished to a beneficiary during a 
period specified by the Secretary and that an incentive payment be made 
no later than 30 days after a qualifying service is furnished to the 
beneficiary.
    Section 1899(m)(2)(E) of the Act, as added by the Bipartisan Budget 
Act, provides that no separate payment shall be made to an ACO for the 
costs, including the costs of incentive payments, of carrying out an 
ACO beneficiary incentive program. The section further provides that 
this requirement shall not be construed as prohibiting an ACO from 
using shared savings received under the Shared Savings Program to carry 
out an ACO beneficiary incentive program. In addition, section 
1899(m)(2)(F) of the Act provides that incentive payments made by an 
ACO under an ACO beneficiary incentive program shall be disregarded for 
purposes of calculating benchmarks, estimated average per capita 
Medicare expenditures, and shared savings for purposes of the Shared 
Savings Program.
    As added by the Bipartisan Budget Act, section 1899(m)(2)(G) of the 
Act provides that an ACO conducting an ACO beneficiary incentive 
program shall, at such times and in such format as the Secretary may 
require, report to the Secretary such information and retain such 
documentation as the Secretary may require, including the amount and 
frequency of incentive payments made and the number of Medicare FFS 
beneficiaries receiving such payments.

[[Page 41870]]

    Finally, section 1899(m)(3) of the Act excludes payments under an 
ACO beneficiary incentive program from being considered income or 
resources or otherwise taken into account for purposes of: (1) 
Determining eligibility for benefits or assistance under any Federal 
program or State or local program financed with Federal funds; or (2) 
any Federal or State laws relating to taxation.
c. Proposals for Beneficiary Incentive Programs
    In order to implement the changes set forth in section 1899(b)(2) 
and (m) of the Act, we are proposing to add regulation text at Sec.  
425.304(c) that would allow ACOs participating under certain two-sided 
models to establish beneficiary incentive programs to provide incentive 
payments to assigned beneficiaries who receive qualifying services. In 
developing our proposed policy, we have considered the statutory 
provisions set forth in section 1899(b)(2) and (m) of the Act, as 
amended, as well as the following: The application process for 
establishing a beneficiary incentive program; who can furnish an 
incentive payment; the amount, timing, and frequency of an incentive 
payment; how an incentive payment may be financed, and necessary 
program integrity requirements. We address each of these considerations 
in this proposed rule.
    As previously explained, section 1899(m)(1)(A) of the Act 
authorizes ``an ACO participating under this section under a payment 
model described in clause (i) or (ii) of paragraph (2)(B)'' to 
establish an ACO beneficiary incentive program. In turn, section 
1899(m)(2)(B)(i) of the Act describes ACOs participating in ``Track 2 
and Track 3 payment models as described in section 425.600(a) . . . (or 
in any successor regulation).'' Section 1899(m)(2)(B)(ii) of the Act 
describes ACOs participating in ``any future payment models involving 
two-sided risk.'' As discussed in section II.A.2 of this proposed rule, 
we are proposing to (1) discontinue Track 2 as a participation option 
and limit its availability to agreement periods beginning before July 
1, 2019; (2) rename Track 3 the ``ENHANCED track''; and (3) require 
ACOs with agreement periods beginning July 1, 2019 and in subsequent 
years to enter either the ENHANCED track (which entails two-sided risk) 
or the new BASIC track (in which Levels A and B have one-sided risk and 
Levels C, D, and E have two-sided risk). As noted in proposed Sec.  
425.600(a)(3), for purposes of the Shared Savings Program, all 
references to the ENHANCED track would be deemed to include Track 3; 
the terms are synonymous. Accordingly, Track 2 and ENHANCED track ACOs 
are described under section 1899(m)(2)(B)(i) of the Act, and ACOs in 
Levels C, D, or E of the BASIC track are described under section 
1899(m)(2)(B)(ii) of the Act. As a result, Track 2 ACOs, ENHANCED track 
ACOs, and ACOs in Levels, C, D, or E of the BASIC track are authorized 
to establish beneficiary incentive programs under section 1899(m)(1)(A) 
of the Act.
    Section 1899(m)(1)(B) of the Act states that the ``Secretary shall 
implement this subsection on a date determined appropriate by the 
Secretary. Such date shall be no earlier than January 1, 2019, and no 
later than January 1, 2020.'' We propose to allow ACOs to establish a 
beneficiary incentive program beginning no earlier than July 1, 2019. 
As discussed later in this section, ACOs that are approved to operate a 
beneficiary incentive program shall conduct the program for at least 1 
year as required by section 1899(m)(2)(A) of the Act unless CMS 
terminates the ACO's beneficiary incentive program. This means, for 
example, that an ACO currently participating in the Shared Savings 
Program under Track 2 or Track 3 whose agreement period expires on 
December 31, 2019 would be ineligible to operate a beneficiary 
incentive program starting on July 1, 2019 because the ACO would have 
only 6 months of its agreement remaining as of July 1, 2019. The ACO 
could, however, start a beneficiary incentive program on January 1, 
2020 (assuming it renews its agreement).
    We considered the operational impact of having both a midyear 
beneficiary incentive program cycle (for ACOs that seek to establish a 
beneficiary incentive program beginning on July 1, 2019) and a calendar 
year beneficiary incentive program cycle (for ACOs that seek to 
establish a beneficiary incentive program beginning on January 1, 2020, 
or a later January 1 start date). We believe it could be confusing for 
ACOs, and difficult for CMS to monitor approved beneficiary incentive 
programs, if some ACOs begin their beneficiary incentive programs in 
July 2019 and other ACOs begin their beneficiary incentive programs in 
January 2020. For example, under this approach, annual certifications 
regarding intent to continue a beneficiary incentive program (as 
further discussed herein) would be provided by ACOs at different times 
of the year, depending on when each ACO established its beneficiary 
incentive program. To address this, we believe it is necessary to 
require ACOs that establish a beneficiary incentive program on July 1, 
2019 to commit to an initial beneficiary incentive program term of 18 
months (with certifications required near the conclusion of the 18-
month period and for each consecutive 12-month period thereafter). 
However, any ACO that establishes a beneficiary incentive program 
beginning on January 1 of a performance year would be required to 
commit to an initial beneficiary incentive program term of 12 months. 
This would allow the term cycles of all ACO beneficiary incentive 
programs to later ``sync'' so that they all operate on a calendar year 
beginning on January 1, 2021. As an alternative, we considered 
permitting all ACOs to establish a beneficiary incentive program 
beginning January 1, 2020. However, we believe that some ACOs may 
prefer to establish a beneficiary incentive program on July 1, 2019, 
rather than delay until January 1, 2020.
    The statute does not prescribe procedures that ACOs must adhere to 
in applying to establish a beneficiary incentive program. In addition, 
beyond the requirement that ACOs participate in Track 2, Track 3 
(which, as we previously discussed, will be renamed the ``ENHANCED 
track'') or a ``future payment model involving two-sided risk'' 
(sections 1899(m)(2)(B)(i) and (ii) of the Act), the new provisions do 
not describe what factors we should consider in evaluating whether an 
ACO should be permitted to establish a beneficiary incentive program. 
Instead, section 1899(m)(1)(A) of the Act states that the ``Secretary 
shall permit such an ACO to establish such a program at the Secretary's 
discretion and subject to such requirements . . . as the Secretary 
determines necessary.'' We propose that the application for the 
beneficiary incentive program be in a form and manner specified by CMS, 
which may be separate from the application to participate in the Shared 
Savings Program. We would provide additional information regarding the 
application on our website.
    We propose to permit eligible ACOs to apply to establish a 
beneficiary incentive program during the July 1, 2019 application cycle 
or during a future annual application cycle for the Shared Savings 
Program. In addition, we propose to permit an eligible ACO that is mid-
agreement to apply to establish a beneficiary incentive program during 
the application cycle prior to the performance year in which the ACO 
chooses to begin implementing its beneficiary incentive program. This 
would apply to ACOs that enter a two-sided model at the start of an 
agreement period but that do not apply to establish

[[Page 41871]]

a beneficiary incentive program at the time of their initial or renewal 
application to the Shared Savings Program. This means, for example, 
that an ACO that enters the Shared Savings Program under a two-sided 
model but that does not seek to offer a beneficiary incentive program 
until its second performance year could apply to offer a beneficiary 
incentive program during the application cycle in advance of its second 
performance year. This would also apply to ACOs that enter the BASIC 
track's glide path under a one-sided model and that apply to establish 
a beneficiary incentive program beginning with a performance year under 
a two-sided model (see discussion in sections II.A.3.b and II.A.4.b of 
this proposed rule).
    An ACO would be required to operate its beneficiary incentive 
program effective at the beginning of the performance year following 
CMS's approval of the ACO's application to establish the beneficiary 
incentive program. The ACO would then be required to operate the 
approved beneficiary incentive program for the entirety of such 12-
month performance year (for ACOs that establish a beneficiary incentive 
program on January 1, 2020, or a later January 1 start date) or for an 
initial 18-month period (for ACOs that establish a beneficiary 
incentive program on July 1, 2019).
    An ACO with an approved beneficiary incentive program application 
would be permitted to operate its beneficiary incentive program for any 
consecutive performance year if it complies with certain certification 
requirements. Specifically, an ACO that seeks to continue to offer its 
beneficiary incentive program beyond the initial 12-month or 18-month 
term (as previously discussed) would be required to certify, in the 
form and manner and by a deadline specified by CMS, its intent to 
continue to operate its beneficiary incentive program for the entirety 
of the next performance year, and that its beneficiary incentive 
program continues to meet all applicable requirements. CMS may 
terminate a beneficiary incentive program, in accordance with Sec.  
425.304(c)(7), as proposed, if an ACO fails to provide such 
certification. We believe this certification requirement is necessary 
for CMS to monitor beneficiary incentive programs. CMS would provide 
further information regarding the annual certification process through 
subregulatory guidance.
    In addition to the application and certification requirements 
previously described, we are considering whether an ACO that offers a 
beneficiary incentive program should be required to notify CMS of any 
modification to its beneficiary incentive program prior to implementing 
such modification. We solicit comments on this issue.
    With respect to who may receive an incentive payment, a FFS 
beneficiary would be eligible to receive an incentive payment if the 
beneficiary is assigned to an ACO through either preliminary 
prospective assignment with retrospective reconciliation, as described 
in Sec.  425.400(a)(2), or prospective assignment, as described in 
Sec.  425.400(a)(3). We note that Track 2 is under preliminary 
prospective assignment with retrospective reconciliation under Sec.  
425.400(a)(2). In addition, as discussed in section II.A.4 of this 
proposed rule, we propose to permit BASIC track and ENHANCED track ACOs 
to enter an agreement period under preliminary prospective assignment, 
as described in Sec.  425.400(a)(2), or under prospective assignment, 
as described in Sec.  425.400(a)(3). Further, a beneficiary may choose 
to voluntarily align with an ACO, and, if eligible for assignment, the 
beneficiary would be prospectively assigned to the ACO (regardless of 
track) for the performance year under Sec.  425.402(e)(1). Therefore, 
consistent with our policy regarding which ACOs may establish a 
beneficiary incentive program, any beneficiary assigned to an ACO that 
is participating under Track 2; Levels C, D, or E of the BASIC track; 
or the ENHANCED track may receive an incentive payment under that ACO's 
CMS-approved beneficiary incentive program.
    Section 1899(m)(2)(C) of the Act sets forth the definition of a 
qualifying service for purposes of the beneficiary incentive program. 
We mirror the language in the proposed regulation text noting that ``a 
qualifying service is a primary care service,'' as defined in Sec.  
425.20, ``with respect to which coinsurance applies under part B,'' 
furnished through an ACO by ``an ACO professional who has a primary 
care specialty designation included in the definition of primary care 
physician'' under Sec.  425.20; an ACO professional who is a physician 
assistant, nurse practitioner, or clinical nurse specialist; or a FQHC 
or RHC. This means that any service furnished by an ACO professional 
who is a physician but does not have a specialty designation included 
in the definition of primary care physician would not be considered a 
qualifying service for which an incentive payment may be furnished.
    With respect to the amount of any incentive payment, section 
1899(m)(2)(D)(i) of the Act provides that an incentive payment made by 
an ACO in accordance with a beneficiary incentive program shall be ``in 
an amount up to $20.'' Accordingly, we propose to incorporate a $20 
incentive payment limit into the regulation. We also propose to adopt 
the provision at section 1899(m)(2)(D)(i) of the Act, which provides 
that the $20 maximum amount must be ``updated annually by the 
percentage increase in the consumer price index for all urban consumers 
(United States city average) for the 12-month period ending with June 
of the previous year.'' To avoid minor changes in the updated maximum 
amount, however, we believe it is necessary to round the updated 
maximum incentive payment amount to the nearest whole dollar. We have 
reflected this policy in our proposed regulations text. We would post 
the updated maximum payment amount on the Shared Savings Program 
website and/or in a guidance regarding beneficiary incentive programs.
    We also propose to adopt the requirement that the incentive payment 
be ``in the same amount for each Medicare fee-for-service beneficiary'' 
without regard to enrollment of such a beneficiary in a Medicare 
supplemental policy, in a State Medicaid plan, or a waiver of such a 
plan, or in any other health insurance policy or health plan. (Section 
1899(m)(2)(D)(ii) of the Act.) Accordingly, all incentive payments 
distributed by an ACO under its beneficiary incentive program must be 
of equal monetary value. In other words, an ACO would not be permitted 
to offer higher-valued incentive payments for particular qualifying 
services or to particular beneficiaries. However, an ACO may provide 
different types of incentive payments (for example, a gift card to some 
beneficiaries and a check to others) depending on a beneficiary's 
preference, so long as all incentive payments offered by the ACO under 
its beneficiary incentive program are of equal monetary value.
    Furthermore, as required by section 1899(m)(2)(D)(iii) of the Act, 
we propose that an ACO furnish an incentive payment to an eligible 
beneficiary each time the beneficiary receives a qualifying service. In 
addition, in accordance with section 1899(m)(2)(D)(iv) of the Act, we 
propose to require that each incentive payment be ``made no later than 
30 days after a qualifying service is furnished to such a 
beneficiary.''
    We have considered the individuals and entities that should be 
permitted to offer incentive payments to beneficiaries under a 
beneficiary incentive program. We note that section 1899(m)(2)(D) of 
the Act, which addresses incentive

[[Page 41872]]

payments, contemplates that incentive payments be furnished directly by 
an ACO to a beneficiary. In addition, we believe this requirement is 
necessary because the ACO is in the best position to ensure that any 
incentive payments offered are distributed only to eligible 
beneficiaries and that other program requirements are met. We are 
therefore proposing to require that the ACO legal entity, and not ACO 
participants or ACO providers/suppliers, furnish the incentive payments 
directly to beneficiaries. We seek comment, however, on other potential 
methods for distributing an incentive payment to a beneficiary.
    As previously explained, section 1899(m)(1)(A) of the Act allows 
the Secretary to establish ``program integrity requirements, as the 
Secretary deems necessary.'' Given the significant fraud and abuse 
concerns associated with offering cash incentives, we believe it is 
necessary to prohibit ACOs from distributing incentive payments to 
beneficiaries in the form of cash. Cash incentive payments would be 
inherently difficult to track for reporting and auditing purposes since 
they would not necessarily be tied to documents providing written 
evidence that a cash incentive payment was furnished to an eligible 
beneficiary for a qualifying service. The inability to trace a cash 
incentive would make it difficult for CMS to ensure that an ACO has 
uniformly furnished incentive payments to all eligible beneficiaries 
and has not made excessive payments or otherwise used incentive 
payments to improperly attract ``healthier'' beneficiaries while 
disadvantaging beneficiaries who are less healthy or have a disability. 
Therefore, we propose to require that incentive payments be in the form 
of a cash equivalent, which includes instruments convertible to cash or 
widely accepted on the same basis as cash, such as checks and debit 
cards.
    In addition, we have considered record retention requirements 
related to beneficiary incentive programs. Section 1899(m)(2)(G) of the 
Act provides that an ACO ``conducting an ACO Beneficiary Incentive 
Program . . . shall, at such times and in such format as the Secretary 
may require . . . retain such documentation as the Secretary may 
require, including the amount and frequency of incentive payments made 
and the number of Medicare fee-for-service beneficiaries receiving such 
payments.'' We believe it is important for an ACO to be accountable for 
its beneficiary incentive program and to mitigate any gaming, fraud, or 
waste that may occur as a result of its beneficiary incentive program. 
Accordingly, we propose that any ACO that implements a beneficiary 
incentive program maintain records that include the following 
information: Identification of each beneficiary that received an 
incentive payment, including name and HICN or Medicare beneficiary 
identifier; the type (such as check or debit card) and amount (that is, 
the value) of each incentive payment made to each beneficiary; the date 
each beneficiary received a qualifying service and the HCPCS code for 
the corresponding service; the identification of the ACO provider/
supplier that furnished the qualifying service; and the date the ACO 
provided each incentive payment to each beneficiary. An ACO that 
establishes a beneficiary incentive program would be required to 
maintain and make available such records in accordance with Sec.  
425.314(b). In addition to these record retention proposals, we expect 
any ACO that establishes a beneficiary incentive program to update its 
compliance plan (as required under Sec.  425.300(b)(2)), to address any 
finalized regulations that address beneficiary incentive programs.
    Furthermore, we propose that an ACO be required to fully fund the 
costs associated with operating a beneficiary incentive program, 
including the cost of any incentive payments. We further propose to 
prohibit ACOs from accepting or using funds furnished by an outside 
entity, including, but not limited to, an insurance company, 
pharmaceutical company, or any other entity outside of the ACO, to 
finance its beneficiary incentive program. We believe these 
requirements are necessary to reduce the likelihood of undue influence 
resulting in inappropriate steering of beneficiaries to specific 
products or providers/suppliers. We seek comments on this issue.
    We also propose to incorporate language in section 1899(m)(2)(E) of 
the Act, which provides that ``[t]he Secretary shall not make any 
separate payment to an ACO for the costs, including incentive payments, 
of carrying out an ACO Beneficiary Incentive Program . . . Nothing in 
this subparagraph shall be construed as prohibiting an ACO from using 
shared savings received under this section to carry out an ACO 
Beneficiary Incentive Program.'' Specifically, we propose under Sec.  
425.304(a)(2) that the policy regarding use of shared savings apply 
with regard to both in-kind items and services furnished under Sec.  
425.304(b) and incentive payments furnished under Sec.  425.304(c).
    Further, we propose to prohibit ACOs from shifting the cost of 
establishing or operating a beneficiary incentive program to a Federal 
health care program, as defined at section 1128B(f) of the Act. 
Essentially, ACOs would not be permitted to bill the cost of an 
incentive payment to any plan or program that provides health benefits, 
whether directly, through insurance, or otherwise, which is funded 
directly, in whole or in part, by the United States Government. We 
believe this requirement is necessary because billing another Federal 
health care program for the cost of a beneficiary incentive program 
would potentially violate section 1899(m)(2)(E) of the Act which 
prohibits the Secretary from making any separate payment to an ACO for 
the costs of carrying out a beneficiary incentive program, including 
the costs of incentive payments. We seek comments on all of our 
proposed program integrity requirements.
    In addition, we are proposing to implement the language in section 
1899(m)(2)(F) of the Act that ``incentive payments made by an ACO . . . 
shall be disregarded for purposes of calculating benchmarks, estimated 
average per capita Medicare expenditures, and shared savings under this 
section.'' We are also proposing to disregard incentive payments made 
by an ACO for purposes of calculating shared losses under this section 
given that that shared savings would be disregarded.
    Furthermore, we propose to implement the language set forth in 
section 1899(m)(3) of the Act, which provides that ``any payment made 
under an ACO Beneficiary Incentive Program . . . shall not be 
considered income or resources or otherwise taken into account for the 
purposes of determining eligibility for benefits or assistance (or the 
amount or extent of benefits or assistance) under any Federal program 
or any State or local program financed in whole or in part with Federal 
funds; or any Federal or state laws relating to taxation.'' We have 
included this proposal at Sec.  425.304(c)(6).
    With regard to termination of a beneficiary incentive program, 
section 1899(m)(2)(H) of the Act provides that the ``Secretary may 
terminate an ACO Beneficiary Incentive Program . . . at any time for 
reasons determined appropriate by the Secretary.'' We believe it would 
be appropriate for CMS to terminate an ACO's use of the beneficiary 
incentive program for failure to comply with the requirements of our 
finalized proposals at Sec.  425.304, in whole or in part, and for the 
reasons set forth in Sec.  425.218(b), and we are therefore proposing 
this policy at Sec.  425.304(c)(7). We solicit comment on whether it 
would be appropriate for the Secretary to terminate a beneficiary

[[Page 41873]]

incentive program in other circumstances as well, or whether an ACO 
should have the ability to terminate its beneficiary incentive program 
early. In addition, we propose to require any ACO that wishes to 
reestablish a beneficiary incentive program after termination to 
reapply in accordance with the procedures established by CMS. We are 
also proposing to modify our regulations at Sec.  425.800 to implement 
the language set forth in section 1899(g)(6) of the Act, which provides 
that there shall be no administrative or judicial review under section 
1869 or 1878 of the Act or otherwise of the termination of an ACO 
beneficiary incentive program.
    With regard to evaluation of beneficiary incentive programs, we 
note that section 50341(c) of the Bipartisan Budget Act requires that, 
no later than October 1, 2023, the Secretary evaluate and report to 
Congress an analysis of the impact of implementing beneficiary 
incentive programs on health expenditures and outcomes. We welcome 
comments on whether there might be information that we should require 
ACOs to maintain (in addition to the information that would be 
maintained as part of record retention requirements set forth at Sec.  
425.304(c)(4)(i)) to support such an evaluation of beneficiary 
incentive programs. We note, however, that we do not want to discourage 
participation by imposing overly burdensome data management 
requirements on ACOs. We therefore seek comment on reporting 
requirements for ACOs that are approved to establish a beneficiary 
incentive program.
    In addition, we note that under the existing regulations for 
monitoring ACO compliance with program requirements, CMS may employ a 
range of methods to monitor and assess ACOs, ACO participants and ACO 
providers/suppliers to ensure that ACOs continue to satisfy Shared 
Savings Program eligibility and program requirements (Sec.  425.316). 
The scope of this provision would include monitoring ACO, ACO 
participant, and ACO provider/supplier compliance with the requirements 
for establishing and operating a beneficiary incentive program.
    We are considering whether beneficiaries should be notified of the 
availability of a beneficiary incentive program. Because beneficiary 
incentives may be subject to abuse, we believe it is necessary, and we 
have proposed, to prohibit the advertisement of a beneficiary incentive 
program. We are considering, however, whether ACOs should be required 
to make beneficiaries aware of the incentive via approved outreach 
material from CMS. For example, under the program's existing 
regulations (Sec.  425.312(a)), including as revised by this proposed 
rule in section II.C.3.a., all ACO participants are required to notify 
beneficiaries that their ACO providers/suppliers are participating in 
the Shared Savings Program. We solicit comment on whether the 
notifications required under Sec.  425.312(a) should include 
information regarding the availability of an ACO's beneficiary 
incentive program, and, if so, whether CMS should supply template 
language on the topic. We also seek comment on how and when an ACO 
might otherwise notify its beneficiaries that its beneficiary incentive 
program is available, without inappropriately steering beneficiaries to 
voluntarily align with the ACO or to seek care from specific ACO 
participants, and, whether it would be appropriate to impose 
restrictions regarding advertising a beneficiary incentive program. We 
note that we would expect any beneficiary notifications regarding 
incentive payments to be maintained and made available for inspection 
in accordance with Sec.  425.314.
    To ensure transparency and to meet the requirements of section 
1899(m)(2)(G) of the Act requiring that an ACO ``conducting an ACO 
Beneficiary Incentive Program . . . shall, at such times and in such 
format as the Secretary may require, report to the Secretary such 
information . . . as the Secretary may require, including the amount 
and frequency of incentive payments made and the number of Medicare 
fee-for-service beneficiaries receiving such payments,'' we further 
propose to revise the program's public reporting requirements in Sec.  
425.308 to require any ACO that has been approved to implement a 
beneficiary incentive program to publicly report certain information 
about incentive payments on its public reporting web page. 
Specifically, we propose to require ACOs to publicly report, for each 
performance year, the total number of beneficiaries who receive an 
incentive payment, the total number of incentive payments furnished, 
HCPCS codes associated with any qualifying payment for which an 
incentive payment was furnished, the total value of all incentive 
payments furnished, and the total type of each incentive payment (for 
example, check or debit card) furnished. We note that this proposed 
policy would require reporting for the 6-month performance year that 
begins on July 1, 2019. We seek comment on whether information about a 
beneficiary incentive program should be publicly reported by the ACO or 
simply reported to CMS annually or upon request.
    In summary, we are proposing to revise the regulation at Sec.  
425.304 to enable an ACO participating in Track 2, levels C, D, or E of 
the BASIC track, or the ENHANCED track, to establish a beneficiary 
incentive program to provide incentive payments to beneficiaries for 
qualifying primary care services in compliance with the requirements 
outlined in the revised regulations.
    Our proposed policies concerning an ACO's ability to establish a 
beneficiary incentive program are summarized in Table 10.

                                Table 10--Ability of ACOs To Establish a Proposed Beneficiary Incentive Program by Track
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Track 1 (one-                          Track 1+                             ENHANCED track
                                                           sided model;    Track 2 (two-sided   model (two-  BASIC track (proposed   (proposed; current
              Policy                  Policy description    propose to     model; propose to       sided           new track)         track 3 financial
                                                           discontinue)       discontinue)         model)                                  model)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Beneficiary Incentive Program.....  Requires ACOs that              N/A  Proposed beginning             N/A  Proposed beginning     Proposed beginning
                                     establish a                          July 1, 2019 and for                July 1, 2019 and for   July 1, 2019 and
                                     beneficiary                          subsequent                          subsequent             for subsequent
                                     incentive program to                 performance years                   performance years      performance years
                                     provide an incentive                 (preliminary                        for ACOs in Levels     (prospective or
                                     payment to each                      prospective                         C, D or E              preliminary
                                     assigned beneficiary                 assignment).                        (prospective or        prospective
                                     (prospective or                                                          preliminary            assignment).
                                     preliminary                                                              prospective
                                     prospective) for                                                         assignment).
                                     each qualifying
                                     service received.
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 41874]]

d. Clarification of Existing Rules
    We are also taking this opportunity to add regulation text at 
renumbered Sec.  425.304(b)(3) to clarify that the in-kind items or 
services provided to a Medicare FFS beneficiary under Sec.  425.304 
must not include Medicare-covered items or services, meaning those 
items or services that would be covered under Title XVIII of the Act on 
the date the in-kind item or service is furnished to the beneficiary. 
It was always our intention that the in-kind items or services 
furnished under existing Sec.  425.304(a) be non-Medicare-covered items 
and services so that CMS can accurately monitor the cost of medically 
necessary care in the Shared Savings Program and to minimize the 
potential for fraud and abuse. We also clarify that the provision of 
in-kind items and services is available to all Medicare FFS 
beneficiaries and is not limited solely to beneficiaries assigned to an 
ACO.
    Finally, we propose a technical change to the title and structure 
of Sec.  425.304. Specifically, we are proposing to replace the title 
of Sec.  425.304 with ``Beneficiary incentives'' and to add a new 
section Sec.  425.305, with a title ``Other program safeguards'', by 
redesignating paragraphs Sec.  425.304(b) and (c) as Sec.  425.305(a) 
and (b), and to make conforming changes to regulations that refer to 
section Sec.  425.304. Specifically, we propose to make the following 
conforming changes: Amending Sec.  425.118 in paragraph (b)(1)(iii) by 
removing ``Sec.  425.304(b)'' and adding in its place ``Sec.  
425.305(a)''; amending Sec.  425.224 in newly redesignated paragraph 
(b)(1)(v) by removing ``Sec.  425.304(b)'' and adding in its place 
``Sec.  425.305(a)''; amending Sec.  425.310 in paragraph (c)(3) by 
removing ``Sec.  425.304(a)'' and adding in its place ``Sec.  
425.304''; and amending Sec.  425.402 in paragraph (e)(3)(i) by 
removing ``Sec.  425.304(a)(2)'' and adding in its place ``Sec.  
425.304(b)(1).''
3. Empowering Beneficiary Choice
a. Beneficiary Notifications
(1) Background on Beneficiary Notifications
    To ensure full transparency between providers participating in 
Shared Savings Program ACOs and the beneficiaries they serve, the 
November 2011 final rule established requirements for how a Shared 
Savings Program ACO must notify Medicare FFS beneficiaries receiving 
primary care services at the point of care that the physician, 
hospital, or other provider is participating in a Shared Savings 
Program ACO (76 FR 67945 through 67946). Specifically, the November 
2011 final rule established a requirement that ACO participants provide 
standardized written notices to beneficiaries of both their ACO 
provider/supplier's participation in the Shared Savings Program and the 
potential for CMS to share beneficiary identifiable data with the ACO.
    We initially established the beneficiary notification requirements 
for ACOs to protect beneficiaries by ensuring patient engagement and 
transparency, including requirements related to beneficiary 
notification, since the statute does not mandate that ACOs provide 
information to beneficiaries about the Shared Savings Program (76 FR 
67945 through 67946). The beneficiary information notices included 
information on whether a beneficiary was receiving services from an ACO 
participant or ACO provider/supplier, and whether the beneficiary's 
expenditure and quality data would be used to determine the ACO's 
eligibility to receive a shared savings payment.
    In the June 2015 final rule, we amended the beneficiary 
notification requirement and sought comment on simplifying the process 
of disseminating the beneficiary information notice. We received 
numerous comments from ACOs that the beneficiary notification 
requirement was too burdensome and created some confusion amongst 
beneficiaries about the Shared Savings Program (80 FR 32739). As a 
result, we revised the rule so that ACO providers/suppliers would be 
required to provide the notification by simply posting signs in their 
facilities and by making the notice available to beneficiaries upon 
request.
    We also amended our rule to streamline the beneficiary notification 
process by which beneficiaries may decline claims data sharing and 
finalized the requirement that ACO participants use CMS-approved 
template language to notify beneficiaries regarding participation in an 
ACO and the opportunity to decline data sharing. In order to streamline 
operations, reduce burden and cost on ACOs and their providers, and 
avoid creating beneficiary confusion, we also streamlined the process 
for beneficiaries to decline data sharing by consolidating the data opt 
out process through 1-800-MEDICARE in the June 2015 final rule (80 FR 
32737 through 32743). Beneficiaries must contact 1-800-MEDICARE to 
decline sharing their Medicare claims data or to reverse that decision.
    As previously discussed, under the program's current requirements, 
an ACO participant (for example physician practices and hospitals) must 
notify beneficiaries in writing of its participation in an ACO by 
posting signs in its facilities and, in settings in which beneficiaries 
receive primary care services, by making a standardized written notice 
(the ``Beneficiary Information Notice'') available to beneficiaries 
upon request (Sec.  425.312). We provide ACOs with templates, in 
English and Spanish, to share with their ACO participants for display 
or distribution. To summarize:
     The poster language template indicates the providers' 
participation in the Shared Savings Program; describes ACOs and what 
they mean for beneficiary care; highlights that a beneficiary's freedom 
to choose his or her doctors and hospitals is maintained; and indicates 
that beneficiaries have the option to decline to have their Medicare 
Part A, B, and D claims data shared with their ACO or other ACOs. The 
poster must be in a legible format for display and in a place where 
beneficiaries can view it.
     The Beneficiary Information Notice template covers the 
same topics and includes details on how beneficiaries can select their 
primary clinician via MyMedicare.gov and voluntarily align to the ACO.
    In addition to these two templates, there are two other ways that 
beneficiaries can learn about ACOs and of their option to decline 
Medicare claims data sharing with ACOs:
     Medicare & You handbook. The language in the ACO section 
of the handbook (available at https://www.medicare.gov/pubs/pdf/10050-Medicare-and-You.pdf) describes ACOs and tells beneficiaries they will 
be notified at the point of care if their doctor participates in the 
Shared Savings Program. It explains what doctor participation in an ACO 
means for a beneficiary's care and that beneficiaries have the right to 
receive care from any doctor that accepts Medicare. The ACO section of 
the handbook also explains that beneficiaries must call 1-800-MEDICARE 
(1-800-633-4227) to decline sharing their health care information with 
ACOs or to reverse that decision.
     1-800-MEDICARE. Customer service representatives are 
equipped with scripted language about the Shared Savings Program, 
including background about ACOs. The customer service representatives 
also can collect information from beneficiaries about declining or 
reinstating Medicare claims data sharing.
    Further, beginning in July 2017, Medicare FFS beneficiaries can 
login to MyMedicare.gov and select the primary

[[Page 41875]]

clinician whom they believe is most responsible for their overall care 
coordination (a process we refer to as voluntary alignment). The 
instructions for selecting a primary clinician are also included in the 
Medicare & You handbook, issued by CMS annually to Medicare 
beneficiaries. The Shared Savings Program uses a beneficiary's 
selection of a primary clinician for assignment purposes, when 
applicable, for ACOs in all tracks beginning in performance year 2018 
(Sec.  425.402(e)).
    We have made information about the Shared Savings Program publicly 
available to educate ACOs, providers, beneficiaries and the general 
public, and to further program transparency. This includes fact sheets, 
program guidance and specifications, program announcements and data 
available through the Shared Savings Program website (see https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/index.html). This material includes resources 
designed to educate beneficiaries about the Shared Savings Program and 
ACOs,\21\ and specifically on the voluntary alignment process.\22\
---------------------------------------------------------------------------

    \21\ Accountable Care Organizations & You, available at https://www.medicare.gov/Pubs/pdf/11588-Accountable-Care-Organizations-FAQs.pdf.
    \22\ Empowering Patients to Make Decisions About Their 
Healthcare: Register for MyMedicare.gov and Select Your Primary 
Clinician, available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Downloads/vol-alignment-bene-fact-sheet.pdf.
---------------------------------------------------------------------------

(2) Proposed Revisions
    We are revisiting the program's existing requirements at Sec.  
425.312 to ensure beneficiaries have a sufficient opportunity to be 
informed about the program and how it may affect their care and their 
data. We have also proposed changes in response to section 50331 of the 
Bipartisan Budget Act of 2018, which amends section 1899(c) of the Act 
to require that the Secretary establish a process by which Medicare FFS 
beneficiaries are (1) ``notified of their ability'' to identify an ACO 
professional as their primary care provider (for purposes of assigning 
the beneficiary to an ACO, as described in Sec.  425.402(e)) and (2) 
``informed of the process by which they may make and change such 
identification.''
    In addition, in proposing revisions to Sec.  425.312 we considered 
how to make the notification a comprehensive resource that compiles 
certain information about the program and what participation in the 
program means for beneficiary care. While there are many sources of 
information on the program that are available to beneficiaries, we are 
concerned that the existing information exists in separate resources, 
which may be time consuming for beneficiaries to compile, and, as a 
result, may be underutilized.
    We also considered methods of notification that would better ensure 
that beneficiaries receive the comprehensive notification at the point 
of care. The current regulations emphasize use of posted signs in 
facilities and, in settings where beneficiaries receive primary care 
services, standardized written notices as a means to notify 
beneficiaries at the point of care that ACO providers/suppliers are 
participating in the program and of the beneficiary's opportunity to 
decline data sharing. Although standardized written notices must be 
made available upon request, we are concerned that few beneficiaries, 
or others who accompany beneficiaries to their medical appointments, 
may initiate request for this information. In turn, beneficiaries may 
not have the information they need to make informed decisions about 
their health care and their data.
    Finally, we considered how to minimize burden on the ACO providers/
suppliers that would provide the notification. We seek to balance the 
requirements of the notification to beneficiaries with the increased 
burden on health care providers that could draw their attention away 
from patient care.
    With these considerations in mind, and to further facilitate 
beneficiary access to information on the Shared Savings Program, we are 
proposing to modify Sec.  425.312(a) to require additional content for 
beneficiary notices. We propose that, beginning July 1, 2019, the ACO 
participant must notify beneficiaries at the point of care about 
voluntary alignment in addition to notifying beneficiaries that its ACO 
providers/suppliers are participating in the Shared Savings Program and 
that the beneficiary has the opportunity to decline claims data 
sharing. Specifically, the ACO participant must notify the beneficiary 
of his or her ability to, and the process by which, he or she may 
identify or change identification of a primary care provider for 
purposes of voluntary alignment.
    We propose to modify Sec.  425.312(b) to require that, beginning 
July 1, 2019, ACO participants must provide the information specified 
in Sec.  425.312(a) to each Medicare FFS beneficiary at the first 
primary care visit of each performance year. Under this proposal, an 
ACO participant would be required to provide this notice during a 
beneficiary's first primary care visit in the 6-month performance year 
from July 1, 2019 through December 31, 2019, as well as the first 
primary care visit in the 12-month performance year that begins on 
January 1, 2020 (and in all subsequent performance years). We propose 
that this notice would be in addition to the existing requirement that 
an ACO participant must post signs in its facilities and make 
standardized written notices available upon request.
    To mitigate the burden of this additional notification, we propose 
to require ACO participants to use a template notice that we would 
prepare and make available to ACOs. The template notice would contain 
all of the information required to be disclosed under Sec.  425.312(a), 
including information on voluntary alignment. With respect to voluntary 
alignment, the template notice would provide details regarding how a 
beneficiary may select his or her primary care provider on 
MyMedicare.gov, and the step-by-step process by which a beneficiary 
could designate an ACO professional as his or her primary care 
provider, and how the beneficiary could change such designation. The 
CMS-developed template notice would also encourage beneficiaries to 
check their ACO professional designation regularly and to update such 
designation when they change care providers or move to a new area. The 
template notice could be provided to beneficiaries at their first 
primary care visit during a performance year, and the same template 
notice could be furnished upon request in accordance with Sec.  
425.312(b)(2).
    We believe this proposed approach would appropriately balance the 
factors we described and achieve our desired outcome of more 
consistently educating beneficiaries about the program while mitigating 
burden of additional notification on ACO participants. In addition, we 
believe this approach would provide detailed information on the program 
to beneficiaries more consistently at a point in time when they may be 
inclined to review the notice and have an opportunity to ask questions 
and address their concerns. Furthermore, we believe this approach would 
pose relatively little additional burden on ACO participants, since 
they are already required to provide written notices to beneficiaries 
upon request.
    We seek comment as to alternative means of dissemination of the 
beneficiary notice, including the frequency with which and by whom the 
notice should be furnished. For example, we seek comment on whether a 
beneficiary should receive the written notice at the beneficiary's 
first primary care visit of the performance year, or

[[Page 41876]]

during the beneficiary's first visit of the performance year with any 
ACO participant. We also seek comment on whether there are alternative 
media for disseminating the beneficiary notice that may be less 
burdensome on ACOs, such as dissemination via email.
    In addition, we solicit comment on whether the template notice 
should include other information outlining ACO activities that may be 
related to or affect a Medicare FFS beneficiary. Such activities may 
include: ACO quality reporting and improvement activities, ACO 
financial incentives to lower growth in expenditures, ACO care redesign 
processes (such as use of care coordinators), the ACO's use of payment 
rule waivers (such as the SNF 3-day rule waiver), and the availability 
of an ACO's beneficiary incentive program.
    We also welcome feedback on the format, content, and frequency of 
this additional notice to beneficiaries about the Shared Savings 
Program, the benefits and drawbacks to requiring additional 
notification about the program at the point of care, and the degree of 
additional burden this notification activity may place on ACO 
participants. More specifically, we welcome feedback on the timing of 
providing the proposed annual notice to the beneficiary, particularly 
what would constitute the appropriate point of care for the beneficiary 
to receive the notice.
    We are also taking this opportunity to add regulation text at 
renumbered Sec.  425.312(a) to clarify our longstanding requirement 
that beneficiary notification obligations apply with regard to all 
Medicare FFS beneficiaries, not only to beneficiaries who have been 
assigned to an ACO (76 FR 67945 through 67946). We seek comment on 
whether an ACO that elects prospective assignment should be required to 
disseminate the beneficiary notice at the point of care only to 
beneficiaries who are prospectively assigned to the ACO, rather than to 
all Medicare FFS beneficiaries.
    Finally, we are also proposing technical changes to the title and 
structure of Sec.  425.312. For example, we are proposing to replace 
the title of Sec.  425.312 with ``Beneficiary notifications.''
b. Beneficiary Opt-In Based Assignment Methodology
    In the November 2011 final rule establishing the Shared Savings 
Program (76 FR 67865), we discussed comments that we had received in 
response to our proposed assignment methodology suggesting alternative 
beneficiary assignment methodologies in order to promote beneficiary 
free choice. For example, some commenters suggested that a beneficiary 
should be assigned to an ACO only if the beneficiary ``opted-in'' or 
enrolled in the ACO. We did not adopt an opt-in or enrollment 
requirement for several reasons, including our belief that such a 
prospective opt-in approach that allows beneficiaries to voluntarily 
elect to be assigned to an ACO would completely sever the connection 
between assignment and actual utilization of primary care services. A 
patient could choose to be assigned to an ACO from which he or she had 
received very few or no primary care services at all. However, more 
recently, some stakeholders have suggested that we reconsider whether 
it might be feasible to incorporate a beneficiary ``opt-in'' 
methodology under the Shared Savings Program. These stakeholders 
believe that under the current beneficiary assignment methodology, it 
can be difficult for an ACO to effectively manage a beneficiary's care 
when there is little or no incentive or requirement for the beneficiary 
to cooperate with the patient management practices of the ACO, such as 
making recommended lifestyle changes or taking medications as 
prescribed. The stakeholders noted that in some cases, an assigned 
beneficiary may receive relatively few primary care services from ACO 
professionals in the ACO and the beneficiary may be unaware that he or 
she has been assigned to the ACO. These stakeholders suggested we 
consider an alternative assignment methodology under which a 
beneficiary would be assigned to an ACO if the beneficiary ``opted-in'' 
to the ACO in order to reduce the reliance on the existing assignment 
methodology under subpart E and as a way to make the assignment 
methodology more patient-centered, and strengthen the engagement of 
beneficiaries in their health care. These stakeholders believe that 
using such an approach to assignment could empower beneficiaries to 
become better engaged and empowered in their health care decisions.
    Although arguably beneficiaries ``opt-in'' to assignment to an ACO 
under the existing claims-based assignment methodology in the sense 
that claims-based assignment is based on each beneficiary's exercise of 
free choice in seeking primary care services from ACO providers/
suppliers, we believe that incorporating an opt-in based assignment 
methodology, and de-emphasizing the claims-based assignment 
methodology, could have merit as a way to assign beneficiaries to ACOs. 
Therefore, we are exploring options for developing an opt-in based 
assignment methodology to further encourage and empower beneficiaries 
to become better engaged and empowered in their health care decisions. 
This approach to beneficiary assignment might also allow ACOs to better 
target their efforts to manage and coordinate care for those 
beneficiaries for whose care they will ultimately be held accountable. 
As discussed in section II.E.2, we have recently implemented a 
voluntary alignment process (which we are proposing to refine based on 
requirements in the Bipartisan Budget Act), which is an electronic 
process that allows beneficiaries to designate a primary clinician as 
responsible for coordinating their overall care. If a beneficiary 
designates an ACO professional as responsible for their overall care 
and the requirements for assignment under Sec.  425.402(e) are met, the 
beneficiary will be prospectively assigned to that ACO. For 2018, the 
first year in which beneficiaries could be assigned to an ACO based on 
their designation of a primary clinician in the ACO as responsible for 
coordinating their care, 4,314 beneficiaries voluntarily aligned to 339 
ACOs, and 338 beneficiaries were assigned to an ACO based solely on 
their voluntary alignment. Ninety-two percent of the beneficiaries who 
voluntarily aligned were already assigned to the same ACO under the 
claims-based assignment algorithm.
    Voluntary alignment is based upon the relationship between the 
beneficiary and a single practitioner in the ACO. In contrast, an opt-
in based assignment methodology would be based on an affirmative 
recognition of the relationship between the beneficiary and the ACO, 
itself. Under an opt-in based assignment methodology, a beneficiary 
would be assigned to an ACO if the beneficiary opted into assignment to 
the ACO. Therefore, under an opt-in approach, ACOs might have a 
stronger economic incentive to compete against other ACOs and 
healthcare providers not participating in an ACO because to the extent 
the ACO is able to increase quality and reduce expenditures for 
duplicative and other unnecessary care, it could attract a greater 
number of beneficiaries to opt-in to assignment the ACO. We believe 
there are a number of policy and operational issues, including the 
issues previously identified in the November 2011 final rule that would 
need to be addressed in order to implement an opt-in based methodology 
to assign beneficiaries to ACOs. These issues

[[Page 41877]]

include the process under which beneficiaries could opt-in to 
assignment to an ACO, ACO marketing guidelines, beneficiary 
communications, system infrastructure to communicate beneficiary opt-
ins, and how to implement an opt-in based assignment methodology that 
responds to stakeholder requests while conforming with existing 
statutory and program requirements under the Shared Savings Program. 
These issues are addressed in the following discussion.
    We believe under an opt-in based assignment methodology, it would 
be important for ACOs to manage notifying beneficiaries, collecting 
beneficiary opt-in data, and reporting the opt-in data to CMS. On an 
annual basis, ACOs would notify their beneficiary population about 
their participation in the Shared Savings Program and provide the 
beneficiaries a window during which time they could notify the ACO of 
their decision to opt-in and be assigned to the ACO, or to withdraw 
their opt-in to the ACO. Opting-in to a Shared Savings Program ACO 
could be similar to enrolling in a MA plan. MA election periods define 
when an individual may enroll or disenroll from a MA plan. An 
individual (or his/her legal representative) must complete an 
enrollment request (using an enrollment form approved by CMS, an online 
application mechanism, or through a telephone enrollment) to enroll in 
a MA plan and submit the request to the MA plan during a valid 
enrollment period. MA plans are required by 42 CFR 422.60 to submit a 
beneficiary's enrollment information to CMS within the timeframes 
specified by CMS, using a standard IT transaction system. Subsequently, 
CMS validates the beneficiary's eligibility, at which point the MA plan 
must meet the remainder of its enrollment-related processing 
requirements (for example, sending a notice to the beneficiary of the 
acceptance or rejection of the enrollment within the timeframes 
specified by CMS). Procedures have been established for disenrolling 
from a MA plan during MA election periods. (For additional details 
about the enrollment process under MA, see the CMS website at https://www.cms.gov/Medicare/Eligibility-and-Enrollment/MedicareMangCareEligEnrol/index.html, and the Medicare Managed Care 
Manual, chapter 2, section 40 at https://www.cms.gov/Medicare/Eligibility-and-Enrollment/MedicareMangCareEligEnrol/Downloads/CY_2018_MA_Enrollment_and_Disenrollment_Guidance_6-15-17.pdf).
    Because opting-in or withdrawing an opt-in to assignment to a 
Shared Savings Program ACO could be similar to enrolling or 
disenrolling in a MA plan, we would need to establish the ACO opt-in 
process and timing in a way to avoid beneficiary confusion as to the 
differences between the Shared Savings Program and MA, and whether the 
beneficiary is opting-in to assignment to an ACO or enrolling in a MA 
plan. We would also need to determine how frequently beneficiaries 
would be able to opt-in or withdraw an opt-in to an ACO, and whether 
there should be limits on the ability to change an opt-in after the end 
of the opt-in window, in order to reduce possible beneficiary 
assignment ``churn''. We note that beneficiaries opting-in to 
assignment to an ACO would still retain the freedom to choose to 
receive care from any Medicare-enrolled provider or supplier, including 
providers and suppliers outside the ACO. The ACO would be responsible 
for providing the list of beneficiaries who have opted-in to assignment 
to the ACO, along with each beneficiary's Medicare number, address, and 
certain other demographic information, to CMS in a form and manner 
specified by CMS. After we receive this information from the ACO, we 
would verify that each of the listed beneficiaries meets the 
beneficiary eligibility criteria set forth in Sec.  425.401(a) before 
finalizing the ACO's assigned beneficiary population for the applicable 
performance year. To perform these important opt-in related functions, 
ACOs might need to acquire new information technology systems, along 
with additional support staff, to track, monitor and transmit opt-in 
data to CMS, including effective dates for beneficiaries who opt-in or 
withdraw an opt-in to the ACO. Furthermore, changes in an ACO's 
composition of ACO participants and ACO providers/suppliers could 
affect a beneficiary's interest in maintaining his or her alignment 
with the ACO through an opt-in approach. As a result, we believe it 
would also be critical for an ACO participating under opt-in based 
assignment to inform beneficiaries of their option to withdraw their 
opt-in to the ACO, generally, and specifically, in the event that an 
ACO participant or ACO provider/supplier, from which the beneficiary 
has received primary care services is no longer participating in the 
ACO.
    MA has marketing guidelines and requirements that apply to 
enrollment activities to prevent selective marketing or discrimination 
based on health status. (See 42 CFR 422.2260 through 422.2276 and 
section 30.4 of the Medicare Marketing Guidelines located at https://www.cms.gov/Medicare/Health-Plans/ManagedCareMarketing/FinalPartCMarketingGuidelines.html.) If we were to adopt an opt-in 
process for the Shared Savings Program, we would impose similar 
requirements to ensure ACOs are providing complete and accurate 
information to beneficiaries to inform their decision-making regarding 
opting-in to assignment to an ACO, and not selectively marketing or 
discriminating based on health status or otherwise improperly 
influencing beneficiary choice. Additionally, ACOs would be required to 
establish a method for tracking the beneficiaries they have notified 
regarding the opportunity to opt-in to assignment to the ACO, and the 
responses they received. Under Sec.  425.314, ACOs agree and must 
require their ACO participants, ACO providers/suppliers, and other 
individuals or entities performing functions or services related to ACO 
activities to agree that CMS has the right to audit, inspect, 
investigate, and evaluate records and other evidence that pertain to 
the ACO's compliance with the requirements of the Shared Savings 
Program. We believe this provision would authorize CMS to conduct 
oversight regarding ACOs' records documenting the beneficiaries who 
received such a notification and the beneficiary responses.
    We are also considering how we would implement an opt-in based 
assignment methodology that addresses stakeholder requests, while 
conforming to existing program requirements. First, the requirement at 
section 1899(b)(2)(D) of the Act, that an ACO have at least 5,000 
assigned beneficiaries, would continue to apply. Thus, under an opt-in 
based assignment methodology, an ACO still would be required to have at 
least 5,000 FFS beneficiaries, who meet our beneficiary eligibility 
criteria, assigned to the ACO at the time of application and for the 
entirety of the ACO's agreement period. We are concerned that using an 
opt-in based assignment methodology as the sole basis for assigning 
beneficiaries to an ACO could make it difficult for many ACOs to meet 
the 5,000 assigned beneficiary requirement under section 1899(b)(2)(D) 
of the Act. In particular, we are considering how an opt-in based 
assignment methodology would be implemented for new ACOs that have 
applied to the Shared Savings Program, but have not yet been approved 
by CMS to participate in the program. We believe it could be difficult 
for a new ACO to achieve 5,000 beneficiary opt-ins prior to the start 
of its first performance year under the program, as required by the 
statute in order to be

[[Page 41878]]

eligible for the program. It could also be difficult for certain 
established ACOs, such as ACOs located in rural areas, to achieve and 
maintain 5,000 beneficiary opt-ins. Smaller assigned beneficiary 
populations would also significantly increase the minimum savings rate 
and minimum loss rate (MSR and MLR) thresholds used to determine 
eligibility for shared savings and accountability for shared losses 
when these rates are based on the size of the ACO's assigned population 
as described in section II.6.b of this proposed rule. Smaller assigned 
beneficiary populations would also be a potential concern if ACOs and 
their ACO participants were to target care management to a small subset 
of patients at the expense of a more comprehensive transformation of 
care delivery with benefits that would have otherwise extended to a 
wider mix of patients regardless of whether they are assigned to the 
ACO.
    Second, under an opt-in assignment approach, we could allow 
beneficiaries to opt-in before they have received a primary care 
service from a physician in the ACO, or any service from an ACO 
provider/supplier. This is similar to the situation that can sometimes 
occur under MA, where a beneficiary enrolls in a MA plan without having 
received services from any of the plan's providers. That means a 
beneficiary could be assigned to an ACO based on his or her opting-in 
to the ACO, and the ACO would be accountable for the total cost and 
quality of care provided to the opted-in beneficiary, including care 
from providers/suppliers that are not participating in the ACO. We note 
that section 1899(c) of the Act requires that beneficiaries be assigned 
to an ACO based on their use of primary care services furnished by 
physicians in the ACO, or beginning January 1, 2019, services provided 
in FQHCs/RHCs. In order to meet this requirement under an opt-in based 
assignment methodology, we are considering whether we would need to 
continue to require that a beneficiary receive at least one primary 
care service from an ACO professional in the ACO who is a primary care 
physician or a physician with a specialty used in assignment (similar 
to our current requirement under Sec.  425.402(b)(1)), in order for the 
beneficiary to be eligible to opt-in to assignment to the ACO.
    Third, we are considering whether any changes would need to be made 
to our methodology for establishing an ACO's historical benchmark if we 
were to implement an opt-in based assignment methodology. Under the 
current assignment methodology used in the Shared Savings Program, we 
assign beneficiaries to ACOs for a performance year based upon either 
voluntary alignment or the claims-based assignment methodology. Because 
the vast majority of beneficiaries are assigned using the claims-based 
assignment methodology, we are able to use the same claims-based 
assignment methodology to assign beneficiaries for purposes of either a 
performance year or a benchmark year. The expenditures of the 
beneficiaries assigned to the ACO for a benchmark year are then used in 
the determination of the benchmark. However, the same approach would 
not be possible under an assignment methodology based solely on a 
beneficiary opt-in approach. If we were to adopt an entirely opt-in 
based assignment methodology, we would need to consider if any changes 
would need to be made to our methodology for establishing an ACO's 
historical benchmark to address selection bias and/or variation in 
expenditures because beneficiaries would not have opted-in to 
assignment to the ACO during the 3 prior years included in the 
historical benchmark under Sec.  425.602, Sec.  425.603, or proposed 
new Sec.  425.601. Thus, under an entirely opt-in based assignment 
methodology there could be a large disconnect between the beneficiaries 
who have opted-in to assignment to the ACO for a performance year and 
the beneficiaries who are assigned to the ACO on the basis of claims 
for the historical benchmark years. An adjustment to the benchmark 
would be necessary to address these discrepancies. Alternatively, if we 
were to adopt a methodology under which we use expenditures from the 3 
historical benchmark years only for beneficiaries who have opted-in to 
assignment to the ACO in the applicable performance year, it could 
create an imbalance because the expenditures for the years that 
comprise the historical benchmark would not include expenditures for 
decedents because beneficiaries necessarily would have survived through 
the baseline period in order to opt-in for the given performance year. 
A similar approach was initially applied in the Pioneer ACO Model, but 
it required complex adjustments to ACOs' benchmarks to account for 
significantly lower spending in historical base years for assigned 
beneficiaries, who necessarily survived for the one or more years 
between the given base year and the applicable performance year in 
which they were assigned to the ACO. It would likely be even more 
difficult and complex to consistently and accurately adjust the 
benchmark in the context of the proposed change to 5 year agreement 
periods (or a 6 year agreement period for agreement periods starting on 
July 1, 2019) because the historical benchmarks would eventually rely 
on an even smaller subset of base year claims available for 
beneficiaries who were enrolled in both Medicare Parts A and B during 
the base year and have survived long enough to cover the up to 7-year 
gap between the historical base year and the performance year for which 
they have opted-in to assignment to the ACO.
    In light of these issues, we are considering implementing an opt-in 
based assignment methodology that would address stakeholder requests 
that we incorporate such an approach to make the assignment methodology 
more patient-centered, while also addressing statutory requirements and 
other Shared Savings Program requirements. Specifically, we believe it 
may be feasible to incorporate an opt-in based assignment methodology 
into the Shared Savings Program in the following manner. We would 
allow, but not require, ACOs to elect an opt-in based assignment 
methodology. Under this approach, at the time of application to enter 
or renew participation in the Shared Savings Program, an ACO could 
elect an opt-in based assignment methodology that would apply for the 
length of the agreement period. Under this approach, we would use the 
assignment methodology under subpart E, including the proposed 
revisions to provisions at Sec. Sec.  425.400, 425.401, 425.402 and 
425.404 as discussed in sections II.E.2 and II.E.3 of this proposed 
rule (herein referred to as the ``existing assignment methodology'' 
which would be comprised of a claims-based assignment methodology and 
voluntary alignment), to determine whether an ACO applicant meets the 
initial requirement under section 1899(b)(2)(D) of the Act to be 
eligible to participate in the program. We would use this approach 
because the ACO applicant would not be able to actively seek Medicare 
beneficiary opt-ins until the next opt-in window. That is, we would 
continue to determine an ACO's eligibility to participate in the 
program under the requirement that an ACO have at least 5,000 assigned 
beneficiaries using the program's existing assignment methodology. 
Therefore, an ACO that elects to participate under opt-in based 
assignment could be eligible to enter an agreement period under the 
program if we determine that it has at least 5,000 assigned 
beneficiaries in each of the 3 years prior to the start of the ACO's

[[Page 41879]]

agreement period, based on the claims-based assignment methodology and 
voluntarily aligned beneficiaries.
    If an ACO chooses not to elect the opt-in based assignment 
methodology during the application or renewal process, then 
beneficiaries would continue to be assigned to the ACO based on the 
existing assignment methodology (claims-based assignment with voluntary 
alignment). As an alternative to allowing ACOs to voluntarily elect 
participation in an opt-in based assignment methodology we are also 
considering discontinuing the existing assignment methodology and 
applying an opt-in based assignment methodology program-wide (described 
herein as a hybrid assignment approach which includes beneficiary opt-
in, modified claims-based assignment, and voluntary alignment). As 
described in this section, ACOs could face operational challenges in 
implementing opt-in based assignment, and this approach to assignment 
could affect the size and composition of the ACO's assigned population, 
specifically to narrow the populations served by ACO. In light of these 
factors, we believe it would be important to gain experience with opt-
in based assignment as a voluntary participation option before 
modifying the program to allow only this participation option.
    For ACOs electing to participate under an opt-in based assignment 
methodology, we would assign beneficiaries to the ACO using a hybrid 
approach that would be based on beneficiary opt-ins, supplemented by 
voluntary alignment and a modified claims-based methodology. 
Notwithstanding the assignment methodology under Sec.  425.402(b), 
under this hybrid approach, a beneficiary would be prospectively 
assigned to an ACO that has elected the opt-in based assignment 
methodology if the beneficiary opted in to assignment to the ACO or 
voluntarily aligned with the ACO by designating an ACO professional as 
responsible for their overall care. If a beneficiary was not 
prospectively assigned to such an ACO based on either beneficiary opt-
in or voluntary alignment, then the beneficiary would be assigned to 
such ACO only if the beneficiary received the plurality of his or her 
primary care services from the ACO and received at least seven primary 
care services from one or more ACO professionals in the ACO during the 
applicable assignment window. If a beneficiary did not receive at least 
seven primary care services from one or more ACO professionals in the 
ACO during the applicable assignment window, then the beneficiary would 
not be assigned to the ACO on the basis of claims even if the 
beneficiary received the plurality of their primary care services from 
the ACO. We note that this threshold of seven primary care services is 
consistent with the threshold established by an integrated healthcare 
system in a prior demonstration that targeted intervention on chronic 
care, high risk patients in need of better coordinated care due to 
their frequent utilization of health care services. A threshold for 
assignment of seven primary care services would mean that up to 25 
percent of an ACO's beneficiaries who would have been assigned to the 
ACO under the existing assignment methodology under Sec.  425.402(b) 
could continue to be assigned to the ACO based on claims. We believe it 
could be appropriate to establish such a minimum threshold of seven 
primary care services for assigning beneficiaries to ACOs electing an 
opt-in based assignment methodology because it would enable such ACOs 
to focus their care coordination activities on beneficiaries who have 
either opted-in to assignment to the ACO or voluntarily aligned with 
the ACO, or who are receiving a high number of primary care services 
from ACO professionals and may have complex conditions requiring care 
coordination. We seek comment on whether to use a higher or lower 
minimum threshold for determining beneficiaries assigned to the ACO 
under a modified claims-based assignment approach.
    Under this hybrid approach to assignment, we would allow the ACO a 
choice of claims-based beneficiary assignment methodology as proposed 
in section II.A.4.c. of this proposed rule. Therefore, ACOs that elect 
to participate under opt-in based assignment for their agreement period 
would also have the opportunity to elect either prospective or 
preliminary prospective claims-based assignment prior to the start of 
their agreement period, and to elect to change this choice of 
assignment methodology annually.
    More generally, we believe that the hybrid assignment methodology, 
which would incorporate claims-based and opt-in based assignment 
methods, as well as voluntary alignment, could be preferable to an opt-
in only approach. A hybrid assignment methodology would increase the 
number of beneficiaries for whom the ACO would be accountable for 
quality and cost of care delivery and thereby provide stronger 
statistical confidence for shared savings or shared losses calculations 
and provide a stronger incentive for ACOs and their ACO participants 
and ACO providers/suppliers to improve care delivery for every FFS 
beneficiary rather than focusing only on beneficiaries who happen to 
have opted-in to assignment to the ACO.
    For ACOs that enter an agreement period in the Shared Savings 
Program under an opt-in based assignment methodology, we would allow 
for a special election period during the first calendar year quarter of 
the ACO's first performance year for beneficiaries to opt-in to 
assignment to the ACO. For each subsequent performance year of an ACO's 
agreement period, the opt-in period would span the first three calendar 
year quarters (January through September) of the prior performance 
year. Beneficiaries that opt-in, and are determined eligible for 
assignment to the ACO, would be prospectively assigned to the ACO for 
the following performance year. Under this approach, there would be no 
floor or minimum number of opt-in beneficiaries required. Rather, we 
would consider whether, in total, the ACO's assigned beneficiary 
population (comprised of beneficiaries who opt-in, beneficiaries 
assigned under the modified claims-based assignment approach, and 
beneficiaries that have voluntarily aligned) meets the minimum 
population size of 5,000 assigned beneficiaries each performance year 
to comply with the requirements for continued participation in the 
program. To illustrate this hybrid assignment approach in determining 
performance year assignment: if an ACO has 2,500 beneficiaries assigned 
under the modified claims-based assignment approach who have not 
otherwise opted-in to assignment to the ACO, and 50 voluntarily aligned 
beneficiaries who have not otherwise opted-in to assignment to the ACO, 
then the ACO would be required to have at least 2,450 beneficiaries who 
have opted-in to assignment to remain in compliance with the program 
eligibility requirement to have at least 5,000 assigned beneficiaries.
    Consistent with current program policy, ACOs electing the opt-in 
based assignment methodology with a performance year assigned 
population below the 5,000-minimum may be subject to the pre-
termination actions in Sec.  425.216 and termination of their 
participation agreement under Sec.  425.218. Under the proposals for 
modifying the MSR/MLR to address small population sizes described in 
section II.A.6.3. of this proposed rule, if an ACO that elects an opt-
in based assignment methodology has an assigned population below 5,000 
beneficiaries, the ACO's MSR/MLR would be set at a level consistent 
with

[[Page 41880]]

the number of assigned beneficiaries to provide assurance that shared 
savings and shared losses represent meaningful changes in expenditures 
rather than normal variation.
    As an alternative approach, we also considered requiring ACOs that 
have elected an opt-in based assignment methodology to maintain at 
least a minimum number of opt-in beneficiaries assigned in each 
performance year of its agreement period. We believe that any minimum 
population requirement should be proportional to the size of ACO's 
population, to recognize differences in the population sizes of ACOs 
across the program. We also considered whether we should require 
incremental increases in the size of the ACO's opt-in assigned 
population over the course of the ACO's agreement period, recognizing 
that it may take time for ACOs to implement the opt-in approach and for 
beneficiaries to opt-in. Another factor we considered is the 
possibility that the size of an ACO's population, and therefore the 
proportion of opt-in beneficiaries, could be affected by ACO 
participant list changes, and changes in the ACO providers/suppliers 
billing through ACO participant TINs, which could affect claims-based 
assignment, and the size of the ACO's voluntarily aligned population. 
Changes in the size of the ACO's claims-based assigned and voluntarily 
aligned populations could cause the ACO to fall out of compliance with 
a required proportion of opt-in assigned beneficiaries, even if there 
has been no reduction in the number of opt-in assigned beneficiaries.
    Under opt-in based assignment, we anticipate that we would not 
establish restrictions on the geographic locations of the ACOs from 
which a beneficiary could select. This would be consistent with the 
program's voluntary alignment process, under which a beneficiary could 
chose to designate a primary clinician as being responsible for his or 
her care even if this clinician is geographically distant from the 
beneficiary's place of residence. Also, currently under the program's 
existing claims-based assignment methodology, beneficiaries who receive 
care in different parts of the country during the assignment window can 
be assigned to an ACO that is geographically distant from the 
beneficiary's place of residence. This approach also recognizes that a 
beneficiary could be assigned to a geographically distant ACO as a 
result of his or her individual circumstances, such as a beneficiary's 
change in place of residence, beneficiary spends time in and receives 
care in different parts of the country during the year (sometimes 
referred to as being a ``snowbird''), or the beneficiary receives care 
from a tertiary care facility that is geographically distant from his 
or her home. Further, this approach is in line with the expanded 
telehealth policies discussed in section II.B of this proposed rule 
under which certain geographic and other restrictions would be removed. 
We welcome comment on whether to establish geographic limitations on 
opt-in based assignment such that a beneficiary's choice of ACOs for 
opt-in would be limited to ACOs located near the beneficiary's place of 
residence, or where the beneficiary receives his or her care, or a 
combination of both.
    When considering the options for incorporating an opt-in based 
assignment methodology, we considered if such a change in assignment 
methodology would also require changes to the proposed benchmarking 
methodology under Sec.  425.601. A hybrid assignment approach could 
potentially require modifications to the benchmarking methodology to 
account for factors such as: Differences in beneficiary 
characteristics, including health status, between beneficiaries who may 
be amenable to opting-in to assignment to an ACO, beneficiaries who 
voluntarily align, and beneficiaries assigned under a modified claims-
based assignment methodology who must have received at least seven 
primary care services from the ACO; differences between the existing 
claims-based assignment methodology and the alternative claims-based 
approach under which a minimum of seven primary care services would be 
required for assignment; and discrepancies caused by the use of the 
existing claims-based assignment methodology to perform assignment for 
historical benchmark years and the use of a hybrid assignment 
methodology for performance years. For simplicity, we prefer an 
approach that would use, to the greatest extent possible, the program's 
benchmarking methodology, as proposed to be modified as discussed in 
section II.D. of this proposed rule. This would allow us to more 
rapidly implement an opt-in based assignment approach, and may be 
easier to understand for ACOs and other program stakeholders 
experienced with the program's benchmarking methodology. We considered 
the following approach to establishing and adjusting the historical 
benchmark for ACOs that elect an opt-in based assignment methodology.
    In establishing the historical benchmark for ACOs electing an opt-
in based beneficiary assignment methodology, we would follow the 
benchmarking approach described in the provisions of the proposed new 
regulation at Sec.  425.601. In particular, we would continue to 
determine benchmark year assignment based on the population of 
beneficiaries that would have been assigned to the ACO under the 
program's existing assignment methodology in each of the 3 most recent 
years prior to the start of the ACO's agreement period. However, we 
would take a different approach to annually risk adjusting the 
historical benchmark expenditures than what is proposed in section II.D 
and in the proposed provisions at Sec. Sec.  425.605(a)(1) and 
425.610(a)(2).
    In risk adjusting the historical benchmark for each performance 
year, we would maintain the current approach of categorizing 
beneficiaries by Medicare enrollment type; however, we would further 
stratify the benchmark year 3 and performance year assigned populations 
into groups that we anticipate would have comparable expenditures and 
risk score trends. That is, we would further stratify the performance 
year population into two categories: (1) Beneficiaries who are assigned 
using the modified claims-based assignment methodology and must have 
received seven or more primary care services from ACO professionals and 
who have not also opted-in to assignment to the ACO; and (2) 
beneficiaries who opt-in and beneficiaries who voluntarily align. A 
beneficiary who has opted-in to assignment to the ACO would continue to 
be stratified in the opted in population throughout the agreement 
period regardless of whether the beneficiary would have been assigned 
using the modified claims-based assignment methodology because the 
beneficiary received seven or more primary care services from the ACO.
    We would also further stratify the BY3 population, determined using 
the existing assignment methodology, into two categories: (1) 
Beneficiaries who received seven or more primary care services from the 
ACO; and (2) beneficiaries who received six or fewer primary care 
services from the ACO.
    We anticipate that beneficiaries who opt-in would likely be a 
subset of beneficiaries who would have been assigned under the existing 
claims-based assignment methodology. As previously described, 92 
percent of voluntarily aligned beneficiaries were already assigned to 
the same ACO using the existing claims-based assignment methodology. 
Further, based on our experience with the program about 75 percent of 
ACOs' assigned beneficiaries receive six or fewer primary care service

[[Page 41881]]

visits annually. Similar to the trend we observed with voluntarily 
aligned beneficiaries, we believe the opt-in beneficiaries would tend 
to resemble in health status and acuity a subset of the ACO's typical 
claims-based assigned population; that is, we anticipate opt-in 
beneficiaries, as with voluntarily aligned beneficiaries, would 
resemble the population of beneficiaries assigned in the benchmark year 
that received six or fewer primary care services.
    We would determine ratios of risk scores for the comparable 
populations of performance year and BY3 assigned beneficiaries. We 
would calculate these risk ratios by comparing the risk scores for the 
BY3 population with seven or more primary care services with the risk 
scores for the performance year population with seven or more primary 
care services who have not otherwise opted-in or voluntarily aligned. 
We would also calculate risk ratios for the remaining beneficiary 
population by comparing risk scores for the BY3 population with six or 
fewer primary care services with the risk scores for the performance 
year population of opt-in and voluntarily aligned beneficiaries. We 
would use these ratios to risk adjust the historical benchmark 
expenditures not only by Medicare enrollment type, but also by these 
stratifications. That is, for each Medicare enrollment type, we would 
apply risk ratios comparing the risk scores of the BY3 population with 
seven or more primary care services and the risk scores of the 
performance year population with seven or more primary care services to 
adjust the historical benchmark expenditures for the population with 
seven or more primary care services in the benchmark period. Similarly, 
we would apply risk ratios comparing the risk scores of the BY3 
population with six or fewer primary care services and the risk scores 
of the performance year opt-in or voluntarily aligned population to 
adjust the historical benchmark expenditures for the population with 
six or fewer primary care services in the benchmark period. We presume 
this is a reasonable approach based on our expectation that opt-in 
beneficiaries will resemble the population of beneficiaries, assigned 
under the existing claims-based assignment methodology, who have 6 or 
fewer primary care services with the ACO annually. This is supported by 
the assumptions that ACOs may selectively market opt-in to lower cost 
beneficiaries, and beneficiaries that require less intensive and 
frequent care may be more inclined to opt-in. However, since we lack 
experience with an opt-in based assignment approach, we would monitor 
the effects of this policy to determine if it is effective in 
addressing the differences in characteristics between the population 
assigned for establishing the ACO's benchmark under the existing 
assignment methodology and the population assigned for the performance 
year under the hybrid assignment approach, and if further adjustments 
may be warranted such as additional adjustments to the historical 
benchmark to account for such differences.
    In rebasing the ACO's benchmark, which occurs at the start of each 
new agreement period, we would include in the benchmark year assigned 
population beneficiaries who were opted in to the ACO in a prior 
performance year that equates to a benchmark year for the ACO's new 
agreement period. For example if an ACO elected opt-in for a 5-year 
agreement period beginning January 1, 2020 and concluding December 31, 
2024, and a beneficiary opted in and was assigned for 2023 and remained 
opted in and assigned for 2024, we would include this beneficiary in 
the benchmark year assigned population for BY2 (2023) and BY3 (2024) 
when we rebase the ACO for its next agreement period beginning January 
1, 2025. We considered that the health status of an opt-in beneficiary 
may continue to change over time as the beneficiary ages, which would 
be accounted for in our use of full CMS-HCC risk scores in risk 
adjusting the rebased historical benchmark. We considered approaches to 
further adapt the rebasing methodology to account for the 
characteristics of the ACO's opt-in beneficiaries, and the ACO's 
experience with participating in an opt-in based assignment 
methodology.
    We considered an approach under which we could determine the 
assigned population for the ACO's rebased benchmark using the program's 
existing assignment methodology and incorporate opt-in assigned 
beneficiaries in the benchmark population. In risk adjusting the ACO's 
rebased benchmark each performance year, we could use a stratification 
approach similar to the approach previously described in this 
discussion. That is we would stratify the BY3 population into two 
categories: (1) Beneficiaries who received seven or more primary care 
services from the ACO; and (2) beneficiaries who received six or fewer 
primary care services from the ACO. We would categorize opt-in 
beneficiaries, assigned in BY3, into either one of these categories 
based on the number of primary care services they received from ACO 
during BY3. We could continue to stratify the performance year 
population assigned under the hybrid assignment methodology into two 
categories: (1) Beneficiaries who are assigned using the modified 
claims-based assignment methodology and must have received seven or 
more primary care services from ACO professionals and who have not also 
opted-in to assignment to the ACO; and (2) beneficiaries who opt-in and 
beneficiaries who voluntarily align. We would apply risk ratios 
comparing the risk scores of the BY3 population with seven or more 
primary care services and the risk scores of the performance year 
population with seven or more primary care services to adjust the 
historical benchmark expenditures for the population with seven or more 
primary care services in the benchmark period. Similarly, we would 
apply risk ratios comparing the risk scores of the BY3 population with 
six or fewer primary care services and the risk scores of the 
performance year opt-in or voluntarily aligned population to adjust the 
historical benchmark expenditures for the population with six or fewer 
primary care services in the benchmark period.
    An alternative approach to rebasing the benchmark for an ACO that 
elected opt-in assignment in their most recent prior agreement period 
and continues their participation in an opt-in based assignment 
methodology in their new agreement period, would be to use the hybrid 
assignment approach to determine benchmark year assignment. To risk 
adjust the benchmark each performance year we could then stratify the 
BY3 and the performance year assigned populations into two categories: 
(1) Beneficiaries assigned through the modified claims-based assignment 
methodology who received seven or more primary care services from the 
ACO; or (2) beneficiaries who opt-in and beneficiaries who voluntarily 
align. This approach would move ACOs to participation under a purely 
hybrid assignment approach since we would no longer use the existing 
assignment methodology in establishing the benchmark. However, this 
approach could result in smaller benchmark year assigned populations 
compared to populations determined based on the more inclusive, 
existing assignment methodology. In turn, this approach could result in 
ACOs that were successful at opting-in beneficiaries being ineligible 
to continue their participation in the program under an opt-in 
assignment methodology because they do not meet the program's 
eligibility requirement to have at least 5,000 beneficiaries assigned 
in each benchmark year.

[[Page 41882]]

    In section II.D. of this proposed rule, we propose that annual 
adjustments in prospective CMS-HCC risk scores would be subject to a 
symmetrical cap of positive or negative 3 percent that would apply for 
the agreement period, such that the adjustment between BY3 and any 
performance year in the agreement period would never be more than 3 
percent in either direction. We are considering whether a modified 
approach to applying these caps would be necessary for ACOs that elect 
opt-in based assignment methodology. For example, for the first 
performance year an opted-in beneficiary is assigned to an ACO, we 
could allow for full upward or downward CMS-HCC risk adjustment, 
thereby excluding these beneficiaries from the symmetrical risk score 
caps. This would allow us to account for newly opted-in beneficiaries' 
full CMS-HCC scores in risk adjusting the benchmark. In each subsequent 
performance year, the opted-in beneficiaries remain aligned to the ACO, 
we could use an asymmetrical approach to capping increases and 
decreases in risk scores. We would cap increases in the opt-in 
beneficiaries' CMS-HCC risk scores to guard against changes in coding 
intensity, but we would apply no cap to decreases in their CMS-HCC risk 
scores. That is, the risk scores for these opt-in beneficiaries would 
be subject to the positive 3 percent cap, but not the negative 3 
percent cap. We believe this approach would safeguard against ACOs 
trying to enroll healthy beneficiaries, who would likely be less 
expensive than their benchmark population, in order to benefit from 
having a limit on downward risk adjustment. Beneficiaries who have not 
otherwise opted-in who are assigned to the ACO based on the modified 
claims-based assignment methodology and those that voluntarily align 
would be subject to the proposed symmetrical 3 percent cap. We note 
that we do not apply caps to risk scores when we rebase an ACO's 
historical benchmark, which allows the historical benchmark to reflect 
the current health status of the beneficiary populations assigned for 
the benchmark years.
    As indicated in the alternatives considered section of the 
Regulatory Impact Analysis (see section IV.D of this proposed rule), 
there is limited information presently available to model the 
behavioral response to an opt-in based assignment methodology, for 
example in terms of ACOs' willingness to elect such an approach and 
beneficiaries' willingness to opt-in. Although for some policies we can 
draw upon our initial experience with implementing voluntary alignment. 
We believe the approach to adjusting benchmarks to address an opt-in 
based assignment methodology, as discussed in this proposed rule, could 
address our concerns about the comparability of benchmark and 
performance year populations. If such a policy were finalized we would 
monitor the impact of these adjustments on ACOs' benchmarks, and we 
would also monitor to determine ACOs' and beneficiaries' response to 
the opt-in based assignment participation option, characteristics of 
opt-in beneficiaries and the ACOs they are assigned to, and the cost 
and quality trends of opt-in beneficiaries to determine if further 
development to the program's financial methodology would be necessary 
to account for this approach.
    If we were to establish an opt-in based assignment methodology, we 
anticipate that we would also need to establish program integrity 
requirements similar to the program integrity requirements with respect 
to voluntary alignment at Sec.  425.402(e)(3). The ACO, ACO 
participants, ACO providers/suppliers, ACO professionals, and other 
individuals or entities performing functions and services related to 
ACO activities would be prohibited from providing or offering gifts or 
other remuneration to Medicare beneficiaries as inducements to 
influence their decision to opt-in to assignment to the ACO. The ACO, 
ACO participants, ACO providers/suppliers, ACO professionals, and other 
individuals or entities performing functions and services related to 
ACO activities would also be prohibited from directly or indirectly, 
committing any act or omission, or adopting any policy that coerces or 
otherwise influences a Medicare beneficiary's decision to opt-in to 
assignment to an ACO. Offering anything of value to a Medicare 
beneficiary as an inducement to influence the Medicare beneficiary's 
decision to opt-in (or not opt-in) to assignment to the ACO would not 
be considered to have a reasonable connection to the medical care of 
the beneficiary, as required under the proposed provision at Sec.  
425.304(b)(1).
    Finally, we would emphasize that, as is the case for all FFS 
beneficiaries currently assigned to an ACO on the basis of claims or 
voluntary alignment, under an opt-in based assignment methodology, 
beneficiaries who opt-in to assignment to an ACO would retain their 
right to seek care from any Medicare-enrolled provider or supplier of 
their choosing, including providers and suppliers outside the ACO.
    We are soliciting comment on whether we should offer ACOs an 
opportunity to voluntarily choose an alternative beneficiary assignment 
methodology under which an ACO could elect to have beneficiaries 
assigned to the ACO based on a beneficiary opt-in methodology 
supplemented by voluntary alignment and a modified claims-based 
assignment methodology. We welcome comments as to whether it would be 
appropriate to establish a minimum threshold number of primary care 
services, such as seven primary care services, for purposes of using 
claims to assign beneficiaries to ACOs electing an opt-in based 
assignment methodology to enable these ACOs to focus their care 
coordination efforts on those beneficiaries who have either opted-in to 
assignment to or voluntarily aligned with the ACO, or who are receiving 
a high number of primary care services from ACO professionals, and may 
have complex conditions requiring a significant amount of care 
coordination. We seek comment on whether this minimum threshold for use 
in determining modified claims-based assignment should be set at a 
higher or lower. We also welcome comments on an appropriate methodology 
for establishing and adjusting an ACO's historical benchmark under an 
opt-in based assignment methodology. Further, we seek comment on how to 
treat opt-in beneficiaries when rebasing the historical benchmark for 
renewing ACOs. Additionally, we welcome comments on any other 
considerations that might be relevant to adopting a methodology under 
which beneficiaries may opt-in to assignment to an ACO, including ways 
to minimize burden on beneficiaries, ACOs, ACO participants, and ACO 
providers/suppliers and avoid beneficiary confusion.
    We have envisioned that if we were to incorporate such an opt-in 
based assignment methodology, the election by ACOs would be entirely 
voluntary. ACOs that did not elect this beneficiary assignment option 
would continue to have their beneficiaries assigned using the existing 
claims-based assignment methodology with voluntary alignment under 
Sec.  425.402. However, we also seek comment on whether we should 
discontinue the existing assignment methodology under subpart E and 
instead assign beneficiaries to all ACOs using a hybrid assignment 
methodology, which would incorporate opt-in based assignment and the 
modified claims-based assignment methodology, as well as voluntary 
alignment. Under such an approach, the use of a modified

[[Page 41883]]

benchmarking methodology could help to ensure that an appropriate 
weight would be placed on the risk-adjusted expenditures of the ACO's 
opt-in population as this population increases in size.

D. Benchmarking Methodology Refinements

1. Background
    An ACO's historical benchmark is calculated based on expenditures 
for beneficiaries that would have been assigned to the ACO in each of 
the 3 calendar years prior to the start of the agreement period 
(Sec. Sec.  425.602(a), 425.603(b) and (c)). For ACOs that have 
continued their participation for a second or subsequent agreement 
period, the benchmark years for their current agreement period are the 
3 calendar years of their previous agreement period.
    There are currently differences between the methodology used to 
establish the ACO's first agreement period historical benchmark (Sec.  
425.602) and the methodology for establishing the ACO's rebased 
historical benchmark in its second or subsequent agreement period 
(Sec.  425.603). We refer readers to discussions of the benchmark 
calculations in earlier rulemaking for details on the development of 
the current policies (see November 2011 final rule, 76 FR 67909 through 
67927; June 2015 final rule, 80 FR 32785 through 32796; June 2016 final 
rule, 81 FR 37953 through 37991). For example, in resetting (or 
rebasing) an ACO's historical benchmark, we replace the national trend 
factor (used in in the first agreement period methodology) with 
regional trend factors, and we use a phased approach to adjust the 
rebased benchmark to reflect a percentage of the difference between the 
ACO's historical expenditures and FFS expenditures in the ACO's 
regional service area. This rebasing methodology incorporating factors 
based on regional FFS expenditures was finalized in the June 2016 final 
rule and is used to establish the benchmark for ACOs beginning a second 
or subsequent agreement period in 2017 and later years. An interim 
approach was established in the June 2015 final rule under which we 
adjusted the rebased benchmarks for ACOs that entered a second 
agreement period beginning in 2016 to account for savings generated in 
their first agreement period (Sec.  425.603(b)(2)).
    In developing the June 2016 final rule, we considered the weight 
that should be applied in calculating the regional adjustment to an 
ACO's historical expenditures. We finalized a phased approach to 
transition to a higher weight in calculating the regional adjustment, 
where we determine the weight used in the calculation depending on 
whether the ACO is found to have lower or higher spending compared to 
its regional service area (Sec.  425.603(c)(9)). For ACOs that have 
higher spending compared to their regional service area, the weight 
placed on the regional adjustment is reduced to 25 percent (compared to 
35 percent) in the first agreement period in which the regional 
adjustment is applied, and 50 percent (compared to 70 percent) in the 
second agreement period in which the adjustment is applied. Ultimately 
a weight of 70 percent will be applied in calculating the regional 
adjustment for all ACOs beginning no later than the third agreement 
period in which the ACO's benchmark is rebased using this methodology, 
unless the Secretary determines that a lower weight should be applied.
    The annual update to the ACO's historical benchmark also differs 
for ACOs in their first versus second or subsequent agreement periods. 
In an ACO's first agreement period, the benchmark is updated each 
performance year based solely on the absolute amount of projected 
growth in national FFS spending for assignable beneficiaries (Sec.  
425.602(b)). Although section 1899(d)(1)(B)(ii) of the Act requires us 
to update the benchmark using the projected absolute amount of growth 
in national per capita expenditures for Medicare Parts A and B 
services, we used our authority under section 1899(i)(3) of the Act to 
adopt an alternate policy under which we calculate the national update 
based on assignable beneficiaries, a subset of the Medicare FFS 
population as defined under Sec.  425.20. For ACOs in a second or 
subsequent agreement period (beginning in 2017 and later years), we 
update the rebased benchmark annually to account for changes in FFS 
spending for assignable beneficiaries in the ACO's regional service 
area (Sec.  425.603(d)). We also used our authority under section 
1899(i)(3) of the Act to adopt this alternate update factor based on 
regional FFS expenditures.
    For all ACOs, at the time of reconciliation for each performance 
year, we further adjust the benchmark to account for changes in the 
health status and demographic factors of the ACO's performance year 
assigned beneficiary population (Sec. Sec.  425.602(a)(9), 
425.603(c)(10)). We use separate methodologies to risk-adjust the 
benchmark for populations of newly assigned and continuously assigned 
beneficiaries. For newly assigned beneficiaries, we use CMS-HCC 
prospective risk scores to adjust for changes in severity and case mix. 
We use demographic factors to adjust for changes in the health status 
of beneficiaries continuously assigned to the ACO. However, if the CMS-
HCC prospective risk scores for the ACO's continuously assigned 
population decline, CMS will adjust the benchmark to reflect changes in 
severity and case mix for this population using the lower CMS-HCC 
prospective risk score. CMS-HCC prospective risk scores are based on 
diagnoses from the prior calendar year, as well as demographic factors.
2. Risk Adjustment Methodology for Adjusting Historical Benchmark Each 
Performance Year
a. Background
    When establishing the historical benchmark, we use the CMS-HCC 
prospective risk adjustment model to calculate beneficiary risk scores 
to adjust for changes in the health status of the population assigned 
to the ACO. The effect of this policy is to apply full CMS-HCC risk 
adjustment to account for changes in case mix in the assigned 
beneficiary population between the first and third benchmark years and 
between the second and third benchmark years. For consistency, this 
approach is also used in adjusting the historical benchmark to account 
for changes to the ACO's certified ACO participant list for performance 
years within an agreement period and when resetting the ACO's 
historical benchmark for its second or subsequent agreement period. See 
Sec. Sec.  425.602(a)(3) and (8), 425.603(c)(3) and (8); see also 
Medicare Shared Savings Program, Shared Savings and Losses and 
Assignment Methodology Specifications (May 2018, version 6) available 
at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/program-guidance-and-specifications.html. Further, 
we use full CMS-HCC risk adjustment when risk adjusting county level 
FFS expenditures and to account for differences between the health 
status of the ACO's assigned population and the assignable beneficiary 
population in the ACO's regional service area as part of the 
methodology for adjusting the ACO's rebased historical benchmark to 
reflect regional FFS expenditures in the ACO's regional service area 
(see Sec.  425.603(c)(9)(i)(C), (e)).
    To account for changes in beneficiary health status between the 
historical benchmark period and the performance year, we perform risk 
adjustment using a methodology that differentiates

[[Page 41884]]

between newly assigned and continuously assigned beneficiaries, as 
defined in Sec.  425.20. As specified under Sec. Sec.  425.604(a), 
425.606(a), and 425.610(a), we use CMS-HCC prospective risk scores to 
account for changes in severity and case mix for newly assigned 
beneficiaries between the third benchmark year (BY3) and the 
performance year. We use demographic factors to adjust for these 
changes in continuously assigned beneficiaries. However, if the CMS-HCC 
prospective risk scores for the continuously assigned population are 
lower in the performance year, we use the lower CMS-HCC prospective 
risk scores to adjust for changes in severity and case mix in this 
population. As we described in earlier rulemaking, this approach 
provides a balance between accounting for actual changes in the health 
status of an ACO's population while limiting the risk due to coding 
intensity shifts--that is, efforts by ACOs, ACO participants and/or ACO 
providers/suppliers to find and report additional beneficiary diagnoses 
so as to increase risk scores--that would artificially inflate ACO 
benchmarks (see for example, 81 FR 38008).
    As described in the Shared Savings and Losses and Assignment 
Methodology specifications referenced previously in this section, all 
CMS-HCC and demographic beneficiary risk scores used in financial 
calculations for the Shared Savings Program are renormalized to ensure 
that the mean risk score among assignable beneficiaries in the national 
FFS population is equal to one. Renormalization helps to ensure 
consistency in risk scores from year to year, given changes made to the 
underlying risk score models. All risk adjustment calculations for the 
Shared Savings Program, including risk score renormalization, are 
performed separately for each Medicare enrollment type (ESRD, disabled, 
aged/dual eligible for Medicare and Medicaid, and aged/non-dual 
eligible for Medicare and Medicaid).
    In practice, to risk adjust expenditures from one year to another, 
we multiply the expenditures that are to be adjusted by the quotient of 
two renormalized risk scores, known as the risk ratio. For example, to 
risk adjust the expenditures for an ACO's assigned beneficiary 
population from the first benchmark year to the third, we multiply 
benchmark year 1 (BY1) expenditures, by a risk ratio equal to the mean 
renormalized risk score among the ACO's assigned beneficiaries in 
benchmark year 3 (BY3) divided by the mean renormalized risk score 
among the ACO's assigned beneficiaries in BY1. One percent growth in 
renormalized risk scores between 2 years would be expressed by a risk 
ratio of 1.010. This ratio reflects growth in risk for the ACO's 
assigned beneficiary population relative to that of the national 
assignable population.
    ACOs and other program stakeholders have expressed various concerns 
about the methodology for risk adjusting an ACO's benchmark each 
performance year, as described in comments on previous rulemaking (see 
76 FR 67916 through 67919, 80 FR 32777 through 32778, 81 FR 37962 
through 37968). We refer readers to these earlier rules for more 
detailed discussions of the issues raised by stakeholders. A common 
concern raised is that the current risk adjustment methodology does not 
adequately adjust for changes in health status among continuously 
assigned beneficiaries between the benchmark and performance years. 
Commenters have argued that the lack of upward CMS-HCC risk adjustment 
in response to increased patient acuity makes it harder for ACOs to 
realize savings and serves as a barrier to more ACOs taking on 
performance-based risk.
    Stakeholders have also raised concerns that the current 
methodology, under which risk adjustment is performed separately for 
newly and continuously assigned beneficiaries, creates uncertainty 
around benchmarks. One commenter in prior rulemaking described the 
policy as rendering the role of risk scores ``opaque'', making it 
difficult for ACOs to anticipate how risk scores may affect their 
financial performance (81 FR 37968). We have attempted to increase 
transparency around the program's risk adjustment process by providing 
beneficiary-level risk score information in quarterly and annual 
reports, as well as by providing detailed explanations of the risk 
adjustment calculations to ACOs through webinars. However, despite 
these efforts, concerns about transparency remain, as evidenced by the 
many requests for technical assistance from ACOs related to risk 
adjustment.
b. Proposed Revisions
    We appreciate the concerns regarding our current risk adjustment 
methodology raised by stakeholders, who have indicated that the current 
approach may not adequately recognize negative changes in health status 
that occur at the individual beneficiary level, particularly among 
continuously assigned beneficiaries who have experienced an acute 
event, such as a heart attack, stroke, or hip fracture, between the 
third benchmark year and the applicable performance year. We recognize 
that such acute events, which almost always require a hospitalization, 
are likely to have an upward impact on CMS-HCC risk scores that is not 
attributable to provider coding initiatives.
    At the same time, we remain concerned that CMS-HCC risk scores, in 
general, are susceptible to increased diagnostic coding efforts. As 
noted previously, we employ full CMS-HCC risk adjustment when 
establishing an ACO's historical benchmark for its first agreement 
period, when adjusting the benchmark to account for participant list 
changes within an agreement period, and when resetting the benchmark 
for a second or subsequent agreement period, as we believe that doing 
so improves the accuracy of the benchmark. We have observed evidence of 
a modest increase in diagnostic coding completeness in the benchmark 
period for ACOs in their second agreement period (rebased ACOs). 
Simulation results suggest that rebased ACOs were more likely to 
benefit from full CMS-HCC risk adjustment in the benchmark period than 
were ACOs in a first agreement period. For rebased ACOs, the benchmark 
period coincides with their first agreement period in the Shared 
Savings Program, a time when these ACOs and their ACO participants and 
ACO providers/suppliers had an incentive to engage in increased coding 
so as to maximize their performance year risk scores, as well as their 
rebased benchmark in the next agreement period. ACOs in a first 
agreement period would have had less incentive to encourage their ACO 
participants and ACO providers/suppliers to engage in coding 
initiatives during the benchmark period as it took place before they 
entered the program. We recognize, however, that increased coding by 
ACO participants and ACO providers/suppliers may also reflect efforts 
to facilitate care coordination, quality improvement, and population 
management activities which require more complete clinical information 
at the point of care.
    We also acknowledge that our current approach to risk adjustment 
for the performance year makes it difficult for ACOs to predict how 
their financial performance may be affected by risk adjustment. The 
current approach involves multiple steps including identifying newly 
and continuously assigned beneficiaries for each ACO for both the 
performance year and BY3, computing mean CMS-HCC risk scores for both 
populations and mean demographic risk scores for the continuously 
assigned beneficiary

[[Page 41885]]

population by Medicare enrollment type, conducting a test to determine 
whether an ACO will receive CMS-HCC or demographic risk adjustment for 
its continuously assigned population, and determining and applying the 
risk ratios used to adjust benchmark expenditures for the performance 
year. Although we have made efforts to explain these steps in detail 
through our program specifications, report documentation, and webinars, 
and have made beneficiary-level risk score data available, we 
frequently receive requests for technical assistance in this area 
suggesting that the methodology is still not entirely clear to ACOs.
    To balance these competing concerns, we considered policies that 
would allow for some upward growth in CMS-HCC risk scores between the 
benchmark period and the performance year, while still limiting the 
impact of ACO coding initiatives, and also provide greater clarity for 
ACOs than the current methodology. In contemplating alternative 
policies, we also considered lessons learned from other CMS 
initiatives, including models tested by the Innovation Center. Finally, 
as we wish to encourage ACOs to take on higher levels of risk, we 
considered the importance of adopting a balanced risk adjustment 
methodology that provides ACOs with some protection against decreases 
in risk scores.
    Our preferred approach would eliminate the distinction between 
newly and continuously assigned beneficiaries. We would use full CMS-
HCC risk adjustment for all assigned beneficiaries between the 
benchmark period and the performance year, subject to a symmetrical cap 
of positive or negative 3 percent for the agreement period, which would 
apply such that the adjustment between BY3 and any performance year in 
the agreement period would never be more than 3 percent in either 
direction. In other words, the risk ratios applied to historical 
benchmark expenditures to capture changes in health status between BY3 
and the performance year would never fall below 0.970 nor be higher 
than 1.030 for any performance year over the course of the agreement 
period. As is the case under the current policy, risk adjustment 
calculations would still be carried out separately for each of the four 
Medicare enrollment types (ESRD, disabled, aged/dual eligible, aged/
non-dual eligible) and CMS-HCC prospective risk scores for each 
enrollment type would still be renormalized to the national assignable 
beneficiary population for that enrollment type before the cap is 
applied. Table 11 provides an illustrative example of how the cap would 
be applied to the risk ratio used to adjust historical benchmark 
expenditures to reflect changes in health status between BY3 and the 
performance year, for any performance year in the agreement period:

           Table 11--Hypothetical Data on Application of Agreement Period Cap on PY to BY3 Risk Ratio
----------------------------------------------------------------------------------------------------------------
                                                        BY3             PY
                                                   renormalized    renormalized     Risk ratio      Final risk
            Medicare enrollment type               CMS-HCC  risk   CMS-HCC  risk      before           ratio
                                                       score           score       applying cap
----------------------------------------------------------------------------------------------------------------
ESRD............................................           1.031           1.054           1.022           1.022
Disabled........................................           1.123           1.074           0.956           0.970
Aged/dual eligible..............................           0.987           1.046           1.060           1.030
Aged/non-dual eligible..........................           1.025           1.001           0.977           0.977
----------------------------------------------------------------------------------------------------------------

    In the example, the decrease in the disabled risk score and the 
increase in the aged/dual risk score would both be subject to the 
positive or negative 3 percent cap. Changes in the ESRD and aged/non-
dual risk scores would not be affected by the cap; the ACO would 
receive full upward and downward adjustment, respectively, for these 
enrollment types.
    This approach would provide full CMS-HCC risk adjustment for ACOs 
with changes in CMS-HCC risk below the cap, and a partial adjustment 
for ACOs with changes in CMS-HCC risk above the cap. Initial modeling 
suggests that among the 239 ACOs that received demographic risk 
adjustment for their continuously assigned population under the current 
policy in PY 2016 (55 percent of the 432 total ACOs reconciled), around 
86 percent would have received a larger positive adjustment to their 
benchmark had this policy been in place. Therefore, we believe this 
approach would more consistently account for worsening health status of 
beneficiaries compared to the current policy. This could reduce the 
incentive for ACOs to avoid complex patients and potentially lead more 
ACOs to accept higher levels of performance-based risk. However, 
because of the cap on the increase in CMS-HCC risk, we believe that 
this policy would continue to provide protection to the Medicare Trust 
Funds against unwarranted increases in CMS-HCC prospective risk scores 
that are due to increased coding intensity, by limiting the impact of 
such increases on ACO benchmarks.
    By instituting a symmetrical cap, this preferred approach would 
also limit large decreases in CMS-HCC prospective risk scores across 
all assigned beneficiaries. We believe that such a balanced approach 
would provide ACOs with a greater incentive to assume performance-based 
risk than under the current methodology, which provides ACOs with no 
protection from risk score decreases. Among the 193 ACOs that received 
CMS-HCC risk adjustment under the current policy for their continuously 
assigned population in PY 2016, 69 percent would have received a 
smaller negative adjustment with the symmetrical 3 percent cap. We also 
believe that this approach, which mirrors one of the risk adjustment 
methodologies tested in the Next Generation ACO Model, has a 
significant advantage over the current Shared Savings Program policy in 
that it is more straightforward, making it easier for ACOs to 
understand and determine the impact of risk adjustment on their 
benchmark. ACOs would be subject to risk adjustment within a clearly 
defined range, allowing them to more easily predict their performance.
    Our choice of 3 percent as the preferred level for the symmetrical 
cap is influenced by program experience. A review of CMS-HCC risk score 
trends among Shared Savings Program ACOs found that a 3 percent cap on 
changes in aged/non-dual CMS-HCC risk scores (the enrollment category 
that represents the majority of assigned beneficiaries for most ACOs) 
would limit positive risk adjustment for less than 30 percent of ACOs, 
even when there is a 5-year lapse between BY3 and the performance year, 
which would be the case in the final year of a 5 year agreement period 
under

[[Page 41886]]

the proposal discussed in section II.A.2 of this proposed rule (or a 6-
year lapse for the final performance year of the agreement period for 
ACOs that start a new agreement period on July 1, 2019, under the 
proposal discussed in section II.A.7). A 3 percent symmetrical cap was 
also advocated by some commenters on the 2016 proposed rule, who 
encouraged the Shared Savings Program to adopt a risk adjustment model 
similar to the one being used by the Next Generation ACO Model (see 81 
FR 37968). Although we believe that a 3 percent cap on changes in CMS-
HCC risk scores is reasonable and appropriate, we also considered 
alternate levels for a cap or allowing full CMS-HCC risk adjustment 
with no cap at all. However, we are concerned that a lower cap would 
not offer enough ACOs meaningfully greater protection against health 
status changes relative to the current approach. At the same time, we 
are concerned that adopting a higher cap, or allowing for full, 
uncapped risk adjustment would not provide sufficient protection 
against potential coding initiatives.
    After consideration of these alternatives, we are proposing to 
change the program's risk adjustment methodology to use CMS-HCC 
prospective risk scores to adjust the historical benchmark for changes 
in severity and case mix for all assigned beneficiaries, subject to a 
symmetrical cap of positive or negative 3 percent for the agreement 
period for agreement periods beginning on July 1, 2019, and in 
subsequent years. The cap would reflect the maximum change in risk 
scores allowed in an agreement period between BY3 and any performance 
year in the agreement period. For ACOs participating in a 5 year and 6-
month agreement period beginning on July 1, 2019, as discussed in 
section II.A.7 of this proposed rule, the cap would represent the 
maximum change in risk scores for the agreement period between BY3 and 
calendar year 2019 in the context of determining financial performance 
for the 6-month performance year from July 1, 2019 through December 31, 
2019, as well as the maximum change in risk scores between BY3 and any 
of the subsequent five performance years of the agreement period. We 
would apply this approach to ACOs participating under the proposed 
BASIC track, as reflected in the proposed new section of the 
regulations at Sec.  425.605, and to ACOs participating under the 
proposed ENHANCED track, as reflected in the proposed modifications to 
Sec.  425.610. We seek comment on this proposal, including the level of 
the cap.
3. Use of Regional Factors When Establishing and Resetting ACOs' 
Benchmarks
a. Background
    As described in the background for this section, we apply a 
regional adjustment to the rebased historical benchmark for ACOs 
entering a second or subsequent agreement period in 2017 or later 
years. This adjustment reflects a percentage of the difference between 
the regional FFS expenditures in the ACO's regional service area and 
the ACO's historical expenditures. The percentage used in calculating 
the adjustment is phased in over time, ultimately reaching 70 percent, 
unless the Secretary determines a lower weight should be applied and 
such lower weight is specified through additional notice and comment 
rulemaking.
    In the June 2016 final rule, we laid out the steps used to 
calculate and apply the regional adjustment (see 81 FR 37963). These 
steps are recapped here:
     First, we calculate the ACO's rebased historical benchmark 
and regional average expenditures for the most recent benchmark year 
for each Medicare enrollment type (ESRD, disabled, aged/dual eligible, 
aged/non-dual eligible), resulting in average per capita expenditure 
values for each of the Medicare enrollment types. The regional average 
expenditure amounts are adjusted for differences between the health 
status of the ACO's assigned beneficiary population and that of the 
assignable population in the ACO's regional service area.
     For each Medicare enrollment type, we then determine the 
difference between the average per capita regional amount and the 
average per capita amount of the ACO's rebased historical benchmark. 
These values may be positive or negative. For example, the difference 
between these values for a particular Medicare enrollment type will be 
expressed as a negative number if the value of the ACO's rebased 
historical benchmark expenditure for that Medicare enrollment type is 
greater than the regional average amount.
     Next, we multiply the resulting difference for each 
Medicare enrollment type by the applicable percentage weight used to 
calculate the amount of the regional adjustment for that agreement 
period. The products (one for each Medicare enrollment type) resulting 
from this step are the amounts of the regional adjustments that will be 
applied to the ACO's historical benchmark.
     We then apply the adjustment to the ACO's rebased 
historical benchmark by adding the adjustment amount for the Medicare 
enrollment type to the ACO's rebased historical benchmark expenditure 
for the same Medicare enrollment type.
     We next multiply the regionally-adjusted value of the 
ACO's rebased historical benchmark for each Medicare enrollment type by 
the proportion of the ACO's assigned beneficiary population for that 
Medicare enrollment type, based on the ACO's assigned beneficiary 
population for benchmark year 3.
     Finally, we sum expenditures across the four Medicare 
enrollment types to determine the ACO's regionally-adjusted rebased 
historical benchmark.
    In the June 2016 final rule, we also detailed how the percentage 
weight used to calculate the regional adjustment will be phased in over 
time (see 81 FR 37971 through 37974). For the first agreement period in 
which this methodology applies, ACOs for which the weighted average 
adjustment across the enrollment types is positive (net positive 
adjustment) will receive a weight of 35 percent for all enrollment 
types (including individual enrollment types for which the adjustment 
is negative) and ACOs for which the weighted average adjustment is 
negative (net negative adjustment) will receive a weight of 25 percent 
for all enrollment types (including individual enrollment types for 
which the adjustment is positive). For the second agreement period in 
which the methodology applies, ACOs with a net positive adjustment will 
receive a weight of 70 percent for all enrollment types and ACOs with a 
net negative adjustment will receive a weight of 50 percent for all 
enrollment types. By the third agreement period in which the 
methodology applies, ACOs with either a net positive or a net negative 
adjustment will receive a weight of 70 percent for all enrollment 
types, unless the Secretary determines that a lower weight should be 
applied.
    This regional adjustment is one of three ways in which regional 
expenditures are currently incorporated into the program's methodology 
for resetting the historical benchmark for an ACO's second or 
subsequent agreement period. We also use regional, instead of national, 
trend factors for each enrollment type to restate BY1 and BY2 
expenditures in BY3 terms when calculating the rebased benchmark, and 
we use regional update factors to update the regionally-adjusted 
rebased

[[Page 41887]]

historical benchmark to the performance year at the time of financial 
reconciliation. As described in the June 2016 final rule (81 FR 37977 
through 37981), we used our statutory authority under section 
1899(i)(3) of the Act to adopt a policy under which we update the 
benchmark using regional factors in lieu of the projected absolute 
amount of growth in national per capita expenditures for Parts A and B 
services under the original Medicare FFS program as required under 
section 1899(d)(1)(B)(ii) of the Act.
    The regional trend factors used to calculate an ACO's rebased 
benchmark and the regional update factors used to update the benchmark 
to the performance year represent growth rates in risk-adjusted FFS 
expenditures among assignable beneficiaries in the ACO's regional 
service area, including beneficiaries assigned to the ACO. An ACO's 
regional service area is defined at Sec.  425.20 as all counties in 
which at least one of the ACO's assigned beneficiaries resides. To 
calculate expenditures used in determining the regional adjustment and 
the trend and update factors, we first calculate risk-adjusted FFS 
expenditures among assignable beneficiaries for each county in the 
ACO's regional service area and then weight these amounts by the 
proportion of the ACO's assigned beneficiaries residing in each county, 
with all calculations performed separately by Medicare enrollment type 
(ESRD, disabled, aged/dual, aged/non-dual).
    In the June 2016 final rule, we discussed the benefits that we 
believe to be associated with incorporating regional expenditures into 
ACO benchmarks. We explained, for example, that the incorporation of 
regional expenditures provides an ACO with a benchmark that is more 
reflective of FFS spending in the ACO's region than a benchmark based 
solely on the ACO's own historical expenditures (see 81 FR 37955). We 
believe that this approach creates stronger financial incentives for 
ACOs that have been successful in reducing expenditures to remain in 
the program, thus improving program sustainability. Many commenters 
expressed support for the approach, citing it as an improvement over 
the existing rebasing methodology (see 81 FR 37956). In the June 2016 
final rule, we also discussed how using regional trend and update 
factors would allow us to better capture the cost experience in the 
ACO's region, the health status and socio-economic dynamics of the 
regional population, and location-specific Medicare payments when 
compared to using national FFS expenditures (see 81 FR 37976 through 
37977). In that rule, we stated our intention to explore the 
possibility of incorporating regional expenditures, including the 
regional adjustment and regional trend and update factors, in the 
benchmark established for an ACO's first agreement period (see 81 FR 
37973). In section II.D.3.b of this proposed rule, we discuss our 
proposals for incorporating regional expenditures into the benchmarks 
for ACOs in their first agreement period under the program.
    We also acknowledged in the June 2016 final rule that the 
incorporation of regional expenditures into ACO benchmarks can have 
differential effects depending on an ACO's individual circumstances 
(see 81 FR 37955). For example, ACOs with low historical expenditures 
relative to their regional service area will see their rebased 
historical benchmark increase due to the regional adjustment, whereas 
the benchmarks for higher spending ACOs will be reduced. One concern is 
that, as the higher weights for the regional adjustment are phased in 
over time, the benchmarks for low-spending ACOs may become overly 
inflated to the point where these organizations need to do little to 
maintain or change their practices to generate savings. For higher-
spending ACOs, there is the concern that a negative regional adjustment 
will discourage program participation or discourage these ACOs from 
caring for complex, high-cost patients. There is also concern about the 
longer-term effects on participation resulting from lower trend and 
update factors among ACOs that have had past success in reducing 
expenditures and that serve a high proportion of the beneficiaries 
within certain counties in their regional service area. In sections 
II.D.3.c and II.D.3.d of this proposed rule, we discuss proposals 
designed to mitigate these concerns.
b. Proposals To Apply Regional Expenditures in Determining the 
Benchmark for an ACO's First Agreement Period
    A number of stakeholders offering comments on the February 2016 
proposed rule advocated for extending the policies incorporating 
regional expenditures proposed for determining the rebased benchmarks 
for ACOs entering a second or subsequent agreement period under the 
program to the methodology for establishing the benchmarks for ACOs in 
their first agreement period under the program (see 81 FR 37971). While 
we declined to modify the methodology used to establish benchmarks for 
ACOs in a first agreement period to incorporate regional expenditures 
as part of the June 2016 final rule, we did signal our intention to 
explore this matter further after gaining experience with the new 
rebasing methodology (see 81 FR 37973).
    Since the publication of the June 2016 final rule we have employed 
the new methodology to determine rebased benchmarks for ACOs starting 
second agreement periods in 2017 and 2018. This experience has 
reinforced our belief that a benchmarking methodology that incorporates 
regional expenditures, in addition to an ACO's own historical 
expenditures, is important for the sustainability of the program. For 
agreement periods starting in 2017, for example, we found that around 
80 percent of ACOs receiving a rebased benchmark benefitted from 
receiving a regional adjustment. Having observed variation across ACO 
regional service areas, we also maintain that the incorporation of 
regional expenditure trends can lead to more accurate benchmarks that 
better reflect experience in ACOs' individual regions than benchmarks 
computed solely using national factors. We believe that introducing 
regional expenditures into the benchmarking methodology for ACOs in a 
first agreement period, as has been recommended by stakeholders, would 
serve to further strengthen the incentives under the program, improve 
program sustainability, and increase the accuracy of benchmark 
calculations for new ACOs by making their benchmarks more reflective of 
the regional environment in which these organizations operate. We also 
believe that adopting a more consistent benchmarking methodology would 
provide greater simplicity and more predictability for ACOs. Under this 
approach, ACOs entering the program would only be required to 
familiarize themselves with a single benchmarking methodology that 
would apply for all agreement periods under the program.
    For the above reasons, we are proposing to incorporate regional 
expenditures into the benchmarking methodology for ACOs in a first 
agreement period for all ACOs entering the program beginning on July 1, 
2019 and in subsequent years. Under this proposal, we would use almost 
the same methodology for determining the historical benchmarks for ACOs 
in their first agreement period as will apply for ACOs in their second 
or subsequent agreement period, including all policies proposed in this 
proposed rule, should they be finalized, regarding establishing the 
historical benchmark at the start of the agreement period, adjusting 
the historical benchmark for each

[[Page 41888]]

performance year within an agreement period, and updating the benchmark 
for each performance year (or for calendar year 2019 in the context of 
determining the financial performance of ACOs during the 6-month 
performance year from July 1, 2019 through December 31, 2019, as 
proposed in section II.A.7 of this proposed rule). The only distinction 
between the methodology that would be used to determine the historical 
benchmark for ACOs in their first agreement period and those in a 
second or subsequent agreement period would be the weights that are 
applied to the 3 benchmark years. Under this proposal we would continue 
to use weights of 10 percent, 30 percent, and 60 percent to weight the 
3 benchmark years, respectively, when calculating the historical 
benchmark for an ACO in its first agreement period, rather than the 
equal weights that are used in resetting the benchmark for ACOs 
entering a second or subsequent agreement period. As described in the 
June 2015 final rule (80 FR 32787 through 32788), the use of equal 
weights when calculating the rebased benchmark was motivated by the 
concern that placing higher weights on the later benchmark years would 
reduce the incentive for ACOs that generate savings or that are 
trending positive in their first agreement period to participate in the 
program over the longer run, or reduce incentives for ACOs to achieve 
savings in the final year of their first agreement period. This concern 
is not relevant for ACOs in a first agreement period. Therefore, for 
these ACOs, we favor maintaining the existing weights, which we believe 
are more accurate because they capture the ACO's most recent experience 
in the benchmark period.
    We propose to add a new provision at Sec.  425.601 to the 
regulations that will describe how we will establish, adjust, update 
and reset historical benchmarks using factors based on regional FFS 
expenditures for all ACOs for agreement periods beginning on July 1, 
2019 and in subsequent years. We seek comment on this proposal.
c. Proposals for Modifying the Regional Adjustment
    In finalizing the phase-in structure for the original regional 
adjustment in the June 2016 final rule, we acknowledged that it might 
be necessary to reevaluate the effects of the regional adjustment on 
the Shared Savings Program and, if warranted, to modify the adjustment 
through additional rulemaking. Therefore, we adopted a policy under 
which the maximum weight to be applied to the adjustment would be 70 
percent, unless the Secretary determines that a lower weight should be 
applied, as specified through future rulemaking (see 81 FR 37969 
through 32974). Relevant considerations in determining the appropriate 
weight to be applied to the adjustment include, but are not limited to, 
effects on net program costs; the extent of participation in the 
program; and the efficiency and quality of care received by 
beneficiaries.
    We have revaluated the effects of the regional adjustment as part 
of the regulatory impact analysis required for this proposed rule (see 
section IV) and have also taken into consideration our experience in 
applying the regional adjustment under the policies established in the 
June 2016 final rule. While we continue to believe that it is necessary 
to employ a benchmarking methodology that incorporates expenditures in 
an ACO's regional service area in addition to the ACO's own historical 
expenditures in order to maintain or improve program sustainability, we 
are concerned that, if unaltered, the regional adjustment will have 
unintended consequences and adverse effects on ACO incentives as 
discussed in the Regulatory Impact Analysis (section IV).
    By design, the regional adjustment results in more generous 
benchmarks for ACOs that spend below their regions. As noted in section 
II.D.3.b of this proposed rule, our initial experience with the 
regional adjustment found that 80 percent of ACOs that renewed for a 
second agreement period starting in 2017 received a positive 
adjustment. These ACOs saw their benchmarks increase by 1.8 percent, on 
average, when the adjustment was applied with the 35 percent weight, 
with several ACOs seeing increases of over 5 percent, and one over 7 
percent. Preliminary results for ACOs that renewed for a second 
agreement period starting in 2018 show a similar share of ACOs 
receiving a positive adjustment and one ACO seeing an adjustment of 
over 10 percent. As the weight applied to the regional adjustment 
increases, we are concerned that the benchmarks for the ACOs with the 
lowest spending relative to their region will become overly inflated to 
the point where they will need to do little to change their care 
practices to generate savings, which could reduce incentives for these 
ACOs to improve the efficiency of care provided to beneficiaries.
    On the other hand, the regional adjustment reduces benchmarks for 
ACOs with higher spending compared to their region. Among 14 ACOs that 
received a net negative regional adjustment to their benchmark in 2017, 
the average reduction was 1.6 percent, with one ACO seeing a reduction 
of over 7 percent. These adjustments were calculated using only a 25 
percent weight. Although preliminary results for ACOs that started a 
second agreement period in 2018 show slightly smaller negative 
adjustments, on average, we are concerned that the ACOs with the 
highest relative costs, some of which have targeted specific 
beneficiary populations that are inherently more complex and costly 
than the regional average, will find little value in remaining in the 
Shared Savings Program when faced with a significantly reduced 
benchmark as the weight applied to the adjustment increases.
    To reduce the likelihood that the regional adjustment will have 
these undesired effects, we are proposing policies that would limit the 
magnitude of the adjustment by reducing the weight that is applied to 
the adjustment and imposing an absolute dollar limit on the adjustment. 
We believe that moderating the regional adjustment would lower 
potential windfall gains to lower-cost ACOs and could help to improve 
the incentive for higher-cost ACOs to continue to participate in the 
program.
    First, we are proposing to amend the schedule of weights used to 
phase in the regional adjustment. Consistent with our current policy, 
the first time that an ACO is subject to a regional adjustment, we 
would apply a weight of 35 percent if the ACO's historical spending was 
lower than its region and a weight of 25 percent if the ACO's 
historical spending was higher than its region. The second time that an 
ACO is subject to a regional adjustment, we would apply a weight of 50 
percent if the ACO's historical spending was lower than its region and 
35 percent if the ACO's historical spending was higher than its region. 
The third or subsequent time that an ACO is subject to a regional 
adjustment we would apply a weight of 50 percent in all cases.
    We wish to make two points related to the proposed schedule of 
weights clear. First, consistent with our current policy under Sec.  
425.603(c)(8) for determining the adjusted benchmark for the second or 
subsequent performance year of an ACO's agreement period, in 
calculating an adjusted benchmark for an ACO that makes changes to its 
ACO participant list or assignment methodology, we would use the same 
set of weights as was used for the first performance year in the 
agreement period. For example, an ACO that is subject to a weight of 25 
percent in its first performance year of an agreement period would 
continue to be subject to a weight of either 35 or 25 percent,

[[Page 41889]]

depending on whether the ACO's historical expenditures, as adjusted, 
are higher or lower than its region, for any subsequent years in the 
same agreement period.
    Second, for renewing or re-entering ACOs (see section II.A.5.c of 
this proposed rule) that previously received a rebased historical 
benchmark under the current benchmarking methodology adopted in the 
June 2016 final rule, we would consider the agreement period the ACO is 
entering upon renewal or re-entry in combination with the weight 
previously applied to calculate the regional adjustment to the ACO's 
benchmark in the ACO's most recent prior agreement period to determine 
the weight that would apply in the new agreement period. For example, 
an ACO that was subject to a weight of 35 or 25 percent in its second 
agreement period in the Shared Savings Program under the current 
benchmarking methodology that enters its third agreement period upon 
renewal would be subject to a weight of 50 or 35 percent. By contrast, 
if the same ACO had terminated during its second agreement period and 
subsequently re-enters the program, the ACO would continue to face a 
weight of 35 or 25 percent until the start of its subsequent agreement 
period. For a new ACO identified as a re-entering ACO because greater 
than 50 percent of its ACO participants have recent prior participation 
in the same ACO, we would consider the weight most recently applied to 
calculate the regional adjustment to the benchmark for the ACO in which 
the majority of the new ACO's participants were participating 
previously.
    The weights included in the proposed new schedule were chosen in 
part to maintain consistency with the current schedule which already 
includes the 25, 35, and 50 percent values. Furthermore, we believe 
that using 50 percent as the maximum weight is appropriate because it 
strikes an even balance between rewarding an ACO for attainment 
(efficiencies already demonstrated at the start of the agreement 
period) versus improvement during the agreement period over its past 
historical performance.
    We also wish to note that while this proposal would reduce the 
maximum regional adjustment as compared to current regulations, our 
proposal to extend the regional adjustment to ACOs in their first 
agreement period in the program would increase the number of years that 
an ACO would be subject to the adjustment. Thus, the lower maximum 
weight in later years would be balanced to some extent by an earlier 
phase-in.
    Based on the magnitude of regional adjustments observed in the 
first 2 years under the new rebasing methodology, which were calculated 
using the lowest weights under the current phase-in schedule, we are 
concerned that reducing the maximum weight on the adjustment may not be 
sufficient to guard against the undesired effects of large positive or 
negative regional adjustments on incentives faced by individual ACOs. 
Therefore, to complement the proposed changes to the schedule of 
weights used to phase-in the regional adjustment, we also considered 
options for imposing a cap on the dollar amount of the regional 
adjustment. We believe that limiting regional adjustments for ACOs that 
are particularly low- or high-cost relative to their regions, will 
better align incentives for these ACOs with program goals, while 
continuing to reward ACOs that have already attained efficiency 
relative to their regional service areas.
    We are thus also proposing to cap the regional adjustment amount 
using a flat dollar amount equal to 5 percent of national per capita 
expenditures for Parts A and B services under the original Medicare FFS 
program in BY3 for assignable beneficiaries identified for the 12-month 
calendar year corresponding to BY3 using data from the CMS OACT. The 
cap would be calculated and applied by Medicare enrollment type (ESRD, 
disabled, aged/dual eligible, aged/non-dual eligible) and would apply 
for both positive and negative adjustments.
    We believe that defining the cap based on national per capita 
expenditures offers simplicity and transparency in that, for each 
enrollment type, a single value would be applicable for all ACOs with 
the same agreement start date. When selecting the level of the proposed 
cap, we aimed to choose a level that would only constrain the 
adjustment for the most extreme ACOs. When looking at the distribution 
of observed final regional adjustments among the 73 ACOs that received 
a rebased benchmark in 2017, we found that the amount of the regional 
adjustment calculated for around 95 percent of these ACOs would fall 
under a symmetrical cap equal to 5 percent of national FFS 
expenditures. We believe that capping the amount of the regional 
adjustment at this level would continue to provide a meaningful reward 
for ACOs that are efficient relative to their region, while reducing 
windfall gains for the ACOs with the lowest relative costs. Similarly, 
we believe capping the amount of a negative regional adjustment at this 
level would continue to impose a penalty on ACOs that are less 
efficient relative to their region, but by guarding against extremely 
high negative adjustments, should increase the program's ability to 
retain ACOs that serve complex patients and that may need some 
additional time to lower costs.
    To implement the cap, we would continue to calculate the difference 
between the average per capita regional amount and the per capita 
rebased benchmark amount for each Medicare enrollment type. We would 
continue to multiply the difference for each enrollment type by the 
appropriate weight (determined using the schedule described previously) 
in order to determine the uncapped adjustment for each Medicare 
enrollment type. For positive adjustments, the final adjustment amount 
for a particular enrollment type would be set equal to the lesser of 
the uncapped adjustment or a dollar amount equal to 5 percent of the 
national per capita FFS expenditures for assignable beneficiaries in 
that enrollment type for BY3. For negative adjustments, the final 
adjustment amount for a particular enrollment type would be set equal 
to the greater (that is, the smaller negative value) of either the 
uncapped adjustment or the negative of 5 percent of the national per 
capita FFS expenditures for assignable beneficiaries in that enrollment 
type for BY3. We would then apply the final adjustment for each 
enrollment type to the benchmark expenditure for that enrollment type 
in the same manner that we currently apply the uncapped regional 
adjustment. Table 12 provides an illustrative example of how the final 
adjustment would be determined.

[[Page 41890]]



                 Table 12--Hypothetical Data on Application of Cap to Regional Adjustment Amount
----------------------------------------------------------------------------------------------------------------
                                                                                   5 percent of
                                                     Uncapped        National        national          Final
            Medicare enrollment type                adjustment    assignable FFS  assignable FFS    adjustment
                                                                    expenditure     expenditure
----------------------------------------------------------------------------------------------------------------
ESRD............................................          $4,214         $81,384          $4,069          $4,069
Disabled........................................            -600          11,128             556            -556
Aged/dual eligible..............................             788          16,571             829             788
Aged/non-dual eligible..........................            -367           9,942             497            -367
----------------------------------------------------------------------------------------------------------------

    In this example, the ACO's positive adjustment for ESRD would be 
constrained by the cap because the uncapped adjustment amount exceeds 5 
percent of the national assignable FFS expenditure for the ESRD 
population. Likewise, the ACO's negative adjustment for the disabled 
population would also be reduced by the cap. The adjustments for aged/
dual and aged/non-dual eligible populations would not be affected.
    We also considered an alternative approach under which the cap 
would be applied at the aggregate level rather than at the Medicare 
enrollment type level. Under this approach, we would calculate regional 
adjustments by Medicare enrollment type as we do currently and then 
determine the weighted average of these adjustments, using the 
enrollment distribution in the ACO's BY3 assigned beneficiary 
population, to arrive at a single aggregate regional adjustment. We 
would then determine a weighted average of national per capita FFS 
expenditures for assignable beneficiaries across the four enrollment 
types, again using the enrollment distribution in the ACO's BY3 
assigned beneficiary population, to arrive at a single aggregate 
national expenditure value. We would calculate a symmetrical aggregate 
cap equal to positive or negative 5 percent of the aggregate national 
expenditure value and compare this cap to the uncapped aggregate 
regional adjustment amount to determine the final aggregate regional 
adjustment. Specifically, if the uncapped aggregate regional adjustment 
amount is above the aggregate cap, then the final aggregate regional 
adjustment would equal the cap. However, if the uncapped aggregate 
regional adjustment amount is below the aggregate cap, then the final 
aggregate regional adjustment would equal the uncapped regional 
adjustment amount. The regional adjustment calculated for each Medicare 
enrollment type would then be multiplied by the ratio of the final 
aggregate regional adjustment to the uncapped aggregate regional 
adjustment. If the uncapped aggregate regional adjustment exceeds the 
aggregate cap, this ratio will be less than one and the regional 
adjustment for each Medicare enrollment type would be reduced by the 
same percentage. If the uncapped aggregate regional adjustment is less 
than or equal to the aggregate cap, the ratio will equal one and the 
regional adjustment would not be reduced for any Medicare enrollment 
type.
    For example, if the uncapped aggregate regional adjustment amount 
was $550 and the aggregate cap was $500, the final aggregate regional 
adjustment would be $500. The regional adjustment for each Medicare 
enrollment type would be multiplied by a ratio of $500 to $550 or 
0.909. This is equivalent to reducing the adjustment for each 
enrollment type by 9.1 percent. As another example, if the uncapped 
aggregate regional adjustment was $450 and the aggregate cap remained 
at $500, the final aggregate regional adjustment would be $450 because 
it is less than the aggregate cap. The regional adjustment for each 
Medicare enrollment type would be multiplied by a ratio equal to 1, and 
thus would not be reduced.
    Initial modeling found the two methods to be comparable for most 
ACOs but suggested that our proposed approach (capping the regional 
adjustment at the Medicare enrollment type level) is somewhat more 
effective at limiting larger upside or downside adjustments. This is 
likely because the aggregate approach smooths out variation in 
adjustments across individual enrollment types. For example, for some 
ACOs, large positive adjustments in one enrollment type may be offset 
by smaller positive adjustments, or negative adjustments in other 
enrollment types under the aggregate approach. The proposed approach 
also aligns with our current benchmark calculations, which are done by 
Medicare enrollment type, and provides greater accuracy and 
transparency. Under this approach, the cap will only reduce the 
magnitude of the adjustment for a particular enrollment type if the 
original uncapped value of the adjustment is relatively large. This is 
not necessarily the case under the aggregate approach, where 
adjustments for all enrollment types, large or small, will be reduced 
if the aggregate regional adjustment exceeds the aggregate cap.
    We believe that imposing a cap on the magnitude of the adjustment, 
coupled with the proposed changes to the schedule of weights used in 
applying the regional adjustment, will help to reduce windfall gains to 
low-spending ACOs and will also help to reduce the incentive for higher 
spending ACOs to leave the program by limiting the negative adjustments 
these ACOs will experience. We anticipate that the proposed cap on the 
regional adjustment will provide stronger incentives for higher 
spending ACOs to remain in the program (by reducing the magnitude of 
the benchmark decrease associated with negative regional adjustments) 
than disincentives for lower spending ACOs. We expect this latter group 
would still be sufficiently rewarded by the regional adjustment under 
the proposed approach to encourage their continued participation in the 
program. However, we also believe that by reducing the windfall gains 
for these ACOs, the proposed constraints on the regional adjustment 
would lead to greater incentives for these ACOs to further reduce 
spending in order to increase their shared savings payments.
    In summary, we are proposing both to modify the schedule of weights 
used to phase in the regional adjustment and to impose a cap on the 
dollar amount of the adjustment. For the first agreement period that an 
ACO is subject to the regional adjustment, we are proposing to apply a 
weight of 35 percent if the ACO's historical spending was lower than 
its region and a weight of 25 percent if the ACO's historical spending 
was higher than its region. For the second agreement period, we are 
proposing to apply weights of 50 percent and 35 percent for lower and

[[Page 41891]]

higher spending ACOs, respectively. For the third or subsequent 
agreement period, we are proposing to apply a weight of 50 percent for 
all ACOs. Additionally, we would impose a symmetrical cap on the 
regional adjustment equal to positive or negative 5 percent of the 
national per capita FFS expenditures for assignable beneficiaries for 
each enrollment type. We are proposing to apply the modified schedule 
of weights and the cap on the regional adjustment for agreement periods 
beginning on July 1, 2019, and in subsequent years. The policies 
proposed in this section are included in the proposed new provision at 
Sec.  425.601, which will govern the determination of historical 
benchmarks for all ACOs for agreement periods starting on July 1, 2019, 
and in subsequent years. We are seeking comment on these proposals, as 
well as the alternative capping methodology considered. We are also 
seeking comment on the proposed timeline for application of these 
proposals.
d. Proposals for Modifying the Methodology for Calculating Growth Rates 
Used in Establishing, Resetting, and Updating the Benchmark
    As discussed previously, we believe that using regional 
expenditures to trend forward BY1 and BY2 to BY3 in the calculation of 
the historical benchmark and to update the benchmark to the performance 
year has the advantage of producing more accurate benchmarks. Regional 
trend and update factors allow us to better capture the cost experience 
in the ACO's region, the health status and socio-economic dynamics of 
the regional population, and location-specific Medicare payments when 
compared to using national FFS expenditures. However, we acknowledge 
the concern raised by stakeholders that the use of regional trend or 
update factors may affect ACOs' incentives to reduce spending growth or 
to continue participation in the program, particularly in circumstances 
where an ACO serves a high proportion of beneficiaries in select 
counties making up its regional service area. For such an ACO, a purely 
regional trend will be more influenced by the ACO's own expenditure 
patterns, making it more difficult for the ACO to outperform its 
benchmark and conflicting with our goal to move ACOs away from 
benchmarks based solely on their own historical costs. We therefore 
considered options that would continue to incorporate regional 
expenditures into trend and update factors while still protecting 
incentives for ACOs that serve a high proportion of the Medicare FFS 
beneficiaries in their regional service area.
    One approach, supported by a number of stakeholders commenting on 
the 2016 proposed rule, would be to exclude an ACO's own assigned 
beneficiaries from the population used to compute regional 
expenditures. However, as we explained in the June 2016 final rule (see 
81 FR 37959 through 37960), we believe that such an approach would 
create potential bias due to the potential for small sample sizes and 
differences in the spending and utilization patterns between ACO-
assigned and non-assigned beneficiaries. The latter could occur, for 
example, if an ACO tends to focus on a specialized beneficiary 
population. We are also concerned that excluding an ACO's own assigned 
beneficiaries from the population could provide ACOs with an incentive 
to influence the assignment process by seeking to provide more care to 
healthy beneficiaries and less care to more costly beneficiaries. Given 
these concerns, we chose to focus on alternative options that would 
address stakeholder concerns by using a combination of national and 
regional factors.
    The first approach we considered would use a blend of national and 
regional growth rates to trend forward BY1 and BY2 to BY3 when 
establishing or resetting an ACO's historical benchmark (referred to as 
the national-regional blend). By incorporating a national trend factor 
that is more independent of an ACO's own performance, we believe that 
the national-regional blend would reduce the influence of the ACO's 
assigned beneficiaries on the ultimate trend factor applied. It would 
also lead to greater symmetry between the Shared Savings Program and MA 
which, among other adjustments, applies a national projected trend to 
update county-level expenditures
    Under this approach, the national-regional blend would be 
calculated as a weighted average of national FFS and regional trend 
factors, where the weight assigned to the national component would 
represent the share of assignable beneficiaries in the ACO's regional 
service area that are assigned to the ACO, calculated as described in 
this section of the proposed rule. The weight assigned to the regional 
component would be equal to 1 minus the national weight. As an ACO's 
penetration in its region increases, a higher weight would be placed on 
the national component of the national-regional blend and a lower 
weight on the regional component, reducing the extent to which the 
trend factors reflect the ACO's own expenditure history.
    The national component of the national-regional blend would be 
trend factors computed for each Medicare enrollment type using per 
capita FFS expenditures for the national assignable beneficiary 
population. These trend factors would be calculated in the same manner 
as the national trend factors used to trend benchmark year expenditures 
for ACOs in a first agreement period under the current regulations. For 
example, the national trend factor for the aged/non-dual population for 
BY1 would be equal to BY3 per capita FFS expenditures among the 
national aged/non-dual assignable population divided by BY1 per capita 
FFS expenditures among the national aged/non-dual assignable 
population. Consistent with our current approach, the per capita FFS 
expenditures used in these calculations would not be explicitly risk-
adjusted. By using risk ratios based on risk scores renormalized to the 
national assignable population, as described in section II.D.2 of this 
proposed rule, we are already controlling for changes in risk in the 
national assignable population elsewhere in the benchmark calculations, 
rendering further risk adjustment of the national trend factors 
unnecessary.
    The regional component of the national-regional blend would be 
trend factors computed for each Medicare enrollment type based on the 
weighted average of risk-adjusted county FFS expenditures for 
assignable beneficiaries, including assigned beneficiaries, in the 
ACO's regional service area. These trend factors would be computed in 
the same manner as the regional trend factors used to trend benchmark 
year expenditures for ACOs that enter a second or subsequent agreement 
period in 2017 or later years under the current regulations. The 
regional trend factors reflect changes in expenditures within given 
counties over time, as well shifts in the geographic distribution of an 
ACO's assigned beneficiary population. This is because regional 
expenditures for each year are calculated as the weighted average of 
county-level expenditures for that year where the weight for a given 
county is the proportion of the ACO's assigned beneficiaries residing 
in that county in that year.
    The weights used to blend the national and regional components 
would be calculated separately for each Medicare enrollment type using 
data for BY3. To calculate the national weights, we would first 
calculate for each enrollment type the share of assignable

[[Page 41892]]

beneficiaries that are assigned to the ACO in each county in the ACO's 
regional service area. We would then weight each county's share by the 
proportion of the ACO's total assigned beneficiary population in that 
enrollment type residing in that county to obtain the regional share. 
This weighting approach mirrors the methodology used to calculate 
regional expenditures, as it gives higher precedence to counties where 
more of the ACO's assigned beneficiaries reside when determining the 
ACO's overall penetration in its region.
    As an example, assume an ACO has 11,000 assigned beneficiaries with 
aged/non-dual eligible enrollment status and the ACO's regional service 
area consists of two counties, County A and County B. There were 10,000 
assignable aged/non-dual beneficiaries residing in County A in BY3, 
with 9,000 assigned to the ACO in that year. There were 12,000 
assignable aged/non-dual beneficiaries residing in County B with 2,000 
assigned to the ACO. The weight for the national component of the 
blended trend factor for the aged/non-dual enrollment type would be: 
[(Assigned Beneficiaries in County A/Assignable Beneficiaries in County 
A) x (Assigned Beneficiaries in County A/Total Assigned Beneficiaries)] 
+ [(Assigned Beneficiaries in County B/Assignable Beneficiaries in 
County B) x (Assigned Beneficiaries in County B/Total Assigned 
Beneficiaries)] or [(9,000/10,000) x (9,000/11,000)] + [(2,000/12,000) 
x (2,000/11,000)], or 76.7 percent. The weight given to the regional 
component of the blended trend factor for aged/non-dual enrollment type 
in this example would be 23.3 percent. Because this hypothetical ACO 
has high penetration in its regional service area, the national 
component of the blended trend factor would receive a much higher 
weight than the regional component.
    Initial modeling among 73 ACOs that renewed for a second agreement 
period in 2017 found that the weighted average share of assignable 
beneficiaries in an ACO's regional service area that are assigned to 
the ACO ranged from under 1 percent to around 60 percent, when looking 
at all four enrollment types combined, with a median of 12.3 percent 
and a mean of 15.1 percent. Among the 73 ACOs, 8 (11 percent) had 
regional shares above 30 percent. We found similar distributions when 
looking at the four enrollment types individually. Among ACOs with 
overall regional shares above 30 percent, the simulated use of blended 
trend factors caused changes in benchmarks (relative to current policy) 
of -0.8 percent to 0.3 percent, with half seeing a slight negative 
impact and the other half seeing a slight positive impact. Based on 
these statistics, it appears that most ACOs currently do not have 
significant penetration in their regional service areas. As a result, 
we would expect that for most ACOs the regional component of the 
blended trend factor would receive a higher weight than the national 
component and that the overall impact of the national-regional blend on 
benchmarks relative to current policy would be small. Should 
penetration patterns change over time, the blended formula would 
automatically shift more weight to the national component of the trend 
factor.
    We would also use a national-regional blend when updating the 
historical benchmark for each performance year. That is, we would 
multiply historical benchmark expenditures for each Medicare enrollment 
type by an update factor that blends national and regional expenditure 
growth rates between BY3 and the performance year. The national 
component for each update factor would equal performance year per 
capita FFS expenditures for the national assignable beneficiary 
population for that enrollment type divided by BY3 per capita FFS 
expenditures for the national assignable beneficiary population for 
that enrollment type. As described above, the FFS expenditures for the 
national population would not be risk-adjusted. The regional component 
for each update factor would equal the weighted average of risk-
adjusted county FFS expenditures among assignable beneficiaries, 
including the ACO's assigned beneficiaries, in the ACO's regional 
service area in the performance year divided by the weighted average of 
risk-adjusted county FFS expenditures among assignable beneficiaries, 
including the ACO's assigned beneficiaries, in the ACO's regional 
service area in BY3. This regional component would be computed in the 
same manner as the regional updates used to update the rebased 
benchmark for ACOs that enter a second or subsequent agreement period 
in 2017 or later years under the current regulations. The weights used 
to blend the national and regional components of the update factor 
would be calculated in the same manner as the weights that we are 
proposing to use in calculating the blended trend factors for the 
historical benchmark, except they would be based on performance year 
rather than BY3 data. That is, the weight assigned to the national 
component would represent the share of assignable beneficiaries in 
ACO's regional service area that are assigned to the ACO (based on a 
weighted average of county-level shares) in the performance year and 
the weight assigned to the regional component would be equal to 1 minus 
that share.
    In addition to the national-regional blend, we considered an 
alternate approach that would incorporate national trends at the county 
level instead of at the regional service area level (national-county 
blend). Under this alternative, for each county that is in an ACO's 
regional service area in BY3, we would calculate trend factors to 
capture growth in county-level risk-adjusted expenditures for 
assignable beneficiaries from BY1 to BY3 and from BY2 to BY3. Each 
county-level trend factor would be blended with the national trend 
factor. The blended trend factor for each county would be a weighted 
average of the national and county-level trends where the weight 
applied to the national component would be the share of assignable 
beneficiaries in the county that are assigned to the ACO in BY3. The 
weight applied to the county component of the blend would be 1 minus 
the national weight.
    After computing the blended trend factor for each county, we would 
determine the weighted average across all counties in the ACO's 
regional service area in BY3, using the proportion of assigned 
beneficiaries residing in each county in BY3 as weights to obtain an 
overall blended trend factor. We would then apply this overall blended 
trend factor to the expenditures for the ACO's assigned beneficiary 
population for the relevant benchmark year. All calculations would be 
done separately for each Medicare enrollment type. A similar approach 
would be used to compute update factors between BY3 and the performance 
year, but using weights based on share of assignable beneficiaries in 
each county that are assigned to the ACO in the performance year.
    Returning to the hypothetical ACO from above, under the national-
county blend we would calculate separate blended trend factors for 
County A and County B. For County A, the national component would 
receive a weight of 90.0 percent (9,000/10,000) and the county 
component would receive a weight of 1 minus 90.0 percent, or 10.0 
percent. For County B, the national component would receive a weight of 
16.7 percent (2,000/12,000) and the county component would receive a 
weight of 1 minus 16.7 percent, or 83.3 percent. After computing the 
blended trend factor for each county, we would take the weighted 
average across the two

[[Page 41893]]

counties, with County A's blended trend factor receiving a weight of 
81.8 percent (9,000/11,000) and County B's blended trend factor 
receiving a weight of 18.2 percent (2,000/11,000).
    Our modeling suggests that, for most ACOs, applying the blend at 
the county-level would yield similar results to the national-regional 
blend. However, for ACOs that have experienced shifts in the geographic 
distribution of their assigned beneficiaries over time, we found the 
two methods to diverge. This is because the national-regional blend 
reflects not only changes in expenditures within specific counties over 
time, but also changes in the geographic distribution of the ACO's own 
assigned beneficiaries. The national-county blend, by contrast, holds 
the geographic distribution of an ACO's assigned beneficiaries fixed at 
the BY3 distribution (for trend factors) or at the performance year 
distribution (for update factors), potentially reducing accuracy.
    We are also concerned that calculating trends at the county rather 
than regional level, in addition to being less accurate, would be less 
transparent to ACOs. While national and regional trends are both used 
under our current benchmarking policies, and are thus familiar to ACOs, 
county-level trends would present a new concept. For these reasons, we 
favor the approach that incorporates national trends at the regional 
rather than county level.
    Finally, we considered yet another approach that would simply 
replace regional trend and update factors with national factors for 
ACOs above a certain threshold of penetration in their regional service 
area. Specifically, if the share of assignable beneficiaries in an 
ACO's regional service area that are assigned to that ACO (computed as 
described above as a weighted average of county-level shares) is above 
the 90th percentile among all currently active ACOs for a given 
enrollment type in BY3, we would use national trend factors to trend 
forward BY1 and BY2 expenditures to BY3. For ACOs that are below the 
90th percentile for a given enrollment type, we would continue to use 
regional factors as we do under the current policy. We would use a 
similar approach for the update factors, except the threshold would be 
based on the share of assignable beneficiaries that are assigned to the 
ACO in the performance year rather than BY3. Among the 73 ACOs that 
entered a second agreement period in 2017, the 90th percentile for the 
four enrollment types ranged between 25 and 30 percent of assignable 
beneficiaries in the ACO's regional service area. One drawback of this 
approach relative to the blended approaches previously described is 
that it treats ACOs that are just below the threshold and just above 
the threshold very differently, even though they may be similarly 
influencing expenditure trends in their regional service areas.
    As we have previously indicated with respect to regional trends 
(see, for example, 81 FR 37976) and as suggested by our modeling, the 
national-regional blend, as well as the other options considered, would 
have mixed effects on ACOs depending on how the expenditure trends in 
an ACO's regional service area differ from the national trend. ACOs 
that have high penetration in their regional service area and that have 
helped to drive lower growth in their region relative to the national 
trend would benefit from this policy. ACOs that have contributed to 
higher growth in their regions would likely have lower benchmarks as a 
result of this policy than under current policy, helping to protect the 
Medicare Trust Fund and providing increased incentives for these ACOs 
to lower costs.
    Based on the considerations previously discussed, we propose to use 
a blend of national and regional trend factors (that is, the national-
regional blend) to trend forward BY1 and BY2 to BY3 when determining 
the historical benchmark. We also propose to use a blend of national 
and regional update factors, computed as described in this section, to 
update the historical benchmark to the performance year (or to calendar 
year 2019 in the context of determining the financial performance of 
ACOs for the 6-month performance year from July 1, 2019 through 
December 31, 2019, as proposed in section II.A.7 of this proposed 
rule). The blended trend and update factors would apply to determine 
the historical benchmark for all agreement periods starting on July 1, 
2019 or in subsequent years, regardless of whether it is an ACO's 
first, second, or subsequent agreement period. We also wish to make 
clear that in the event an ACO makes changes to its certified ACO 
participant list for a given performance year or its assignment 
methodology selection, should our proposal in section II.A.4.c be 
finalized, the weight that is applied to the national and regional 
components of the blended trend and update factors would be recomputed 
to reflect changes in the composition of the ACO's assigned beneficiary 
population in BY3.
    Because the proposed blended update factor would be used in place 
of an update factor based on the projected absolute amount of growth in 
national per capita expenditures for Parts A and B services under the 
original FFS program as called for in section 1899(d)(1)(B)(ii) of the 
Act, this proposal would require us to use our authority under section 
1899(i)(3) of the Act. This provision grants the Secretary the 
authority to use other payment models, including payment models that 
use alternative benchmarking methodologies, if the Secretary determines 
that doing so would improve the quality and efficiency of items and 
services furnished under this title and the alternative methodology 
would result in program expenditures equal to or lower than those that 
would result under the statutory payment model.
    By combining a national component that is more independent of an 
ACO's own experience with a regional component that captures location-
specific trends, we believe that the proposed blended update factor 
would mitigate concerns about ACO influence on regional trend factors, 
improving the accuracy of the benchmark update and potentially 
protecting incentives for ACOs that may have high penetration in their 
regional service areas. As such, we believe that this proposed change 
to the statutory benchmarking methodology would improve the quality and 
efficiency of the program. As discussed in the Regulatory Impact 
Analysis (section IV. of this proposed rule), we project that this 
proposed approach, in combination with other changes to the statutory 
payment model proposed elsewhere in this proposed rule, as well as 
current policies established using the authority of section 1899(i)(3) 
of the Act, would not increase program expenditures relative to those 
under the statutory payment model.
    In summary, we propose to use a blend of national and regional 
trend factors to trend forward BY1 and BY2 to BY3 when determining the 
historical benchmark and a blend of national and regional update 
factors to update the historical benchmark to the performance year (or 
to calendar year 2019 in the context of determining the financial 
performance of ACOs for the 6-month performance year from July 1, 2019 
through December 31, 2019, as proposed in section II.A.7 of this 
proposed rule). The national component of the blended trend and update 
factors would receive a weight equal to the share of assignable 
beneficiaries in the regional service area that are assigned to the 
ACO, computed as described in this section by taking a weighted average 
of county-level shares. The regional component of the blended trend and 
update factors would receive a weight equal to 1 minus the national 
weight. The proposed blended trend and update factors would apply to 
all

[[Page 41894]]

agreement periods starting on July 1, 2019 or in subsequent years, 
regardless of whether it is an ACO's first, second, or subsequent 
agreement period. These proposed policies are included in the proposed 
new provision at Sec.  425.601, which would govern the determination of 
historical benchmarks for all ACOs. We seek comment on these proposals, 
as well as the alternatives considered, including incorporating 
national trends at the county rather than regional level or using 
national trend factors for ACOs with penetration in their regional 
service area exceeding a certain threshold.
4. Technical Changes To Incorporate References to Benchmark Rebasing 
Policies
    We are also proposing to make certain technical, conforming changes 
to the following provisions to reflect our proposal to add a new 
section of the regulations at Sec.  425.601 to govern the calculation 
of the historical benchmark for all agreement periods starting on July 
1, 2019, and in subsequent years. We are also proposing to make 
conforming changes to these provisions to incorporate the policies on 
resetting, adjusting, and updating the benchmark that were adopted in 
the June 2016 final rule, and codified in the regulations at Sec.  
425.603.
     Under subpart C, which governs application procedures, add 
references to Sec. Sec.  425.601 and 425.603 in Sec.  425.204(g);
     Under subpart D, which governs the calculation of shared 
savings and losses, add references to Sec.  425.603 in Sec. Sec.  
425.604 (Track 1) and 425.606 (Track 2); and add references to 
Sec. Sec.  425.601 and 425.603 in Sec.  425.610 (ENHANCED track);
     As part of the modifications to Sec.  425.610, make a 
wording change to the paragraph currently numerated as (a)(2)(ii) that 
could not be completed with the June 2016 final rule due to a 
typographical error. In this paragraph, we would remove the phase 
``adjusts for changes'', and in its place add the phrase ``CMS adjusts 
the benchmark for changes''; and
     Under subpart I, which governs the reconsideration review 
process, add references to Sec. Sec.  425.601 and 425.603 to Sec.  
425.800(a)(4). In addition, as previously described, we have used our 
authority under section 1899(i)(3) of the Act to modify certain aspects 
of the statutory payment and benchmarking methodology under section 
1899(d) of the Act. Accordingly, we also propose to amend Sec.  
425.800(a)(4) to clarify that the preclusion of administrative and 
judicial review applies only to the extent that a specific calculation 
is performed in accordance with section 1899(d) of the Act.

E. Updating Program Policies

1. Overview
    This section addresses various proposed revisions to the Shared 
Savings Program designed to update program policies. We propose to 
revise our regulations governing the assignment process in order to 
align our voluntary alignment policies with the requirements of section 
50331 of the Bipartisan Budget Act of 2018 and to update the definition 
of primary care services. We also propose to extend the policies that 
we recently adopted for ACOs impacted by extreme and uncontrollable 
circumstances during 2017 to 2018 and subsequent performance years. We 
also solicit comment on considerations related to supporting ACOs' 
activities to address the national opioid crisis and the agency's 
meaningful measures initiative. We propose to discontinue use of the 
quality performance measure that assesses an ACO's eligible clinicians' 
level of adoption of CEHRT and propose instead that ACOs annually 
certify that the percentage of eligible clinicians participating in the 
ACO using CEHRT to document and communicate clinical care to their 
patients or other health care providers meets or exceeds certain 
thresholds. Lastly, we seek comment on how Medicare ACOs and Part D 
sponsors could be encouraged to collaborate so as to improve the 
coordination of pharmacy care for Medicare FFS beneficiaries.
2. Revisions to Policies on Voluntary Alignment
a. Background
    Section 50331 of the Bipartisan Budget Act of 2018 amended section 
1899(c) of the Act (42 U.S.C. 1395jjj(c)) to add a new paragraph (2)(B) 
that requires the Secretary, for performance year 2018 and each 
subsequent performance year, to permit a Medicare FFS beneficiary to 
voluntarily identify an ACO professional as the primary care provider 
of the beneficiary for purposes of assigning such beneficiary to an 
ACO, if a system is available for electronic designation. A voluntary 
identification by a Medicare FFS beneficiary under this provision 
supersedes any claims-based assignment otherwise determined by the 
Secretary. Section 50331 also requires the Secretary to establish a 
process under which a Medicare FFS beneficiary is notified of his or 
her ability to designate a primary care provider or subsequently to 
change this designation. An ACO professional is defined under section 
1899(h) of the Act as a physician as defined in section 1861(r)(1) of 
the Act and a practitioner described in section 1842(b)(18)(C)(i) of 
the Act.
    We believe that section 50331 requires certain revisions to our 
current beneficiary voluntary alignment policies in Sec.  425.402(e). 
Prior to enactment of the Bipartisan Budget Act of 2018, section 
1899(c) of the Act required that beneficiaries be assigned to an ACO 
based on their use of primary care services furnished by a physician as 
defined in section 1861(r)(1) of the Act, and beginning January 1, 
2019, services provided in RHCs/FQHCs. In order to satisfy this 
statutory requirement, we currently require that a beneficiary receive 
at least one primary care service during the beneficiary assignment 
window from an ACO professional in the ACO who is a physician with a 
specialty used in assignment in order to be assigned to the ACO (see 
Sec.  425.402(b)(1)). As currently provided in Sec.  425.404(b), for 
performance year 2019 and subsequent performance years, for purposes of 
the assignment methodology in Sec.  425.402, CMS treats a service 
reported on an FQHC/RHC claim as a primary care service performed by a 
primary care physician. After identifying the beneficiaries who have 
received a primary care service from a physician in the ACO, we use a 
two-step, claims-based methodology to assign beneficiaries to a 
particular ACO for a calendar year (see Sec.  425.402(b)(2) through 
(4)). In the CY 2017 PFS final rule (81 FR 80501 through 80510), we 
augmented this claims-based beneficiary assignment methodology by 
finalizing a policy under which beneficiaries, beginning in 2017 for 
assignment for performance year 2018, may voluntarily align with an ACO 
by designating a ``primary clinician'' they believe is responsible for 
coordinating their overall care using MyMedicare.gov, a secure online 
patient portal. MyMedicare.gov contains a list of all of the Medicare-
enrolled practitioners who appear on the Physician Compare website and 
beneficiaries may choose any practitioner present on Physician Compare 
as their primary clinician.
    Notwithstanding the assignment methodology in Sec.  425.402(b), 
beneficiaries who designate an ACO professional whose services are used 
in assignment as responsible for their overall care will be 
prospectively assigned to the ACO in which that ACO professional 
participates, provided the beneficiary meets the eligibility criteria 
established at Sec.  425.401(a) and is not excluded from assignment by 
the

[[Page 41895]]

criteria in Sec.  425.401(b), and has had at least one primary care 
service during the assignment window with an ACO professional in the 
ACO who is a primary care physician as defined under Sec.  425.20 or a 
physician with one of the primary specialty designations included in 
Sec.  425.402(c) (see Sec.  425.402(e)). Such beneficiaries will be 
added prospectively to the ACO's list of assigned beneficiaries for the 
subsequent performance year, superseding any assignment that might have 
otherwise occurred under the claims-based methodology. Further, 
beneficiaries may change their designation at any time through 
MyMedicare.gov; the new choice will be incorporated when we perform 
assignment for the subsequent performance year. Beneficiaries who 
designate a provider or supplier outside an ACO, who is a primary care 
physician, a physician with a specialty designation that is considered 
in the assignment methodology, or a nurse practitioner, physician 
assistant, or clinical nurse specialist, as responsible for 
coordinating their overall care will not be added to an ACO's list of 
assigned beneficiaries, even if they would otherwise meet the criteria 
for claims-based assignment.
b. Proposals
    Section 1899(c) of the Act, as amended by section 50331 of the 
Bipartisan Budget Act of 2018, requires the Secretary to permit a 
Medicare FFS beneficiary to voluntarily identify an ACO professional as 
their primary care provider for purposes of assignment to an ACO. Under 
our current methodology, a beneficiary may select any practitioner who 
has a record on the Physician Compare website as their primary 
clinician; however, we will only assign the beneficiary to an ACO if 
they have chosen a practitioner who is a primary care physician (as 
defined at Sec.  425.20), a physician with one of the primary specialty 
designations included in Sec.  425.402(c), or a nurse practitioner, 
physician assistant, or clinical nurse specialist. Therefore, we 
propose to modify our current voluntary alignment policies at Sec.  
425.402(e)(2)(iii) to provide that we will assign a beneficiary to an 
ACO based upon their selection of any ACO professional, regardless of 
specialty, as their primary clinician. Under this proposal, a 
beneficiary may select a practitioner with any specialty designation, 
for example, a specialty of allergy/immunology or surgery, as their 
primary care provider and be eligible for assignment to the ACO in 
which the practitioner is an ACO professional. Specifically, we propose 
to revise Sec.  425.402(e)(2)(iii) to remove the requirement that the 
ACO professional designated by the beneficiary be a primary care 
physician as defined at Sec.  425.20, a physician with a specialty 
designation included at Sec.  425.402(c), or a nurse practitioner, 
physician assistant, or clinical nurse specialist. In addition, the 
provision at Sec.  425.402(e)(2)(iv) addresses beneficiary designations 
of clinicians outside the ACO as their primary clinician. The current 
policy at Sec.  425.402(e)(2)(iv) provides that a beneficiary will not 
be assigned to an ACO for a performance year if the beneficiary has 
designated a provider or supplier outside the ACO who is a primary care 
physician as defined at Sec.  425.20, a physician with a specialty 
designation included at Sec.  425.402(c), or a nurse practitioner, 
physician assistant, or clinical nurse specialist as their primary 
clinician responsible for coordinating their overall care. Consistent 
with the proposed revisions to Sec.  425.402(e)(2)(iii) to incorporate 
the requirements of section 50331 of the Bipartisan Budget Act, we 
propose to revise Sec.  425.402(e)(2)(iv) to indicate that if a 
beneficiary designates any provider or supplier outside the ACO as 
their primary clinician responsible for coordinating their overall 
care, the beneficiary will not be added to the ACO's list of assigned 
beneficiaries for a performance year.
    Section 1899(c) of the Act, as amended by section 50331 of the 
Bipartisan Budget Act of 2018, requires the Secretary to allow a 
beneficiary to voluntarily align with an ACO, and does not impose any 
restriction with respect to whether the beneficiary has received any 
services from an ACO professional (see section 1899(c)(2)(B)(i) of the 
Act). We also believe the requirement in section 1899(c)(2)(B)(iii) of 
the Act that a beneficiary's voluntary identification shall supersede 
any claims-based alignment is consistent with eliminating the 
requirement that the beneficiary have received a service from an ACO 
professional in order to be eligible to be assigned an ACO. Therefore, 
we propose to remove the requirement at Sec.  425.402(e)(2)(i) that a 
beneficiary must have received at least one primary care service from 
an ACO professional who is either a primary care physician or a 
physician with a specialty designation included in Sec.  425.402(c) 
within the 12 month assignment window in order to be assigned to the 
ACO. Under this proposal, a beneficiary who selects a primary clinician 
who is an ACO professional, but who does not receive any services from 
an ACO participant during the assignment window, will remain eligible 
for assignment to the ACO. We believe this approach reduces burden on 
beneficiaries and their practitioners by not requiring practitioners to 
provide unnecessary care during a specified period of time in order for 
a beneficiary to remain eligible for assignment to the ACO. Consistent 
with this proposal, we propose to remove Sec.  425.402(e)(2)(i) in its 
entirety.
    We note that, under this proposal, if a beneficiary does not change 
their primary clinician designation, the beneficiary will remain 
assigned to the ACO in which that practitioner participates during the 
ACO's entire agreement period and any subsequent agreement periods 
under the Shared Savings Program, even if the beneficiary no longer 
seeks care from any ACO professionals. Because a beneficiary who has 
voluntarily identified a Shared Savings Program ACO professional as 
their primary care provider will remain assigned to the ACO regardless 
of where they seek care, this proposed change could also impact 
assignment under certain Innovation Center models in which overlapping 
beneficiary assignment is not permitted. Although we believe our 
proposed policy is consistent with the requirement under section 
1899(c)(2)(B)(iii) of the Act that a voluntary identification by a 
beneficiary shall supersede any claims-based assignment, we also 
believe it could be appropriate, in limited circumstances, to align a 
beneficiary to an entity participating in certain specialty and 
disease-specific Innovation Center models, such as the CEC Model. CMS 
implemented the CEC Model to test a new system of payment and service 
delivery that CMS believes will lead to better health outcomes for 
Medicare beneficiaries living with ESRD, while lowering costs to 
Medicare Parts A and B. Under the model, CMS is working with groups of 
health care providers, dialysis facilities, and other suppliers 
involved in the care of ESRD beneficiaries to improve the coordination 
and quality of care that these individuals receive. We believe that an 
ESRD beneficiary, who is otherwise eligible for assignment to an entity 
participating in the CEC Model, could benefit from the focused 
attention on and increased care coordination for their ESRD available 
under the CEC Model. Such a beneficiary could be disadvantaged if they 
were unable to receive the type of specialized care for their ESRD that 
would be available from an entity participating in the CEC Model. 
Furthermore, we believe it could be difficult for the Innovation Center 
to conduct a viable test of a specialty or

[[Page 41896]]

disease-specific model, if we were to require that beneficiaries who 
have previously designated an ACO professional as their primary 
clinician remain assigned to the Shared Savings Program ACO under all 
circumstances. Currently, the CEC Model completes its annual PY 
prospective assignment lists prior to the Shared Savings Program in 
order to identify the beneficiaries who may benefit from receiving 
specialized care from an entity participating in the CEC Model. 
Additionally, on a quarterly basis, a beneficiary may be assigned to 
the CEC Model who was previously assigned to a Track 1 or Track 2 ACO.
    As a result, we believe that in some instances it may be necessary 
for the Innovation Center to use its authority under section 
1115A(d)(1) of the Act to waive the requirements of section 
1899(c)(2)(B) of the Act solely as necessary for purposes of testing a 
particular model.
    Therefore, we are proposing to create an exception to the general 
policy that a beneficiary who has voluntarily identified a Shared 
Savings Program ACO professional as their primary care provider will 
remain assigned to the ACO regardless of where they seek care. 
Specifically, we propose that we would not assign such a beneficiary to 
the ACO when the beneficiary is also eligible for assignment to an 
entity participating in a model tested or expanded under section 1115A 
of the Act under which claims-based assignment is based solely on 
claims for services other than primary care services and for which 
there has been a determination by Secretary that a waiver under section 
1115A(d)(1) of the Act of the requirement in section 1899(c)(2)(B) of 
the Act is necessary solely for purposes of testing the model. Under 
this proposal, if a beneficiary selects a primary clinician who is a 
Shared Savings Program ACO professional and the beneficiary is also 
eligible for alignment to a specialty care or disease specific model 
tested or expanded under section 1115A of the Act under which claims-
based assignment is based solely on claims for services other than 
primary care services and for which there has been a determination that 
a waiver of the requirement in section 1899(c)(2)(B) is necessary 
solely for purposes of testing the Model, the Innovation Center or its 
designee would notify the beneficiary of their alignment to an entity 
participating in the model. Additionally, although such a beneficiary 
may still voluntarily identify his or her primary clinician and may 
seek care from any clinician, the beneficiary would not be assigned to 
a Shared Savings Program ACO even if the designated primary clinician 
is a Shared Savings Program ACO professional.
    We would include a list of any models that meet these criteria on 
the Shared Savings Program website, to supplement the information 
already included in the beneficiary assignment reports we currently 
provide to ACOs (as described under Sec.  425.702(c)), so that ACOs can 
know why certain beneficiaries, who may have designated an ACO 
professional as their primary clinician, are not assigned to them. 
Similar information would also be shared with 1-800-MEDICARE to ensure 
that Medicare customer service representatives are able to help 
beneficiaries who may be confused as to why they are not aligned to the 
ACO in which their primary clinician is participating.
    Section 1899(c)(2)(B)(ii) of the Act, as amended by section 50331 
of the Bipartisan Budget Act, requires the Secretary to establish a 
process under the Shared Savings Program through which each Medicare 
FFS beneficiary is notified of the ability to identify an ACO 
professional as his or her primary care provider and informed of the 
process that may be used to make and change such identification. We 
intend to implement section 1899(c)(2)(B)(ii) of the Act under the 
beneficiary notification process at Sec.  425.312. In addition, we plan 
to use the beneficiary notification process under Sec.  425.312 to 
address the concern that beneficiary designations may become outdated. 
Specifically, we propose to require ACO participants to use a CMS-
developed template notice that encourages beneficiaries to check their 
designation regularly and to update their designation when they change 
care providers or move to a new area. We discuss our beneficiary 
notification processes further in section II.C.3.a of this proposed 
rule.
    We propose to apply these modifications to our policies under the 
Shared Savings Program regarding voluntary alignment beginning for 
performance years starting on January 1, 2019, and subsequent 
performance years. We propose to incorporate these new requirements in 
the regulations by redesignating Sec.  425.402(e)(2)(i) through (iv) as 
Sec.  425.402(e)(2)(i)(A) through (D), adding a paragraph heading for 
newly redesignated Sec.  425.402(e)(2)(i), and including a new Sec.  
425.402(e)(2)(ii).
    We note that as specified in Sec.  425.402(e)(2)(ii) a beneficiary 
who has designated an ACO professional as their primary clinician must 
still be eligible for assignment to an ACO by meeting the criteria 
specified in Sec.  425.401(a). These criteria establish the minimum 
requirements for a beneficiary to be eligible to be assigned to an ACO 
under our existing assignment methodology, and we believe it is 
appropriate to impose the same basic limitations on the assignment of 
beneficiaries on the basis of voluntary alignment. We do not believe it 
would be appropriate, for example, to assign a beneficiary to an ACO if 
the beneficiary does not reside in the United States, or if the other 
eligibility requirements are not met.
    We request comments on our proposals to implement the new 
requirements governing voluntary alignment under section 50331 of the 
Bipartisan Budget Act of 2018. We also seek comment on our proposal to 
create a limited exception to our proposed policies on voluntary 
alignment to allow a beneficiary to be assigned to an entity 
participating in a model tested or expanded under section 1115A of the 
Act when certain criteria are met. In addition, we welcome comments on 
how we might increase beneficiary awareness and further improve the 
electronic process through which a beneficiary may voluntarily identify 
an ACO professional as their primary care provider through 
My.Medicare.gov for purposes of assignment to an ACO.
3. Revisions to the Definition of Primary Care Services Used in 
Beneficiary Assignment
a. Background
    Section 1899(c)(1) of the Act, as amended by the 21st Century Cures 
Act and the Bipartisan Budget Act of 2018, provides that for 
performance years beginning on or after January 1, 2019, the Secretary 
shall assign beneficiaries to an ACO based on their utilization of 
primary care services provided by a physician and all services 
furnished by RHCs and FQHCs. However, the statute does not specify 
which kinds of services may be considered primary care services for 
purposes of beneficiary assignment. We established the initial list of 
services that we considered to be primary care services in the November 
2011 final rule (76 FR 67853). In that final rule, we indicated that we 
intended to monitor this issue and would consider making changes to the 
definition of primary care services to add or delete codes used to 
identify primary care services, if there were sufficient evidence that 
revisions were warranted. We have updated the list of primary care 
service codes in subsequent rulemaking to reflect additions or 
modifications to the codes that have been recognized for payment under 
the Medicare PFS, as summarized in the CY 2018 PFS proposed rule (82

[[Page 41897]]

FR 34109 and 34110). Subsequently, in the CY 2018 PFS final rule, we 
revised the definition of primary care services to include three 
additional chronic care management service codes, 99487, 99489, and 
G0506, and four behavioral health integration service codes, G0502, 
G0503, G0504 and G0507 (82 FR 53212 and 53213). These additions are 
effective for purposes of performing beneficiary assignment under Sec.  
425.402 for performance year 2019 and subsequent performance years.
    Accounting for these recent changes, we define primary care 
services in Sec.  425.400(c) for purposes of assigning beneficiaries to 
ACOs under Sec.  425.402 as the set of services identified by the 
following HCPCS/CPT codes:
    CPT codes:
    (1) 99201 through 99215 (codes for office or other outpatient visit 
for the evaluation and management of a patient).
    (2) 99304 through 99318 (codes for professional services furnished 
in a Nursing Facility, excluding services furnished in a SNF which are 
reported on claims with place of service code 31).
    (3) 99319 through 99340 (codes for patient domiciliary, rest home, 
or custodial care visit).
    (4) 99341 through 99350 (codes for evaluation and management 
services furnished in a patients' home).
    (5) 99487, 99489 and 99490 (codes for chronic care management).
    (6) 99495 and 99496 (codes for transitional care management 
services).
    HCPCS codes:
    (1) G0402 (the code for the Welcome to Medicare visit).
    (2) G0438 and G0439 (codes for the Annual Wellness Visits).
    (3) G0463 (code for services furnished in electing teaching 
amendment hospitals).
    (4) G0506 (code for chronic care management).
    (5) G0502, G0503, G0504 and G0507 (codes for behavioral health 
integration).
    As discussed in the CY 2018 PFS final rule, a commenter recommended 
that CMS consider including the advance care planning codes, CPT codes 
99497 and 99498, in the definition of primary care services in future 
rulemaking (82 FR 53213). We indicated that we would consider whether 
CPT codes 99497 and 99498 or any additional existing HCPCS/CPT codes 
should be added to the definition of primary care services in future 
rulemaking for purposes of assignment of beneficiaries to ACOs under 
the Shared Savings Program. In addition, effective for CY 2018, the 
HCPCS codes for behavioral health integration G0502, G0503, G0504 and 
G0507 have been replaced by CPT codes 99492, 99493, 99494, 99484 (82 FR 
53078).
    CPT codes 99304 through 99318 are used for reporting evaluation and 
management services furnished by physicians and other practitioners in 
a skilled nursing facility (reported on claims with POS code 31) or a 
nursing facility (reported on claims with POS code 32). Based on 
stakeholder input, we finalized a policy in the CY 2016 PFS final rule 
(80 FR 71271 through 71272) effective for performance year 2017 and 
subsequent performance years, to exclude services identified by CPT 
codes 99304 through 99318 from the definition of primary care services 
for purposes of the beneficiary assignment methodology when the claim 
includes the POS code 31 modifier designating the services as having 
been furnished in a SNF. We established this policy to recognize that 
SNF patients are shorter stay patients who are generally receiving 
continued acute medical care and rehabilitative services. Although 
their care may be coordinated during their time in the SNF, they are 
then transitioned back into the community to the primary care 
professionals who are typically responsible for providing care to meet 
their true primary care needs. We continue to believe that it is 
appropriate for SNF patients to be assigned to ACOs based on care 
received from primary care professionals in the community (including 
nursing facilities), who are typically responsible for providing care 
to meet the true primary care needs of these beneficiaries. ACOs 
serving special needs populations, including beneficiaries receiving 
long term care services, and other stakeholders have recently suggested 
that we consider an alternative method for determining operationally 
whether services identified by CPT codes 99304 through 99318 were 
furnished in a SNF. Instead of indirectly determining whether a 
beneficiary was a SNF patient when the services were furnished based on 
physician claims data, these stakeholders suggest we more directly 
determine whether a beneficiary was a SNF patient based on SNF facility 
claims data. These stakeholders have recommended that CMS use 
contemporaneous SNF Medicare facility claims to determine whether a 
professional service identified by CPT codes 99304 through 99318 was 
furnished in a SNF and thus should not be used for purposes of the 
beneficiary assignment methodology under Sec.  425.402. Specifically, 
these stakeholders suggest that we determine whether services 
identified by CPT codes 99304 through 99318 were furnished in a SNF by 
determining whether the beneficiary also received SNF facility services 
on the same date of service.
    In this rule we propose to make changes to the definition of 
primary care services in Sec.  425.400(c) to add new codes and to 
revise how we determine whether services identified by CPT codes 99304 
through 99318 were furnished in a SNF.
b. Proposed Revisions
    Based on feedback from ACOs and our further review of the HCPCS and 
CPT codes currently recognized for payment under the PFS, we believe it 
would be appropriate to amend the definition of primary care services 
to include certain additional codes. Specifically, we propose to revise 
the definition of primary care services in Sec.  425.400(c) to include 
the following HCPCS and CPT codes: (1) Advance care planning service 
codes, CPT codes 99497 and 99498, (2) administration of health risk 
assessment service codes, CPT codes 96160 and 96161, (3) prolonged 
evaluation and management or psychotherapy service(s) beyond the 
typical service time of the primary procedure, CPT codes 99354 and 
99355, (4) annual depression screening service code, HCPCS code G0444, 
(5) alcohol misuse screening service code, HCPCS code G0442, and (6) 
alcohol misuse counseling service code, HCPCS code G0443. In addition, 
in the recent CY 2019 PFS proposed rule (see 83 FR 35841 through 35844) 
CMS proposed to create three new HCPCS codes to reflect the additional 
resources involved in furnishing certain evaluation and management 
services: (1) GPC1X add-on code, for the visit complexity inherent to 
evaluation and management associated with certain primary care 
services, (2) GCG0X add-on code, for visit complexity inherent to 
evaluation and management associated with endocrinology, rheumatology, 
hematology/oncology, urology, neurology, obstetrics/gynecology, 
allergy/immunology, otolaryngology, or interventional pain management-
centered care, and (3) GPRO1, an additional add-on code for prolonged 
evaluation and management or psychotherapy services beyond the typical 
service time of the primary procedure. We believe it would be 
appropriate to include these codes in the definition of primary care 
services under the Shared Savings Program because these codes are used 
to bill for services that are similar to services that are already 
included in the list of primary care codes at Sec.  425.400(c). We

[[Page 41898]]

also expect that primary care physicians, nurse practitioners, 
physician assistants, and clinical nurse specialists frequently furnish 
these services as part of their overall management of a patient. As a 
result, we believe that including these codes would increase the 
accuracy of the assignment process by helping to ensure that 
beneficiaries are assigned to the ACO or other entity that is actually 
managing the beneficiary's care.
    The following provides additional information about the HCPCS and 
CPT codes that we are proposing to add to the definition of primary 
care services:
    Advance care planning (CPT codes 99497 and 99498): Effective 
January 1, 2016, CMS pays for voluntary advance care planning under the 
PFS (80 FR 70955 through 70959). See CMS, Medicare Learning Network, 
``Advance Care Planning'' (ICN 909289, August 2016), available at 
https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/Downloads/AdvanceCarePlanning.pdf. Advance care 
planning enables Medicare beneficiaries to make important decisions 
that give them control over the type of care they receive and when they 
receive it. Medicare pays for advance care planning either as a 
separate Part B service when it is medically necessary or as an 
optional element of a beneficiary's Annual Wellness Visit. We believe 
it would be appropriate to include both Advance Care Planning codes 
99497 and 99498 in the definition of primary care services under the 
Shared Savings Program because the services provided as part of advance 
care planning include counseling and other evaluation and management 
services similar to the services included in Annual Wellness Visits and 
other evaluation and management service codes that are already included 
in the list of primary care codes.
    Administration of health risk assessment (CPT codes 96160 and 
96161): In the CY 2017 PFS final rule (81 FR 80330 through 80331), CMS 
added two new CPT codes, 96160 and 96161, to the PFS, effective for CY 
2017, to be used for payment for the administration of health risk 
assessment. These codes are ``add-on codes'' that describe additional 
resource components of a broader service furnished to the patient that 
are not accounted for in the valuation of the base code. For example, 
if a health risk assessment service were administered during a 
physician office visit, then the physician would bill for both the 
appropriate office visit code and the appropriate health risk 
assessment code. We believe it would be appropriate to include CPT 
codes 96160 and 96161 in the definition of primary care services 
because these add-on codes frequently represent additional practice 
expenses related to office visits for evaluation and management 
services that are already included in the definition of primary care 
services.
    Prolonged evaluation and management or psychotherapy service(s) 
beyond the typical service time of the primary procedure (CPT codes 
99354 and 99355): These two codes are also ``add-on codes'' that 
describe additional resource components of a broader service furnished 
in the office or other outpatient setting that are not accounted for in 
the valuation of the base codes. Code 99354 is listed on a claim to 
report the first hour of additional face-to-face time with a patient 
and code 99355 is listed separately for each additional 30 minutes of 
face-to-face time with a patient beyond the time reported under code 
99354. Codes 99354 and 99355 would be billed separately in addition to 
the base office or other outpatient evaluation and management or 
psychotherapy service. (See Medicare Claims Processing Manual Chapter 
12, Sections 30.6.15.1 Prolonged Services With Direct Face-to-Face 
Patient Contact Service (Codes 99354-99357) available at https://
www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/
clm104c12.pdf; also see CMS, MLN Matters, Prolonged Services (Codes 
99354-99359) (Article Number MM5972, Revised March 7, 2017), available 
at https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/downloads/mm5972.pdf.) Although we do 
not currently include prolonged services codes CPT code 99354 and 99355 
on our list of primary care services, based on further review we 
believe it would be appropriate to include them on our list of primary 
care services to more accurately assign beneficiaries to ACOs based on 
all the allowed charges for the primary care services furnished to 
beneficiaries. We note that the definitions of codes 99354 and 99355 
also include prolonged services for certain psychotherapy services, 
which are not currently included on our list of primary care services. 
Therefore, we propose to include the allowed charges for CPT code 99354 
and 99355, for purposes of assigning beneficiaries to ACOs, only when 
the base code is also on the list of primary care services.
    Annual depression screening (HCPCS code G0444), alcohol misuse 
screening (HCPCS code G0442), and alcohol misuse counseling (HCPCS code 
G0443): Effective October 14, 2011, all Medicare beneficiaries are 
eligible for annual depression screening and alcohol misuse screening. 
(See CMS Manual System, Screening for Depression in Adults (Transmittal 
2359, November 23, 2011) available at https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/downloads/R2359CP.pdf and see CMS, 
MLN Matters, Screening and Behavioral Counseling Interventions in 
Primary Care to Reduce Alcohol Misuse (Article Number MM7633, Revised 
June 4, 2012), available at https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/downloads/mm7633.pdf). 
Although these three codes have been in use since before the 
implementation of the Shared Savings Program in 2012, based on further 
review of these services, we believe that it would be appropriate to 
consider these services in beneficiary assignment. Annual depression 
screening may be covered if it is furnished in a primary care setting 
that has staff-assisted depression care supports in place to assure 
accurate diagnosis, effective treatment, and follow-up. Alcohol misuse 
screening and counseling are screening and behavioral counseling 
interventions in primary care to reduce alcohol misuse. All three of 
these codes include screening and counseling services similar to 
counseling and other evaluation and management services included in the 
codes already on the list of primary care codes.
    In the recent CY 2019 PFS proposed rule (see 83 FR 35841 through 
35844)), CMS proposed to create three new HCPCS G-codes as part of a 
broader proposal to simplify the documentation requirements and to more 
accurately pay for services represented by CPT codes 99201 through 
99215 (codes for office or other outpatient visit for the evaluation 
and management of a patient). All three of these codes are ``add-on 
codes'' that describe additional resource components of a broader 
service furnished to the patient that are not accounted for in the 
valuation of the base codes.
    HCPCS code GPC1X is intended to capture the additional resource 
costs, beyond those involved in the base evaluation and management 
codes, of providing face-to-face primary care services for established 
patients. HCPCS code GPC1X would be billed in addition to the base 
evaluation and management code for an established patient when the 
visit includes primary care services. In contrast, new HCPCS code GCG0X 
is an add-on code intended to reflect the

[[Page 41899]]

complexity inherent to evaluation and management services associated 
with endocrinology, rheumatology, hematology/oncology, urology, 
neurology, obstetrics/gynecology, allergy/immunology, otolaryngology, 
cardiology, and interventional pain management-centered care. We 
believe it would be appropriate to include both proposed new HCPCS 
codes GCG0X and GPC1X in our definition of primary care services 
because they represent services that are currently included in CPT 
codes 99201 through 99215, which are already included in the list of 
primary care codes in Sec.  425.400(c).
    Finally, proposed new HCPCS code GPRO1 (prolonged evaluation and 
management or psychotherapy services beyond the typical service time of 
the primary procedure, in the office or other outpatient setting 
requiring direct patient contact beyond the usual service; 30 minutes) 
is modeled on CPT code 99354, a prolonged services code discussed 
earlier in this section which we are proposing to add to our list of 
primary care services. HCPCS code GPRO1 is intended to reflect 
prolonged evaluation and management or psychotherapy service(s) of 30 
minutes duration beyond the typical service time of the primary or base 
service, whereas existing CPT code 99354 reflects prolonged services of 
60 minutes duration. As is the case for code 99354, code GPRO1 would be 
billed separately in addition to the base office or other outpatient 
evaluation and management or psychotherapy service. We believe it would 
be appropriate to include proposed HCPCS code GPRO1 on our list of 
primary care services for the same reasons we are proposing to add CPT 
code 99354 to our list of primary care services. Because the proposed 
definition of HCPCS code GPRO1 also includes prolonged services for 
certain psychotherapy services, which are not currently included on our 
list of primary care services, we propose to include the allowed 
charges for HCPCS code GPRO1, for purposes of assigning beneficiaries 
to ACOs, only when the base code is also on the list of primary care 
services.
    We propose to include these codes in the definition of primary care 
services when performing beneficiary assignment under Sec.  425.402, 
for performance years starting on January 1, 2019, and subsequent 
years. We note, however, that our proposal to include the three 
proposed new ``add-on codes'', GPC1X, GCG0X, and GPRO1, is contingent 
on CMS finalizing its proposal to create these new codes for use 
starting in 2019.
    As previously discussed in section II.E.3.a, ACOs and other 
stakeholders have expressed concerns regarding our current policy of 
identifying services billed under CPT codes 99304 through 99318 
furnished in a SNF by using the POS modifier 31. We continue to believe 
it is appropriate to exclude from assignment services billed under CPT 
codes 99304 through 99318 when such services are furnished in a SNF. 
However, we agree with stakeholders that it might increase the accuracy 
of beneficiary assignment for these vulnerable and generally high cost 
beneficiaries if we were to revise our method for determining whether 
services identified by CPT codes 99304 through 99318 were furnished in 
a SNF to focus on whether the beneficiary also received SNF facility 
services on the same day. We believe it would be feasible for us to 
directly and more precisely determine whether services identified by 
CPT codes 99304 through 99318 were furnished in a SNF by analyzing our 
facility claims data files rather than by using the POS modifier 31 in 
our professional claims data files. Operationally, we would exclude 
professional services claims billed under CPT codes 99304 through 99318 
from use in the assignment methodology when there is a SNF facility 
claim in our claims files with dates of service that overlap with the 
date of service for the professional service. Therefore, we propose to 
revise the regulation at Sec.  425.400(c)(1)(iv)(A)(2), effective for 
performance years starting on January 1, 2019 and subsequent 
performance years, to remove the exclusion of claims including the POS 
code 31 and in its place indicate more generally that we would exclude 
services billed under CPT codes 99304 through 99318 when such services 
are furnished in a SNF.
    Under our current process, if CMS's HCPCS committee or the American 
Medical Association's CPT Editorial Panel modifies or replaces any of 
the codes that we designate as primary care service codes in Sec.  
425.400(c), we must revise the primary care service codes listed in 
Sec.  425.400(c) as appropriate through further rulemaking before the 
revised codes can be used for purposes of assignment. As noted 
previously, effective for CY 2018, the HCPCS codes for behavioral 
health integration G0502, G0503, G0504 and G0507 have been replaced by 
CPT codes 99492, 99493, 99494 and 99484. Therefore, consistent with our 
current process, we propose to revise the primary care service codes in 
Sec.  425.400(c)(1)(iv) to replace HCPCS codes G0502, G0503, G0504 and 
G0507 with CPT codes 99492, 99493, 99494 and 99484 for performance 
years starting on January 1, 2019, and subsequent performance years.
    We note that the regulations text at Sec.  425.400(c)(1)(iv) 
includes brief descriptions for the HCPCS codes that we have designated 
as primary care service codes, but does not include such descriptions 
for the CPT codes that we have designated as primary care service 
codes. For consistency, we are proposing a technical change to the 
regulations at Sec.  425.400(c)(1)(iv)(A) to also include descriptions 
for the CPT codes. We also note that one of the Chronic Care Management 
(CCM) codes, CPT code 99490, is inadvertently listed in the regulations 
text at Sec.  425.400(c)(1)(iv)(A)(6) along with the codes for 
Transitional Care Management (TCM) services. We are proposing a 
technical change to the regulations to move CPT code 99490 up to Sec.  
425.400(c)(1)(iv)(A)(5) with the other CCM codes.
    We welcome comments on the new codes we are proposing to add to the 
definition of primary care services used for purposes of assigning 
beneficiaries to Shared Savings Program ACOs. In addition, we seek 
comments on our proposal to revise our method for excluding services 
identified by CPT codes 99304 through 99318 when furnished in a SNF. We 
also seek comments on the other proposed technical changes to Sec.  
425.400(c)(1)(iv). We also welcome comments on any additional existing 
HCPCS/CPT codes that we should consider adding to the definition of 
primary care services in future rulemaking.
4. Extreme and Uncontrollable Circumstances Policies for the Shared 
Savings Program
a. Background
    Following the 2017 California wildfires and Hurricanes Harvey, 
Irma, Maria and Nate, stakeholders expressed concerns that the effects 
of these types of disasters on ACO participants, ACO providers/
suppliers, and the assigned beneficiary population could undermine an 
ACO's ability to successfully meet the quality performance standards, 
and adversely affect financial performance, including, in the case of 
ACOs under performance-based risk, increasing shared losses. To address 
these concerns, we published an interim final rule with comment period 
titled Medicare Program; Medicare Shared Savings Program: Extreme and 
Uncontrollable Circumstances Policies for Performance Year 2017 
(hereinafter referred to as the Shared Savings Program IFC) that 
appeared in the

[[Page 41900]]

Federal Register on December 26, 2017 (82 FR 60912). In the Shared 
Savings Program IFC, we established policies for addressing ACO quality 
performance scoring and the determination of the shared losses owed by 
ACOs participating under performance-based risk tracks for ACOs that 
were affected by extreme or uncontrollable circumstances during 
performance year 2017. The policies adopted in the Shared Savings 
Program IFC were effective for performance year 2017, including the 
applicable quality data reporting period for the performance year. We 
have considered the comments received to date on the Shared Savings 
Program IFC in developing the policies in this proposed rule for 2018 
and subsequent years.
    The extreme and uncontrollable circumstances policies established 
in the Shared Savings Program for performance year 2017 align with the 
policies established under the Quality Payment Program for the 2017 
MIPS performance period and subsequent MIPS performance periods (see CY 
2018 Quality Payment Program final rule with comment, 82 FR 53780 
through 53783 and Quality Payment Program IFC, 82 FR 53895 through 
53900). In particular, in the Shared Savings Program IFC (82 FR 60914), 
we indicated that we would determine whether an ACO has been affected 
by an extreme and uncontrollable circumstance by determining whether 20 
percent or more of the ACO's assigned beneficiaries resided in counties 
designated as an emergency declared area in performance year 2017 as 
determined under the Quality Payment Program or the ACO's legal entity 
is located in such an area. In the Quality Payment Program IFC, we 
explained that we anticipated that the types of events that could 
trigger the extreme and uncontrollable circumstances policies would be 
events designated a Federal Emergency Management Agency (FEMA) major 
disaster or a public health emergency declared by the Secretary, 
although we indicated that we would review each situation on a case-by-
case basis (82 FR 53897).
    Because ACOs may face extreme and uncontrollable circumstances in 
2018 and subsequent years, we believe it is appropriate to propose to 
extend the policies adopted in the Shared Savings Program IFC for 
addressing ACO quality performance scoring and the determination of the 
shared losses owed for ACOs affected by extreme or uncontrollable 
circumstances to performance year 2018 and subsequent performance 
years. In addition, in the Shared Savings Program IFC, we indicated 
that we planned to observe the impact of the 2017 hurricanes and 
wildfires on ACOs' expenditures for their assigned beneficiaries during 
performance year 2017, and might revisit the need to make adjustments 
to the methodology for calculating the benchmark in future rulemaking. 
We consider this issue further in the discussion that follows.
b. Proposed Revisions
    The financial and quality performance of ACOs located in areas 
subject to extreme and uncontrollable circumstances could be 
significantly and adversely affected. Disasters may have several 
possible effects on ACO quality and financial performance. For 
instance, displacement of beneficiaries may make it difficult for ACOs 
to access medical record data required for quality reporting, as well 
as, reduce the beneficiary response rate on survey measures. Further, 
for practices damaged by a disaster, the medical records needed for 
quality reporting may be inaccessible. We also believe that disasters 
may affect the infrastructure of ACO participants, ACO providers/
suppliers, and potentially the ACO legal entity itself, thereby 
disrupting routine operations related to their participation in the 
Shared Savings Program and achievement of program goals. The effects of 
a disaster could include challenges in communication between the ACO 
and its participating providers and suppliers and in implementation of 
and participation in programmatic activities. Catastrophic events 
outside the ACO's control can also increase the difficulty of 
coordinating care for patient populations, and due to the 
unpredictability of changes in utilization and cost of services 
furnished to beneficiaries, may have a significant impact on 
expenditures for the applicable performance year and the ACO's 
benchmark in the subsequent agreement period. These factors could 
jeopardize ACOs' ability to succeed in the Shared Savings Program, and 
ACOs, especially those in performance-based risk tracks, may reconsider 
whether they are able to continue their participation in the program.
    Because widespread disruptions could occur during 2018 or 
subsequent performance years, we believe it is appropriate to have 
policies in place to change the way in which we assess the quality and 
financial performance of Shared Savings Program ACOs in any affected 
areas. Accordingly, we propose to extend the automatic extreme and 
uncontrollable circumstances policies under the Shared Savings Program 
that were established for performance year 2017 to performance year 
2018 and subsequent performance years. Specifically, we propose that 
the Shared Savings Program extreme and uncontrollable circumstances 
policies for performance year 2018 and subsequent performance years 
would apply when we determine that an event qualifies as an automatic 
triggering event under the Quality Payment Program. As we discussed in 
the Shared Savings Program IFC (82 FR 60914), we believe it is also 
appropriate to extend these policies to encompass the quality reporting 
period, unless the reporting period is extended, because if an ACO is 
unable to submit its quality data as a result of a disaster occurring 
during the quality data submission window, we would not have the 
quality data necessary to measure the ACO's quality performance for the 
performance year. For example, if an extreme and uncontrollable event 
were to occur in February 2019, which we anticipate would be during the 
quality data reporting period for performance year 2018, then the 
extreme and uncontrollable circumstances policies would apply for 
quality data reporting and quality performance scoring for performance 
year 2018, if the reporting period is not extended. We do not believe 
it is appropriate to extend this policy to encompass the quality data 
reporting period if the reporting period is extended because affected 
ACOs would have an additional opportunity to submit their quality data, 
enabling us to measure their quality performance in the applicable 
performance year. Accordingly, we also propose that the policies 
regarding quality reporting would apply with respect to the 
determination of the ACO's quality performance in the event that an 
extreme and uncontrollable event occurs during the applicable quality 
data reporting period for a performance year and the reporting period 
is not extended. However, we note that, because a disaster that occurs 
after the end of the performance year would have no impact on the 
determination of an ACO's financial performance for that performance 
year, we do not believe it would be appropriate to make an adjustment 
to shared losses in the event an extreme or uncontrollable event occurs 
during the quality data reporting period.
(1) Modification of Quality Performance Scores for all ACOs in Affected 
Areas
    As we explained in the Shared Savings Program IFC (82 FR 60914 
through 60916), ACOs and their ACO

[[Page 41901]]

participants and ACO providers/suppliers are frequently located across 
several different geographic regions or localities, serving a mix of 
beneficiaries who may be differentially impacted by hurricanes, 
wildfires, or other triggering events. Therefore, for 2017, we 
established a policy for determining when an ACO, which may have ACO 
participants and ACO providers/suppliers located in multiple geographic 
areas, would qualify for the automatic extreme and uncontrollable 
circumstance policies for the determination of quality performance. 
Specifically, we adopted a policy for performance year 2017 of 
determining whether an ACO has been affected by extreme and 
uncontrollable circumstances by determining whether 20 percent or more 
of the ACO's assigned beneficiaries resided in counties designated as 
an emergency declared area in the performance year, as determined under 
the Quality Payment Program as discussed in the Quality Payment Program 
IFC (82 FR 53898) or the ACO's legal entity is located in such an area. 
For 2017, we adopted a policy under which the location of an ACO's 
legal entity is determined based on the address on file for the ACO in 
CMS's ACO application and management system. We used 20 percent of the 
ACO's assigned beneficiary population as the minimum threshold to 
establish an ACO's eligibility for the policies regarding quality 
reporting and quality performance scoring for 2017 because, as we 
stated in the Shared Savings Program IFC, we believe the 20 percent 
threshold provides a reasonable way to identify ACOs whose quality 
performance may have been adversely affected by an extreme or 
uncontrollable circumstance, while excluding ACOs whose performance 
would not likely be significantly affected.
    The 20 percent threshold was selected to account for the effect of 
an extreme or uncontrollable circumstance on an ACO that has the 
minimum number of assigned beneficiaries to be eligible for the program 
(5,000 beneficiaries), and in consideration of the average total number 
of unique beneficiaries for whom quality information is required to be 
reported in the combined CAHPS survey sample (860 beneficiaries) and 
the CMS web interface sample (approximately 3,500 beneficiaries). 
(There may be some overlap between the CAHPS sample and the CMS web 
interface sample.) Therefore, we estimated that an ACO with an assigned 
population of 5,000 beneficiaries typically would be required to report 
quality information on a total of 4,000 beneficiaries. Thus, we 
indicated that we believe the 20 percent threshold ensures that an ACO 
with the minimum number of assigned beneficiaries would have an 
adequate number of beneficiaries across the CAHPS and CMS web interface 
samples in order to fully report on these measures. However, we also 
noted that it is possible that some ACOs that have fewer than 20 
percent of their assigned beneficiaries residing in affected areas may 
have a legal entity that is located in an emergency declared area. 
Consequently, their ability to quality report may be equally impacted 
because the ACO legal entity may be unable to collect the necessary 
information from the ACO participants or experience infrastructure 
issues related to capturing, organizing, and reporting the data to CMS. 
We stated that if less than 20 percent of the ACO's assigned 
beneficiaries reside in an affected area and the ACO's legal entity is 
not located in a county designated as an affected area, then we believe 
that there is unlikely to be a significant impact upon the ACO's 
ability to report or on the representativeness of the quality 
performance score that is determined for the ACO. For performance year 
2017, we will determine what percentage of the ACO's performance year 
assigned population was affected by a disaster based on the final list 
of beneficiaries assigned to the ACO for the performance year. Although 
beneficiaries are assigned to ACOs under Track 1 and Track 2 based on 
preliminary prospective assignment with retrospective reconciliation 
after the end of the performance year, these ACOs will be able to use 
their quarterly assignment lists, which include beneficiaries' counties 
of residence, for early insight into whether they are likely to meet 
the 20 percent threshold.
    In the Shared Savings Program IFC, we modified the quality 
performance standard specified under Sec.  425.502 by adding a new 
paragraph (f) to address potential adjustments to the quality 
performance score for performance year 2017 of ACOs determined to be 
affected by extreme and uncontrollable circumstances. We also modified 
Sec.  425.502(e)(4) to specify that an ACO receiving the mean Shared 
Savings Program ACO quality score for performance year 2017 based on 
the extreme and uncontrollable circumstances policies is not eligible 
for bonus points awarded based on quality improvement in that year 
because quality data will not be available to determine if there was 
improvement from year to year.
    In the Shared Savings Program IFC, we established policies with 
respect to quality reporting and quality performance scoring for the 
2017 performance year. In anticipation of any future extreme and 
uncontrollable events, we believe it is appropriate to propose to 
extend these policies, with minor modifications, to subsequent 
performance years as well. In order to avoid confusion and reduce 
unnecessary burdens on affected ACOs, we propose to align our policies 
for 2018 and subsequent years with policies established for the Quality 
Payment Program in final rule with comment period, entitled CY 2018 
Updates to the Quality Payment Program (82 FR 53568). Specifically, we 
propose to apply determinations made under the Quality Payment Program 
with respect to whether an extreme and uncontrollable circumstance has 
occurred and the identification of the affected geographic areas and 
the applicable time periods. Generally, in line with the approach taken 
for 2017 in the Quality Payment Program IFC (82 FR 53897), we 
anticipate that the types of events that would be considered an 
automatic triggering event would be events designated as a Federal 
Emergency Management Agency (FEMA) major disaster or a public health 
emergency declared by the Secretary, but CMS will review each situation 
on a case-by-case basis. We also propose that CMS would have sole 
discretion to determine the time period during which an extreme and 
uncontrollable circumstance occurred, the percentage of the ACO's 
assigned beneficiaries residing in the affected areas, and the location 
of the ACO legal entity. Additionally, we propose to determine an ACO's 
legal entity location based on the address on file for the ACO in CMS's 
ACO application and management system.
    In the Shared Savings Program IFC, we established a policy for 
performance year 2017 under which we will determine the percentage of 
the ACO's assigned population that was affected by a disaster based on 
the final list of beneficiaries assigned to the ACO for the performance 
year. We begin producing the final list of assigned beneficiaries after 
allowing for 3 months of claims run out following the end of a 
performance year. However, the quality reporting period ends before the 
3-month claims run out period ends. Therefore, we are concerned that 
if, for future performance years, we continue to calculate the 
percentage of affected beneficiaries based on the ACO's final

[[Page 41902]]

list of assigned beneficiaries, it would not be operationally feasible 
for us to notify an ACO as to whether it meets the 20 percent threshold 
prior to the end of the quality reporting period because the final list 
of assigned beneficiaries is not available until after the close of the 
quality reporting period. We now believe it would be appropriate to 
base this calculation on the list of assigned beneficiaries used to 
generate the Web Interface quality reporting sample, which would be 
available with the quarter three program reports, generally in November 
of the applicable performance year (or calendar year for the 6-month 
performance year (or performance period) from January 1, 2019, through 
June 30, 2019). Under this timeline, we would be able to notify ACOs 
earlier as to whether they exceed the 20 percent threshold, and ACOs 
could then use this information to decide whether to report quality 
data for the performance year. Therefore, for performance year 2018 and 
subsequent performance years, we are proposing to determine the 
percentage of an ACO's assigned beneficiaries that reside in an area 
affected by an extreme and uncontrollable circumstance using the list 
of assigned beneficiaries used to generate the Web Interface quality 
reporting sample. We believe we can use this assignment list report 
regardless of the date(s) the natural disaster occurred. The assignment 
list report provides us with a list of beneficiaries who have received 
the plurality of their primary care services from ACO professionals in 
the ACO at a specific point in time. As this is the list that is used 
to determine the quality reporting sample, we believe it is appropriate 
to use the same list to determine how many of the ACO's beneficiaries 
reside in an area affected by a disaster, such that the ACO's ability 
to report quality data could be compromised. We propose to revise Sec.  
425.502(f) to reflect this proposal for performance year 2018 and 
subsequent years. We welcome comments on this proposal
    In the Shared Savings Program IFC (82 FR 60916), we described the 
policies under the MIPS APM scoring standard that would apply for 
performance year 2017 for MIPS eligible clinicians in an ACO that did 
not completely report quality. The existing tracks of the Shared 
Savings Program (Track 1, Track 2 and Track 3), and the Track 1+ Model 
are MIPS APMs under the APM scoring standard.\23\ If finalized, we 
expect the proposed BASIC track and ENHANCED track (based on Track 3) 
would similarly be considered MIPS APMs under the APM scoring standard. 
For purposes of the APM scoring standard, MIPS eligible clinicians in 
an ACO that has been affected by an extreme and uncontrollable 
circumstance and does not report quality for a performance year, and 
therefore, receives the mean ACO quality score under the Shared Savings 
Program, would have the MIPS quality performance category reweighted to 
zero percent resulting in MIPS performance category weighting of 75 
percent for the Promoting Interoperability performance category and 25 
percent for Improvement Activities performance category under the APM 
scoring standard per our policy at Sec.  414.1370(h)(5)(i)(B). In the 
event an ACO that has been affected by an extreme and uncontrollable 
circumstance is able to completely and accurately report all quality 
measures for a performance year, and therefore receives the higher of 
the ACO's quality performance score or the mean quality performance 
score under the Shared Savings Program, we would not reweight the MIPS 
quality performance category to zero percent under the APM scoring 
standard. Additionally, unless otherwise excepted, the ACO participants 
will receive a Promoting Interoperability (PI) (formerly called 
Advancing Care Information (ACI)) performance category score under the 
APM scoring standard based on their reporting, which could further 
increase their final score under MIPS.
---------------------------------------------------------------------------

    \23\ See, for example Alternative Payment Models in the Quality 
Payment Program as of February 2018, available at https://www.cms.gov/Medicare/Quality-Payment-Program/Resource-Library/Comprehensive-List-of-APMs.pdf.
---------------------------------------------------------------------------

    We propose to revise Sec.  425.502(f) to extend the policies 
established for performance year 2017 to performance year 2018 and 
subsequent performance years. Specifically, we propose that for 
performance year 2018 and subsequent performance years, including the 
applicable quality data reporting period for the performance year if 
the reporting period is not extended, in the event that we determine 
that 20 percent or more of an ACO's assigned beneficiaries, as 
determined using the list of beneficiaries used to generate the Web 
Interface quality reporting sample, reside in an area that is affected 
by an extreme and uncontrollable circumstance, as determined under the 
Quality Payment Program, or that the ACO's legal entity is located in 
such an area, we would use the following approach to calculate the 
ACO's quality performance score instead of the methodology specified in 
Sec.  425.502(a) through (e).
     The ACO's minimum quality score would be set to equal the 
mean quality performance score for all Shared Savings Program ACOs for 
the applicable performance year.
     If the ACO is able to completely and accurately report all 
quality measures, we would use the higher of the ACO's quality 
performance score or the mean quality performance score for all Shared 
Savings Program ACOs. If the ACO's quality performance score is used, 
the ACO would also be eligible for quality improvement points.
     If the ACO receives the mean Shared Savings Program 
quality performance score, the ACO would not be eligible for bonus 
points awarded based on quality improvement during the applicable 
performance year.
     If an ACO receives the mean Shared Savings Program ACO 
quality performance score for a performance year, in the next 
performance year for which the ACO reports quality data and receives a 
quality performance score based on its own performance, we would 
measure quality improvement based on a comparison between the ACO's 
performance in that year and in the most recently available prior 
performance year in which the ACO reported quality. Under this 
approach, the comparison will continue to be between consecutive years 
of quality reporting, but these years may not be consecutive calendar 
years.
    Additionally, we propose to address the possibility that ACOs that 
have a 6-month performance year (or performance period) during 2019 may 
be affected by extreme and uncontrollable circumstances. As described 
in section II.A.7 of this proposed rule, we are proposing to use 12 
months of data, based on the calendar year, to determine quality 
performance for the two 6-month performance years during 2019 (from 
January 2019 through June 2019, and from July 2019 through December 
2019). We are also proposing to use this same approach to determine 
quality performance for ACOs that start a 12-month performance year on 
January 1, 2019, and then elect to voluntarily terminate their 
participation agreement with an effective termination date of June 30, 
2019, and enter a new agreement period starting on July 1, 2019. 
Accordingly, we believe it is necessary to account for disasters 
occurring in any month(s) of calendar year 2019 for ACOs participating 
in a 6-month performance year (or performance period) during 2019 
regardless of whether the ACO is actively participating in the Shared 
Savings Program at the time of the

[[Page 41903]]

disaster. Therefore, for ACOs affected by a disaster in any month of 
2019, we would use the alternative scoring methodology specified in 
Sec.  425.502(f) to determine the quality performance score for the 
2019 quality reporting period, if the reporting period is not extended. 
For example, assume that an ACO participates in the Shared Savings 
Program for a 6-month performance year from January 1, 2019, through 
June 30, 2019, and does not continue its participation in the program 
for a new agreement period beginning July 1, 2019. Further assume that 
we determine that 20 percent or more of the ACO's assigned 
beneficiaries, as determined using the list of beneficiaries used to 
generate the Web Interface quality reporting sample, reside in an area 
that is affected by an extreme and uncontrollable circumstance, as 
determined under the Quality Payment Program, in September 2019. The 
ACO's quality performance score for the 2019 reporting period would be 
adjusted according to the policies in Sec.  425.502(f).
    We propose to specify the applicability of the alternative scoring 
methodology in Sec.  425.502(f) to the 6-month performance years (or 
the 6-month performance period) within calendar year 2019 in the 
proposed new section of the regulations at Sec.  425.609 that describes 
the methodology for determining an ACO's financial and quality 
performance for the two 6-month performance years (or the 6-month 
performance period) during 2019.
(2) Mitigating Shared Losses for ACOs Participating in a Performance-
Based Risk Track
    In the Shared Savings Program IFC (82 FR 60916) we modified the 
payment methodology for performance-based risk tracks for performance 
year 2017, established under the authority of section 1899(i) of the 
Act, to mitigate shared losses owed by ACOs affected by extreme and 
uncontrollable circumstances. Under this approach, we will reduce the 
ACO's shared losses, if any, determined to be owed for performance year 
2017 under the existing methodology for calculating shared losses in 
the Shared Savings Program regulations at 42 CFR part 425 subpart G by 
an amount determined by multiplying the shared losses by two factors: 
(1) The percentage of the total months in the performance year affected 
by an extreme and uncontrollable circumstance; and (2) the percentage 
of the ACO's assigned beneficiaries who reside in an area affected by 
an extreme and uncontrollable circumstance. For performance year 2017, 
we will determine the percentage of the ACO's performance year assigned 
beneficiary population that was affected by the disaster based on the 
final list of beneficiaries assigned to the ACO for the performance 
year. For example, assume that an ACO is determined to owe shared 
losses of $100,000 for performance year 2017, a disaster was declared 
for October through December during the performance year, and 25 
percent of the ACO's assigned beneficiaries reside in the disaster 
area. In this scenario, we would adjust the ACO's losses in the 
following manner: $100,000 - ($100,000 x 0.25 x 0.25) = $100,000 - 
$6,250 = $93,750. The policies for performance year 2017 are specified 
in paragraph (i) in Sec.  425.606 for ACOs under Track 2 and Sec.  
425.610 for ACOs under Track 3.
    We believe it is appropriate to continue to apply these policies in 
performance year 2018 and subsequent years to address stakeholders' 
concerns that ACOs participating under a performance-based risk track 
could be held responsible for sharing losses with the Medicare program 
resulting from catastrophic events outside the ACO's control given the 
increase in utilization, difficulty of coordinating care for patient 
populations leaving the impacted areas, and the use of natural disaster 
payment modifiers making it difficult to identify whether a claim would 
otherwise have been denied under normal Medicare FFS rules. Absent this 
relief, we believe ACOs that are participating in performance-based 
risk tracks may reconsider whether they are able to continue their 
participation in the Shared Savings Program under a performance-based 
risk track. The approach we adopted for performance year 2017 in the 
Shared Savings Program IFC, and which we are proposing to continue for 
performance year 2018 and subsequent years, balances the need to offer 
relief to affected ACOs with the need to continue to hold those ACOs 
accountable for losses incurred during the months in which there was no 
applicable disaster declaration and for the portion of their final 
assigned beneficiary population that was outside the area affected by 
the disaster. Consistent with the policy adopted for performance year 
2017 in the Shared Savings Program IFC, we believe it is appropriate to 
continue to use the final assignment list report for the performance 
year for purposes of this calculation. This final assignment list 
report will be available at the time we conduct final reconciliation 
and provides the most complete information regarding the extent to 
which an ACO's assigned beneficiary population was affected by a 
disaster.
    Additionally, we propose to also address the possibility that ACOs 
that have a 6-month performance year during 2019 may be affected by 
extreme and uncontrollable circumstances. As described in section 
II.A.7 of this proposed rule, we are proposing to use 12 months of 
expenditure data, based on the calendar year, to perform financial 
reconciliation for the two 6-month performance years during 2019 (from 
January 2019 through June 2019, and from July 2019 through December 
2019). Accordingly, for ACOs participating in a 6-month performance 
year during 2019, we believe it is necessary to account for disasters 
occurring in any month(s) of calendar year 2019, regardless of whether 
the ACO is actively participating in the Shared Savings Program at the 
time of the disaster. This proposal applies to ACOs participating under 
a 6-month performance year during calendar year 2019, that would be 
reconciled based on their financial performance during the entire 12-
month calendar year 2019 (as described in section II.A.7 of this 
proposed rule and in the proposed provision at Sec.  425.609). This 
proposal also applies to ACOs that start a 12-month performance year on 
January 1, 2019, and then elect to voluntarily terminate their 
participation agreement with an effective termination date of June 30, 
2019, and enter a new agreement period starting on July 1, 2019. 
Consistent with Sec.  425.221(b)(3)(i), we would reconcile these ACOs 
for the performance period from January 1, 2019, through June 30, 2019, 
based on their financial performance during the entire 12-month 
calendar year 2019, according to the methodology in the proposed 
provision at Sec.  425.609.
    For ACOs with a 6-month performance year (or performance period) 
that are affected by an extreme or uncontrollable circumstance during 
calendar year 2019, we propose to first determine shared losses for the 
ACO over the full calendar year, adjust the ACO's losses for extreme 
and uncontrollable circumstances, and then determine the portion of 
shared losses for the 6-month performance year (or performance period) 
according to the methodology proposed under Sec.  425.609. For example, 
assume that: A disaster was declared for October 2019 through December 
2019; an ACO is being reconciled for its participation during the 
performance year (or performance period) from January 1, 2019, through 
June 30, 2019; the ACO is determined to have shared losses of $100,000 
for calendar year 2019; and 25 percent of

[[Page 41904]]

the ACO's assigned beneficiaries reside in the disaster area. In this 
scenario, we would adjust the ACO's losses in the following manner: 
$100,000-($100,000 x 0.25 x 0.25) = $100,000-$6,250 = $93,750, then we 
would multiply these losses by the portion of the year the ACO 
participated = $93,750 x 0.5 = $46,875.
    This proposed approach to mitigate shared losses for ACOs that may 
be affected by extreme and uncontrollable circumstances would also 
apply to ACOs that are liable for a pro-rated share of losses, 
determined based on their financial performance during the entire 
performance year, as a consequence of voluntary termination of a 12-
month performance year after June 30 or involuntary termination by CMS 
(as described in section II.A.6 of this proposed rule and in the 
proposed revisions to Sec.  425.221(b)(2)). We note that according to 
the proposed policies in section II.A.6.d of this proposed rule, an ACO 
under a two-sided model that voluntarily terminates its participation 
agreement under Sec.  425.220 during a 6-month performance year with an 
effective date of termination prior to the last calendar day of the 
performance year is not liable for shared losses incurred during the 
performance year. For ACOs that are involuntarily terminated from a 6-
month performance year, pro-rated shared losses for the 6-month 
performance year would be determined based on assigned beneficiary 
expenditures for the full calendar year 2019 (as described in section 
II.A.7 of this proposed rule) and then pro-rated to account for the 
partial year of participation prior to involuntary termination.
    We acknowledge that it is possible that ACOs that either 
voluntarily terminate after June 30th of a 12-month performance year or 
are involuntarily terminated and will be reconciled to determine a pro-
rated share of any shared losses may also be affected by extreme and 
uncontrollable circumstances. In this case, we propose that the amount 
of shared losses calculated for the calendar year would be adjusted to 
reflect the number of months and the percentage of the assigned 
beneficiary population affected by extreme and uncontrollable 
circumstances, before we calculate the pro-rated amount of shared 
losses for the portion of the year the ACO participated in the Shared 
Savings Program. For example, assume that: A disaster was declared for 
October 2019 through December 2019; an ACO had been involuntarily 
terminated on March 31, 2019 and will be reconciled for its 
participation during the portion of the performance year from January 
1, 2019 through March 31, 2019. The ACO is determined to have shared 
losses of $100,000 for calendar year 2019; and 25 percent of the ACO's 
assigned beneficiaries reside in the disaster area. In this scenario, 
we would adjust the ACO's losses in the following manner: $100,000-
($100,000 x 0.25 x 0.25) = $100,000-$6,250 = $93,750, then we would 
multiply these losses by the portion of the year the ACO participated = 
$93,750 x 0.25 = $23,437.50.
    Therefore, we propose to amend Sec. Sec.  425.606(i) and 425.610(i) 
to extend the policies regarding extreme and uncontrollable 
circumstances that were established for performance year 2017 to 
performance year 2018 and subsequent years. In section II.A.3.a of this 
proposed rule, we discuss our proposal that these policies for 
addressing the impact of extreme and uncontrollable circumstances on 
ACO financial performance would also apply to BASIC track ACOs under 
performance-based risk. These proposals are reflected in the proposed 
new provision at Sec.  425.605(f). We also propose to specify in 
revisions to Sec. Sec.  425.606(i) and 425.610(i), and in the proposed 
new provision for the BASIC track at Sec.  425.605(f), that the 
policies regarding extreme and uncontrollable circumstances will also 
apply to ACOs that are reconciled for a partial year of performance 
under Sec.  425.221(b)(2) as a result of voluntary or involuntary early 
termination. The proposed revisions to Sec. Sec.  425.606(i) and 
425.610(i) also address the applicability of these policies to a Track 
2 or Track 3 ACO that starts a 12-month performance year on January 1, 
2019, and then elects to voluntarily terminate its participation 
agreement with an effective termination date of June 30, 2019, and 
enters a new agreement period starting on July 1, 2019; these ACOs 
would be reconciled for the performance period from January 1, 2019 
through June 30, 2019, consistent with the proposed new provision at 
Sec.  425.221(b)(3)(i). In addition, we are proposing to include a 
provision at Sec.  425.609(d) to provide that the policies on extreme 
and uncontrollable circumstances would apply to the determination of 
shared losses for ACOs participating in a 6-month performance year 
during 2019.
    We note that to the extent that our proposal to extend the policies 
adopted in the Shared Savings Program IFC to 2018 and subsequent 
performance years constitutes a proposal to change the payment 
methodology for 2018 after the start of the performance year, we 
believe that consistent with section 1871(e)(1)(A)(ii) of the Act, and 
for the reasons discussed in this section of this proposed rule, it 
would be contrary to the public interest not to propose to establish a 
policy under which we would have the authority adjust the shared losses 
calculated for ACOs in Track 2 and Track 3 for performance year 2018 to 
reflect the impact of any extreme or uncontrollable circumstances that 
may occur during the year.
    These proposed policies would not change the status of those 
payment models that meet the criteria to be Advanced APMs under the 
Quality Payment Program (see Sec.  414.1415). Our proposed policies 
would reduce the amount of shared losses owed by ACOs affected by a 
disaster, but the overall financial risk under the payment model would 
not change and participating ACOs would still remain at risk for an 
amount of shared losses in excess of the Advanced APM generally 
applicable nominal amount standard. Additionally, these policies would 
not prevent an eligible clinician from satisfying the requirements to 
become a QP for purposes of the APM Incentive Payment (available for 
payment years through 2024) or higher physician fee schedule updates 
(for payment years beginning in 2026) under the Quality Payment 
Program.
    We also want to emphasize that all ACOs would continue to be 
entitled to share in any savings they may achieve for a performance 
year. ACOs in all tracks of the program will continue to receive shared 
savings payments, if any, as determined under subpart G of the 
regulations. The calculation of savings and the determination of shared 
savings payment amounts for a performance year would not be affected by 
the proposed policies to address extreme and uncontrollable 
circumstances, except that the quality performance score for an 
affected ACO may be adjusted as described in this section of this 
proposed rule.
(3) Determination of Historical Benchmarks for ACOs in Affected Areas
    In the Shared Savings Program IFC, we sought comment on how to 
address the impact of extreme and uncontrollable circumstances on the 
expenditures for an ACO's assigned beneficiary population for purposes 
of determining the benchmark (82 FR 60917). As we explained in the 
Shared Savings Program IFC (82 FR 60913), the impact of disasters on an 
ACO's financial performance could be unpredictable as a result of 
changes in utilization and cost of services furnished to the Medicare 
beneficiaries it serves. In some cases, ACO

[[Page 41905]]

participants might be unable to coordinate care because of migration of 
patient populations leaving the impacted areas. On the other hand, 
patient populations remaining in impacted areas might receive fewer 
services and have lower overall costs to the extent that healthcare 
providers are unable to reopen their offices because they lack power 
and water, or have limited access to fuel for operating alternate power 
generators. Significant changes in costs incurred, whether increased or 
decreased, as a result of an extreme or uncontrollable circumstance may 
impact the benchmark determined for the ACO's subsequent agreement 
period in the Shared Savings Program, as performance years of the 
current agreement period become the historical benchmark years for the 
subsequent agreement period. An increase in expenditures for a 
particular calendar year would result in a higher benchmark value when 
the same calendar year is used to determine the ACO's historical 
benchmark, and in calculating adjustments to the rebased benchmark 
based on regional FFS expenditures. Likewise, a decrease in 
expenditures for a particular calendar year would result in a lower 
benchmark value when the same calendar year is used to determine the 
ACO's historical benchmark.
    While considering options for adjusting ACOs' historical benchmarks 
to account for disasters occurring during a benchmark year, we 
considered the effect that the proposed regional factors, that are 
discussed in section II.D.3 might have on the historical benchmarks for 
ACOs located in a disaster area. After review, we believe that when 
regional factors are applied to an ACO's historical benchmark, the 
regional factors would inherently adjust for variations in expenditures 
from year to year, and thus would also adjust for regional variations 
in expenditures related to extreme and uncontrollable circumstances. 
For example, assume that an ACO experienced a reduction in beneficiary 
expenditures in performance year 2017 because a portion of its assigned 
beneficiaries resided in counties that were impacted by a disaster. 
Then, also assume expenditures returned to their previously higher 
level in 2018 and this ACO subsequently renewed its ACO participation 
agreement in 2020. In 2020, when the ACO's historical benchmark would 
be reset (rebased), the expenditures for 2017 (now a historical 
benchmark year) would be subject to a higher regional trend factor 
because expenditures increased back to the expected level in 2018, 
which would increase the 2017 benchmark year expenditures. 
Additionally, this ACO could also have its historical benchmark 
increased even further as a result of its performance compared to 
others in its region, as reflected in the regional adjustment to the 
ACO's historical benchmark. In contrast, consider an ACO that 
experienced an increase in beneficiary expenditures in performance year 
2017 because a portion of its assigned beneficiaries resided in 
counties that were impacted by a disaster. Then, assume expenditures 
returned to their previously lower level in 2018 and this ACO renewed 
its ACO participation agreement in 2020. In 2020, when the ACO's 
historical benchmark would be reset, the expenditures for 2017 would be 
subject to a lower regional trend factor because expenditures decreased 
back to the expected level in 2018, which would decrease the 2017 
benchmark year expenditures. Additionally, this ACO could also have its 
historical benchmark decreased further as a result of its performance 
compared to others in its region, as reflected in the regional 
adjustment to the ACO's historical benchmark.
    Our expectation that the proposed regional factors that would be 
used to establish an ACO's historical benchmark would also adjust for 
variations in expenditures related to extreme and uncontrollable 
circumstances is supported by a preliminary analysis of data for areas 
that were affected by the disasters that occurred in performance year 
2017. Our analysis of the data showed that, as a result of the 
disasters in these areas, expenditure trends for the performance year 
appeared below projections. For these areas, the expenditures began to 
increase after the disaster incident period ended, but expenditures 
were still below expectations for the year. Based on the expenditure 
trends beginning to return to expected levels after the disaster 
period, it would be reasonable to expect that expenditures would 
continue to increase to expected levels in 2018. This difference 
between the lower than expected levels of expenditures in 2017 and a 
return to expected expenditures in 2018, would result in a higher 
regional trend factor being applied to 2017 expenditures when they are 
used to determine an ACO's historical benchmark.
    In considering whether it might be necessary to make an additional 
adjustment to ACOs' historical benchmarks to account for expenditure 
variations related to extreme and uncontrollable circumstances, we 
considered an approach where we would adjust the historical benchmark 
by reducing the weight of expenditures for beneficiaries who resided in 
a disaster area during a disaster period and placing a correspondingly 
larger weight on expenditures for beneficiaries residing outside the 
disaster area during the disaster period. Such an approach would be 
expected to proportionally increase the historical benchmark for ACOs 
that experienced a decrease in expenditures, and conversely 
proportionally decrease the historical benchmark for ACOs that 
experienced an increase in expenditures for their assigned 
beneficiaries who were impacted by a disaster. Under this approach, for 
each of the historical benchmark years, we would identify each ACO's 
assigned beneficiaries who had resided in a disaster area during a 
disaster period. The portion of expenditures for these assigned 
beneficiaries that was impacted by the disaster would be removed from 
the applicable historical benchmark year(s). The removal of these 
expenditures from the historical benchmark year(s) would allow the 
historical benchmark calculations to include only expenditures that 
were not impacted by the disaster. We believe this methodology for 
calculating benchmark expenditures would adjust for expenditure 
increases or decreases that may occur as a result of impacts related to 
a disaster.
    If we were to implement such an adjustment to the historical 
benchmark, we believe it would be appropriate to avoid making minor 
historical benchmark adjustments for an ACO that was not significantly 
affected by a disaster by establishing a minimum threshold for the 
percentage of an ACO's beneficiaries located in a disaster area. Based 
on data from 2017, quarter 3, over 80 percent of ACOs had less than 50 
percent of their assigned beneficiaries residing in disaster counties, 
with over 75 percent having less than 10 percent of their assigned 
beneficiaries residing in disaster counties. Based on this data, we 
believe a minimum threshold of 50 percent of assigned beneficiaries 
residing in disaster counties could be an appropriate threshold for the 
adjustment to historical benchmarks because historical benchmarks are 
calculated based on the ACO's entire assigned beneficiary population in 
each benchmark year, rather than a sample as is used for quality 
reporting.
    However, we are concerned that this methodology for calculating an 
adjustment might not be as accurate as the inherent adjustment that 
would result from applying regional factors when resetting the 
benchmark and may

[[Page 41906]]

impact other expected expenditure variations occurring in the impacted 
areas. For example, if an additional disaster adjustment were to be 
applied, it might have unintended impacts when expenditure truncation 
is applied, it might inappropriately weight and not account for 
expected variations in expenditures between areas that were and were 
not impacted by the disaster, and it might compound effects that have 
already been offset by the regional adjustment. In addition, the 
expenditures, as adjusted, may not be representative of the ACO's 
actual performance and aggregate assigned beneficiary population during 
the benchmark period.
    In summary, we believe the regional factors that we are proposing 
to apply as part of the methodology for determining an ACO's historical 
benchmark would reduce the expenditures in a historical benchmark year 
when they are greater than expected (relative to other historical 
benchmark years) as a result of a disaster and conversely increase 
expenditures in a historical benchmark year when they are below the 
expected amount. For these reasons, we believe that the proposal in 
section II.D.3 of this proposed rule to apply regional factors when 
determining ACOs' historical benchmarks, starting with an ACO's first 
agreement period for agreement periods starting on July 1, 2019, and in 
subsequent years, would be sufficient to address any changes in 
expenditures during an ACO's historical benchmark years as a result of 
extreme and uncontrollable circumstances, and an additional adjustment, 
such as the method discussed previously in this section would not 
appear to be necessary. However, we will continue to evaluate the 
impact of the 2017 disasters on ACOs' assigned beneficiary 
expenditures, and we intend to continue to consider whether it might be 
appropriate to make an additional adjustment to the historical 
benchmark to account for expenditures that may have increased or 
decreased in a historical benchmark year as a result of an extreme or 
uncontrollable circumstance.
    We welcome comments on these issues, including whether it is 
necessary to adjust ACOs' historical benchmarks to account for extreme 
and uncontrollable circumstances that might occur during a benchmark 
year, and appropriate methods for making such benchmark adjustments. We 
would also note that the proposal in section II.D.3 of this proposed 
rule to apply regional factors to determine ACOs' historical benchmarks 
would apply starting with an ACO's first agreement period for agreement 
periods starting on July 1, 2019, and in subsequent years and would 
therefore have no effect on benchmarks for ACOs in a first agreement 
period starting before July 1, 2019. Accordingly, we welcome comments 
on whether and how an adjustment should be made for ACOs whose 
benchmarks do not reflect these regional factors.
    We invite comments on the policies being proposed for assessing the 
financial and quality performance of ACOs affected by an extreme or 
uncontrollable circumstance during performance year 2018 and subsequent 
years, including the applicable quality data reporting period for the 
performance year, unless the reporting period is extended. We believe 
these policies would reduce burden and financial uncertainty for ACOs, 
ACO participants, and ACO providers/suppliers affected by future 
catastrophes, and will also align with existing Medicare policies in 
the Quality Payment Program. We also invite comments on any additional 
areas where relief may be helpful or other ways to mitigate unexpected 
issues that may arise in the event of an extreme and uncontrollable 
circumstance.
5. Program Data and Quality Measures
    In this section, we solicit comments on possible changes to the 
quality measure set and modifications to program data shared with ACOs 
to support CMS's Meaningful Measures initiative and respond to the 
nation's opioid misuse epidemic. As part of the Meaningful Measures 
initiative, we are focusing the agency's efforts on updating quality 
measures, reducing regulatory burden, and promoting innovation (see CMS 
Press Release, CMS Administrator Verma Announces New Meaningful 
Measures Initiative and Addresses Regulatory Reform; Promotes 
Innovation at LAN Summit, October 30, 2017, available at https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2017-Press-releases-items/2017-10-30.html). Under the Meaningful Measures 
initiative, we are working towards assessing performance on only those 
core issues that are most vital to providing high-quality care and 
improving patient outcomes, with an emphasis on outcome-based measures, 
reducing unnecessary burden on providers, and putting patients first. 
When we developed the quality reporting requirements under the Shared 
Savings Program, we considered the quality reporting requirements under 
other initiatives, such as the Physician Quality Reporting System 
(PQRS) and Million Hearts Initiative, and consulted with the measures 
community to ensure that the specifications for the measures used under 
the Shared Savings Program are up-to-date and reduce reporting burden.
    Since the Shared Savings Program was first established in 2012, we 
have not only updated the quality measure set to reduce reporting 
burden, but also to focus on more meaningful outcome-based measures. 
The most recent updates to the Shared Savings Program quality measure 
set were made in the CY 2017 PFS Final Rule (81 FR 80484 through 80489) 
to adopt the ACO measure recommendations made by the Core Quality 
Measures Collaborative, a multi-stakeholder group with the goal of 
aligning quality measures for reporting across public and private 
stakeholders in order to reduce provider reporting burden. Currently, 
more than half of the 31 Shared Savings Program quality measures are 
outcome-based, including:
     Patient-reported outcome measures collected through the 
CAHPS for ACOs Survey that strengthen patient and caregiver experience;
     Outcome measures supporting care coordination and 
effective communication, such as unplanned admission and readmission 
measures; and
     Intermediate outcome measures that address the effective 
treatment of chronic disease, such as hemoglobin A1c control for 
patients with diabetes and control of high blood pressure.
    It is important that the quality reporting requirements under the 
Shared Savings Program align with the reporting requirements under 
other Medicare initiatives and those used by other payers in order to 
minimize the need for Shared Savings Program participants to devote 
excessive resources to understanding differences in measure 
specifications or engaging in duplicative reporting. We seek comment, 
including recommendations and input on meaningful measures, on how we 
may be able to further advance the quality measure set for ACO 
reporting, consistent with the requirement under section 1899(b)(3)(C) 
of the Act that the Secretary seek to improve the quality of care 
furnished by ACOs by specifying higher standards, new measures, or 
both.
    One particular area of focus by the Department of Health and Human 
Services is the opioid misuse epidemic. The Centers for Disease Control 
and Prevention (CDC) reports that the number of people experiencing 
chronic pain lasting more than 3 months is estimated to include 11 
percent of the adult population. According to a 2016

[[Page 41907]]

CDC publication, 2 million Americans had opioid use disorder (OUD) 
associated with prescription opioids in 2014 (https://www.cdc.gov/drugoverdose/prescribing/guideline.html). Since the implementation of 
Medicare Part D in 2006 to cover prescription medications, the Medicare 
program has become the largest payer for prescription opioids in the 
United States (Zhou et al, 2016; https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4955937/). Safe and effective opioid prescribing for older 
adults is of particular importance because misuse and abuse of opioids 
can lead to increased adverse events in this population (for example, 
increased falls, fractures, hospitalization, ER visits, mortality), 
especially given the high prevalence of polypharmacy in the elderly. 
Polypharmacy is the simultaneous use of multiple drugs by a single 
patient, for one or more conditions, which increases the risk of 
adverse events. For example, a study by MedPAC found that some 
beneficiaries who use opioids fill more than 50 prescriptions among 10 
drug classes annually (http://www.medpac.gov/docs/default-source/reports/chapter-5-polypharmacy-and-opioid-use-among-medicare-part-d-enrollees-june-2015-report-.pdf?sfvrsn=0, MedPAC, 2015).
    As part of a multifaceted response to address the growing problem 
of overuse and abuse of opioids in the Part D program, CMS adopted a 
policy in 2013 requiring Medicare Part D plan sponsors to implement 
enhanced drug utilization review. Between 2011 through 2014, there was 
a 26 percent decrease or 7,500 fewer Medicare Part D beneficiaries 
identified as potential opioid over-utilizers which may be due, at 
least in part, to these new policies. On January 5, 2017, CMS released 
its Opioid Misuse Strategy. This document outlines CMS's strategy and 
the array of actions underway to address the national opioid misuse 
epidemic and can be found at https://www.cms.gov/Outreach-and-Education/Outreach/Partnerships/Downloads/CMS-Opioid-Misuse-Strategy-2016.pdf.
    We aim to align our policies under the Shared Savings Program with 
the priorities identified in the Opioid Misuse Strategy and to help 
ACOs and their participating providers and suppliers in responding to 
and managing opioid use, and are therefore considering several actions 
to improve alignment. Specifically, we are considering what information 
regarding opioid use, including information developed using aggregate 
Medicare Part D data, could be shared with ACOs. We are also 
considering the addition of one or more measures specific to opioid use 
to the ACO quality measures set. The potential benefits of such 
policies would be to focus ACOs on the appropriate use of opioids for 
their assigned beneficiaries and support their opioid misuse prevention 
efforts.
    First, we are considering what information, including what 
aggregated Medicare Part D data, could be useful to ACOs to combat 
opioid misuse in their assigned beneficiary population. We recognize 
the importance of available and emerging resources regarding the opioid 
epidemic at the federal, state, and local level, and intend to work 
with our federal partners to make relevant resources available in a 
timely manner to support ACOs' goals and activities. We will also 
continue to share information with ACOs highlighting Federal opioid 
initiatives, such as the CDC Guideline for Prescribing Opioids for 
Chronic Pain (https://www.cdc.gov/drugoverdose/prescribing/guideline.html), which reviews the CDC's recommended approach to opioid 
prescribing, and the Surgeon General's report on Substance Use and 
Addiction, Facing Addiction in America: The Surgeon General's Report on 
Alcohol, Drugs, and Health, (https://addiction.surgeongeneral.gov/) 
which focuses on educating and mobilizing prescribers to take action to 
end the opioid epidemic by improving prescribing practices, informing 
patients about the risks of and resources for opioid addiction, and 
encouraging health care professionals to take a pledge to end the 
opioid crisis. We will also continue to highlight information about the 
opioid crisis and innovations for opioid treatment and prevention 
strategies in ACO learning system webinars. These webinars provide the 
forum for peer-to-peer sharing, such as the webinar held last year on 
Community Approaches to Preventing Opioid-Related Overdoses and Deaths, 
which included speakers from State and community organizations.
    Although we recognize that not all beneficiaries assigned to Shared 
Savings Program ACOs have Part D coverage, we believe a sufficient 
number do have Part D coverage to make aggregate Part D data regarding 
opioid use helpful for the ACOs. As an example, we have found the 
following information for performance year 2016:
     Approximately 70 percent of beneficiaries assigned to ACOs 
participating in the Shared Savings Program had continuous Part D 
coverage.
     For assigned beneficiaries with continuous Part D 
enrollment, almost 37 percent had at least one opioid prescription. 
This percentage ranged from 10.6 percent to 58.3 percent across ACOs.
     The mean number of opioid medications filled per assigned 
beneficiary (with continuous Part D coverage) varied across ACOs, 
ranging from 0.3 to 4.5 prescriptions filled, with an average of 2.1 
prescriptions filled.
     The number of opioid prescriptions filled for each 
assigned beneficiary with at least one opioid prescription filled 
varied across ACOs and ranged from 2.6 to 8.4 prescriptions, with an 
average of 5.5 opioid prescriptions filled.
    ACOs currently receive as part of the monthly claims and claims 
line feed data Part D prescription drug event (PDE) data on prescribed 
opioids for their assigned beneficiaries who have not opted out of data 
sharing. We encourage ACOs to use this beneficiary-level data in their 
care delivery practices.
    We also seek suggestions for other types of aggregate data related 
to opioid use that could be added for informational purposes to the 
aggregate quarterly and annual reports CMS provides to ACOs. The aim 
would be for ACOs to utilize this additional information to improve 
population health management for assigned beneficiaries, including 
prevention, identifying anomalies, and coordinating care. The type of 
aggregate data should be highly relevant for a population-based program 
at the national level and have demonstrated value in quality 
improvement initiatives. We are particularly interested in high impact 
aggregate data that would reflect gaps in quality of care, patient 
safety, multiple aspects of care, and drivers of cost. We aim to 
provide aggregate data that have validity for longitudinal analysis to 
enable both ACOs and the Shared Savings Program to trend performance 
across time and monitor for changes. Aggregate data on both processes 
and outcomes are appropriate, provided that the data are readily 
available. Types of aggregate data that we have begun to consider, 
based on the information available from prescription drug event records 
for assigned beneficiaries enrolled in Medicare Part D, include filled 
prescriptions for opioids (percentage of the ACO's assigned 
beneficiaries with any opioid prescription, number of opioid 
prescriptions per opioid user), number of beneficiaries with a 
concurrent prescription of opioids and benzodiazepines; and number of 
beneficiaries with opioid prescriptions above a certain daily Morphine 
Equivalent Dosage threshold. Second, we are seeking comments on 
measures

[[Page 41908]]

that can be added to the quality measure set for the purpose of 
addressing the opioid epidemic and addiction, more generally. We seek 
comment on measures related to various aspects of opioid use, such as 
prevention, pain management, or opioid use disorder treatment, and on 
measures related to addiction. In particular, we are considering the 
following relevant NQF-endorsed measures, with emphasis on Medicare 
individuals with Part D coverage who are 18 years or older without 
cancer or enrolled in hospice:
     NQF #2940 Use of Opioids at High Dosage in Persons Without 
Cancer: Analyzes the proportion (XX out of 1,000) of Medicare Part D 
beneficiaries 18 years or older without cancer or enrolled in hospice 
receiving prescriptions for opioids with a daily dosage of morphine 
milligram equivalent (MME) greater than 120 mg for 90 consecutive days 
or longer.
     NQF #2950 Use of Opioids from Multiple Providers in 
Persons Without Cancer: Analyzes the proportion (XX out of 1,000) of 
Medicare Part D beneficiaries 18 years or older without cancer or 
enrolled in hospice receiving prescriptions for opioids from four (4) 
or more prescribers AND four (4) or more pharmacies.
     NQF #2951 Use of Opioids from Multiple Providers and at 
High Dosage in Persons Without Cancer: Analyzes the proportion (XX out 
of 1,000) of Medicare Part D beneficiaries 18 years or older without 
cancer or enrolled in hospice with a daily dosage of morphine milligram 
equivalent (MME) greater than 120 mg for 90 consecutive days or longer, 
AND who received opioid prescriptions from four (4) or more prescribers 
AND four (4) or more pharmacies.
    In addition, we seek input on potential measures for which data are 
readily available, such as measures that might be appropriately 
calculated using Part D data, and that capture performance on outcomes 
of appropriate opioid management. Comments on measures that are not 
already NQF endorsed should include descriptions of reliability, 
validity, benchmarking, the population in which the measure was tested, 
along with the data source that was used, and information on whether 
the measure is endorsed and by what organization. We recognize that 
measures of the various aspects of opioid use may involve concepts 
related to integrated, coordinated, and collaborative care, including 
as applicable for co-occurring and/or chronic conditions, as well as 
measures that reflect the impact of interventions on patient outcomes, 
including direct and indirect patient outcome measures. We also seek 
comment on opioid-related measures that would support effective 
measurement alignment of substance use disorders across programs, 
settings, and varying interventions.
6. Promoting Interoperability
    Consistent with the call in the 21st Century Cures Act for 
interoperable access, exchange, and use of health information, the 
final rule entitled, 2015 Edition Health Information Technology (Health 
IT) Certification Criteria, 2015 Edition Base Electronic Health Record 
(EHR) Definition, and ONC Health IT Certification Program Modifications 
(2015 Edition final rule) (80 FR 62601) under 45 CFR part 170 \24\ 
focuses on the 2015 Edition of health IT certification criteria that 
support patient care, patient participation in care delivery, and 
electronic exchange of interoperable health information. The 2015 
Edition final rule, which was issued on October 16, 2015, is expected 
to improve interoperability by adopting new and updated vocabulary and 
content standards for the structured recording and exchange of health 
information and to facilitate the accessibility and exchange of data by 
including enhanced data export, transitions of care, and application 
programming interface capabilities. These policies are relevant to 
assessing the use of CEHRT under the Quality Payment Program and other 
value based payment initiatives.
---------------------------------------------------------------------------

    \24\ For more information, see: https://www.healthit.gov/sites/default/files/understanding-certified-health-it-2.pdf.
---------------------------------------------------------------------------

    Under the Shared Savings Program, section 1899(b)(2)(G) of the Act 
requires participating ACOs to define processes to report on quality 
measures and coordinate care, such as through the use of telehealth, 
remote patient monitoring, and other such enabling technologies. 
Consistent with the statute, ACOs participating in the Shared Savings 
Program are required to coordinate care across and among primary care 
physicians, specialists, and acute and post-acute providers and 
suppliers and to have a written plan to encourage and promote the use 
of enabling technologies for improving care coordination, including the 
use of electronic health records and electronic exchange of health 
information (Sec.  425.112(b)(4)). Additionally, since the inception of 
the program in 2012, CMS has assessed the level of CEHRT use by certain 
clinicians in the ACO as a double-weighted quality measure (Use of 
Certified EHR Technology, ACO-11) as part of the quality reporting 
requirements for each performance year. For the 2018 performance year, 
we will use data derived from the Quality Payment Program's Promoting 
Interoperability performance category to calculate the percentage of 
eligible clinicians participating in an ACO who successfully meet the 
Advancing Care Information Performance Category Base Score for purposes 
of ACO-11. Because the measure is used in determining an ACO's quality 
score and for determining shared savings or losses under the Shared 
Savings Program, all eligible clinicians participating in Shared 
Savings Program ACOs must submit data for the Quality Payment Program's 
Advancing Care Information performance category, including those 
eligible clinicians who are participating in Shared Savings Program 
tracks that have been designated as Advanced APMs and who have met the 
QP threshold or are otherwise not subject to the MIPS reporting 
requirements.
    In contrast, some alternative payment models tested by the 
Innovation Center, require all participants to use CEHRT even though 
certain tracks within those Models do not meet the financial risk 
standard for designation as Advanced APMs, such as the Oncology Care 
Model (one-sided risk arrangement track) and the Comprehensive End-
Stage Renal Disease Care (CEC) Model (non-LDO one-sided risk 
arrangement track).\25\ The primary rationale for this requirement is 
to promote CEHRT use by eligible clinicians and organizations 
participating in APMs by requiring them to demonstrate a strong 
commitment to the exchange of health information, regardless of whether 
they are participating in an APM that meets the criteria to be 
designated as an Advanced APM. Additionally, under the Quality Payment 
Program, an incentive payment will be made to certain Qualifying APM 
Participants (QPs) participating in Advanced APMs. Beginning in 2017, 
an eligible clinician can become a QP for the year by participating 
sufficiently in an Advanced APM during the QP performance period. 
Eligible clinicians who are QPs for a year receive a lump sum APM 
incentive payment for payment years from 2019 through 2024, and are 
excluded from the MIPS reporting requirements for the performance year 
and the MIPS payment adjustment for the payment year. In the CY 2017 
Quality Payment Program final rule (81 FR 77408) we finalized the 
criteria that define an

[[Page 41909]]

Advanced APM based on the requirements set forth in sections 
1833(z)(3)(C) and (D) of the Act. An Advanced APM is an APM that, among 
other criteria, requires its participants to use CEHRT. In the CY 2017 
Quality Payment Program final rule, we established that Advanced APMs 
meet this requirement if the APM either (1) requires at least 50 
percent of eligible clinicians in each participating APM Entity, or for 
APMs in which hospitals are the APM Entities, each hospital, to use 
CEHRT to document and communicate clinical care to their patients or 
other health care providers; or (2) for the Shared Savings Program, 
applies a penalty or reward to an APM Entity based on the degree of the 
use of CEHRT of the eligible clinicians in the APM Entity (Sec.  
414.1415(a)(1)(i) and (ii)). In the CY 2017 PFS final rule, we updated 
the title and specifications of EHR quality measure (ACO-11) to align 
with the Quality Payment Program criterion on CEHRT use in order to 
ensure that certain tracks under the Shared Savings Program could meet 
the criteria to be Advanced APMs. Specifically, we revised the ACO-11 
measure to assess ACOs on the degree of CEHRT use by eligible 
clinicians participating in the ACO in order to align with the Quality 
Payment Program. Performance on the measure is determined by 
calculating the percentage of eligible clinicians participating in the 
ACO who successfully meet the Promoting Interoperability Performance 
Category Base Score.
---------------------------------------------------------------------------

    \25\ See list of Alternative Payment Models in the Quality 
Payment Program as of February 2018, available at https://www.cms.gov/Medicare/Quality-Payment-Program/Resource-Library/Comprehensive-List-of-APMs.pdf.
---------------------------------------------------------------------------

    In light of our additional experience with the Shared Savings 
Program, our desire to continue to promote and encourage CEHRT use by 
ACOs and their ACO participants and ACO providers/suppliers, and our 
desire to better align with the goals of the Quality Payment Program 
and the criteria for participation in certain alternative payment 
models tested by the Innovation Center, as previously noted, we believe 
it would be appropriate to amend our regulations related to CEHRT use 
and the eligibility requirements for ACOs to participate in the Shared 
Savings Program. Specifically, we propose to add a requirement that all 
ACOs demonstrate a specified level of CEHRT use in order to be eligible 
to participate in the Shared Savings Program. Additionally, we propose 
that, as a condition of participation in a track, or a payment model 
within a track, that meets the financial risk standard to be an 
Advanced APM, ACOs must certify that the percentage of eligible 
clinicians participating in the ACO who use CEHRT to document and 
communicate clinical care to their patients or other health care 
providers meets or exceeds the threshold required for Advanced APMs as 
defined under the Quality Payment Program (Sec.  414.1415(a)(1)(i)). In 
conjunction with this proposed new eligibility requirement, we propose 
to retire the EHR quality measure (ACO-11) related to CEHRT use, 
thereby reducing reporting burden, effective for quality reporting for 
performance years starting on January 1, 2019, and subsequent 
performance years. In addition, consistent with our proposal to align 
with the Advanced APM criterion on use of CEHRT, we propose to apply 
the definition of CEHRT under the Quality Payment Program (Sec.  
414.1305), including any subsequent updates to this definition, for 
purposes of the Shared Savings Program.
    First, we are proposing that for performance years starting on 
January 1, 2019, and subsequent performance years ACOs in a track or a 
payment model within a track that does not meet the financial risk 
standard to be an Advanced APM must attest and certify upon application 
to participate in the Shared Savings Program, and subsequently, as part 
of the annual certification process, that at least 50 percent of the 
eligible clinicians participating in the ACO use CEHRT to document and 
communicate clinical care to their patients or other health care 
providers. ACOs would be required to submit this certification in the 
form and manner specified by CMS.
    This proposed requirement aligns with the requirements regarding 
CEHRT use in many alternative payment models being tested by the 
Innovation Center (as previously noted). Additionally, we note that at 
the time of application, ACOs must have a written plan to use enabling 
technologies, such as electronic health records and other health IT 
tools, to coordinate care (Sec.  425.112(b)(4)(i)(C)). Over the years, 
successful ACOs have impressed upon us the importance of ``hitting the 
ground running'' on the first day of their participation in the Shared 
Savings Program, rather than spending the first year or two developing 
their care processes. We believe that requiring ACOs that are entering 
a track or a payment model within a track that does not meet the 
financial risk standard to be an Advanced APM to certify that at least 
50 percent of the eligible clinicians participating in the ACO use 
CEHRT aligns with existing requirements under the Shared Saving Program 
and many Innovation Center alternative payment models and encourages 
participation by organizations that are more likely to meet the program 
goals. In addition, we believe such a requirement would also promote 
greater emphasis on the importance of CEHRT use for care coordination. 
Finally, we note that in the CY 2019 PFS proposed rule, we proposed to 
increase the threshold of CEHRT use required for APMs to meet criteria 
for designation as Advanced APMs under the Quality Payment Program to 
75 percent (see 83 FR 35990). Given the proposals for updates and 
modifications to the Shared Savings Program tracks found elsewhere in 
this proposed rule, as well as the proposals under the Quality Payment 
Program, we believe it is important that only those ACOs that are 
likely to be able to meet or exceed the threshold designated for 
Advanced APMs should be eligible to enter and continue their 
participation in the Shared Savings Program. Because of this, and also 
our desire to align requirements as explained in more detail later in 
this section, we also considered whether to propose to require all 
Shared Savings Program ACOs, including ACOs in tracks or payment models 
within tracks that would not meet financial criteria to be designated 
as Advanced APMs, to meet the 75 percent threshold proposed under the 
Quality Payment Program.
    We propose changes to the regulations at Sec.  425.204(c) (to 
establish the new application requirement) and Sec.  425.302(a)(3)(iii) 
(to establish the new annual certification requirement). We also 
propose to add a new provision at Sec.  425.506(f)(1) to indicate that 
for performance years starting on January 1, 2019, and subsequent 
performance years, all ACOs in a track or a payment model within a 
track that does not meet the financial risk standard to be an Advanced 
APM must certify that at least 50 percent of their eligible clinicians 
use CEHRT to document and communicate clinical care to their patients 
or other health care providers. We note that this proposal, if 
finalized, would not affect the previously-finalized provisions for 
MIPS eligible clinicians reporting on the Promoting Interoperability 
(PI) performance category under MIPS. In other words, MIPS eligible 
clinicians who are participating in ACOs would continue to report as 
usual on the Promoting Interoperability performance category. We 
welcome comment on these proposed changes. We also seek comment on 
whether the percentage of CEHRT use should be set at a level higher 
than 50 percent for ACOs in a track or a payment model within a track 
that does not meet the financial risk standard to be an Advanced APM 
given

[[Page 41910]]

that average ACO performance on the Use of Certified EHR Technology 
measure (ACO-11) has substantially exceeded 50 percent, with ACOs 
reporting that on average roughly 80 percent of primary care physicians 
in their ACOs meet meaningful use requirements,\26\ suggesting that a 
higher threshold may be warranted now or in the future. Additionally, a 
higher threshold percentage (such as 75 percent) would align with the 
proposed changes to the CEHRT use requirement under the Quality Payment 
Program in the CY 2019 PFS proposed rule.
---------------------------------------------------------------------------

    \26\ This estimate is based on calculations of primary care 
physician CEHRT use prior to the changes made to ACO-11 to align 
with the Quality Payment Program, which became effective for quality 
reporting for performance year 2017.
---------------------------------------------------------------------------

    Further, for ACOs in tracks or models that meet the financial risk 
standard to be Advanced APMs under the Quality Payment Program, we 
propose to align the proposed CEHRT use threshold with the criterion on 
use of CEHRT established for Advanced APMs under the Quality Payment 
Program. Although we believe it would be ideal for all ACOs to meet the 
same CEHRT thresholds to be eligible for participation in the Shared 
Savings Program, we recognize that there may be reasons why it may be 
desirable for ACOs in tracks or payment models within a track that do 
not meet the financial risk standard for Advanced APMs to have a 
different threshold requirement for CEHRT use than more sophisticated 
ACOs that are participating in tracks or payment models that qualify as 
Advanced APMs under the Quality Payment Program. For example, we note 
that in order for an APM to meet the criteria to be an Advanced APM 
under the Quality Payment Program, it must currently require at least 
50 percent of eligible clinicians in each participating APM entity to 
use CEHRT to document and communicate clinical care to their patients 
or other health care providers (in addition to certain other criteria). 
However, we have proposed to increase this threshold level under the 
Quality Payment Program to 75 percent of eligible clinicians in each 
participating Advanced APM entity, as part of the CY 2019 PFS proposed 
rule, as previously noted. Therefore, for performance years starting on 
January 1, 2019, and subsequent performance years for Shared Savings 
Program tracks (or payment models within tracks) that meet the 
financial risk standard to be an Advanced APM, we propose to align the 
CEHRT requirement with the Quality Payment Program Advanced APM CEHRT 
use criterion at Sec.  414.1415(a)(1)(i). Specifically, we propose that 
such ACOs would be required to certify that they meet the higher of the 
50 percent threshold proposed for ACOs in a track (or a payment model 
within a track) that does not meet the financial risk standard to be an 
Advanced APM or the CEHRT use criterion for Advanced APMs under the 
Quality Payment Program at Sec.  414.1415(a)(1)(i). We believe that 
requiring these ACOs to meet the higher of the 50 percent threshold 
proposed for ACOs in a track (or a payment model within a track) that 
does not meet the financial risk standard to be an Advanced APM or the 
CEHRT use criterion for Advanced APMs will ensure alignment of 
eligibility requirements across all Shared Savings Program ACOs, while 
also ensuring that if the CEHRT use criterion for Advanced APMs is 
higher than 50 percent, those Shared Savings Program tracks (or payment 
models within a track) that meet the financial risk standard to be an 
Advanced APM would also meet the CEHRT threshold established under the 
Quality Payment Program. We anticipate that for performance years 
starting on January 1, 2019, the tracks (or payment models within 
tracks) that would be required to meet the CEHRT threshold designated 
at Sec.  414.1415(a)(1)(i) would include Track 2, Track 3, and the 
Track 1+ Model, and for performance years starting on July 1, 2019, 
they would include the BASIC track, Level E, and the ENHANCED track. 
ACOs in these tracks (or a payment model within such a track) would be 
required to attest and certify that the percentage of the eligible 
clinicians in the ACO that use CEHRT to document and communicate 
clinical care to their patients or other health care providers meets or 
exceeds the level of CEHRT use specified under the Quality Payment 
Program regulation at Sec.  414.1415(a)(1)(i). Although this proposal 
may cause Shared Savings Program ACOs in different tracks (or different 
payment models within the same track) to be held to different 
requirements regarding CEHRT use, we believe it is appropriate to 
ensure not only that ACOs that are still new to participation in the 
Shared Savings Program are not excluded from the program due to a 
requirement that a high percentage of eligible clinicians participating 
in the ACO use CEHRT, but also that eligible clinicians in ACOs further 
along the risk continuum have the opportunity to participate in an 
Advanced APM for purposes of the Quality Payment Program.
    We propose to add a new provision to the regulations at Sec.  
425.506(f)(2) to establish the CEHRT requirement for performance years 
starting on January 1, 2019, and subsequent performance years for ACOs 
in a track or a payment model within a track that meets the financial 
risk standard to be an Advanced APM under the Quality Payment Program. 
These ACOs would be required to certify that the percentage of eligible 
clinicians participating in the ACO that use CEHRT to document and 
communicate clinical care to their patients or other health care 
providers meets or exceeds the higher of 50 percent or the threshold 
for CEHRT use by Advanced APMs at Sec.  414.1415(a)(1)(i). We seek 
comment on this proposal. We also seek comment on whether we should 
apply the same standard regarding CEHRT use across all Shared Savings 
Program ACOs, including ACOs participating in tracks or payment models 
within tracks that do not meet the financial risk standard to be 
designated as Advanced APMs, specifically Track 1 and the proposed 
BASIC track, Levels A through D, or maintain the proposed 50 percent 
requirement for these ACOs as they gain experience on the glide path to 
performance-based risk.
    As a part of these proposals to require ACOs to certify that a 
specified percentage of their eligible clinicians use CEHRT, CMS 
reserves the right to monitor, assess, and/or audit an ACO's compliance 
with respect to its certification of CEHRT use among its participating 
eligible clinicians, consistent with Sec. Sec.  425.314 and 425.316, 
and to take compliance actions (including warning letters, corrective 
action plans, and termination) as set forth at Sec. Sec.  425.216 and 
425.218 when ACOs fail to meet or exceed the required CEHRT use 
thresholds. Additionally, we propose to adopt for purposes of the 
Shared Savings Program the same definition of ``CEHRT'' as is used 
under the Quality Payment Program. We propose to amend Sec.  425.20 to 
incorporate a definition of CEHRT consistent with the definition at 
Sec.  414.1305, including any subsequent updates or revisions to that 
definition. Consistent with this proposal and to ensure alignment with 
the requirements regarding CEHRT use under the Quality Payment Program, 
we also propose to amend Sec.  425.20 to incorporate the definition of 
``eligible clinician'' at Sec.  414.1305 that applies under the Quality 
Payment Program.
    Additionally, if the proposal to introduce a specified threshold of 
CEHRT use as an eligibility requirement for participation in the Shared 
Savings

[[Page 41911]]

Program is finalized, we believe this new requirement should replace 
the current ACO quality measure that assesses the Use of Certified EHR 
Technology (ACO-11). The proposed new eligibility requirement, which 
would be assessed through the application process and annual 
certification, would help to meet the goals of the program and align 
with the approach used in other MIPS APMs. Moreover, the proposed new 
requirement would render reporting on the Use of Certified EHR 
Technology quality measure unnecessary in order for otherwise eligible 
tracks (and payments models within tracks) to meet the Advanced APM 
criterion regarding required use of CEHRT under Sec.  
414.1415(a)(1)(i). As a result, continuing to require ACOs to report on 
this measure would introduce undue reporting burden on eligible 
clinicians that meet the QP threshold and would otherwise not be 
required to report the Promoting Interoperability performance category 
for purposes of the Quality Payment Program. Therefore, we are 
proposing to remove the Use of Certified EHR Technology measure (ACO-
11) from the Shared Savings Program quality measure set, effective with 
quality reporting for performance years starting on January 1, 2019, 
and subsequent performance years. We propose corresponding changes to 
the regulation at Sec.  425.506. As previously noted, the removal of 
the Use of Certified EHR Technology measure (ACO-11) from the quality 
measure set used under the Shared Savings Program, if finalized, would 
not affect policies under MIPS for reporting on the Promoting 
Interoperability performance category and scoring under the APM Scoring 
Standard for MIPS eligible clinicians in MIPS APMs. In other words, 
eligible clinicians subject to MIPS (such as eligible clinicians in 
BASIC track, Levels A through D, Track 1, and other MIPS eligible 
clinicians who are required to report on the Promoting Interoperability 
performance category for purposes of the Quality Payment Program) would 
continue to report as usual on the Promoting Interoperability 
performance category. However, data reported for purposes of the 
Promoting Interoperability performance category under MIPS would not be 
used to assess the ACO's quality performance under the Shared Savings 
Program. We welcome public comment on the proposal to remove the 
quality measure on Use of Certified EHR Technology (ACO-11) from the 
Medicare Shared Savings Program measure set, effective for quality 
reporting for performance years starting on January 1, 2019, and 
subsequent years.
    Finally, as discussed previously in this section, in the CY 2017 
Quality Payment Program final rule, CMS finalized a separate Advanced 
APM CEHRT use criterion that applies for the Shared Savings Program at 
Sec.  414.1415(a)(1)(ii). To meet the Advanced APM CEHRT use criterion 
under the Shared Savings Program, a penalty or reward must be applied 
to an APM Entity based upon the degree of CEHRT use among its eligible 
clinicians. We believed that this alternative criterion was appropriate 
to assess the Advanced APM CEHRT use requirement under the Shared 
Savings Program because at the time a specific level of CEHRT use was 
not required for participation in the program (81 FR 77412).
    We now believe that that our proposal to impose specific CEHRT use 
requirements on ACOs participating in the Shared Savings Program would 
eliminate the need for the separate CEHRT use criterion applicable to 
the Shared Savings Program APMs found at Sec.  414.1415(a)(1)(ii). If 
the previously described proposals are finalized, ACOs seeking to 
participate in a Shared Savings Program track (or payment model within 
a track) that meets the financial risk standard to be an Advanced APM 
would be required to demonstrate that the percentage of eligible 
clinicians in the ACO using CEHRT to document and communicate clinical 
care to their patients or other health care providers meets or exceeds 
the higher of 50 percent or the percentage specified in the CEHRT use 
criterion for Advanced APMs at Sec.  414.1415(a)(1)(i). As a result, a 
separate CEHRT use criterion for APMs under the Shared Savings Program 
would no longer be necessary.
    We therefore propose to revise the separate Shared Savings Program 
CEHRT use criterion at Sec.  414.1415(a)(1)(ii) so that it applies only 
for QP Performance Periods under the Quality Payment Program prior to 
2019. We seek comment on this proposal.
7. Coordination of Pharmacy Care for ACO Beneficiaries
    Medicare ACOs and other stakeholders have indicated an interest in 
collaborating to enhance the coordination of pharmacy care for Medicare 
FFS beneficiaries to reduce the risk of adverse events and improve 
medication adherence. For example, areas where ACOs and the sponsors of 
stand-alone Part D PDPs might collaborate to enhance pharmacy care 
coordination include establishing innovative approaches to increase 
clinician formulary compliance (when clinically appropriate) and 
medication compliance; providing pharmacy counseling services from 
pharmacists; and implementing medication therapy management. Part D 
sponsors may be able to play a greater role in coordinating the care of 
their enrolled Medicare FFS beneficiaries and having greater 
accountability for their overall health outcomes, such as for 
beneficiaries with chronic diseases where treatment and outcome are 
highly dependent on appropriate medication use and adherence. Increased 
collaboration between ACOs and Part D sponsors may facilitate better 
and more affordable drug treatment options for beneficiaries by 
encouraging the use of generic prescription medications, where 
clinically appropriate, or reducing medical errors through better 
coordination between providers and Part D sponsors.
    We believe that Medicare ACOs and Part D sponsors may be able to 
enter into appropriate business arrangements to support improved 
pharmacy care coordination, provided such arrangements comply with all 
applicable laws and regulations. However, challenges may exist in 
forming these arrangements. Under the Pioneer ACO Model, an average of 
54 percent of the beneficiaries assigned to Pioneer ACOs in 2012 were 
also enrolled in a PDP in that year, with the median ACO having at most 
only 13 percent of its assigned beneficiaries enrolled in a plan 
offered by the same PDP parent organization. For performance year 2016, 
we found that approximately 70 percent of the beneficiaries assigned to 
Shared Savings Program ACOs had continuous Part D coverage.
    We believe timely access to data could improve pharmacy care 
coordination. Although CMS already provides Medicare ACOs with certain 
Part D prescription drug event data, it may be useful for both Medicare 
ACOs and Part D sponsors to share certain clinical data and pharmacy 
data with each other to support coordination of pharmacy care. Any data 
sharing arrangements between ACOs and Part D sponsors should comply 
with all applicable legal requirements regarding the privacy and 
confidentiality of such data, including the Health Insurance 
Portability and Accountability Act (HIPAA).
    We seek comment on how Medicare ACOs, and specifically Shared 
Savings Program ACOs, and Part D sponsors

[[Page 41912]]

could work together and be encouraged to improve the coordination of 
pharmacy care for Medicare FFS beneficiaries to achieve better health 
outcomes, better health care, and lower per-capita expenditures for 
Medicare beneficiaries. In addition, we seek comment on what kind of 
support would be useful for Medicare ACOs and Part D sponsors in 
establishing new, innovative business arrangements to promote pharmacy 
care coordination to improve overall health outcomes for Medicare 
beneficiaries. We also seek comment on issues related to how CMS, 
Medicare ACOs and Part D sponsors might structure the financial terms 
of these arrangements to reward Part D sponsors' contributions towards 
achieving program goals, including improving the beneficiary's 
coordination of care. Lastly, we seek comment on whether ACOs are 
currently partnering with Part D sponsors, if there are any barriers to 
developing these relationships (including, but not limited to, data and 
information sharing), and if there are any recommendations for how CMS 
can assist, as appropriate, with reducing barriers and enabling more 
robust data sharing.

F. Applicability of Proposed Policies to Track 1+ Model ACOs

1. Background
    The Track 1+ Model was established under the Innovation Center's 
authority at section 1115A of the Act, to test innovative payment and 
service delivery models to reduce program expenditures while preserving 
or enhancing the quality of care for Medicare, Medicaid, and Children's 
Health Insurance Program beneficiaries. We have previously noted that 
55 Shared Savings Program Track 1 ACOs entered into the Track 1+ Model 
beginning January 1, 2018. This includes 35 ACOs that entered the model 
within their current agreement period (to complete the remainder of 
their agreement period under the Model) and 20 ACOs that entered a 3-
year agreement in the Model.
    To enter the model, ACOs approved to participate are required to 
agree to the terms and conditions of the model by executing a Track 1+ 
Model Participation Agreement. See https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Downloads/track-1plus-model-par-agreement.pdf. Track 1+ Model ACOs are also required to 
have been approved to participate in the Shared Savings Program (Track 
1) and to have executed a Shared Savings Program Participation 
Agreement. As indicated in the Track 1+ Model Participation Agreement, 
in accordance with its authority under section 1115A(d)(1) of the Act, 
CMS has waived certain provisions of law that otherwise would be 
applicable to ACOs participating in Track 1 of the Shared Savings 
Program, as necessary for purposes of testing the Track 1+ Model, and 
established alternative requirements for the ACOs participating in the 
Track 1+ Model.
    Unless stated otherwise in the Track 1+ Model Participation 
Agreement, the requirements of the Shared Savings Program under 42 CFR 
part 425 continue to apply. Consistent with Sec.  425.212, Track 1+ 
Model ACOs are subject to all applicable regulatory changes, including 
but not limited to, changes to the regulatory provisions referenced 
within the Track 1+ Model Participation Agreement that become effective 
during the term of the ACO's Shared Savings Program Participation 
Agreement and Track 1+ Model Participation Agreement, unless otherwise 
specified through rulemaking or amendment to the Track 1+ Model 
Participation Agreement. We note that the terms of the Track 1+ Model 
Participation Agreement permit the parties (CMS and the ACO) to amend 
the agreement at any time by mutual written agreement.
2. Unavailability of Application Cycles for Entry Into the Track 1+ 
Model in 2019 and 2020
    An ACO's opportunity to join the Track 1+ Model aligns with the 
Shared Savings Program's application cycle. The original design of the 
Track 1+ Model included 3 application cycles for ACOs to apply to enter 
or renew their participation in the Track 1+ Model for an agreement 
period start date of 2018, 2019, or 2020. The 2018 application cycle is 
closed, and as discussed elsewhere in this proposed rule, 55 ACOs began 
participating in the Track 1+ Model on January 1, 2018. As discussed in 
section II.A.7 of this proposed rule, we are not offering an 
application cycle for a January 1, 2019 start date for new agreement 
periods under the Shared Savings Program. Therefore, we would similarly 
not offer a start date of January 1, 2019, for participation in the 
Track 1+ Model.
    In addition, we have also re-evaluated the need for continuing the 
Track 1+ Model as a participation option for 2019 and 2020 in light of 
the proposal to offer the BASIC track (including a glide path for 
eligible ACOs) as a participation option beginning in 2019. Like the 
Track 1+ Model, the BASIC track would offer relatively lower levels of 
risk and potential reward than Track 2 and the ENHANCED track. The 
BASIC track's glide path would allow the flexibility for eligible ACOs 
to enter a one-sided model and to automatically progress through levels 
of risk and reward that end at a comparable level of risk and reward 
(Level E) as offered in the Track 1+ Model and to also qualify as 
participating in an Advanced APM. ACOs in the glide path could also 
elect to more quickly enter higher levels of risk and reward within the 
BASIC track. If the proposed approach to adding the BASIC track is 
finalized and made available for agreement periods beginning in 2019 
and subsequent years, we would discontinue future application cycles 
for the Track 1+ Model. In that case, the Track 1+ Model would not 
accept new model participants for start dates of July 1, 2019, or 
January 1, 2020, or in subsequent years.
    Existing Track 1+ Model ACOs would be able to complete the 
remainder of their current agreement period in the model, or terminate 
their current participation agreements (for the Track 1+ Model and the 
Shared Savings Program) and apply to enter a new Shared Savings Program 
agreement period under either the BASIC track (Level E) or the ENHANCED 
track, depending upon whether the ACO is low revenue or high revenue 
(as described in section II.A.5 of this proposed rule). Additionally, 
as discussed in section II.A.7.c.1 of this proposed rule, ACOs would 
not have the opportunity to apply to use a SNF 3-day rule waiver 
starting on January 1, 2019, under our decision to forgo an annual 
application cycle for a January 1, 2019 start date in the Shared 
Savings Program and the proposal that the next available application 
cycle would occur in advance of a July 1, 2019 start date in the Shared 
Savings Program. An exception to the January 1 start date for use of a 
SNF 3-day rule waiver would similarly be made to allow for a July 1, 
2019 start date for eligible Track 1+ Model ACOs that apply for and are 
approved to use a SNF 3-day rule waiver.
    In making this decision to discontinue future application cycles 
for the Track 1+ Model, we considered the high level of participation 
in the Track 1+ Model in its first performance year. This high level of 
interest in the model indicates a positive response to its design, and 
therefore we believe we have met an important goal of testing the Track 
1+ Model. As we previously described in section II.A.1 of this proposed 
rule, the availability of the Track 1+ Model

[[Page 41913]]

significantly increased the number of ACOs participating under a two-
sided risk model in connection with their participation in the Shared 
Savings Program, with over half of the 101 Shared Savings Program ACOs 
that have elected to take on performance-based risk opting to 
participate in the Track 1+ Model starting in 2018, the Model's first 
year. We will evaluate the quality and financial performance of Track 
1+ Model ACOs and consider the results of this evaluation in the 
development of future policies for the Shared Saving Program.
    Further, as discussed in section II.A of this proposed rule, we 
have incorporated lessons learned from our initial experience with the 
Track 1+ Model into the design of the proposed BASIC track. This 
includes offering a payment model within the BASIC track (Level E) that 
includes the same level of risk and potential reward as available under 
the Track 1+ Model. We have also proposed a repayment mechanism 
estimation methodology based on our experience with the Track 1+ Model, 
to allow for potentially lower, and therefore less burdensome, 
repayment mechanism amounts for ACOs with relatively lower estimated 
ACO participant Medicare FFS revenue compared to estimated benchmark 
expenditures for their assigned Medicare FFS beneficiary population. We 
believe offering both the BASIC track and the Track 1+ Model would 
create unnecessary redundancy in participation options within CMS's 
Medicare ACO initiatives.
3. Applicability of Proposed Policies to Track 1+ Model ACOs Through 
Revised Program Regulations or Revisions to Track 1+ Model 
Participation Agreements
    We believe a comprehensive discussion of the applicability of the 
proposed policies to Track 1+ Model ACOs would allow these ACOs to 
better prepare for their future years of participation in the program 
and the Track 1+ Model. There are two ways in which the proposed 
policies would become applicable to Track 1+ Model ACOs: (1) Through 
revisions to existing regulations that currently apply to Track 1+ 
Model ACOs, and (2) through revisions to the ACO's Track 1+ Model 
Participation Agreement.
    Unless specified otherwise, the proposed changes to the program's 
regulations that are applicable to Shared Savings Program ACOs within a 
current agreement period would apply to ACOs in the Track 1+ Model in 
the same way that they apply to ACOs in Track 1, so long as the 
applicable regulation has not been waived under the Track 1+ Model. 
Similarly, to the extent that certain requirements of the regulations 
that apply to ACOs under Track 2 or Track 3 have been incorporated for 
ACOs in the Track 1+ Model under the terms of the Track 1+ Model 
Participation Agreement, any proposed changes to those regulations 
would also apply to ACOs in the Track 1+ Model in the same way that 
they apply to ACOs in Track 2 or Track 3. For example, the following 
proposed policies would apply to Track 1+ Model ACOs, if finalized:
     Changes to the repayment mechanism requirements (other 
than the proposed provisions regarding calculation of the repayment 
mechanism amount at Sec.  425.204(f)(4)), which would be applicable 
with the effective date of the final rule (section II.A.6.c). We 
believe these proposed requirements are similar to the requirements 
under which Track 1+ Model ACOs established their repayment mechanisms, 
such that no revision to these arrangements would be required, in the 
event the proposed policies are finalized. Further, consistent with the 
proposed changes to the repayment mechanism requirements, we note that 
Track 1+ Model ACOs that seek to renew their Shared Savings Program 
agreement would be permitted to use their existing repayment mechanism 
arrangement to support their continued participation in the Shared 
Savings Program under a two-sided model in their next agreement period, 
provided that the amount and duration of the repayment mechanism 
arrangement are updated as specified by CMS.
     The requirement to notify beneficiaries regarding 
voluntary alignment and to provide a standardized written notice at the 
first primary care visit of each performance year (section II.C.3.a.2). 
If finalized, the proposed policy would be applicable for the 
performance year beginning on July 1, 2019, and subsequent performance 
years.
     Revisions to voluntary alignment policies (section 
II.E.2). If finalized, the proposed policies would be applicable for 
the performance year beginning on January 1, 2019, and subsequent 
performance years.
     Revisions to the definition of primary care services used 
in beneficiary assignment (section II.E.3.b). If finalized, the 
proposed policy would be applicable for the performance year beginning 
on January 1, 2019, and subsequent performance years.
     Discontinuation of quality measure ACO-11; requirement to 
attest at the time of application and as part of the annual 
certification that a specified percentage of the ACO's eligible 
clinicians use CEHRT (section II.E.6). If finalized, the proposed 
policy would be applicable for the performance year beginning on 
January 1, 2019, and subsequent performance years.
    We would also seek to apply the following proposed policies to 
Track 1+ Model ACOs, although to do so would require an amendment to 
the Track 1+ Model Participation Agreement executed by CMS and the ACO:
     Monitoring for and consequences of poor financial 
performance (section II.A.5.d).
     Revising the MSR/MLR to address small population sizes 
(section II.A.6.b.3).
     Payment consequences of early termination for ACOs under 
performance-based risk (section II.A.6.d).
     Annual certification that the percentage of eligible 
clinicians participating in the ACO that use CEHRT to document and 
communicate clinical care to their patients or other health care 
providers meets or exceeds the higher of 50 percent or the threshold 
established under Sec.  414.1415(a)(1)(i) (section II.E.6). This 
certification would be required to ensure the Track 1+ Model continues 
to meet the CEHRT criterion for qualification as an Advanced APM for 
purposes of the Quality Payment Program.
     For ACOs that started a first or second Shared Savings 
Program participation agreement on January 1, 2016, and entered the 
Track 1+ Model on January 1, 2018, and that elect to extend their 
Shared Savings Program participation agreement for the 6-month 
performance year from January 1, 2019 through June 30, 2019 (as 
described in section II.A.7 of this proposed rule):
    ++ Consistent with the policy proposed in section II.A.7.c.3 and 
Sec.  425.204(f)(6), the ACO would be required to extend its repayment 
mechanism so that it ends 24 months after the end of the agreement 
period (June 30, 2021).
    ++ We would determine performance for the 6-month performance year 
from January 1, 2019 through June 30, 2019, according to the approach 
specified in a proposed new section of the regulations at Sec.  
425.609(b), applying the financial methodology for calculating shared 
losses specified in the ACO's Track 1+ Model Participation Agreement.
    ++ We would continue to share aggregate report data with the ACO 
for the entire calendar year 2019, consistent with the proposed 
approach described in section II.A.7.c.9, and the terms of the

[[Page 41914]]

ACO's Track 1+ Model Participation Agreement.
     Extreme and uncontrollable circumstances policies for 
determining shared losses for performance years 2018 and subsequent 
years, consistent with the policies specified in Sec. Sec.  425.610(i) 
(section II.E.4) and 425.609(d) (section II.A.7.c.5) for ACOs that 
elect to extend their Shared Savings Program participation agreement 
for the 6-month performance year from January 1, 2019 through June 30, 
2019.
     Certain requirements related to the use of telehealth 
services beginning on January 1, 2020, as provided under section 
1899(l) of the Act (section II.B.2.b.2). As previously described, the 
Bipartisan Budget Act of 2018 provides for coverage of certain 
telehealth services furnished by physicians and practitioners in ACOs 
participating in a model tested or expanded under section 1115A of the 
Act that operate under a two-sided model and for which beneficiaries 
are assigned to the ACO using a prospective assignment method. ACOs 
participating in the Track 1+ Model meet these criteria. We believe it 
would be appropriate to apply the same requirements under the Track 1+ 
Model with respect to the use of telehealth services that would apply 
to other Shared Savings Program ACOs that are applicable ACOs for 
purposes of section 1899(l) of the Act. This would ensure consistency 
across program operations, payments, and beneficiary protection 
requirements for Track 1+ Model ACOs and other Shared Savings Program 
ACOs with respect to the use of telehealth services.
    We seek comment on these considerations, and any other issues that 
we may not have discussed related to the effect of the proposed 
policies on ACOs that entered the Track 1+ Model beginning in 2018. We 
note that these ACOs will complete their participation in the Track 1+ 
Model by no later than December 31, 2020 (for ACOs that entered the 
model at the start of a 3-year agreement period), or sooner in the case 
of ACOs that entered the model at the start of their second or third 
performance year within their current 3-year agreement period.

G. Summary of Proposed Timing of Applicability

    Applicability or implementation dates may vary, depending on the 
policy, and the timing specified in the final rule. Unless otherwise 
noted, the proposed changes would be effective 60 days after 
publication of the final rule. Table 13 lists the anticipated 
applicability date of key changes in this proposed rule. By indicating 
that a provision is applicable to a performance year (PY) or agreement 
period, activities related to implementation of the policy may precede 
the start of the performance year or agreement period.

                     Table 13--Applicability Dates of Select Provisions of the Proposed Rule
----------------------------------------------------------------------------------------------------------------
           Preamble section                     Section title/description               Applicability date
----------------------------------------------------------------------------------------------------------------
II.A.2................................  Availability of an additional             Agreement periods starting on
                                         participation option under a new BASIC    or after July 1, 2019.
                                         track (including glide path) under an
                                         agreement period of at least 5 years;
                                        Availability of Track 3 as the ENHANCED
                                         track under an agreement period of at
                                         least 5 years.
II.A.2................................  Discontinuing Track 1 and Track 2.......  No longer available for
                                                                                   applicants for agreement
                                                                                   periods starting in 2019 and
                                                                                   subsequent years.
II.A.2................................  Discontinuing deferred renewal option...  No longer available for
                                                                                   renewal applicants for
                                                                                   agreement periods starting in
                                                                                   2019 and subsequent years.
II.A.4.b..............................  Permitting annual election of differing   Performance year beginning on
                                         levels of risk and potential reward       July 1, 2019, and subsequent
                                         within the BASIC track's glide path.      years for eligible ACOs.
II.A.4.c..............................  Permitting annual election of             Performance year beginning on
                                         beneficiary assignment methodology for    July 1, 2019, and subsequent
                                         ACOs in BASIC track or ENHANCED track.    years.
II.A.5.c..............................  Evaluation criteria for determining       Agreement periods starting on
                                         participation options based on ACO        or after July 1, 2019.
                                         participants' Medicare FFS revenue, ACO
                                         legal entity and ACO participant
                                         experience with performance-based risk
                                         Medicare ACO initiatives, and prior
                                         performance (if applicable).
II.A.5.d.2............................  Monitoring for financial performance....  Performance years beginning in
                                                                                   2019 and subsequent years.
II.A.6.b.2............................  Timing of election of MSR/MLR...........  Agreement periods starting on
                                                                                   or after July 1, 2019.
II.A.6.b.3............................  Modifying the MSR/MLR to address small    Performance years beginning in
                                         population sizes.                         2019 and subsequent years.
II.A.6.c.3............................  Annual recalculation of repayment         Agreement periods starting on
                                         mechanism amounts.                        or after July 1, 2019.
II.A.6.d..............................  Payment consequences of early             Performance years beginning in
                                         termination for ACOs under performance-   2019 and subsequent years.
                                         based risk.
II.A.7................................  Participation options for agreement       January 1, 2019 effective date
                                         periods beginning in 2019.                for extension of existing
                                                                                   agreement period for a 6-
                                                                                   month fourth performance
                                                                                   year, if elected by ACOs that
                                                                                   started a first or second
                                                                                   agreement period on January
                                                                                   1, 2016.
                                                                                  One-time, July 1, 2019
                                                                                   agreement start date; 6-month
                                                                                   first performance year.
II.B.2.a..............................  Availability of the SNF 3-day rule        July 1, 2019 and subsequent
                                         waiver for eligible ACOs under            performance years, for
                                         performance-based risk under either       eligible ACOs applying for,
                                         prospective assignment or preliminary     or currently approved for, a
                                         prospective assignment.                   SNF 3-day rule waiver. Not
                                                                                   available to Track 2 ACOs.
II.B.2.a..............................  Eligible CAHs and hospitals operating     July 1, 2019, and subsequent
                                         under a swing-bed agreements permitted    performance years.
                                         to partner with eligible ACOs as SNF
                                         affiliates.

[[Page 41915]]

 
II.B.2.b..............................  Telehealth services furnished under       Performance year 2020 and
                                         section 1899(l).                          subsequent years for services
                                                                                   furnished by physicians and
                                                                                   practitioners billing through
                                                                                   the TIN of an ACO participant
                                                                                   in an applicable ACO.
II.C.2................................  Implementation of approved beneficiary    July 1, 2019, and subsequent
                                         incentive programs.                       performance years.
II.C.3.a.2............................  New content and timing for beneficiary    Performance year beginning on
                                         notifications.                            July 1, 2019, and subsequent
                                                                                   years.
II.D.2.b..............................  Benchmarking Methodology Refinements:     Agreement periods starting on
                                         Risk adjustment methodology for           or after July 1, 2019.
                                         adjusting historical benchmark each
                                         performance year.
II.D.3.b..............................  Benchmarking Methodology Refinements:     Agreement periods starting on
                                         Application of regional factors to        or after July 1, 2019.
                                         determine the benchmark for an ACO's
                                         first agreement period.
II.D.3.c..............................  Benchmarking Methodology Refinements:     Agreement periods starting on
                                         Modifying the regional adjustment..       or after July 1, 2019.
II.D.3.d..............................  Benchmarking Methodology Refinements:     Agreement periods starting on
                                         Modifying the methodology for             or after July 1, 2019.
                                         calculating growth rates used in
                                         establishing, resetting, and updating
                                         the benchmark.
II.E.2................................  Modifications to voluntary alignment      Performance years beginning in
                                         requirements.                             2019 and subsequent years.
II.E.3................................  Revisions to the definition of primary    Performance years beginning in
                                         care services used in beneficiary         2019 and subsequent years.
                                         assignment.
II.E.4................................  Extreme and uncontrollable circumstances  Performance year 2018 and
                                         policies for the Shared Savings Program.  subsequent years.
II.E.6................................  Addition of an interoperability           Performance years beginning in
                                         criterion (use of CEHRT) to determine     2019 and subsequent years.
                                         eligibility for program participation.
II.E.6................................  Discontinued use of quality measure ACO-  Performance years beginning in
                                         11.                                       2019 and subsequent years.
----------------------------------------------------------------------------------------------------------------

III. Collection of Information Requirements

    As stated in section 3022 of the Affordable Care Act, Chapter 35 of 
title 44, United States Code, shall not apply to the Shared Savings 
Program. Consequently, the information collection requirements 
contained in this proposed rule need not be reviewed by the Office of 
Management and Budget.

IV. Regulatory Impact Analysis

A. Statement of Need

    This proposed rule is necessary in order to make certain payment 
and policy changes to the Medicare Shared Savings Program established 
under section 1899 of the Act. The Shared Savings Program promotes 
accountability for a patient population, fosters the coordination of 
items and services under Parts A and B, and encourages investment in 
infrastructure and redesigned care processes for high quality and 
efficient service delivery.
    The need for the proposed policies is summarized in the statement 
of the rule's purpose in section I of this proposed rule and described 
in greater detail throughout the discussion of the proposed policies in 
section II of this proposed rule. As we have previously explained in 
this proposed rule, ACOs in two-sided models have shown significant 
savings to the Medicare program and are advancing quality. However, the 
majority of ACOs remain under a one-sided model. Some of these ACOs are 
generating losses (and therefore increasing Medicare spending) while 
receiving waivers of certain federal requirements in connection with 
their participation in the program. These ACOs may also be encouraging 
consolidation in the market place and reducing competition and choice 
for Medicare FFS beneficiaries. Under the proposed redesign of the 
Shared Savings Program, ACOs of different compositions, and levels of 
experience with the accountable care model could continue to 
participate in the program, but the proposals included in this proposed 
rule would put the program on a path towards achieving a more 
measureable move to value and achieve savings for the Medicare program, 
while promoting a competitive and accountable marketplace.
    In summary, this proposed rule would redesign the participation 
options, including the payment models, available to Shared Savings 
Program ACOs to encourage their transition to performance-based risk. 
As part of this approach, CMS proposes to extend the length of ACOs' 
agreement periods from 3 to 5 years as well as to make changes to the 
program's benchmarking methodology to allow for benchmarks that better 
reflect the ACO's regional service area expenditures beginning with its 
first agreement period, while mitigating the effects of factors based 
on regional FFS expenditures on ACO benchmarks more generally. These 
proposed policies are necessary to improve the value proposition of the 
program for currently participating ACOs considering continuing their 
participation, as well as for organizations considering entering the 
program. Further, these changes are timely as large cohorts of the 
program's early entrants, the vast majority of which are currently 
participating in the program's one-sided model (Track 1), face a 
required transition to performance-based risk at the start of their 
next agreement period under the program's current regulations.
    Other key changes to the program's regulations are also necessary, 
including to implement new requirements established by the Bipartisan 
Budget Act, which generally allow for additional flexibilities in 
payment and program policies for ACOs and their participating providers 
and suppliers. Specifically, we are proposing policies to implement 
provisions of the Bipartisan Budget Act that allow certain ACOs to 
establish CMS-approved beneficiary incentive programs to provide 
incentive payments to assigned beneficiaries who receive qualifying 
primary care services; permit payment for expanded use of telehealth 
services furnished by physicians or other practitioners participating 
in an applicable ACO that is subject to a prospective assignment 
methodology;

[[Page 41916]]

provide greater flexibility in the assignment of Medicare FFS 
beneficiaries to ACOs by allowing ACOs in tracks under a retrospective 
beneficiary assignment methodology a choice of prospective assignment 
for the agreement period; and offer the opportunity for Medicare FFS 
beneficiaries to voluntarily identify an ACO professional as their 
primary care provider with such a voluntary identification superseding 
claims-based assignment. Additionally, this proposed rule would expand 
the availability of the program's existing SNF 3-day rule waiver to all 
ACOs participating under performance-based risk to support these ACOs 
in coordinating care across settings to meet the needs of their patient 
populations.
    To provide ACOs time to consider the new participation options and 
prepare for program changes, make investments and other business 
decisions about participation, obtain buy-in from their governing 
bodies and executives, and complete and submit a Shared Savings Program 
application for a performance year beginning in 2019, we intend to 
forgo the application cycle in 2018 for an agreement start date of 
January 1, 2019, and instead propose to offer a July 1, 2019 start 
date. This midyear start in 2019 would also allow both new applicants 
and ACOs currently participating in the program an opportunity to make 
any changes to the structure and composition of their ACO as may be 
necessary to comply with the new program requirements for the ACO's 
preferred participation option, if changes to the participation options 
are finalized as proposed. Additionally, ACOs with a participation 
agreement ending on December 31, 2018, would have an opportunity to 
extend their current agreement period for an additional 6-month 
performance year and to apply for a new agreement period under the 
BASIC track or ENHANCED track beginning on July 1, 2019. ACOs entering 
a new agreement period on July 1, 2019, would have the opportunity to 
participate in the program under an agreement period spanning 5 years 
and 6 months, where the first performance year is the 6-month period 
between July 1, 2019, and December 31, 2019. This proposed rule 
includes the proposed methodology for determining ACO financial 
performance for these two, 6-month performance years during CY 2019.
    Further, this proposed rule would make other timely updates to the 
program's regulations, for consistency with other changes in program 
policies or Medicare policies more generally, such as: (1) Modifying 
the definition of primary care services used in beneficiary assignment 
to add new codes and revising how we determine whether evaluation and 
management services were furnished in a SNF; (2) extending policies 
previously adopted for performance year 2017 to performance year 2018 
and subsequent years to address quality performance scoring and the 
determination of shared losses (under two-sided models) in the event of 
extreme or uncontrollable circumstances; and (3) promoting 
interoperability in Medicare by establishing a new Shared Savings 
Program eligibility requirement related to adoption of CEHRT by an 
ACO's eligible clinicians, while discontinuing use of the existing 
quality measure on use of CEHRT.

B. Overall Impact

    We examined the impacts of this rule as required by Executive Order 
12866 on Regulatory Planning and Review (September 30, 1993), Executive 
Order 13563 on Improving Regulation and Regulatory Review (January 18, 
2011), Executive Order 13771 on Reducing Regulation and Controlling 
Regulatory Costs (January 30, 2017), the Regulatory Flexibility Act 
(RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the 
Social Security Act, section 202 of the Unfunded Mandates Reform Act of 
1995 (March 22, 1995; Pub. L. 104-4), Executive Order 13132 on 
Federalism (August 4, 1999), and the Congressional Review Act (5 U.S.C. 
804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Section 
3(f) of Executive Order 12866 defines a ``significant regulatory 
action'' as an action that is likely to result in a rule: (1) Having an 
annual effect on the economy of $100 million or more in any 1 year, or 
adversely and materially affecting a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or state, local or tribal governments or communities (also 
referred to as ``economically significant''); (2) creating a serious 
inconsistency or otherwise interfering with an action taken or planned 
by another agency; (3) materially altering the budgetary impacts of 
entitlement grants, user fees, or loan programs or the rights and 
obligations of recipients thereof; or (4) raising novel legal or policy 
issues arising out of legal mandates, the President's priorities, or 
the principles set forth in the Executive Order. Executive Order 13771 
directs agencies to categorize all impacts which generate or alleviate 
costs associated with regulatory burden and to determine the action's 
net incremental effect.
    A regulatory impact analysis (RIA) must be prepared for major rules 
with economically significant effects ($100 million or more in any 1 
year). We estimate that this rulemaking is ``economically significant'' 
as measured by the $100 million threshold, and hence also a major rule 
under the Congressional Review Act. Accordingly, we have prepared a 
RIA, which to the best of our ability presents the costs and benefits 
of the rulemaking.
    In keeping with our standard practice, the main analysis presented 
in this RIA compares the expected outcomes if the full set of proposals 
in this rule were finalized to the expected outcomes under current 
regulations. We provide our analysis of the expected costs of the 
proposed payment model under section 1899(i)(3) of the Act to the costs 
that would be incurred under the statutory payment model under section 
1899(d) of the Act in section IV.E. of this proposed rule.

C. Anticipated Effects

1. Effects on the Medicare Program
a. Background
    The Shared Savings Program is a voluntary program operating since 
2012 that provides financial incentives for demonstrating quality of 
care and efficiency gains within FFS Medicare. In developing the 
proposed policies, we evaluated the impact of the quality and financial 
results of the first 4 performance years of the program. We also 
considered our earlier projections of the program's impacts as 
described in the November 2011 final rule (see Table 8, 76 FR 67963), 
the June 2015 final rule (80 FR 32819), and June 2016 final rule (81 FR 
38002).
(1) ACO Performance 2012 Through 2016
    We have four performance years of financial performance results 
available for the Shared Savings Program.\27\ Table 14 describes 
performance year 2016

[[Page 41917]]

results for ACOs segmented by track. These results show that in 
performance year 2016, the 410 Track 1 ACOs spent more on average 
relative to their financial benchmarks, resulting in a net loss of $49 
million, or $7 per beneficiary. Because these ACOs were in a one-sided 
shared savings only model, CMS did not recoup any portion of these 
losses. Further, in performance year 2016, the 6 Track 2 and 16 Track 3 
ACOs spent less on average relative to their financial benchmarks. 
Track 2 ACOs produced net savings of $18 million or $308 per 
beneficiary, and Track 3 ACOs produced net savings of $14 million or 
$39 per beneficiary. These results (albeit from a relatively small 
sample of ACOs that in a number of cases moved to a performance-based 
risk track only after showing strong performance in a first agreement 
period under Track 1) indicate that ACOs under performance-based risk 
were more successful at lowering expenditures in performance year 2016 
than ACOs under Track 1.
---------------------------------------------------------------------------

    \27\ The first performance year for the program concluded 
December 31, 2013, which included a 21-period for April 2012 
starters, an 18-month period for July 2012 starters, and a 12-month 
period for January 2013 starters. Thereafter, results have been 
determined for the calendar year performance year for 2014 through 
2016 for all ACOs that participated in the program for the relevant 
year. Performance year 2017 results are not available at the time of 
publication of this proposed rule.
---------------------------------------------------------------------------

    The same performance year 2016 data also show that ACOs produce a 
higher level of net savings and more optimal financial performance 
results the longer they have been in the Shared Savings Program and 
with additional participation experience. In performance year 2016, 42 
percent of ACOs that started participating in the Shared Savings 
Program in 2012 and remained in the program shared in savings and 36 
percent of both 2013 and 2014 starters shared in savings. In contrast, 
26 percent of 2015 starters shared in savings and 18 percent of 2016 
starters shared in savings in performance year 2016.

                                                Table 14--PY 2016 Results by Shared Savings Program Track
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                             Net effect
                                   Number of    Parts A and B      Parts A and B      Shared savings      Shared loss       Net effect in        per
     Track       Two-sided risk?     ACOs       spending above     spending below   payments from CMS    payments from        aggregate      beneficiary
                                  reconciled      benchmark          benchmark           to ACOs          ACOs to CMS                         per year
                 ...............  ..........  [A]..............  [B]..............  [C]..............  [D]..............  [A - B + C - D].  ............
--------------------------------------------------------------------------------------------------------------------------------------------------------
Track 1........  No.............         410  $1.021 billion...  $1.562 billion...  $590 million.....  $0...............  $49 million.....            $7
Track 2........  Yes............           6  0................  42 million.......  24 million.......  0................  -18 million.....          -308
Track 3........  Yes............          16  25 million.......  95 million.......  64 million.......  9 million........  -14 million.....           -39
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Table 15 indicates that when analyzing the performance of ACOs in 
Track 1, which is the track in which the majority of Shared Savings 
Program ACOs participated as of performance year 2016, it becomes clear 
that low revenue ACOs are saving CMS money while high revenue ACOs are 
resulting in additional spending by CMS before accounting for market-
wide and potential spillover effects. Low revenue Track 1 ACOs produced 
net savings of $182 million relative to their benchmarks or $73 per 
enrollee, and high revenue Track 1 ACOs produced a net loss of $231 
million or $46 per enrollee. For the purpose of this analysis, an ACO 
whose ACO participants' Medicare FFS revenue for assigned beneficiaries 
was less than 10 percent of the ACO's assigned beneficiary population's 
Parts A and B expenditures, was identified as a ``low revenue ACO,'' 
while an ACO whose ACO participants' Medicare FFS revenue for assigned 
beneficiaries was at least 10 percent of the ACO's assigned beneficiary 
population's Parts A and B expenditures, was identified as a ``high 
revenue ACO''. Nationally, evaluation and management spending accounts 
for about 10 percent of total Parts A and B per capita spending. 
Because ACO assignment focuses on evaluation and management spending, 
applying a 10 percent limit to identify low revenue ACOs would capture 
all ACOs that participated in the Shared Savings Program in performance 
year 2016 that were solely comprised of providers and suppliers billing 
physician fee schedule services and generally exclude ACOs with 
providers and suppliers that bill inpatient services for their assigned 
beneficiaries. The use of a threshold of 10 percent of the Parts A and 
B expenditures for the ACO's assigned beneficiary population to 
classify ACOs as either ``low revenue'' or ``high revenue'' also showed 
the most significant difference in performance between the two types of 
ACOs. We note that this approach differs from the proposed definitions 
for low revenue ACO and high revenue ACO discussed in section II.A.5.b. 
of this proposed rule. However, our analysis has confirmed that the 
simpler and more practical proposed policy for identifying low revenue 
ACOs using a 25-percent threshold in terms of the ratio of ACO 
participants' total Medicare Parts A and B FFS revenue relative to 
total Medicare Parts A and B expenditures for the ACO's assigned 
beneficiary population produces a comparable subgroup of ACOs with 
similarly-elevated average financial performance and physician-based 
ACO participant composition.

                                         Table 15--PY 2016 Results for Low Revenue and High Revenue Track 1 ACOs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                            Number of                                                                    Shared loss                         Net effect
                              ACOs         Parts A and B         Parts A and B        Shared savings       payments       Net effect in          per
 Track 1 ACO composition     (total       spending above        spending below     payments from CMS to   from ACOs   aggregate [A - B + C   beneficiary
                              410)           benchmark             benchmark               ACOs             to CMS            - D]            per year
                           ..........                        [A].................  [B].................          [C]  [D].................  ............
                          ------------------------------------------------------------------------------------------------------------------------------
Low revenue..............         188  $339 million........  -$863 million.......  $343 million........           $0  -$182 million.......          -$73
High revenue.............         222  682 million.........  -698 million........  247 million.........            0  231 million.........            46
--------------------------------------------------------------------------------------------------------------------------------------------------------

    With respect to ACO quality, the Shared Savings Program's quality 
measure set includes both process and outcome measures that evaluate 
preventive care, clinical care for at-risk populations, patient 
experience of care, and care coordination. ACOs have consistently 
achieved higher average performance rates compared to group practices 
reporting similar quality measures. In addition, ACOs that have 
participated in the program over a

[[Page 41918]]

longer time period have shown greater improvement in quality 
performance. For example, across all Shared Savings Program ACOs that 
reported quality in both performance year 2013 and performance year 
2016, average quality performance improved by 15 percent across 25 
measures used consistently across the performance years. Further, for 
performance year 2016, 93 percent of Shared Savings Program ACOs 
received bonus points for improving quality performance in at least one 
of the four quality measure domains with an average quality score 
increase for the applicable domain of 3 percentage points.
(2) ACO Market-Wide Effects and Potential Spillover
    Analysis of wider program claims data indicates Medicare ACOs have 
considerable market-wide impact, including significant spillover 
effects not directly measurable by ACO benchmarks. Whereas spending 
relative to benchmark (Tables 14 and 15) indicates Shared Savings 
Program ACOs as a group are not producing net savings for the Medicare 
FFS program, a study of wider claims data indicates significant net 
savings are likely being produced. Table 16 includes data through 
performance year 2016 on the cumulative per capita Medicare FFS 
expenditure trend (on a price-standardized and risk-adjusted basis) in 
markets that include Medicare ACOs, including ACOs participating in the 
Shared Savings Program as well as in the Pioneer and Next Generation 
ACO Models. Table 16 illustrates that, compared to the results in 
relation to ACOs' historical benchmarks discussed previously (see Table 
14), more savings are likely being generated when both the spillover 
effects on related populations and the feedback effect of growing ACO 
participation on the national average FFS program spending growth, 
which in turn has been used to update ACO benchmarks, are factored in. 
Table 16 expresses combined market average per capita spending growth 
since 2011 relative to a baseline FFS per capita trend observed for 
hospital referral regions continuing to have less than 10 percent of 
total assignable FFS beneficiaries assigned to Medicare ACOs through 
2016. Markets that have been ``ACO active'' longer (defined by the year 
a market first reached at least 10 percent assignment of assignable FFS 
beneficiaries to Medicare ACOs) show the greatest relative reduction in 
average adjusted growth in per capita Medicare FFS spending. Markets 
that have included Medicare ACOs since 2012, particularly the 
relatively small subset of 10 hospital referral regions reaching 
significant ACO participation in risk (defined as at least 30 percent 
assignment by 2016 to ACOs participating in a Shared Savings Program 
track or Medicare ACO model with performance-based risk), show the most 
significant reductions in Medicare FFS spending through 2016.
[GRAPHIC] [TIFF OMITTED] TP17AU18.017

    Based on an analysis of Medicare Shared Savings Program and Pioneer 
ACO Model performance data, we observe that the sharpest declines in 
spending are for post-acute facility services (particularly skilled 
nursing facility services), with smaller rates of savings (but more 
dollars saved overall) from prevented hospital admissions and reduced 
spending for outpatient hospital episodes. These findings become 
apparent when assessing hospital referral regions both with (>10 
percent of assignable Medicare FFS beneficiaries assigned to ACOs in 
2012) and without (<10 percent through 2016) a significant portion of 
assignable Medicare FFS beneficiaries assigned to ACOs. Comparing 
price-standardized per capita changes in spending from 2011 to 2016, 
regions with significant ACO penetration yielded larger declines in 
expenditures in the following areas relative to those without 
significant ACO penetration: Post-acute care facilities (relative 
decrease of 9.0 percent), inpatient (1.6 percent relative decrease), 
and outpatient (3.5 percent relative decrease). These relative 
decreases were accompanied by declines in evaluation and management 
services (2.5 percent relative decrease), emergency department (ED) 
utilization (1.6 percent relative decrease), hospital admissions (1.9 
percent decrease), and hospital readmissions (3.5 percent decrease). 
There also appears to be substitution of higher cost services with 
lower cost services. For example, during the same period, home health 
expenditures increased by 5.0 percent and ambulatory surgery center 
expenditures increased by 1.4 percent, indicating that some 
beneficiaries could be forgoing care in institutional and inpatient 
settings in favor of lower cost sites of care.
    These findings are supported by outside literature and research. 
For example, a study conducted by J. Michael McWilliams and colleagues 
(JAMA, 2017) found that Shared Savings Program ACOs that began 
participating in 2012 reduced post-acute care

[[Page 41919]]

spending by 9 percent by 2014.\28\ Another study by Ulrika Winblad and 
colleagues (Health Affairs, 2017) determined that ACO-affiliated 
hospitals reduced readmissions from skilled nursing facilities at a 
faster rate than non-ACO-affiliated hospitals through 2013.\29\ In 
addition, a study by John Hsu and colleagues (Health Affairs, 2017) 
concluded that using care management programs, large Pioneer ACOs 
generated 6 percent fewer ED visits, 8 percent fewer hospitalizations, 
and overall 6 percent less Medicare spending relative to a comparison 
group through 2014.\30\
---------------------------------------------------------------------------

    \28\ McWilliams JM, et al. Changes in Postacute Care in the 
Medicare Shared Savings Program. JAMA Intern Med. 2017; 177(4):518-
526. doi:10.1001/jamainternmed.2016.9115.
    \29\ Winblad U, et al. ACO-Affiliated Hospitals Reduced 
Rehospitalizations from Skilled Nursing Facilities Faster than Other 
Hospitals. Health Affairs. 2017 January; 36(1): 67-73. doi:10.1377/
hlthaff.2016.0759.
    \30\ Hsu J, et al. Bending The Spending Curve By Altering Care 
Delivery Patterns: The Role Of Care Management Within A Pioneer ACO. 
Health Affairs. 2017 May 1; 36(5):876-884. doi:10.1377/
hlthaff.2016.0922.
---------------------------------------------------------------------------

    Assuming Medicare ACOs were responsible for all relative deviations 
in trend from non-ACO markets produces an optimistic estimate that 
total combined Medicare ACO efforts potentially reduced total FFS 
Medicare Parts A and B spending in 2016 by about 1.2 percent, or $4.2 
billion (after accounting for shared savings payments but before 
accounting for the potential impact on MA plan payment). However, it is 
likely that ACOs are not the only factor responsible for lower spending 
growth found in early-ACO-active markets. Health care providers in such 
markets are likely to be more receptive to other models and/or 
interventions, potentially including the following, for example: (1) 
Health Care Innovation Award payment and service delivery models funded 
by the Innovation Center; (2) advanced primary care functionality 
promoted by other payers, independent organizations like the National 
Committee for Quality Assurance, and/or through Innovation Center 
initiatives including the Multi-Payer Advanced Primary Care Practice 
Demonstration and Comprehensive Primary Care Initiative; and (3) care 
coordination funded through other Medicare initiatives, including, for 
example, the Community-based Care Transitions Program. Furthermore, the 
markets making up the non-ACO comparison group only cover about 10 
percent of the national assignable FFS population in 2016 and may offer 
an imperfect counterfactual from which to estimate ACO effects on other 
markets.
    An alternative (and likely more precise) estimate for the overall 
Medicare ACO effect on spending through 2016 involves assuming a 
spillover multiplier mainly for savings on non-assigned beneficiaries 
whose spending is not explicitly included in benchmark calculations and 
combining primary and spillover effects to estimate the degree that ACO 
benchmarks were reduced by the feedback such efficiency gains would 
have on national average spending growth. Analysis of claims data 
indicates an average ACO's providers and suppliers provide services to 
roughly 40 to 50 percent more beneficiaries than are technically 
assigned to the ACO in a given year. In addition, savings would 
potentially extend to spending greater than the large claims truncation 
amount, IME payments, DSH payments, and other pass-through payments 
that are excluded from ACO financial calculations. Assuming 
proportional savings accrue for non-assigned beneficiaries and the 
excluded spending categories, as previously described, supports a 
spillover savings assumption of 1.6 (that is, 60 cents of savings on 
non-benchmark spending for every dollar of savings on benchmark 
spending). Total implied savings, including the assumed spillover 
savings, would imply Medicare ACOs were responsible for about 50 
percent of the lower spending growth in ACO markets (after becoming ACO 
active), or roughly 0.5 percent lower total FFS Parts A and B spending 
in 2016 after accounting for shared savings payments.
    There are several other key takeaways from the available evidence 
and literature regarding the performance of Medicare ACOs, including 
the following:
    Independent Research Finds ACOs Reduce Medicare Trust Fund Outlays. 
The implications from studying market-level trends described in the 
previous section are compatible with findings reported by independent 
researchers. J. Michael McWilliams (JAMA, 2016) found that in 2014, 
Shared Savings Program ACOs generated estimated program savings of $628 
million, or about 2.5 times higher than the savings in relation to 
participating ACOs' historical benchmarks and nearly twice the total 
shared savings payments of $341 million.\31\ Another study by 
McWilliams and colleagues (JAMA, 2013) on a commercial ACO initiative, 
the Alternative Quality Contract, estimated a net 3.4 percent reduction 
in spending on Medicare beneficiaries due to spillover from a 
commercial non-Medicare ACO initiative.\32\ This research supports the 
hypothesis that changes in delivery implemented by Medicare ACO 
clinicians would in turn cause efficiency gains in the wider Medicare 
FFS population. In another study supporting this hypothesis, Madeleine 
Phipps-Taylor and Stephen Shortell (NEJM, 2016) conducted a set of case 
studies which concluded that ACOs were making system and process 
changes that would improve the value of services provided to all 
patients, regardless of payer.\33\
---------------------------------------------------------------------------

    \31\ McWilliams JM. Changes in Medicare Shared Savings Program 
Savings From 2013 to 2014. JAMA. 2016; 316(16):1711-1713. 
doi:10.1001/jama.2016.12049.
    \32\ McWilliams JM, et al. Changes in Health Care Spending and 
Quality for Medicare Beneficiaries Associated With a Commercial ACO 
Contract. JAMA. 2013; 310(8):829-836. doi:10.1001/jama.2013.276302.
    \33\ Madeleine Phipps-Taylor & Stephen M. Shortell. ACO 
Spillover Effects: An Opportunity Not to Be Missed, NEJM Catalyst 
(September 21, 2016); available at https://catalyst.nejm.org/aco-spillover-effects-opportunity-not-missed/.
---------------------------------------------------------------------------

    Low revenue ACOs (including small and physician-only ACOs) have 
produced stronger average benchmark savings to date than high revenue 
ACOs (likely including institutional providers). We also find lower 
spending growth in the handful of markets that happen to be virtually 
exclusively populated by low revenue ACOs; however, the sample size of 
such markets is too small for us to confidently estimate relative 
performance but does offer some corroboration of the stronger results 
observed for low revenue ACOs on average relative to their historical 
benchmarks. Further, evidence suggests that overall payment reform has 
been associated with little acceleration in consolidation of health 
care providers that surpasses trends already underway (Post et al., 
2017),\34\ although there is some evidence of potential defensive 
consolidation in response to new payment models (Neprash et al., 
2017).\35\ Anecdotally, ACOs provide physician practices with a way to 
stay independent and offer a viable alternative to merging with a 
hospital (Mostashari, 2016).\36\
---------------------------------------------------------------------------

    \34\ See for example, Brady Post, Tom Buchmueller, and Andrew M. 
Ryan. Vertical Integration of Hospitals and Physicians: Economic 
Theory and Empirical Evidence on Spending and Quality. Medical Care 
Research and Review. August 2017. https://doi.org/10.1177/1077558717727834. See also, Liaw WR, et al. Solo and Small 
Practices: A Vital, Diverse Part of Primary Care. Ann Fam Med. 
2016;14(1):8-15. doi:10.1370/afm.1839.
    \35\ Neprash HT, Chernew ME & McWilliams JM. Little Evidence 
Exists to Support the Expectation That Providers Would Consolidate 
to Enter New Payment Models. Health Affairs. 2017; 36(2): 346-354. 
doi:10.1377/hlthaff.2016.0840.
    \36\ See for example, Mostashari, F. The Paradox of Size: How 
Small, Independent Practices Can Thrive in Value-Based Care. Ann Fam 
Med. 2016; 14(1):5-7. doi:10.1370/afm.1899.

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[[Page 41920]]

    Generating savings is difficult for ACOs. It may take time as well 
as trial and error for ACOs to build more efficient care delivery 
infrastructure. Small absolute savings compound over time in an 
incremental fashion. This gradual change is evidenced by ACOs' 
financial performance results to date, which indicate that ACOs produce 
more net savings the longer they participate in programs such as the 
Shared Savings Program.
    Shared savings are not profits. Program experience since 2012 
indicates that ACOs make upfront investments in care delivery 
infrastructure, including data analytics and staffing, with the intent 
of saving money through improvements in care management and 
coordination. ACOs that do not achieve savings must still fund these 
operational costs.
    Sustainably rewarding attained efficiency and continued improvement 
is the central challenge. Therefore, optimizing program design elements 
for ACO initiatives such as the Shared Savings Program is key to 
ensuring that both of these goals are attained. Such elements include 
the methodology used to set and reset the ACO's historical benchmark, 
the approach used to calculate the ACO's shared savings and/or shared 
losses, the level of performance-based risk for ACOs, and the 
methodology for assigning beneficiaries to the ACOs. Striking this 
balance correctly would foster increased participation in ACO 
initiatives, which is required to produce higher levels of net savings.
b. Assumptions and Uncertainties
    The changes to the Shared Savings Program proposed in this rule 
could result in a range of possible outcomes. We considered a number of 
uncertainties related to determining future participation and 
performance by ACOs in the Shared Savings Program.
    Changes to the existing benchmark calculations described previously 
would benefit program cost savings by producing benchmarks with 
improved accuracy (most notably by limiting the effect of the regional 
benchmark adjustment to positive or negative 5 percent of the national 
per capita spending amount). However, such savings would be partly 
offset by increased shared savings payments to ACOs benefiting from our 
proposal to apply the methodology incorporating factors based on 
regional FFS expenditures beginning with the ACO's first agreement 
period, revising risk adjustment to include up to a 3 percent increase 
in average HCC risk score over the course of an agreement period, and 
blending national trend with regional trend when calculating ACO 
benchmarks. Such trade-offs reflect the intention of our proposal to 
strengthen the balance between rewarding ACOs for attainment of 
efficiency in an absolute sense in tandem with incentivizing continual 
improvement relative to an ACO's recent baseline.
    More predictable relationships, that is, an ACO's knowledge of its 
costs relative to the FFS expenditures in its region used to adjust its 
benchmark, can allow risk-averse ACOs to successfully manage 
significant exposure to performance-based risk. However, the proposed 
policy would limit regional adjustments so that they still incentivize 
low cost ACOs to take on risk while mitigating excessive windfall 
payments to ACOs that, for a variety of reasons, may be very low cost 
at baseline. The proposed policy also increases the possibility that 
higher cost ACOs would find a reasonable business case to remain in the 
program and thereby continue to lower their cost over time.
    We also considered the possibility that providers and suppliers 
would have differing responses to changing financial incentives offered 
by the program, including for example the varying levels of savings 
sharing rates and/or loss sharing limits proposed for the BASIC and 
ENHANCED tracks. Participation decisions are expected to continue to be 
based largely on an ACO's expectation of the effect of rebasing and the 
regional adjustment on its ability to show spending below an expected 
future benchmark. We also considered the incentive for ACOs to 
participate under the highest level of risk and reward in the BASIC 
track or in the ENHANCED track in order to be considered an Advanced 
APM Entity for purposes of the Quality Payment Program. Eligible 
clinicians in an ACO that is an Advanced APM Entity may become 
Qualifying APM Participants for a year if they receive a sufficient 
percentage of their payments for Part B covered professional services 
or a sufficient percentage of Medicare patients through the ACO.
    We also gave consideration to the effect on program entry and 
renewal as a result of discontinuing Track 1 and Track 2, and offering 
instead the BASIC track (including the glide path for eligible ACOs) 
and ENHANCED track, including the option for ACOs currently under 3-
year agreements for participation in Track 1, Track 2, and Track 3 to 
terminate their agreement to quickly enter a new agreement period under 
the BASIC track or the ENHANCED track. For example, if 2014 starters 
complete a second 3-year agreement period under Track 1 and are 
eligible to enter the BASIC track's glide path under a one-sided model 
in 2020, these ACOs could have 7 performance years under a one-sided 
model. Modeling indicates that while such allowance could slow the 
transition to risk for some ACOs that might otherwise have enough of a 
business case to make an immediate transition to performance-based 
risk, the longer glide path would likely result in greater overall 
program participation by the end of the projection period and 
marginally increase overall program savings. We also considered the 
effect on participation from the proposals to permit ACOs to change 
their beneficiary assignment method selection prior to the start of 
each performance year, to allow ACOs in the BASIC track's glide path 
the option annually to elect to transition to a higher level of risk 
and reward within the glide path, and to offer a July 1, 2019 start 
date (including the proposed extension of an existing agreement period 
through June 30, 2019).
    We also considered the potential effects of policies proposed to 
promote participation by low revenue ACOs as follows. By allowing low 
revenue ACOs to enter the BASIC track (potentially immediately entering 
the maximum level of risk and potential reward under such track) and 
continue their participation in the BASIC track for a subsequent 
agreement period (under the highest level of risk and potential 
reward), the proposal would offer low revenue ACOs a longer period 
under a more acceptable degree of risk given their revenue constraints, 
before transitioning to more significant risk exposure under the 
ENHANCED track.
    Low revenue ACOs can still choose to enter the ENHANCED track, and 
take on additional downside risk in exchange for the opportunity to 
share in a higher percentage of any savings. Such migration is 
likeliest for low revenue ACOs expecting a favorable regional 
adjustment to their rebased historical benchmark. The proposal to 
include the regional adjustment in the methodology for determining an 
ACO's benchmark for its first agreement period should help provide such 
ACOs the degree of certainty necessary for earlier election of 
performance-based risk, while capping the regional adjustment at 
positive or negative 5 percent of national per capita expenditures for 
Parts A and B services for assignable beneficiaries helps CMS avoid 
unnecessarily large windfall payments for ACOs that would have

[[Page 41921]]

already been properly incentivized to aggressively participate with a 
regional adjustment set at the level of the cap.
    In addition, we considered related impacts of the proposed changes 
to the program's benchmarking methodology, as used to establish, 
adjust, update and reset the ACO's benchmark. For renewing ACOs--
especially ACOs that are concerned about competition from operating in 
a highly-competitive ACO market or ACOs that make up a large portion of 
their market--several proposed changes are likely to help mitigate 
concerns about the long term business case of the model. Most notably, 
the use of a regional/national blend to determine the growth rates for 
the trend and update factors should reduce the degree to which ACO 
savings (and/or neighboring ACO savings) affect an ACO's own benchmark 
updates. Furthermore, the proposal to use full HCC risk ratios (capped 
at positive or negative 3 percent) regardless of the assignment status 
of a beneficiary should help to assuage concerns that risk adjustment 
could adversely affect an ACO that increasingly serves a higher 
morbidity population inside of its market.
    To best reflect these uncertainties, we continue to utilize a 
stochastic model that incorporates assumed probability distributions 
for each of the key variables that would impact participation, changes 
in care delivery, and the overall financial impact of the Shared 
Savings Program. The model continues to employ historical baseline 
variation in trends for groups of beneficiaries assigned using the 
program's claim-based assignment methodology to simulate the effect of 
benchmark calculations as described in the June 2016 final rule (81 FR 
38005 through 38007). We used several unique assumptions and assumption 
ranges in the updated model.
    To estimate the number of ACOs that would participate in the 
program, we assumed that up to approximately 250 existing 2018 ACOs 
would be affected by the proposed policies starting with a potential 
third agreement period beginning on July 1, 2019, or in 2020 or 2021. 
We also assumed that up to approximately 300 existing 2018 ACOs would 
be affected by the proposed policies starting with a potential second 
agreement period beginning on July 1, 2019, in 2020, or 2021. In 
addition, between 20 and 50 new ACOs were assumed to form annually from 
2019 through 2028.
    We assumed ACO decision making regarding participation would 
reflect each ACO's updated circumstances including prior year 
performance as well as expected difference in spending in relation to 
future anticipated adjusted benchmark spending. Specific related 
assumptions are as follows:
    For one, the potential that existing ACOs would renew under the 
policies in the proposed rule would be related to expectations 
regarding the effect of the proposed changes to the regional adjustment 
on the ACO's rebased benchmark. ACOs expecting adjusted historical 
benchmarks from 2 to 10 percent higher than actual per capita cost are 
assumed to select the highest-risk option (Track 3 in the baseline or 
the ENHANCED track under the proposed rule); such range is reduced for 
second or later rebasing under the policies in the proposed rule to 1 
to 5 percent higher than actual per capita cost. Otherwise, ACOs 
expecting adjusted rebased benchmarks from 0 to 3 percent higher than 
actual per capita cost are assumed to select the Track 1+ Model 
(baseline) or BASIC track, Level E (proposed). ACOs expecting adjusted 
rebased historical benchmarks from zero to 5 percent lower than actual 
per capita cost are expected not to renew unless another agreement in 
Track 1 is allowed (baseline), or are assumed to have between zero and 
50 percent chance of electing the BASIC track (proposed).
    Second, all other renewal decisions would follow the same 
assumptions as the preceding description except for the following 
cases. For the baseline scenario, a Track 1 ACO eligible for a second 
Track 1 agreement period during the projection period that does not 
otherwise select renewal in Track 3 or the Track 1+ Model would only 
renew in Track 1 if the ACO had earned shared savings in either of the 
first 2 years of the existing agreement period or if the ACO 
anticipates an adjusted historical benchmark no lower than 3 percent 
below actual cost. For the proposed scenario, an ACO not otherwise 
choosing the ENHANCED track would only renew in the BASIC track if the 
following conditions were met: (1) The ACO expects an adjusted 
historical benchmark no lower than 0 to 3 percent below actual cost; 
(2) the ACO did not experience a loss in the existing agreement period; 
and (3) the ACO is low revenue (as high revenue ACOs would be precluded 
from renewing in the BASIC track).
    Third, we used the following approach to make assumptions about 
participation decisions for ACOs encountering a shared loss. An 
adjusted shared loss (L) was calculated by netting out the total 
expected incentive payments that would be made under the Quality 
Payment Program to ACO providers/suppliers who are Qualifying APM 
Participants during the payment year that is 2 years after the 
performance year for which the ACO is accountable for shared losses. In 
each trial a random variable (X) was chosen from a skewed distribution 
ranging from zero to 3 percent of benchmark (mode 1 percent of 
benchmark) for determining participation decisions affecting years