Proposed rule changes ACO benchmarks

The Centers for Medicare & Medicaid Services (CMS) released a proposed rule to update the methodology used to measure the performance of accountable care organizations (ACOs) in the Medicare Shared Savings Program. The rule is the result of complaints that the current methodology unfairly punishes high-performing ACOs. The proposed evaluation changes would result in $120 million in net federal savings between 2017 and 2019, according to the CMS.

The proposal builds on the momentum of growth in the Shared Savings Program and charts a path for long-term sustainability by improving the long-term incentives for ACOs as they continue to provide efficient, high quality healthcare to Medicare beneficiaries, according to an announcement from the agency.

"Medicare payments are an important catalyst to improving care delivery, spending our resources smarter and keeping people healthy," said Andy Slavitt, CMS acting administrator. "This proposal allows ACOs in all parts of the country to be successful by recognizing both their achievements and improvements in how they provide care. This should have the effect of growing the number of ACOs, and making ACOs and the coordinated care they provide to patients, more of a standard in all parts of the country."

Under the proposed rule, CMS would modify the process for resetting the benchmarks, which are used to determine performance for ACOs renewing their participation agreements for a second or subsequent agreement period. The proposed methodology would incorporate factors based on regional fee-for-service expenditures into establishing and updating the ACO’s rebased historical benchmark, including an adjustment to the benchmark based on regional spending that is phased-in over several agreement periods.

Key proposals in the rule include the following:

• Recognition that health cost trends vary between communities, so regional data would be used, rather than national spending growth trends, when establishing and updating an ACO’s rebased benchmark.
• Adjusting an ACO’s rebased benchmark when it enters a second or subsequent agreement period by a percentage (increased over time) of the difference between fee-for-service.
• Spending in the ACO’s regional service area and the ACO’s historical spending to provide a greater incentive for continued ACO participation and improvement.
• Giving ACOs time to prepare for benchmarks that incorporate regional expenditures by using a phased-in approach to implementation.

The proposed rule also adds a participation option to facilitate an ACO’s transition to performance-based risk arrangements by allowing eligible ACOs to elect a fourth year under their existing first agreement and defer by one year entering a second agreement period under a performance-based risk track. It streamlines the methodology for adjusting an ACO’s benchmark when its composition changes and clarifies the timeline and other criteria for reopening determinations of ACO shared savings and shared losses for good cause or fraud or similar fault.

View the proposed rule. Comments may be submitted until March 28.