Medicare Program; Medicare Shared Savings Program: Accountable Care Organizations, 72759-72872 [2014-28388]

Download as PDF Vol. 79 Monday, No. 235 December 8, 2014 Part II Department of Health and Human Services mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Centers for Medicare & Medicaid Services 42 CFR Part 425 Medicare Program; Medicare Shared Savings Program: Accountable Care Organizations; Proposed Rule VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 PO 00000 Frm 00001 Fmt 4717 Sfmt 4717 E:\FR\FM\08DEP2.SGM 08DEP2 72760 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services 42 CFR Part 425 [CMS–1461–P] RIN 0938–AS06 Medicare Program; Medicare Shared Savings Program: Accountable Care Organizations Centers for Medicare & Medicaid Services (CMS), HHS. ACTION: Proposed rule. AGENCY: This proposed rule addresses changes to the Medicare Shared Savings Program (Shared Savings Program), including provisions relating to the payment of Accountable Care Organizations (ACOs) participating in the Shared Savings Program. Under the Shared Savings Program, providers of services and suppliers that participate in an 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. SUMMARY: To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on February 6, 2015. ADDRESSES: In commenting, please refer to file code CMS–1461–P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission. You may submit comments in one of four 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–1461–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–1461–P, Mail Stop C4–26–05, 7500 Security Boulevard, Baltimore, MD 21244–1850. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 DATES: VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 4. By hand or courier. Alternatively, you may deliver (by hand or courier) your written comments ONLY to the following addresses prior to the close of the comment period: a. For delivery in Washington, DC— Centers for Medicare & Medicaid Services, Department of Health and Human Services, Room 445–G, Hubert H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 20201 (Because access to the interior of the Hubert H. Humphrey Building is not readily available to persons without Federal government identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp-in clock is available for persons wishing to retain a proof of filing by stamping in and retaining an extra copy of the comments being filed.) b. For delivery in Baltimore, MD— Centers for Medicare & Medicaid Services, Department of Health and Human Services, 7500 Security Boulevard, Baltimore, MD 21244– 1850. If you intend to deliver your comments to the Baltimore address, call telephone number (410) 786–7195 in advance to schedule your arrival with one of our staff members. Comments erroneously mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and received after the comment period. For information on viewing public comments, see the beginning of the SUPPLEMENTARY INFORMATION section. FOR FURTHER INFORMATION CONTACT: Dr. Terri Postma or Rick Ensor, 410–786– 8084, Email address: 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 Web site as soon as possible after they have been received: https:// www.regulations.gov. Follow the search instructions on that Web site 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 PO 00000 Frm 00002 Fmt 4701 Sfmt 4702 a.m. to 4 p.m. To schedule an appointment to view public comments, phone 1–800–743–3951. Table of Contents To assist readers in referencing sections contained in this preamble, we are providing a table of contents. I. Executive Summary and Background A. Executive Summary 1. Purpose 2. Summary of the Major Provisions 3. Summary of Costs and Benefits B. Background II. Provisions of This Proposed Rule A. Definitions 1. Proposed Definitions 2. Proposed Revisions to Existing Definitions a. Definition of ACO Participant b. Definition of ACO Professional c. Definition of ACO Provider/Supplier d. Definition of Assignment e. Definition of Hospital f. Definition of Primary Care Services g. Definitions of Continuously Assigned Beneficiary and Newly Assigned Beneficiary h. Definition of Agreement Period B. ACO Eligibility Requirements 1. Agreement Requirements a. Overview b. Proposed Revisions 2. Sufficient Number of Primary Care Providers and Beneficiaries a. Overview b. Proposed Revisions 3. Identification and Required Reporting of ACO Participants and ACO Providers/ Suppliers a. Overview b. Proposed Revisions (1) Certified List of ACO Participants and ACO Providers/Suppliers (2) Managing Changes to ACO Participants (3) Managing Changes to ACO Providers/ Suppliers (4) Update of Medicare Enrollment Information 4. Significant Changes to an ACO a. Overview b. Proposed Revisions 5. Consideration of Claims Billed by Merged/Acquired Medicare-Enrolled Entities a. Overview b. Proposal 6. Legal Structure and Governance a. Legal Entity and Governing Body (1) Overview (2) Proposed Revisions b. Fiduciary Duties of Governing Body Members (1) Overview (2) Proposed Revisions c. Composition of the Governing Body (1) Overview (2) Proposed Revisions 7. Leadership and Management Structure a. Overview b. Proposed Revisions 8. Required Process To Coordinate Care a. Overview b. Accelerating Health Information Technology E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules c. Proposed Revisions 9. Transition of Pioneer ACOs Into the Shared Savings Program a. Overview b. Proposed Revisions C. Establishing and Maintaining the Participation Agreement With the Secretary 1. Background 2. Application Deadlines a. Overview b. Proposed Revisions 3. Renewal of Participation Agreements a. Overview b. Proposed Revisions 4. Changes to Program Requirements During the 3-Year Agreement a. Overview b. Proposed Revisions D. Provision of Aggregate and Beneficiary Identifiable Data 1. Background 2. Aggregate Data Reports and Limited Identifiable Data a. Overview b. Proposed Revisions 3. Claims Data Sharing and Beneficiary Opt-Out a. Overview b. Proposed Revisions E. Assignment of Medicare FFS Beneficiaries 1. Background 2. Basic Criteria for a Beneficiary To Be Assigned to an ACO 3. Definition of Primary Care Services a. Overview b. Proposed Revisions 4. Consideration of Physician Specialties and Non-Physician Practitioners in the Assignment Process a. Overview b. Proposed Revisions 5. Assignment of Beneficiaries to ACOs That Include FQHCs, RHCs, CAHs, or ETA Hospitals a. Assignment of Beneficiaries to ACOs That Include FQHCs and RHCs (1) Overview (2) Proposed Revisions b. Assignment of Beneficiaries to ACOs That Include CAHs c. Assignment of Beneficiaries to ACOs That Include ETA Hospitals 6. Effective Date for Finalization of Proposals Affecting Beneficiary Assignment F. Shared Savings and Losses 1. Background 2. Modifications to the Existing Payment Tracks a. Overview b. Proposals Related to Transition From the One-Sided to Two-Sided Model c. Proposals for Modifications to the Track 2 Financial Model 3. Creating Options for ACOs That Participate in Risk-Based Arrangements a. Overview b. Proposals for Assignment of Beneficiaries Under Track 3 (1) Background (2) Proposal for Prospective Assignment Under Track 3 c. Proposed Exclusion Criteria for Prospectively Assigned Beneficiaries VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 d. Proposed Timing of Prospective Assignment e. Proposals for Addressing Interactions Between Prospective and Retrospective Assignment Models f. Proposals for Determining Benchmark and Performance Year Expenditures Under Track 3 g. Proposals for Risk Adjusting the Updated Benchmark for Track 3 ACOs h. Proposals for Final Sharing/Loss Rate and Performance Payment/Loss Recoupment Limit Under Track 3 i. Proposals for Minimum Savings Rate and Minimum Loss Rate in Track 3 4. Seeking Comment on Ways To Encourage ACOs Participation in Performance-Based Risk Arrangements a. Payment Requirements and Program Requirements That May Need To Be Waived in Order To Carry Out the Shared Savings Program (1) SNF 3-Day Rule (2) Billing and Payment for Telehealth Services (3) Homebound Requirement Under the Home Health Benefit (4) Waivers for Referrals to Postacute Care Settings (5) Waiver of Other Payment Rules b. Other Options for Improving the Transition to Two-Sided PerformanceBased Risk Arrangements (1) Beneficiary Attestation (2) Seeking Comment on a Step-Wise Progression for ACOs To Take on Performance-Based Risk 5. Modifications to Repayment Mechanism Requirements a. Overview b. Proposals for Amount and Duration of the Repayment Mechanism c. Proposals Regarding Permissible Repayment Mechanisms 6. Seeking Comment on Methodology for Establishing, Updating, and Resetting the Benchmark a. Background on Establishing, Updating, and Resetting the Benchmark (1) Background on Use of National Growth Rate as a Benchmark Trending Factor (2) Background on Use of National FFS Growth Factors in Updating the Benchmark During the Agreement Period (3) Background on Managing Changes to ACOs During the Agreement Period (4) Background on Resetting the Benchmark (5) Background on Stakeholders’ Concerns About Benchmarking Methodology b. Factors To Use in Resetting ACO Benchmarks and Alternative Benchmarking Methodologies (1) Equally Weighting the Three Benchmark Years (2) Accounting for Shared Savings Payments in Benchmarks (3) Use of Regional Factors (as opposed to national factors) in Establishing and Updating Benchmarks (4) Alternative Benchmark Resetting Methodology: Hold the ACO’s Historical Costs Constant Relative to Its Region (5) Alternative Benchmark Methodology: Transition ACOs to Benchmarks Based Only on Regional FFS Costs Over the Course of Multiple Agreement Periods PO 00000 Frm 00003 Fmt 4701 Sfmt 4702 72761 (6) Seeking Comment on the Benchmarking Alternatives Considered and the Applicability of These Approaches 7. Seeking Comment on Technical Adjustments to the Benchmark and Performance Year Expenditures G. Additional Program Requirements and Beneficiary Protections 1. Background 2. Public Reporting and Transparency a. Overview b. Proposed Revisions 3. Terminating Program Participation a. Overview b. Proposed Revisions (1) Grounds for Termination (2) Close-Out Procedures and Payment Consequences of Early Termination (3) Reconsideration Review Process (A) Overview (B) Proposed Changes (4) Monitoring ACO Compliance With Quality Performance Standards III. Collection of Information Requirements IV. Response to Comments V. Regulatory Impact Analysis A. Statement of Need B. Overall Impact C. Anticipated Effects 1. Effects on the Medicare Program a. Assumptions and Uncertainties b. Detailed Stochastic Modeling Results c. Further Considerations 2. Effects on Beneficiaries 3. Effect on Providers and Suppliers 4. Effect on Small Entities 5. Effect on Small Rural Hospitals 6. Unfunded Mandates D. Alternatives Considered E. Accounting Statement and Table F. Conclusion Regulations Text Acronyms ACO Accountable Care Organization BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (Pub. L. 106–554) CAHs Critical Access Hospitals CCM Chronic Care Management CEHRT Certified Electronic Health Record Technology CG–CAHPS Clinician and Group Consumer Assessment of Health Providers and Systems CHIP Children’s Health Insurance Program CMP Civil Monetary Penalties CMS Centers for Medicare & Medicaid Services CNM Certified Nurse Midwife CMS–HCC CMS Hierarchal Condition Category CPT [Physicians] Current Procedural Terminology (CPT codes, descriptions and other data only are copyright 2013 American Medical Association. All rights reserved.) CWF Common Working File DHHS Department of Health and Human Services DOJ Department of Justice DRA Deficit Reduction Act of 2005 (Pub. L. 109–171) DSH Disproportionate Share Hospital DUA Data Use Agreement E:\FR\FM\08DEP2.SGM 08DEP2 72762 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules EHR Electronic Health Record ESRD End Stage Renal Disease ETA hospital Electing Teaching Amendment Hospital FFS Fee-for-service FQHCs Federally Qualified Health Centers FTC Federal Trade Commission GPCI Geographic Practice Cost Index GPRO Group Practice Reporting Option HCC Hierarchal Condition Category HCPCS Healthcare Common Procedure Coding System HICN Health Insurance Claim Number HIPAA Health Insurance Portability and Accountability Act of 1996 (Pub. L. 104– 191) HVBP Hospital Value-based Purchasing IPA Independent Practice Association IPPS Inpatient Prospective Payment System IRS Internal Revenue Service MA Medicare Advantage MedPAC Medicare Payment Advisory Commission MLR Minimum Loss Rate MSP Medicare Secondary Payer MSR Minimum Savings Rate MU Meaningful Use NCQA National Committee for Quality Assurance NP Nurse Practitioner NPI National Provider Identifier NQF National Quality Forum OIG Office of Inspector General PA Physician Assistant PACE Program of All Inclusive Care for the Elderly PECOS Provider Enrollment, Chain, and Ownership System PFS Physician Fee Schedule PGP Physician Group Practice PHI Protected Health Information PPS Prospective Payment System PQRS Physician Quality Reporting System PRA Paperwork Reduction Act PSA Primary Service Areas RHCs Rural Health Clinics RIA Regulatory Impact Analysis SNFs Skilled Nursing Facilities SSA Social Security Act SSN Social Security Number TIN Taxpayer Identification Number VM Value Modifier mstockstill on DSK4VPTVN1PROD with PROPOSALS2 CPT (Current Procedural Terminology) Copyright Notice Throughout this proposed rule, we use CPT codes and descriptions to refer to a variety of services. We note that CPT codes and descriptions are copyright 2013 American Medical Association. All Rights Reserved. CPT is a registered trademark of the American Medical Association (AMA). Applicable Federal Acquisition Regulations (FARs) and Defense Federal Acquisition Regulations (DFARs) apply. I. Executive Summary and Background A. Executive Summary 1. Purpose Section 1899 of the Social Security Act (the Act) established the Medicare Shared Savings Program, which VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 promotes accountability for a patient population, fosters coordination of items and services under parts A and B, and encourages investment in infrastructure and redesigned care processes for high quality and efficient health care service delivery. This proposed rule would make changes to the regulations that were promulgated in November 2011 to implement the Shared Savings Program in order to make refinements based on our experience with the program and to respond to concerns raised by stakeholders. Unless otherwise noted, these changes would be effective 60 days after publication of the final rule. Application or implementation dates may vary, depending on the nature of the policy; however, we anticipate all of the final policies and methodological changes would be applied for the 2016 performance year for all participating organizations unless otherwise noted. 2. Summary of the Major Provisions This proposed rule is designed to codify existing guidance, reduce administrative burden and improve program function and transparency in the following areas: (1) Data-sharing requirements; (2) requirements for ACO participant agreements, the ACO application process, and our review of applications; (3) identification and reporting of ACO participants and ACO providers/suppliers, including managing changes to the list of ACO participants and ACO providers/ suppliers; (4) eligibility requirements related to the ACO’s number of beneficiaries, required processes, the ACO’s legal structure and governing body, and its leadership and management structure; (5) modification to assignment methodology; (6) repayment mechanisms for ACOs in two-sided performance-based risk tracks; (7) alternatives to encourage participation in risk-based models; (8) ACO public reporting and transparency; (9) the ACO termination process; and (10) the reconsideration review process. To achieve these goals, we make the following proposed modifications to our current program rules: • Clarify existing and establish new definitions of terms including an ACO participant, ACO provider/supplier, and ACO participation agreement. • Add a process for ACOs to renew the participation agreement for an additional agreement period. • Add, clarify, and revise the beneficiary assignment algorithm, including the following— ++ Update the CPT codes that would be considered to be primary care services as well as changing the PO 00000 Frm 00004 Fmt 4701 Sfmt 4702 treatment of certain physician specialties in the assignment process; ++ Include the claims for primary care services furnished by NP, PAs, and CNSs in Step 1 of the assignment algorithm; and ++ Clarify how primary care services furnished in federally qualified health centers (FQHCs), rural health clinics (RHCs), and electing teaching amendment (ETA) hospitals will be considered in the assignment process. • Expand the kinds of beneficiaryidentifiable data that would be provided to ACOs in various reports under the Shared Savings Program as well as simplify the claims data sharing opt-out process to improve the timeliness of access to claims data. • Add or change policies to encourage greater ACO participation in risk-based models by— ++ Offering the opportunity for ACOs to continue participating under a onesided participation agreement after their first 3-year agreement; ++ Reducing risk under Track 2; and ++ Adopting an alternative risk-based model referred to as Track 3 which includes proposals for a higher sharing rate and prospective assignment of beneficiaries. In addition, we seek comment on a number of options that we have been considering in order to encourage ACOs to take on two-sided performance-based risk under the Shared Savings Program. We also seek comment on issues related to resetting the benchmark in a subsequent performance year and the use of statutory waiver authority to improve participation in two-sided risk models. 3. Summary of Costs and Benefits We assume that our proposals to ease the transition to risk, reduce risk under Track 2, and adopt an alternative riskbased model (Track 3) would result in increased participation in the Shared Savings Program. As shown in our impact analysis, we expect the proposed changes to result in a significant increase in total shared savings, while shared losses would decrease. Moreover, as participation in the Shared Savings Program continues to expand, we anticipate there would be a broader focus on care coordination and quality improvement among providers and suppliers within the Medicare program that would lead to both increased efficiency in the provision of care and improved quality of the care provided to beneficiaries. The proposed changes detailed in this rule would result in median estimated federal savings of $280 million greater than the $730 million median net E:\FR\FM\08DEP2.SGM 08DEP2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 savings estimated at baseline for calendar years (CYs) 2016 through 2018. We estimate that the provisions of this proposed rule would result in a reduction in the median shared loss dollars by $140 million and an increase in the median shared savings payments by $320 million dollars relative to the baseline for CYs 2016 through 2018. The estimated aggregate average start up investment and 3 year operating costs if all proposals are finalized is approximately $441 million. B. 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. Collectively known as the Affordable Care Act, these public laws include a number of provisions designed to improve the quality of Medicare services, support innovation and the establishment of new payment models, better align Medicare payments with provider costs, strengthen Medicare program integrity, and put Medicare on a firmer financial footing. Section 3022 of the Affordable Care Act amended Title XVIII of the Act (42 U.S.C. 1395 et seq.) by adding new section 1899 to the Act to establish a Shared Savings Program. This program is a key component of the Medicare delivery system reform initiatives included in the Affordable Care Act and is a new approach to the delivery of health care. The purpose of the Shared Savings Program is to promote accountability for a population of Medicare beneficiaries, improve the coordination of FFS items and services, encourage investment in infrastructure and redesigned care processes for high quality and efficient service delivery, and promote higher value care. ACOs that successfully meet quality and savings requirements share a percentage of the achieved savings with Medicare. Under the Shared Savings Program, ACOs share in savings only if they meet both the quality performance standards and generate shareable savings. Consistent with the purpose of the Shared Savings Program, we focused on developing policies aimed at achieving the three-part aim consisting of: (1) Better care for individuals; (2) better health for populations; and (3) lower growth in expenditures. In the November 2, 2011 Federal Register (76 FR 67802), we published the final rule entitled ‘‘Medicare Program; Medicare Shared Savings VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 Program: Accountable Care Organizations’’ (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. We anticipated that subsequent rulemaking for the Shared Savings Program would be informed by lessons learned from our experience with the program as well as from testing through the Pioneer ACO Model and other initiatives conducted by the Center for Medicare and Medicaid Innovation (Innovation Center) under section 1115A of the Act. Over 330 organizations are now participating in the Shared Savings Program. We are gratified by stakeholder interest in this program. In the November 2011 final rule (76 FR 67805), we stated that we intended to assess the policies for the Shared Savings Program and models being tested by the Innovation Center to determine how well they were working and if there were any modifications that would enhance them. As evidenced by the high degree of interest in participation in the Shared Savings Program, we believe that the policies adopted in the November 2011 final rule are generally wellaccepted. However, we have identified several policy areas we would like to revisit in light of the additional experience we have gained during the first 2 years of program implementation. We note that in developing the Shared Savings Program, and in response to stakeholder suggestions, we worked very closely with agencies across the federal government to develop policies to encourage participation in the program and to ensure a coordinated inter- and intra-agency program implementation. The result of this effort was the release of several documents regarding the application of other relevant laws and regulations to ACOs. These documents are described in more detail in section II.C.5. of the November 2011 final rule (76 FR 67840) and include: (1) A joint CMS and DHHS OIG interim final rule with comment period establishing waivers of the application of the physician self-referral law, the Federal anti-kickback statute, and certain civil monetary penalties (CMP) law provisions for specified arrangements involving ACOs participating in the Shared Savings Program (76 FR 67992); (2) an Internal Revenue Service (IRS) notice (Notice 2011–20) and fact sheet (FS–2011–11) issued in response to comments regarding the need for additional tax guidance for tax-exempt organizations, PO 00000 Frm 00005 Fmt 4701 Sfmt 4702 72763 including tax-exempt hospitals, that may participate in the Shared Savings Program (see Notice 2011–20 at www.irs.gov//pub/irs-drop/n-11–20.pdf and FS–2011–11 at www.irs.gov/pub/irsnews/fs-2011-11.pdf); and (3) a final Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Shared Savings Program issued jointly by the FTC and DOJ (collectively, the Antitrust Agencies) and published in the October 28, 2011 Federal Register (76 FR 67026). We have continued working with these agencies as we have implemented this program and believe that these materials continue to offer valuable information regarding a number of issues of great importance both to our implementation of the Shared Savings Program and to the entities that participate in the program. We encourage ACOs and other stakeholders to review and comply with the referenced documents. Documents can be accessed through the links on our Web site at: https://www.cms.gov/ Medicare/Medicare-Fee-for-ServicePayment/sharedsavingsprogram/ Statutes_Regulations_Guidance.html. II. Provisions of This Proposed Rule The purpose of this proposed rule is to propose revisions to some key policies adopted in the November 2011 final rule (76 FR 67802), to incorporate in our regulations certain guidance that we have issued since the Shared Savings Program was established, and to propose regulatory additions to support program compliance and growth. Our intent is to encourage continued and enhanced stakeholder participation, to reduce administrative burden for ACOs while facilitating their efforts to improve care outcomes, and to maintain excellence in program operations while bolstering program integrity. A. Definitions In the November 2011 final rule (76 FR 67802), we adopted definitions of key terms for purposes of the Shared Savings Program at § 425.20. These terms are used throughout this proposed rule. We encourage readers to review these definitions. Based on our experiences thus far with the Shared Savings Program and inquiries we received regarding the defined terms, we propose some additions to the definitions and a few revisions to the existing definitions. 1. Proposed Definitions We propose to add several new terms to the definitions in § 425.20. First, we propose to add a definition of ‘‘participation agreement.’’ Specifically, E:\FR\FM\08DEP2.SGM 08DEP2 72764 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules we propose to define the term to mean the written agreement required under § 425.208(a) between the ACO and CMS that, along with the regulations at part 425, governs the ACO’s participation in the Shared Savings Program. We further propose to make conforming changes throughout part 425, replacing references to an ACO’s agreement with CMS with the defined term ‘‘participation agreement.’’ In addition, we propose to make a conforming change in § 425.204(c)(1)(i) to remove the incorrect reference to ‘‘participation agreements’’ and replace it with ‘‘ACO participant agreements.’’ Second, we propose to add the related definition of ‘‘ACO participant agreement.’’ Specifically, we propose to define ‘‘ACO participant agreement’’ to mean the written agreement between an ACO and an ACO participant required at § 425.116 in which the ACO participant agrees to participate in, and comply with, the requirements of the Shared Savings Program. Third, as discussed in greater detail in section II.F. of this proposed rule, we propose to add a definition for ‘‘assignment window,’’ to mean the 12month period used to assign beneficiaries to an ACO. 2. Proposed Revisions to Existing Definitions mstockstill on DSK4VPTVN1PROD with PROPOSALS2 a. Definition of ACO Participant The current definition of ‘‘ACO participant’’ states that an ‘‘ACO participant means an individual or group of ACO provider(s)/supplier(s), that is identified by a Medicare-enrolled TIN, that alone or together with one or more other ACO participants comprise(s) an ACO, and that is included on the list of ACO participants that is required under § 425.204(c)(5).’’ Based on inquiries we have received since the publication of November 2011 final rule, we believe that there has been some confusion as to the distinction between an ACO participant and an ACO provider/supplier. The key point is that an ACO participant is an entity, not a practitioner, identified by a Medicareenrolled TIN (that is, a TIN that is used to bill Medicare for services furnished to Medicare fee-for-service beneficiaries). An ACO participant may be composed of one or more ACO providers/suppliers whose services are billed under a Medicare billing number assigned to the TIN of the ACO participant. Additionally, we emphasize that the ACO is responsible for ensuring that all individuals and entities that have reassigned the right to receive Medicare payment to the TIN of the ACO VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 participant have also agreed to be ACO providers/suppliers. We propose to revise the definition of ‘‘ACO participant’’ to clarify that an ACO participant is an entity identified by a Medicare-enrolled TIN. Additionally, we are correcting a grammatical error by revising the definition to indicate that one or more ACO participants ‘‘compose,’’ rather than ‘‘comprise’’ an ACO. We note that a related grammatical error is corrected at § 425.204(c)(iv). These proposed changes to the definition of ‘‘ACO participant’’ are not intended to alter the way the Shared Savings Program currently operates. b. Definition of ACO Professional Under the current definition at § 425.20, an ‘‘ACO professional’’ means an ACO provider/supplier who is either of the following: • A physician legally authorized to practice medicine and surgery by the State in which he performs such function or action. • A practitioner who is one of the following: ++ A physician assistant (as defined at § 410.74(a)(2)). ++ A nurse practitioner (as defined at § 410.75(b)). ++ A clinical nurse specialist (as defined at § 410.76(b)). We propose to revise the definition of ACO professional to remove the requirement that an ACO professional be an ACO provider/supplier. We also propose to revise the definition of ACO professional to indicate that an ACO professional is an individual who bills for items or services he or she furnishes to Medicare fee-for-service beneficiaries under a Medicare billing number assigned to the TIN of an ACO participant in accordance with Medicare regulations. We are proposing these modifications because there may be ACO professionals who furnished services billed through an ACO participant’s TIN in the benchmarking years but are no longer affiliated with the ACO participant and therefore are not furnishing services billed through the TIN of the ACO participant during the performance years. These proposed changes to the definition of ‘‘ACO professional’’ are not intended to alter the way the Shared Savings Program currently operates. c. Definition of ACO Provider/Supplier Under the current definition at § 425.20, an ‘‘ACO provider/supplier’’ means an individual or entity that—(1) is a provider (as defined at § 400.202) or a supplier (as defined at § 400.202); (2) is enrolled in Medicare; (3) bills for PO 00000 Frm 00006 Fmt 4701 Sfmt 4702 items and services it furnishes to Medicare fee-for-service beneficiaries under a Medicare billing number assigned to the TIN of an ACO participant in accordance with applicable Medicare regulations; and (4) is included on the certified list of ACO providers/suppliers that is submitted by the ACO. We propose to modify the definition to clarify that an individual or entity is an ACO provider/supplier only when it bills for items and services furnished to Medicare FFS beneficiaries during the agreement period under a Medicare billing number assigned to the TIN of an ACO participant and is included on the list of ACO providers/ suppliers that is required under the proposed regulation at § 425.118. We do not believe that an individual or entity that may previously have reassigned the right to receive Medicare payment to an ACO participant, but that is not participating in the activities of the ACO by furnishing care to Medicare FFS beneficiaries that is billed through the TIN of an ACO participant during the ACO’s agreement period, should be considered to be an ACO provider/ supplier. Thus, this modification is intended to clarify that a provider or supplier must bill for items or services furnished to Medicare FFS beneficiaries through the TIN of an ACO participant during the ACO’s agreement period in order to be an ACO provider/supplier. d. Definition of Assignment Under the current definition at § 425.20, ‘‘assignment’’ means ‘‘the operational process by which CMS determines whether a beneficiary has chosen to receive a sufficient level of the requisite primary care services from a physician who is an ACO provider/ supplier so that the ACO may be appropriately designated as exercising basic responsibility for that beneficiary’s care.’’ As discussed previously in this section, we are proposing to modify the definition of ‘‘ACO professional’’ to remove the requirement that an ACO professional be an ACO provider/ supplier. Similarly, we believe that for purposes of defining assignment, it is more appropriate to use the term ‘‘ACO professional,’’ as revised, than the term ‘‘ACO provider/supplier’’ because a physician or other practitioner can only be an ACO provider/supplier if he or she bills for items and services through the TIN of an ACO participant during the ACO’s agreement period and is included on the list of ACO providers/ suppliers required under our regulations. However, as we discussed previously, there may be an ACO professional who furnished services billed through an ACO participant’s TIN E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules in the benchmarking years but is no longer billing through the ACO participant’s TIN during the performance years and therefore cannot be considered an ACO provider/ supplier. For example, a practitioner that retired before the ACO entered into a participation agreement with CMS and is no longer billing through the TIN of an ACO participant, and therefore was not included on the ACO provider/ supplier list is not an ACO provider/ supplier. Nevertheless, the services furnished by this ACO professional and billed through the TIN of an ACO participant would be considered for purposes of determining beneficiary assignment to the ACO during the benchmarking period. In the interests of clarity, we therefore propose to modify the definition of assignment to reflect that our assignment methodology takes into account claims for primary care services furnished by ACO professionals, not solely claims for primary care services furnished by physicians in the ACO. This revision will ensure consistency with program operations and alignment with the definition of ‘‘ACO professional’’ since it is the aggregation of the ACO professionals’ claims that impacts assignment. Consistent with section 1899(c) of the Act, a beneficiary must have at least one primary care service furnished by a physician in the ACO in order to be eligible for assignment to the ACO, and this is reflected in the assignment methodology articulated under subpart E of the Shared Savings Program regulations. Once a beneficiary is determined to be eligible for assignment, the beneficiary is then assigned to the ACO if its ACO professionals have rendered the plurality of primary care services for the beneficiary as determined under the stepwise assignment methodology in § 425.402. Thus, we believe the proposed modification to the definition of ‘‘assignment’’ would more accurately reflect the use of claims for primary care services furnished by ACO professionals that are submitted through an ACO participant’s TIN in determining beneficiary assignment in the ACO’s benchmark and performance years. Additionally, we propose to make conforming changes as necessary to the regulations governing the assignment methodology in subpart E of part 425, to revise the references to ‘‘ACO provider/ supplier’’ to read ‘‘ACO professional.’’ e. Definition of Hospital We are proposing a technical revision to the definition of ‘‘hospital’’ for purposes of the Shared Savings Program. Section 1899(h)(2) of the Act VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 provides that, for purposes of the Shared Savings Program, the term ‘‘hospital’’ means a subsection (d) hospital as defined in section 1886(d)(1)(B) of the Act. In the November 2011 final rule (76 FR 67812), we stated that this statutory definition of hospital thus limits: ’’. . . the definition to include only acute care hospitals paid under the hospital inpatient prospective payment system (IPPS).’’ Consistent with this interpretation, we proposed and finalized the following definition of ‘‘hospital’’ for purposes of the Shared Savings Program at § 425.20: ‘‘Hospital means a hospital subject to the prospective payment system specified in § 412.1(a)(1) of this chapter.’’ Under this regulatory definition, Maryland acute care hospitals would not be considered to be hospitals for purposes of the Shared Savings Program because hospitals in the state of Maryland are subject to a waiver from the Medicare payment methodologies under which they would otherwise be paid. However, we have taken the position in other contexts, for example, for purposes of electronic health record (EHR) incentive payments (75 FR 44448) and in the FY 2014 IPPS final rule (78 FR 50623), that Maryland acute care hospitals remain subsection (d) hospitals. This is because these hospitals are ‘‘located in one of the fifty states or the District of Columbia’’ (as provided in the definition of subsection (d) hospitals at section 1886(d)(1)(B) of the Act) and are not hospitals that are specifically excluded from that category, such as cancer hospitals and psychiatric hospitals. Therefore, we propose to revise the definition of ‘‘hospital’’ for purposes of the Shared Savings Program to provide that a ‘‘hospital’’ means a hospital as defined in section 1886(d)(1)(B) of the Act. The proposed regulation text is consistent with both the statutory definition of ‘‘hospital’’ for purposes of the Shared Savings Program in section 1899(h)(2) of the Act and the position we have taken in other contexts in referring to subsection (d) hospitals. The effect of this change is to clarify that a Maryland acute care hospital is a ‘‘hospital’’ for purposes of the Shared Savings Program. f. Definition of Primary Care Services We propose to modify the definition of ‘‘primary care services.’’ We refer the reader to section II.E.3. of this proposed rule for a more detailed discussion of the proposed revision to this definition, which is relevant to the assignment of a Medicare beneficiary to an ACO. PO 00000 Frm 00007 Fmt 4701 Sfmt 4702 72765 g. Definitions of ‘‘Continuously Assigned Beneficiary’’ and ‘‘Newly Assigned Beneficiary’’ As discussed in greater detail in section II.F.3.b. of this proposed rule, we propose revisions to the definitions of ‘‘continuously assigned beneficiary’’ and ‘‘newly assigned beneficiary.’’ These definitions relate to risk adjustment for the assigned population and require minor modification to accommodate the newly proposed Track 3. h. Definition of Agreement Period In connection with our discussion of the applicability of certain changes that are made to program requirements during the agreement period, we propose revisions to the definition of ‘‘agreement period.’’ Readers should refer to section II.C.4. of this proposed rule for a discussion of the proposed changes to the definition. B. ACO Eligibility Requirements 1. Agreement Requirements a. Overview Section 1899(b)(2)(B) of the Act requires participating ACOs to ‘‘enter into an agreement with the Secretary to participate in the program for not less than a 3-year period.’’ If the ACO is approved for participation in the Shared Savings Program, an executive who has the ability to legally bind the ACO must sign and submit a participation agreement to CMS (§ 425.208(a)(1)). Under the participation agreement with CMS, the ACO agrees to comply with the regulations governing the Shared Savings Program (§ 425.208(a)(2)). In addition, the ACO must require its ACO participants, ACO providers/suppliers, and other individuals or entities performing functions or services related to the ACO’s activities to agree to comply with the Shared Savings Program regulations and all other applicable laws and regulations (§ 425.208(b) and § 425.210(b)). 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 (§ 425.210(a)). As part of its application, we currently require each ACO to submit a sample of the agreement it executes with each of its ACO participants (the ‘‘ACO participant agreement’’). Also, as part of its application and when requesting the addition of new ACO participants, we require an ACO to submit evidence that it has a signed written agreement with each of its ACO participants. (See guidance on our Web site at https:// E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 72766 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/ sharedsavingsprogram/Downloads/ Memo_Additional_Guidance_on_ACO_ Participants.pdf.) An ACO’s application to participate in the Shared Savings Program and any subsequent request to add new ACO participants will not be approved if the ACO does not have an agreement in place with each of its ACO participants in which each ACO participant agrees to participate in the Shared Savings Program and to comply with the requirements of the Shared Savings Program. In our review of applications to participate in the Shared Savings Program, we received many ACO participant agreements that were not properly executed, were not between the correct parties, lacked the required provisions, contained incorrect information, or failed to comply with § 425.304(c) relating to the prohibition on certain required referrals and cost shifting. When we identified such agreements, ACOs experienced processing delays, and in some cases, we were unable to approve the ACO applicant and/or its ACO participant to participate in the Shared Savings Program. Consequently, we issued guidance for ACO applicants in which we reiterated the required elements for ACO participant agreements and strongly recommended that ACOs employ good contracting practices to ensure that each of their ACO participant agreements met our requirements (see https://www.cms.gov/ Medicare/Medicare-Fee-for-ServicePayment/sharedsavingsprogram/ Downloads/Tips-ACO-DevelopingParticipant-Agreements.pdf). The ACO participant agreements are necessary for purposes of program transparency and to ensure an ACO’s compliance with program requirements. Moreover, many important program operations (including calculation of shared savings, assignment of beneficiaries, and financial benchmarking), use claims and other information that are submitted to CMS by the ACO participant. Our guidance clarified that ACO participant agreements and any agreements with ACO providers/suppliers must contain the following: • An explicit requirement that the ACO participant or the ACO provider/ supplier will comply with the requirements and conditions of the Shared Savings Program (part 425), including, but not limited to, those specified in the participation agreement with CMS. • A description of the ACO participants’ and ACO providers’/ VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 suppliers’ rights and obligations in and representation by the ACO. • A description of how the opportunity to get shared savings or other financial arrangements will encourage ACO participants and ACO providers/suppliers to follow the quality assurance and improvement program and evidence-based clinical guidelines. • Remedial measures that will apply to ACO participants and ACO providers/suppliers who do not comply with the requirements of their agreements with the ACO. Our guidance also requires that the ACO participant agreements be made directly between the ACO and the ACO participant. We believe it is important that the parties entering into the agreement have a direct legal relationship to ensure that the requirements of the agreement are fully and directly enforceable by the ACO, including the ability of the ACO to terminate an agreement with an ACO participant that is not complying with the requirements of the Shared Savings Program. Additionally, a direct legal relationship ensures that the ACO participant may, if necessary, terminate the agreement with the ACO according to the terms of the agreement without interrupting other contracts or agreements with third parties. Therefore, the ACO and the ACO participant must be the only parties to an ACO participant agreement; the agreements may not include a third party to the agreement. For example, the agreement may not be between the ACO and another entity, such as an independent practice association (IPA) or management company that in turn has an agreement with one or more ACO participants. Similarly, existing contracts between ACOs and ACO participants that include third parties should not be used. We recognize that there are existing contractual agreements between entities (for example, contracts that permit organizations like IPAs to negotiate contracts with health care payers on behalf of individual practitioners). However, because it is important to ensure that there is a direct legal relationship between the ACO and the ACO participant evidenced by a written agreement, and because ACO participants continue to bill and receive payments as usual under the Medicare FFS rules (that is, there is no negotiation for payment under the program) we believe that typical IPA contracts are generally inappropriate and unnecessary for purposes of participation in the Shared Savings Program. An ACO and ACO participant may use a contract unrelated to the PO 00000 Frm 00008 Fmt 4701 Sfmt 4702 Shared Savings Program as an ACO participant agreement only when it is between the two parties and is amended to satisfy the requirements for ACO participant agreements under the Shared Savings Program. It is the ACO’s responsibility to make sure that each ACO participant agreement identifies the parties entering into the agreement using their correct legal names, specifies the term of the agreement, and is signed by both parties to the agreement. We validate the legal names of the parties based on information the ACO submitted in its application and the legal name of the entity associated with the ACO participant’s TIN in the Provider Enrollment Chain & Ownership System (PECOS). We reject an ACO participant agreement if the party names do not match our records. It may be necessary for the ACO to execute a new or amended ACO participant agreement. Although the ACO participant must ensure that each of its ACO providers/ suppliers (as identified by a National Provider Identifier (NPI)) has agreed to participate in the ACO and will comply with program rules, the ACO has the ultimate responsibility for ensuring that all the ACO providers/suppliers that bill through the TIN of the ACO participant (that is, reassign their right to receive Medicare payment to the ACO participant) have also agreed to participate in the Shared Savings Program and comply with our program regulations. The ACO may ensure this by directly contracting with each ACO provider/supplier (NPI) or by contractually requiring the ACO participant to ensure that all ACO providers/suppliers that bill through its TIN have agreed to participate in, and comply with the requirements of, the Shared Saving Program. If the ACO chooses to contract directly with the ACO providers/suppliers, the agreements must meet the same requirements as the agreements with ACO participants. We emphasize that even if an ACO chooses to contract directly with the ACO providers/ suppliers (NPIs), it must still have the required ACO participant agreement. In other words, the ACO must be able to produce valid written agreements for each ACO participant and each ACO provider/supplier. Furthermore, since we use TINs (and not merely some of the NPIs that make up the entity identified by a TIN) as the basis for identifying ACO participants, and we use all claims submitted under an ACO participant’s TIN for financial calculations and beneficiary assignment, an ACO may not include an entity as an ACO participant unless all Medicare E:\FR\FM\08DEP2.SGM 08DEP2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 enrolled providers and suppliers billing under that entity’s TIN have agreed to participate in the ACO as ACO providers/suppliers. To illustrate the requirement that all ACO providers/suppliers must agree to participate in and comply with the terms of the Shared Savings Program before the ACO can include the ACO participant’s TIN on its list of ACO participants, we offer the following scenarios that describe when an ACO participant’s TIN may and may not be included on the applicant’s ACO participant list: Correct: A large group practice (Medicare-enrolled TIN) decides to participate in an ACO as an ACO participant. Its owner signs an agreement with the ACO on behalf of the practice to participate in the program and follow program regulations. Also, all practitioners that have reassigned their right to receive Medicare payments to the TIN of the large group practice have also agreed to participate and follow program regulations. Therefore, the ACO may include this group practice TIN on its list of ACO participants. Incorrect: A large group practice (Medicare-enrolled TIN) decides to participate in an ACO as an ACO participant. Its owner signs an agreement to participate in the program and follow program regulations. However, not all practitioners that have reassigned their right to receive Medicare payment to the group practice TIN have agreed to participate in the ACO and follow Shared Savings Program regulations. Therefore, the ACO may not include this group practice TIN on its list of ACO participants. Incorrect: Several practitioners in a large group practice (Medicare-enrolled TIN) decide to participate in an ACO. However, the group practice as a whole has not agreed to participate in the program. Therefore, the ACO may not include this group practice TIN on its list of ACO participants. We propose to codify much of our guidance regarding the content of the ACO participant and ACO provider/ supplier agreements. b. Proposed Revisions First, we propose to add new § 425.116 to set forth the requirements for agreements between an ACO and an ACO participant or ACO provider/ supplier. We believe the new provision would promote a better general understanding of the Shared Savings Program and transparency for ACO participants and ACO providers/ suppliers. It is our intent to provide VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 requirements that would facilitate and enhance the relationships between ACOs and ACO participants, and reduce uncertainties and misunderstandings leading to rejection of ACO participant agreements during application review. Specifically, we propose to require that ACO participant agreements satisfy the following criteria: • The ACO and the ACO participant are the only parties to the agreement. • The agreement must be signed on behalf of the ACO and the ACO participant by individuals who are authorized to bind the ACO and the ACO participant, respectively. • The agreement must expressly require the ACO participant to agree, and to ensure that each ACO provider/ supplier billing through the TIN of the ACO participant agrees, to participate in the Shared Savings Program and to comply with the requirements of the Shared Savings Program and all other applicable laws and regulations (including, but not limited to, those specified at § 425.208(b)). • The agreement must set forth the ACO participant’s rights and obligations in, and representation by, the ACO, including without limitation, the quality reporting requirements set forth in Subpart F, the beneficiary notification requirements set forth at § 425.312, and how participation in the Shared Savings Program affects the ability of the ACO participant and its ACO providers/ suppliers to participate in other Medicare demonstration projects or programs that involve shared savings. • The agreement must describe how the opportunity to receive shared savings or other financial arrangements will encourage the ACO participant to adhere to the quality assurance and improvement program and evidencebased medicine guidelines established by the ACO. • The agreement must require the ACO participant to update enrollment information with its Medicare contractor using the PECOS, including the addition and deletion of ACO professionals billing through the TIN of the ACO participant, on a timely basis in accordance with Medicare program requirements. The Agreement must also require ACO participants to notify the ACO within 30 days after any addition or deletion of an ACO provider/ supplier. • The agreement must permit the ACO to take remedial action against the ACO participant, and must require the ACO participant to take remedial action against its ACO providers/suppliers, including imposition of a corrective action plan, denial of shared savings payments (that is, the ability of the ACO PO 00000 Frm 00009 Fmt 4701 Sfmt 4702 72767 participant or ACO provider/supplier to receive a distribution of the ACO’s shared savings) and termination of the ACO participant agreement, to address noncompliance with the requirements of the Shared Savings Program and other program integrity issues, including those identified by CMS. • The term of the agreement must be for at least 1 performance year and must articulate potential consequences for early termination from the ACO. • The agreement must require completion of a close-out process upon the termination or expiration of the ACO’s participation agreement that requires the ACO participant to furnish data necessary to complete the annual assessment of the ACO’s quality of care and addresses other relevant matters. Although we propose that the term of an ACO participant agreement be for at least 1 performance year, we do not intend to prohibit early termination of the agreement. We recognize that there may be legitimate reasons to terminate an ACO participant agreement. However, because care coordination and quality improvement requires commitment from ACO participants, we believe this requirement would improve the likelihood of success in the Shared Savings Program. We are also considering whether and how ACO participant agreements should encourage participation to continue for subsequent performance years. We seek comment on this issue. In the case of an ACO that chooses to contract directly with its ACO providers/suppliers, we propose virtually identical requirements for its agreements with ACO providers/ suppliers. We note that agreements with ACO providers/suppliers would not be required to be for a term of 1 year, because we do not want to impede individual practitioners from activities such as retirement, reassignment of billing rights, or changing employers. In the case of ACO providers/suppliers that do not have a contract directly with the ACO, we are considering requiring each ACO to ensure that its ACO participants contract with or otherwise arrange for the services of its ACO providers/suppliers on the same or similar terms as those required for contracts made directly between the ACO and ACO providers/suppliers. In addition, we propose to add at § 425.204(c)(6) a requirement that, as part of the application process and upon request thereafter, the ACO must submit documents demonstrating that its ACO participants, ACO providers/suppliers, and other individuals or entities performing functions or services related to ACO activities are required to comply E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 72768 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules with the requirements of the Shared Savings Program. In the case of ACO participants, the evidence to be submitted must, consistent with our past guidance, include executed agreements or sample form agreements together with the first and last (signature) page of each form agreement that has been fully executed by the parties to the agreement. However, we reserve the right, to request all pages of an executed ACO participant agreement to confirm that it conforms to the sample form agreement submitted by the ACO. We further propose at § 425.116(c) that executed ACO participant agreements must also be submitted when an ACO seeks approval to add new ACO participants. The agreements may be submitted in the same form and manner as set forth in § 425.204(c)(6). Finally, although we would not routinely request an ACO to submit copies of executed agreements with its ACO providers/suppliers or other individuals or entities performing functions or services related to ACO activities as part of the ACO’s application or continued participation in each performance year, we reserve our right to request this information during the application or renewal process and at any other time for audit or monitoring purposes in accordance with § 425.314 and § 425.316. We believe that the proposed requirements regarding agreements between ACOs and ACO participants, together with our earlier guidance regarding good contracting practices, would enhance transparency between the ACO, ACO participants, and ACO professionals, reduce turnover among ACO participants, prevent misunderstandings related to participation in the Shared Savings Program, and assist prospective ACOs in submitting complete applications and requests for adding ACO participants. We believe that codifying these requirements would assist the ACO, ACO participants, and ACO providers/ suppliers in better understanding the program and their rights and responsibilities while participating in the program. We solicit comment on the proposed new requirements and on whether there are additional elements that should be considered for inclusion in the agreements the ACO has with its ACO participants and ACO providers/ suppliers. 2. Sufficient Number of Primary Care Providers and Beneficiaries a. Overview Section 1899(b)(2)(D) of the Act requires participating ACOs to ‘‘include VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 primary care ACO professionals that are sufficient for the number of Medicare fee-for-service beneficiaries assigned to the ACO . . .’’ and that at a minimum, ‘‘the ACO must have at least 5,000 such beneficiaries assigned to it. . . .’’ Under § 425.110(a)(2) of the regulations, an ACO is deemed to have initially satisfied the requirement to have at least 5,000 assigned beneficiaries if the number of Medicare beneficiaries historically assigned to the ACO participants in each of the 3 years before the start of the agreement period is 5,000 or more. Under the beneficiary assignment methodology set forth in the regulations at part 425, subpart E, the assignment of beneficiaries to a particular ACO for a calendar year is dependent upon a number of factors, including where the beneficiary elected to receive primary care services and whether the beneficiary received primary care services from ACO professionals participating in one or more Shared Savings Program ACOs. We note that to ensure no duplication in shared savings payments for care provided to the same beneficiaries, assignment of a beneficiary may also be dependent on whether the beneficiary has been assigned to another initiative involving shared savings, such as the Pioneer ACO Model (§ 425.114(c)). While a final assignment determination can be made for the first 2 benchmark years (BY1 and BY2, respectively) for an ACO applying to participate in the Shared Savings Program, it is not possible to determine the final assignment for the third benchmark year (BY3) (that is, the calendar year immediately prior to the start of the agreement period) because application review and determination of whether the ACO has met the required 5,000 assignment must take place during BY3 before all claims are submitted for the calendar year. Further, there is a lag period after the end of a calendar year during which additional claims for the year are billed and processed. Therefore, the final historical benchmark for the 3-year period and the preliminary prospective assignment for PY1 must be determined after the ACO’s agreement period has already started. We note that we currently estimate the number of historically assigned beneficiaries for the third benchmark year for Tracks 1 and 2 by using claims with dates of service for the last 3 months of benchmark year 2 (October through December) and the first 9 months of benchmark year 3 (January through September, with up to 3 months claims run out, as available). We use this approach to calculate the number of PO 00000 Frm 00010 Fmt 4701 Sfmt 4702 assigned beneficiaries for BY3 in order to be as consistent as possible with the timeframes (that is, 12 month period) and claims run out used for the BY1 and BY2 calculations. Section 425.110(b) provides that an ACO that falls below 5,000 assigned beneficiaries at any time during the agreement period will be allowed to continue in the program, but CMS must issue a warning letter and place the ACO on a CAP. The purpose of this provision is to ensure that the ACO is aware that its number of assigned beneficiaries is below 5,000, is notified of the consequences of remaining under 5,000, and that the ACO is taking appropriate steps to correct the deficiency. Section 425.110(b)(1) provides that, while under the CAP, the ACO will remain eligible to share in savings for the performance year in which it fell below the 5,000, and the MSR will be adjusted according to the number of assigned beneficiaries determined at the time of reconciliation. For example, according to Table 6 in the November 2011 final rule (42 FR 67928), a Track 1 ACO with an assigned population of 5,000 would have an MSR of 3.9. If the ACO’s number of assigned beneficiaries falls below 5,000, we would work with the CMS Office of the Actuary to determine the MSR for the number of beneficiaries below 5,000, set at the same 90 percent confidence interval that is used to determine an ACO’s MSR when the ACO has a smaller assigned beneficiary population. If the number of beneficiaries assigned to the ACO remains less than 5,000 by the end of the next performance year, the ACO is terminated and is not be permitted to share in savings for that performance year (§ 425.110(b)(2)). b. Proposed Revisions First, we propose to revise § 425.110(a)(2) to clarify the data used during the application review process to estimate the number of beneficiaries historically assigned in each of the 3 years of the benchmarking period. Specifically, we propose that the number of assigned beneficiaries would be calculated for each benchmark year using the assignment methodology set forth in Subpart E of part 425, and in the case of BY3, we would use the most recent data available with up to a 3month claims run out to estimate the number of assigned beneficiaries. This proposed revision would reflect current operational processes under which we assign beneficiaries to ACOs using complete claims data for BY1 and BY2 but must rely on incomplete claims data for BY3. We would likely continue to E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules estimate the number of historically assigned beneficiaries for the third benchmark year by using claims with dates of service for the last 3 months of BY2 and the first 9 months of BY3, with up to 3 months claims run out. However, that could vary from year to year depending on data availability during the application review process. As discussed previously, we believe that using this approach to calculate the number of assigned beneficiaries for BY3 is consistent with the timeframes and claims run out used for BY1 and BY2 calculations because we would be using a full 12 months of claims, rather than the only available claims for the calendar year, which would be less than 12 months. The estimates of the number of assigned beneficiaries would be used during the ACO application review process to determine whether the ACO exceeds the 5,000 assigned beneficiary threshold for each year of the historical benchmark period. If based upon these estimates, we determine that an ACO had at least 5,000 assigned beneficiaries in each of the benchmark years, it would be deemed to have initially satisfied the eligibility requirement that the ACO have at least 5,000 assigned beneficiaries. The specific data to be used for computing these initial estimates during the ACO application review process would be designated through program instructions and guidance. Although unlikely, it is possible that when final benchmark year assignment numbers are generated after the ACO has been accepted into the program, the number of assigned beneficiaries could be below 5,000. In this event, the ACO will be allowed to continue in the program, but may be subject to the actions set forth in § 425.110(b). Second, given our experience with the program and the timing of performance year determinations regarding beneficiary assignment provided during reconciliation, we wish to modify our rules to provide greater flexibility to address situations in which an ACO’s assigned beneficiary population falls below 5,000 assigned beneficiaries. Specifically, we have concerns that in some cases it may be very difficult for an ACO to increase its number of assigned beneficiaries by the end of the next performance year, as currently required by § 425.110(b)(2). For example, assume an ACO with a start date of January 2013 were to get its third quarterly report for PY1 in November or December 2013, and the report indicated that the ACO’s preliminary prospectively assigned beneficiary population had fallen below 5,000. VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 Under our current regulations, we would send the ACO a warning letter and place the ACO on a CAP. If the ACO were to fail to increase its assigned beneficiary population to at least 5,000 by the end of the next performance year (PY2), it would be terminated. We note that increasing the number of assigned beneficiaries generally involves adding new ACO participants and/or ACO providers/suppliers. However, in the previous example, by the time the ACO had been notified that its assigned beneficiary population had fallen below 5,000 beneficiaries, it would have been too late for the ACO to add new ACO participants for PY2, leaving the ACO with more limited options for timely correction of the deficit. We believe that § 425.110(b) should be modified to provide ACOs with adequate time to successfully complete a CAP. Therefore, we propose to revise § 425.110(b)(2) to state that CMS will specify in its request for a CAP the performance year during which the ACO’s assigned population must meet or exceed 5,000 beneficiaries. This modification would permit some flexibility for ACOs whose assigned populations fall below 5,000 late in a performance year to take appropriate actions to address the deficit. Additionally, we do not believe it is necessary to request a CAP from every ACO whose assigned beneficiary population falls below 5,000. For example, we should have the discretion not to impose a CAP when the ACO has already submitted a request to add ACO participants effective at the beginning of the next performance year and CMS has a reasonable expectation that the addition of these new ACO participants would increase the assigned beneficiary population above the 5,000 minimum beneficiary threshold. Therefore, we propose to revise § 425.110(b) to indicate that we have the discretion whether to impose any remedial measures or to terminate an ACO for failure to satisfy the minimum assigned beneficiary threshold. Specifically, we propose to revise § 425.110(b) to state that the ACO ‘‘may’’ be subject to any of the actions described in § 425.216 (actions prior to termination, including a warning letter or request for CAP) and § 425.218 (termination). However, we note that although we are proposing to retain discretion as to whether to impose remedial measures or terminate an ACO whose assigned beneficiary population falls below 5,000, we recognize that the requirement that an ACO have at least 5,000 assigned beneficiaries is a condition of eligibility to participate in the Shared Savings Program under § 1899(b)(2)(D), and PO 00000 Frm 00011 Fmt 4701 Sfmt 4702 72769 would exercise our discretion accordingly and consistently. 3. Identification and Required Reporting of ACO Participants and ACO Providers/Suppliers a. Overview For purposes of the Shared Savings Program, an ACO is an entity that is identified by a TIN and comprised of one or more Medicare-enrolled TINs associated with ACO participants (see § 425.20). The Medicare-enrolled TINs of ACO participants, in turn, are associated with Medicare enrolled individuals and entities that bill through the TIN of the ACO participant. (For example, in the case of a physician, the physician has reassigned to the TIN of the ACO participant his or her right to receive Medicare payments, and their services to Medicare beneficiaries are billed by the ACO participant under a billing number assigned to the TIN of the ACO participant). As part of the application process and annually thereafter, the ACO must submit a certified list identifying all of its ACO participants and their Medicare-enrolled TINs (the ‘‘ACO participant list’’) (§ 425.204(c)(5)(i)). Additionally, for each ACO participant, the ACO must submit a list identifying all ACO providers/suppliers (including their NPIs or other provider identifiers) that bill Medicare during the agreement period under a billing number assigned to the TIN of an ACO participant (the ‘‘ACO provider/supplier list’’) (§ 425.204(c)(5)(i)(A)). Our regulations require the ACO to indicate on the ACO provider/supplier list whether an individual is a primary care physician as defined at § 425.20. All Medicare enrolled individuals and entities that bill through an ACO participant’s TIN during the agreement period must be on the certified ACO provider/supplier list and agree to participate in the ACO. ACOs are required to maintain, update, and annually furnish the ACO participant and ACO provider/supplier lists to CMS at the beginning of each performance year and at such other times as may be specified by CMS (§ 425.304(d)). We use TINs identified on the ACO participant list to identify claims billed to Medicare in order to support the assignment of Medicare fee-for-service beneficiaries to the ACO, the implementation of quality and other reporting requirements, and the determination of shared savings and losses (see section 1899(b)(2)(E) of the Act). We also use the ACO’s initial (and annually updated) ACO participant list to: Identify parties subject to the E:\FR\FM\08DEP2.SGM 08DEP2 72770 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules screenings under § 425.304(b); determine whether the ACO satisfies the requirement to have a minimum of 5,000 assigned beneficiaries; establish the historical benchmark; perform financial calculations associated with quarterly and annual reports; determine preliminary prospective assignment for and during the performance year; determine a sample of beneficiaries for quality reporting; and coordinate participation in the Physician Quality Reporting System (PQRS) under the Shared Savings Program. Both the ACO participant and ACO provider/supplier lists are used to ensure compliance with program requirements. We refer readers to our guidance at https://www.cms.gov/ Medicare/Medicare-Fee-for-ServicePayment/sharedsavingsprogram/ Updating-ACO-Participant-List.html for more information. In this section, we discuss current policy and procedures regarding the identification and required reporting of ACO participants and ACO providers/ suppliers. In addition, we propose revisions to our regulations to improve program transparency by ensuring that all ACO participants and ACO providers/suppliers are accurately identified. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 b. Proposed Revisions In order to administer the Shared Savings Program, we need to identify accurately the ACO participants and ACO providers/suppliers associated with each ACO that participates in the program. An accurate understanding of the ACO participants is critical for assignment of beneficiaries to the ACO as well as assessing the quality of care provided by the ACO to its assigned beneficiaries. An accurate understanding of the ACO providers/ suppliers is also critical for ensuring compliance with program rules. We believe that this information is equally critical to the ACO for its own operational and compliance purposes. Thus, both CMS and the ACO need to have a common understanding of the individuals and entities that comprise the ACO participants and ACO providers/suppliers in the ACO. We obtain this common understanding by requiring the ACO to certify the accuracy of its ACO participant and ACO provider/supplier lists prior to the start of each performance year and to update the lists as changes occur during the performance year. Because we rely on these lists for both operational and program integrity purposes, we must have a transparent process that results in the accurate identification of all ACO participants and ACO providers/ VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 suppliers that compose each ACO in the Shared Savings Program. We propose to add a new § 425.118 to reflect with more specificity the requirements for submitting ACO participant and ACO provider/supplier lists and the reporting of changes to those lists. In addition, we propose to revise § 425.204(c)(5) and to remove § 425.214(a) and § 425.304(d) because these provisions are addressed in new § 425.118. (1) Certified Lists of ACO Participants and ACO Providers/Suppliers We intend to continue to require ACOs to maintain, update and submit to CMS accurate and complete ACO participant and ACO provider/supplier lists, but are proposing to establish new § 425.118 to set forth the requirements and processes for maintaining, updating, and submitting the required ACO participant and ACO provider/ supplier lists. New § 425.118 would consolidate and revise provisions at § 425.204(c)(5), § 425.214(a) and § 425.304(d) regarding the ACO participant and ACO provider/supplier lists. Specifically, we propose at § 425.118(a) that prior to the start of the agreement period and before each performance year thereafter, the ACO must provide CMS with a complete and certified list of its ACO participants and their Medicare-enrolled TINs. We would use this ACO participant list to identify the Medicare-enrolled individuals and entities that are affiliated with the ACO participant’s TIN in PECOS, the CMS enrollment system. Because these individuals and entities are currently billing through the Medicare enrolled TIN identified by the ACO as an ACO participant, they must be included on the ACO provider/supplier list. We would provide the ACO with a list of all ACO providers/suppliers (NPIs) that we have identified as billing through each ACO participant’s Medicare-enrolled TIN. In accordance with § 425.118(a), the ACO would be required to review the list, make any necessary corrections, and certify the lists of all of its ACO participants and ACO providers/ suppliers (including their TINs and NPIs) as true, accurate, and complete. In addition, we propose that an ACO must submit certified ACO participant and ACO provider/supplier lists at any time upon CMS request. We note that all NPIs that reassign their right to receive Medicare payment to an ACO participant must be on the certified list of ACO providers/suppliers and must agree to be ACO providers/suppliers. We propose to clarify this point in regulations text at § 425.118(a)(4). PO 00000 Frm 00012 Fmt 4701 Sfmt 4702 Finally, in accordance with developing and certifying the ACO participant and provider/supplier lists, we propose at § 425.118(d) to require the ACO to report changes in ACO participant and ACO provider/supplier enrollment status in PECOS within 30 days after such changes have occurred (for example, to report changes in an ACO provider’s/supplier’s reassignment of the right to receive Medicare payment or revocation of billing rights). This requirement corresponds with our longstanding policy that requires enrolled providers and suppliers to notify their Medicare contractors through PECOS within specified timeframes for certain reportable events. We recognize that PECOS is generally not accessible to ACOs to make these changes directly because most ACOs are not enrolled in Medicare. Therefore, an ACO may satisfy the requirement to update PECOS throughout the performance year by requiring its ACO participants to submit the required information directly in PECOS within 30 days after the change, provided that the ACO participant actually submits the required information within 30 days. We propose to require ACOs to include language in their ACO participant agreements (discussed in section II.B.1. of this proposed rule) to ensure compliance with this requirement. We are not proposing to change the current 30-day timeframe required for such reporting in PECOS. These changes are consistent with the current requirements regarding ACO participant and ACO provider/supplier list updates under § 425.304(d) and we believe that they would enhance transparency and accuracy within the Shared Savings Program. We further propose to remove § 425.304(d) because the requirements, although not modified, would be incorporated into new § 425.118(d). This revised process should afford the ACO the opportunity to work with its ACO participants to identify its ACO providers/suppliers and to ensure compliance with Shared Savings Program requirements. Currently, we also require the ACO to indicate whether the ACO provider/supplier is a primary care physician as defined in § 425.20. Because this information is derived from the claims submitted under the ACO participant’s TINs (FQHCs and RHCs being the exception), we have found this unnecessary to implement the program, so we are proposing to remove this requirement, which currently appears in § 425.204(c)(5)(i)(A). E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules (2) Managing Changes to ACO Participants Except for rare instances, such as the cessation of ACO participant operations or exclusion from the Medicare program, we expect ACO participants to remain in the ACO for the entire 3 year agreement period. This is due to our belief that care coordination and quality improvement require the commitment of ACO participants. Moreover, as noted previously, we utilize the ACO participant list, among other things, for assigning beneficiaries to the ACO, determining the ACO’s benchmark and performance year expenditures, and drawing the sample for ACO quality reporting. Nevertheless, we understand that there are legitimate reasons why an ACO may need to update its list of ACO participants during the 3-year agreement period. Thus, under current § 425.214(a), an ACO may add or remove ACO participants (identified by TINs) throughout a performance year, provided that it notifies CMS within 30 days of such addition or removal. If such changes occur, we may, at our discretion, adjust the ACO’s benchmark, risk scores, and preliminary prospective assignment (§ 425.214(a)(3)). We articulated the timing of these changes in our guidance (https://cms.gov/ Medicare/Medicare-Fee-for-ServicePayment/sharedsavingsprogram/ Updating-ACO-Participant-List.html), which states that we adjust the ACO’s historical benchmark at the start of a performance year if the ACO participant list that the ACO certified at the start of that performance year differs from the one it certified at the start of the prior performance year. We use the updated certified ACO participant list to assign beneficiaries to the ACO in the benchmark period (the 3 years prior to the start of the ACO’s agreement period) in order to determine the ACO’s adjusted historical benchmark. Our guidance provides that, as a result of changes to the ACO’s certified ACO participant list, we may adjust the historical benchmark upward or downward. We use the new annually certified list of ACO participants and the adjusted benchmark for the following program operations: The new performance year’s assignment; quality measurement and sampling; reports for the new performance year; and financial reconciliation. We provide ACOs with the adjusted Historical Benchmark Report reflecting these changes. However, our guidance stated that absent unusual circumstances, changes in ACO participants that occur in the middle of a performance year will not result in midyear changes to VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 assignment, sampling for quality reporting, financial reconciliation, or other matters. As indicated in our guidance, the midyear removal of an entity from the ACO participant list due to program integrity issues is one unusual circumstance that could result in midyear changes to assignment and other matters. Finally, our guidance states that we do not make adjustments upon Medicare payment changes such as wage-index adjustments, or the addition or deletion of ACO participants during the course of the performance year made by the ACO and ACO participants. We propose to add new provisions at § 425.118(b) to address the procedures for adding and removing ACO participants during the agreement period. These proposals revise the regulations to incorporate some of the important policies that we have implemented through our operational guidance as well as some additional proposals to ease the administrative burden generated by the magnitude of changes made to ACO participant lists to date. First, we propose under § 425.118(b)(1) that an ACO must submit a request to add a new entity to its ACO participant list in the form and manner specified by CMS and that CMS must approve additions to the ACO participant list before they can become effective. We do not believe ACO participants should be admitted into the program if, for example, the screening conducted under § 425.304(b) reveals that the entity has a history of program integrity issues, or if the ACO participant agreement with the entity does not comply with program requirements, or if the entity is participating in another Medicare shared savings initiative (§ 425.114). If CMS denies the request to add an entity to the ACO participant list, then the entity is not eligible to participate in the ACO for the upcoming performance year. Second, we propose that, if CMS approves the request, the entity will be added to the ACO participant list at the beginning of the following performance year. That is, entities that are approved for addition to the ACO participant list will not become ACO participants, and their claims would not be considered for purposes of benchmarking, assignment and other operational purposes, until the beginning of the next performance year. For example, if an ACO notifies CMS of the addition of an entity in June of the second performance year (PY2), the entity would not become an ACO participant and its claims would not be included in program operations until PO 00000 Frm 00013 Fmt 4701 Sfmt 4702 72771 January 1 of PY3 if CMS approves the entity’s addition. Third, we propose that an ACO must notify CMS no later than 30 days after the date of termination of the entity’s ACO participant agreement. The ACO may notify CMS in advance of such termination. The ACO must submit the notice of removal, which must include the date of termination, in the form and manner specified by CMS. We propose that the removal of the ACO participant from the ACO participant list would be effective on the date of termination of the ACO participation agreement. We propose at § 425.118(b)(3)(i) that changes made by an ACO to its annually certified ACO participant list would result in adjustments to its historical benchmark, assignment, quality reporting sample, and the obligation of the ACO to report on behalf of eligible professionals for certain CMS quality initiatives. We would annually adjust the ACO’s benchmark calculations to include (or exclude) the claims submitted during the benchmark years by the newly added (or removed) ACO participants. In other words, the annually certified ACO participant list is used under Subparts E (assignment of beneficiaries), F (quality performance assessment), and G (calculation of shared savings/losses) for the performance year. For example, if an ACO began program participation in 2013, the PY1 certified list generates an historical benchmark calculated from claims submitted by the TINs on the PY1 certified list during CY 2010, 2011, and 2012. If the ACO adds ACO participants during 2013 and certifies an updated list for PY2 reflecting those additions, we would adjust the historical benchmark to accommodate those changes by recalculating the benchmark using the claims submitted by the PY2 list of certified ACO participants during the ACO’s same benchmark years (CYs 2010, 2011, and 2012). In this way, the ACO’s benchmark continues to be based on the same 3 years prior to the start of the ACO’s agreement, but ensures that the changes in ACO composition and performance year calculations retain a consistent comparison between benchmark and performance during the agreement period. As noted previously, adjustment to the ACO’s historical benchmark as a result of changes to the ACO’s certified ACO participant list may move the benchmark upward or downward. We would use the annual certified ACO participant list and the adjusted benchmark for the new performance year’s beneficiary assignment, quality measurement and other operations that E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 72772 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules are dependent on the ACO participant list as outlined in our guidance. We would provide ACOs with an adjusted Historical Benchmark Report that reflects the new certified ACO participant list. We propose to add this requirement at § 425.118(b)(3). We propose at § 425.118(b)(3)(ii) to codify the policy we established in guidance that, absent unusual circumstances, the removal of an ACO participant from the ACO participant list during the performance year must not affect certain program calculations for the remainder of the performance year in which the removal becomes effective. Namely, the removal of an entity from the ACO participant list during the performance year would not affect the ACO’s beneficiary assignment or, by extension, such program operations as the calculation of the ACO’s historical benchmark, financial calculations for quarterly and annual reporting, the sample of beneficiaries for quality reporting, or the obligation of the ACO to report on behalf of eligible professionals for certain quality initiatives. In other words, absent unusual circumstances, CMS uses only the ACO participant list that is certified at the beginning of a performance year to assign beneficiaries to the ACO under Subpart E and to determine the ACO’s quality and financial performance for that performance year under Subparts F and G. Examples of unusual circumstances that might justify midyear changes include the midyear removal of an ACO participant due to avoidance of at-risk beneficiaries or another program integrity issue. For example, if an ACO participant is on the ACO’s certified list of ACO participants for the second performance year, and the ACO timely notifies CMS of the termination of the entity’s ACO participant agreement effective June 30th of PY2, the ACO participant would be removed from the ACO participant list effective June 30th of PY2. However, the former ACO participant’s TIN would still be used for purposes of calculating the quality reporting requirements, financial reports, benchmarking, assignment and reporting of PQRS, meaningful use of EHR, and the valuebased modifier. The ACO participant list that was certified at the start of the performance year governs the assessment of the ACO’s financial and quality performance for that year, regardless of changes to the list during the performance year. We believe this is necessary to help create some stability in the assessment of the ACO’s quality and financial performance for each performance year. If CMS had to modify underlying program operations each VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 time an ACO added or removed a TIN from its list of ACO participants, the ACO would not be able to rely on information (such as the calculation of the historical benchmark) that we provide before the beginning of the performance year. We would not make adjustments upon Medicare payment changes such as wage index adjustments. We further believe it is important for ACOs to communicate effectively with ACO participants that seek to join an ACO so that they understand the potential impact to the ACO, the ACO participant, and the ACO providers/ suppliers affiliated with the ACO participant when an ACO participant leaves during a performance year. For example, it is likely that the ACO would be required to report quality data for beneficiaries that were seen by the former ACO participant in the previous 12 months. The ACO must work with the former ACO participant to obtain the necessary quality reporting data. Additionally, the ACO participant would not be able to qualify for PQRS incentive payment or avoid the PQRS payment adjustment apart from the ACO for that performance year. Therefore, it is in the best interest of both parties to understand this in advance and to commit to working together to fulfill the obligations for the performance year. To assist ACO and ACO participants, we have proposed criteria for ACO participant agreements addressing this issue (see section II.B.1. of this proposed rule). (3) Managing Changes to ACO Providers/Suppliers We recognize that ACO providers/ suppliers may terminate their affiliation with an ACO participant or affiliate with new or additional Medicareenrolled TINs (which may or may not be ACO participants) on a frequent basis. Thus, the annual certified ACO provider/supplier list may quickly become outdated. In order to ensure that CMS and the ACO have a common understanding of which NPIs are part of the ACO at any particular point in time, our regulations at § 425.214 set forth requirements for managing changes to the ACO during the term of the participation agreement. Specifically, § 425.214(a)(2) and § 425.304(d)(2) require an ACO to notify CMS within 30 days of the addition or removal of an ACO provider/supplier from the ACO provider/supplier list. We are proposing new § 425.118(c) on how to report changes to the ACO provider/supplier list that occur during the performance year. Under proposed § 425.118(c), ACOs will continue to be PO 00000 Frm 00014 Fmt 4701 Sfmt 4702 required to report these changes within 30 days. As discussed later in this section, we would require the ACO to ensure that changes in ACO participant and ACO provider/supplier enrollment status are reported in PECOS. However, because the lists of ACO providers/ suppliers cannot be maintained in PECOS, we propose to require ACOs to notify CMS’ Shared Savings Program separately, in the form and manner specified by CMS, of the addition or removal of an ACO provider/supplier. At this time, we anticipate that ACOs will be required to send such notifications via electronic mail; however, specific guidance regarding this notification process would be provided by the Secretary on the CMS Web site and/or through the ACO intranet portal. We propose that an ACO may add an individual or entity to the ACO provider/supplier list if it notifies CMS within 30 days after the individual or entity became a Medicare-enrolled provider or supplier that bills for items and services it furnishes to Medicare fee-for-service beneficiaries under a billing number assigned to the TIN of an ACO participant. If the ACO provides such notice by the 30-day deadline, the addition of an ACO provider/supplier would be effective on the date specified in the notice furnished to CMS but no earlier than 30 days before the date of notice. If the ACO fails to provide timely notice to CMS regarding the addition of an individual or entity to the ACO provider/supplier list, then the addition becomes effective on the date CMS receives notice from the ACO. However, we note that when an individual has begun billing through the TIN of an ACO participant but is not on the ACO provider/supplier list, the individual satisfies the definition of an ACO professional, in which case his or her claims for services furnished to Medicare fee-for-service beneficiaries are considered for assignment and other operational purposes previously described. Each potential ACO provider/supplier that reassigns his or her billing rights under the TIN of an ACO participant is screened by CMS through the enrollment process and PECOS system. Additionally, the Shared Savings Program conducts additional screening on a biannual basis for each ACO provider/supplier through the CMS Fraud Prevention System. In spite of this, we are concerned that our proposed effective date for the addition of an individual or entity to the ACO provider/supplier list will prevent us from conducting a robust program integrity screening of such individuals E:\FR\FM\08DEP2.SGM 08DEP2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 and entities. Therefore, we are considering whether to delay the effective date of any additions to the ACO provider/supplier list until after we have completed a program integrity screening of the individuals or entities that the ACO wishes to add to the list. For example, we are considering whether to delay the effective date of additions to the ACO provider/supplier list until the start of the next performance year, similar to the timing for adding TINs of ACO participants to the list of ACO participants. In this way, a complete yearly screening, including screening with the assistance of our law enforcement partners, could occur at one time for both the ACO participant list and the ACO provider/supplier list. As noted previously, until the individual or entity has been officially designated as an ACO provider/ supplier, that individual or entity would be an ACO professional because of its billing relationship with the ACO participant. Thus, any claims billed by the ACO professional through the TIN of the ACO participant would be used for assignment and related activities during the performance year in which the change takes place, regardless of whether the individual or entity subsequently becomes an ACO provider/supplier. We seek comment on this proposal. We propose that to remove an ACO provider/supplier from the ACO provider/supplier list, an ACO must notify CMS no later than 30 days after the individual or entity ceases to be a Medicare-enrolled provider or supplier that bills for items and services it furnishes to Medicare fee-for-service beneficiaries under a billing number assigned to the TIN of an ACO participant. The individual or entity would be removed from the ACO provider/supplier list effective as of the date the individual or entity terminates its affiliation with the ACO participant. (4) Update of Medicare Enrollment Information We propose at § 425.118(d) to require the ACO to ensure that changes in ACO participant and ACO provider/supplier enrollment status are reported in PECOS consistent with § 424.516 (for example, changes in an ACO provider’s/supplier’s reassignment of the right to receive Medicare payment or revocation of billing rights). As previously discussed in detail, this requirement corresponds with our longstanding policy that requires enrolled providers and suppliers to notify their Medicare contractors through PECOS within specified timeframes for certain reportable events. VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 4. Significant Changes to an ACO a. Overview Section 425.214(b) requires an ACO to notify CMS within 30 days of any significant change. A significant change occurs when an ACO is no longer able to meet the Shared Savings Program eligibility or program requirements (§ 425.214(b)). Upon receiving an ACO’s notice of a significant change, CMS reviews the ACO’s eligibility to continue participating in the Shared Savings Program and, if necessary, may terminate the ACO’s participation agreement (§ 425.214 (c)). In addition, § 425.214(c)(2) provides that CMS may determine that a significant change has caused the ACO’s structure to be so different from what was approved in the ACO’s initial application that it is no longer able to meet the eligibility or program requirements. Under such circumstances, CMS would terminate the ACO’s participation agreement, and permit the ACO to submit a new application for program participation. In the November 2011 final rule (76 FR 67840), we noted that changes to an ACO participant list could constitute a significant change to an ACO if, for example, the removal of a large primary care practice from the list of ACO participants caused the number of assigned beneficiaries to fall below 5,000. b. Proposed Revisions In light of changes proposed in the previous section of this preamble, we propose to redesignate § 425.214(b) and (c) as § 425.214(a) and (b). Second, we propose to describe when certain changes to the ACO constitute a significant change to the ACO. We believe that a change in ownership of an ACO or the addition or deletion of ACO participants could affect an ACO’s compliance with the governance requirements in § 425.106 or other eligibility requirements. We note that some changes to the ACO participant list may be of such a magnitude that the ACO is no longer the entity that was originally approved for program participation. In addition, depending on the nature of the change in ownership, the ACO would need to execute a new participation agreement with CMS if the existing participation agreement is no longer with the correct legal entity. We believe that such changes constitute significant changes and should be subject to the actions outlined under § 425.214(b). Therefore, we are proposing to specify at § 425.214(a) that a significant change occurs when the ACO is no longer able to meet the eligibility or other PO 00000 Frm 00015 Fmt 4701 Sfmt 4702 72773 requirements of the Shared Savings Program, or when the number or identity of ACO participants included on the ACO participant list, as updated in accordance with § 425.118, changes by 50 percent or more during an agreement period. For example, in the case of an ACO whose initial certified ACO participant list contained ten ACO participants, five of which gradually left the ACO and either were not replaced or were replaced with five different ACO participants, the ACO would have undergone a significant change because the number or identity of its ACO participants changed by 50 percent. Similarly, if an ACO’s initial certified ACO participant list contains 20 ACO participants, and the ACO incrementally adds 10 new ACO participants for a total of 30 ACO participants, it would have undergone a significant change with the addition of the 10th new ACO participant. Upon notice that an ACO has experienced a significant change, we would evaluate the ACO’s eligibility to continue participating in the Shared Savings Program and make one of the determinations listed in the provision we propose to redesignate as § 425.214(b). We may request additional information to determine whether and under what terms the ACO may continue in the program. We note that a determination that a significant change has occurred would not necessarily result in the termination of the ACO’s participation agreement. We further propose to modify § 425.214 to provide that an ACO’s failure to notify CMS of a significant change must not preclude CMS from determining that the ACO has experienced a significant change. In addition, we are seeking comment on whether we should consider amending our regulations to clarify that the ACO’s notice of a significant change must be furnished prior to the occurrence of the significant change. We believe some significant changes could benefit from a longer notice period, particularly in the case of a change of ownership that causes the ACO to be unable to comply with program requirements. Therefore, we seek comment on whether ACOs should be required to provide 45 or 60 days’ advance notice of a significant change. We also seek comment on what changes in the ACO participant list should constitute a significant change. E:\FR\FM\08DEP2.SGM 08DEP2 72774 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 5. Consideration of Claims Billed by Merged/Acquired Medicare-Enrolled Entities a. Overview As discussed in the November 2011 final rule (76 FR 67843), we do not believe that mergers and acquisitions by ACO providers and suppliers are the only way for an entity to become an ACO. The statute and our regulations permit ACO participants that form an ACO to use a variety of collaborative organizational structures, including collaborations other than merger. We reject the proposition that an entity under single control, that is, an entity formed through a merger, would be more likely to meet the goals of improved health at a lower cost. However, we have received questions from industry stakeholders regarding how previous mergers and acquisitions of entities with Medicare enrolled billing TINs will be treated for purposes of the Shared Savings Program. In particular, some applicants have inquired whether the claims billed to Medicare in previous years by an entity that has since been merged with, or acquired by, a different entity could be used to determine whether an applicant meets the requirement to have at least 5,000 beneficiaries assigned to it in each of the benchmark years (§ 425.110) and to establish the ACO’s historical benchmark and preliminary prospective assignment. To illustrate, suppose a large group practice that is a prospective ACO participant recently purchased two small primary care practices, and the primary care practitioners from those small practices have reassigned the right to receive Medicare payment to the larger group practice Medicare-enrolled TIN. In this instance, it is likely that the primary care providers will continue to serve the same patient population they served before the practices were purchased, and that their patients may appear on the ACO’s list of assigned beneficiaries at the end of the performance year. Therefore, applicants and established ACOs have inquired whether there is a way to take into account the claims billed by the Medicare-enrolled TINs of practices acquired by sale or merger for purposes of meeting the minimum assigned beneficiary threshold and creating a more accurate benchmark and preliminary prospective list of assigned beneficiaries for the upcoming performance year. Similarly, an established ACO may request consideration of the claims billed by the Medicare-enrolled TINs of entities acquired during the course of a performance year for the same purposes. VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 In response to questions from industry stakeholders, we provided additional guidance on our Web site to all Shared Savings Program applicants about the requirements related to mergers and acquisitions (see https:// www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/ sharedsavingsprogram/Downloads/ Merger-Acquisitions-FAQ.pdf). In this guidance, we indicated that under the following circumstances, we may take the claims billed under TINs of entities acquired through purchase or merger into account for purposes of beneficiary assignment and the ACO’s historical benchmark: • The ACO participant must have subsumed the acquired entity’s TIN in its entirety, including all the providers and suppliers that reassigned the right to receive Medicare payment to that acquired entity’s TIN. • All the providers and suppliers that previously reassigned the right to receive Medicare payment to the acquired entity’s TIN must reassign that right to the TIN of the acquiring ACO participant. • The acquired entity’s TIN must no longer be used to bill Medicare. In order to attribute the billings of merged or acquired TINs to the ACO’s benchmark, the ACO applicant must— • Submit the acquired entity’s TIN on the ACO participant list, along with an attestation stating that all providers and/ suppliers that previously billed under the acquired entity’s TIN have reassigned their right to receive Medicare payment to an ACO participant’s TIN; • Indicate the acquired entity’s TIN and which ACO participant acquired it; and • Submit supporting documentation demonstrating that the entity’s TIN was acquired by an ACO participant through a sale or merger and submit a letter attesting that the acquired entity’s TIN will no longer be used to bill Medicare. We note that we require an applicant’s list of ACO providers/ suppliers to include all individuals who previously billed under the acquired entity’s TIN to have reassigned their right to receive Medicare payment to an ACO participant’s TIN. We believe that these requirements are necessary to ensure that these entities have actually been completely merged or acquired and that it would be likely that the primary care providers will continue to serve the same patient population. In this way, the beneficiary assignments and the benchmarks would be more accurate for ACOs that include merged or acquired Medicare-enrolled TINs under which their ACO PO 00000 Frm 00016 Fmt 4701 Sfmt 4702 professionals billed during application or updates to the ACO participant list. b. Proposal We believe the current criteria and processes have been working well and have benefited both CMS (for example, by providing assurance that an entity’s Medicare-enrolled billing TIN have actually been acquired through sale or merger) and the affected ACOs (for example, by allowing for an increase in the ACO’s number of appropriately assigned beneficiaries and providing for a more accurate financial benchmark). To avoid uncertainty and to establish a clear and consistent process for the recognition of the claims previously billed by the TINs of acquired entities, we propose to codify the current operational guidance on this topic at § 425.204(g) with some minor revisions to more precisely and accurately describe our proposed policy. Proposed § 425.204(g) would add the option for ACOs to request consideration of claims submitted by the Medicare-enrolled TINs of acquired entities as part of their application, and would address the documentation requirements for such requests. Although this provision is added in a section regarding the content of the initial application, we propose to permit ACOs to annually request consideration of claims submitted by the TINs of entities acquired through sale or merger upon submission of the ACO’s updated list of ACO participants. 6. Legal Structure and Governance Section 1899(b)(1) of the Act requires ACO participants to have established a ‘‘mechanism for shared governance’’ in order to be eligible to participate as ACOs in the Shared Savings Program. In addition, section 1899(b)(2)(C) of the Act requires the ACO to have a formal legal structure that allows the organization to receive and distribute shared savings payments to ACO participants and ACO providers/ suppliers. We believe this requirement is important because a formal legal structure can ensure the ACO is protected against improper influence. In this section, we propose clarifications to our rules related to the ACO’s legal entity and governing body. The purpose of these changes is to clarify our regulations and to ensure that ACO decision making is governed by individuals who have a fiduciary duty, including a duty of loyalty, to the ACO alone and not to any other individuals or entities. We believe these clarifications are relatively minor and would not significantly impact the program as currently implemented. E:\FR\FM\08DEP2.SGM 08DEP2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 a. Legal Entity and Governing Body (1) Overview As specified in the November 2011 final rule (76 FR 67816) and at § 425.104(a), an ACO must be a legal entity, formed under applicable state, federal, or tribal law, and authorized to conduct business in each state in which it operates for purposes of the following: • Receiving and distributing shared savings. • Repaying shared losses or other monies determined to be owed to CMS. • Establishing, reporting, and ensuring provider compliance with health care quality criteria, including quality performance standards. • Fulfilling other ACO functions identified in this part. Additionally, under § 425.104(b), an ACO formed by two or more ‘‘otherwise independent’’ ACO participants must be a legal entity separate from any of its ACO participants. Our regulations at § 425.106(b)(4) further specify that when an ACO comprises ‘‘multiple, otherwise independent ACO participants,’’ the governing body of the ACO must be ‘‘separate and unique to the ACO’’. In contrast, if the ACO is an ‘‘existing legal entity,’’ the ACO governing body may be the same as the governing body of that existing legal entity, provided it satisfies all other requirements of § 425.106, including provisions regarding the fiduciary duties of governing body members, the composition of the governing body, and conflict of interest policies (§ 425.106(b)(5)). Some applicants have questioned when an ACO needs to be formed as a separate legal entity, particularly the meaning in § 425.104(b) of ‘‘otherwise independent’’ ACO participants. Specifically, applicants have questioned whether multiple prospective ACO participants are ‘‘otherwise independent’’ when they have a prior relationship through, for example, an integrated health system. In addition, we received some questions regarding compliance with the governing body requirements set forth in § 425.106(b)(4) and (5). For example, we received questions from some IPAs, each of which wanted to apply to the Shared Savings Program as an ACO using its existing legal structure and governing body. In some cases, the IPA represented many group practices, but not every group practice represented by an IPA had agreed to be an ACO participant. We believe that such an IPA would need to organize its ACO as a separate legal entity with its own governing body to ensure that the governing body members would have a fiduciary duty to the ACO alone, as VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 required by § 425.106(b)(3), and not to an entity comprised in part by entities that are not ACO participants. (2) Proposed Revisions We propose to clarify our regulation text regarding when an ACO must be formed as a separate legal entity. Specifically, we propose to remove the reference to ‘‘otherwise independent ACO participants’’ in § 425.104(b). The revised regulation would provide that an ACO formed by ‘‘two or more ACO participants, each of which is identified by a unique TIN,’’ must be a legal entity separate from any of its ACO participants. For example, if an ACO is composed of three ACO participants, each of which belongs to the same health system or IPA, the ACO must be a legal entity separate and distinct from any one of the three ACO participants. In addition, we propose to clarify § 425.106(a), which sets forth the general requirement that an ACO have an identifiable governing body with the authority to execute the functions of an ACO. Specifically, we propose that the governing body must satisfy three criteria. First, the governing body of the ACO must be the same as the governing body of the legal entity that is the ACO. Second, in the case of an ACO that comprises multiple ACO participants the governing body must be separate and unique to the ACO and must not be the same as the governing body of any ACO participant. Third, the governing body must satisfy all other requirements set forth in § 425.106, including the fiduciary duty requirement. We note that the second criterion incorporates the requirement that currently appears at § 425.106(b)(4), which provides that the governing body of the ACO must be separate and unique to the ACO in cases where there are multiple ACO participants. Accordingly, we propose to remove § 425.106(b)(4). We further propose to remove § 425.106(b)(5), which provides that if an ACO is an existing legal entity, its governing body may be the same as the governing body of that existing entity, provided that it satisfies the other requirements of § 425.106. In light of our proposed revision to § 425.106(a), we believe this provision is unnecessary and should be removed to avoid confusion. In proposing that the governing body be the same as the governing body of the legal entity that is the ACO, we intend to preclude delegation of all ACO decision-making authority to a committee of the governing body or retention of ACO decision-making authority by a parent company; ultimate authority for the ACO must still reside with the governing body. We recognize PO 00000 Frm 00017 Fmt 4701 Sfmt 4702 72775 that the governing body of the legal entity that is the ACO may wish to organize committees that address certain matters pertaining to the ACO, but we do not believe that such committees can constitute the governing body of the ACO. We also recognize that a parent organization may wish to retain certain authorities to protect the parent company and ensure the subsidiary’s success; however, the ACO’s governing body must retain the ultimate authority to execute the functions of an ACO. As stated in the regulations, we believe such functions include such things as developing and implementing the required processes under § 425.112 and holding leadership and management accountable for the ACO’s activities. We also believe this authority extends to such activities including the appointment and removal of members of the governing body, leadership, and management, and determining how shared savings are used and distributed among ACO participants and ACO providers/suppliers. We seek comments on this proposal that the ultimate authority for the ACO to carry out its activities must reside with the governing body of the ACO. The purpose of the new provision precluding the governing body of the ACO from being the same as the governing body of an ACO participant is to ensure that decisions made on behalf of the ACO are not improperly influenced by the interests of individuals and entities other than the ACO. In order to comply with the requirement that the governing body be separate and unique to the ACO, it must not be responsible for representing the interests of any entity participating in the ACO or any entity that is not participating in the ACO. Thus, we propose the requirement that an ACO’s governing body must not be the same as the governing body of any of the ACO participants. b. Fiduciary Duties of Governing Body Members (1) Overview Our current regulations at § 425.106(b)(3) require that the governing body members have a fiduciary duty to the ACO and must act consistent with that fiduciary duty. We have clarified in guidance that the governing body members cannot meet the fiduciary duty requirement if the governing body is also responsible for governing the activities of individuals or entities that are not part of the ACO (See ‘‘Additional Guidance for Medicare Shared Savings Program Accountable Care Organization (ACO) Applicants’’ E:\FR\FM\08DEP2.SGM 08DEP2 72776 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules located online at https://www.cms.gov/ Medicare/Medicare-Fee-for-ServicePayment/sharedsavingsprogram/ Downloads/Memo_Additional_ Guidance_on_ACO_Participants.pdf). For example, in the case of an IPA that applies as an ACO to the Shared Savings Program, we believe it would be difficult for the members of the IPA’s governing body to make decisions in the best interests of the ACO if only some of the group practices that compose the IPA are ACO participants; decisions affecting the ACO may be improperly influenced by the interests of group practices that are part of the IPA but are not ACO participants. For this reason, our regulations require the IPA to establish the ACO as a separate legal entity. This new legal entity must have a governing body whose members have a fiduciary responsibility to the ACO alone and not to any other individual or entity. We wish to emphasize that the ACO’s governing body decisions must be free from the influence of interests that may conflict with the ACO’s interests. (2) Proposed Revisions We propose to clarify in § 425.106(b)(3) that the fiduciary duty owed to an ACO by its governing body members includes the duty of loyalty. This proposal does not represent a change in policy and is simply intended to emphasize that members of an ACO governing body must not have divided loyalties; they must act only in the best interests of the ACO and not another individual or entity, including the individual interests of ACO participants, ACO professionals, ACO providers/suppliers, or other individuals or entities. c. Composition of the Governing Body mstockstill on DSK4VPTVN1PROD with PROPOSALS2 (1) Overview Section 1899(b)(1) requires an ACO to have a ‘‘mechanism for shared governance’’ among ACO participants. Section 425.106(c)(1) of the regulations requires an ACO to provide for meaningful participation in the composition and control of the ACO’s governing body for ACO participants or their designated representatives. As we explained in the November 2011 final rule (76 FR 67819), we believe that an ACO should be operated and directed by Medicare-enrolled entities that directly provide health care services to beneficiaries. However, we acknowledged, that small groups of providers often lack both the capital and infrastructure necessary to form an ACO and to administer the programmatic requirements of the Shared Savings VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 Program and could benefit from partnerships with non-Medicare enrolled entities. For this reason, we proposed (76 FR 19541) that to be eligible for participation in the Shared Savings Program, the ACO participants must have at least 75 percent control of the ACO’s governing body. In the November 2011 final rule, we explained that this requirement would ensure that ACOs remain provider-driven, but also leave room for nonproviders to participate in the program. In addition, to provide for patient involvement in the ACO governing process, we specified at § 425.106(c)(2) that an ACO’s governing body must include a Medicare beneficiary served by the ACO who does not have a conflict of interest with the ACO. We acknowledged that beneficiary representation on an ACO’s governing body may not always be feasible. For example, commenters raised concerns that requiring a beneficiary on the governing body could conflict with State corporate practice of medicine laws or other local laws regarding governing body requirements for public health or higher education institutions (76 FR 67821). As a result, we believed it was appropriate to provide some flexibility for us to permit an ACO to adopt an alternative structure for its governing body, while still ensuring that ACO participants and Medicare FFS beneficiaries are involved in ACO governance. Accordingly, the November 2011 final rule, offers some flexibility to permit an ACO to participate in the Shared Savings Program even if its governing body fails to include a beneficiary or satisfy the requirement that 75 percent of the governing body be controlled by ACO participants. Specifically, § 425.106(c)(5) provides that if an ACO’s governing body does not meet either the 75 percent threshold or the requirement regarding beneficiary representation, it must describe in its application how the proposed structure of its governing body would involve ACO participants in innovative ways in ACO governance or provide a meaningful opportunity for beneficiaries to participate in the governance of the ACO. For example, under this provision, we anticipated that exceptions might be needed for ACOs that operate in states with Corporate Practice of Medicine restrictions to structure beneficiary representation accordingly. We contemplated that this provision could also be used by an existing entity to explain why it should not be required to reconfigure its board if it had other means of addressing the requirement to PO 00000 Frm 00018 Fmt 4701 Sfmt 4702 include a consumer perspective in governance (see 76 FR 67821). (2) Proposed Revisions We propose to revise § 425.106(c)(5) to remove the flexibility for ACOs to deviate from the requirement that at least 75 percent control of an ACO’s governing body must be held by ACO participants. Based on our experience to date with implementing the program, we have learned that ACO applicants do not have difficulty meeting the requirement under § 425.106(c)(3) that ACO participants maintain 75 percent control of the governing body. We have not denied participation to any ACO applicants on the basis of failure to comply with this requirement, and it has not been necessary to grant any exceptions to this rule under § 425.106(c)(5). To the contrary, we have found the 75 percent control requirement to be necessary and protective of the ACO participant’s interests. Accordingly, we believe there is no reason to continue to offer an exception to the rule. We continue to believe it is important to maintain the flexibility for ACOs to request innovative ways to provide meaningful representation of Medicare beneficiaries on ACO governing bodies. Based on our experience, some ACOs have been unable to include a beneficiary on their governing body, and these entities have used the process under § 425.106(c)(5) to establish that they satisfy the requirement for meaningful beneficiary representation through the use of patient advisory bodies that report to the governing body of the ACO. We also propose to revise § 425.106(c)(2) to explicitly prohibit an ACO provider/supplier from being the beneficiary representative on the governing body. Some ACO applicants have proposed that one of their ACO providers/suppliers would serve as the beneficiary representative on the governing body. We believe it would be very difficult for an ACO provider/ supplier who is Medicare beneficiary to represent only the interests of beneficiaries, rather than his or her own interests as an ACO provider/supplier, the interests of other ACO providers/ suppliers, or the interests of the ACO participant through which he or she bills Medicare. Finally, we are proposing to revise § 425.106(c)(1) to reiterate the statutory standard in section 1899(b)(1) of the Act requiring an ACO to have a ‘‘mechanism for shared governance’’ among ACO participants. Although we declined in the November 2011 final rule to promulgate a requirement that each E:\FR\FM\08DEP2.SGM 08DEP2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules ACO participant be a member of the ACO’s governing body (76 FR 67818), the governing body must nevertheless represent a mechanism for shared governance among ACO participants. To that end, the governing body of an ACO that is composed of more than one ACO participant should not, for example, include representatives from only one ACO participant. For ACOs that have extensive ACO participant lists, we would expect to see representatives from many different ACO participants on the governing body. Our proposal to reiterate the statutory standard for shared governance in our regulations at § 425.106(c)(1) does not constitute a substantive change to the program. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 7. Leadership and Management Structure a. Overview Section 1899(b)(2)(F) of the Act requires an eligible ACO to ‘‘have in place a leadership and management structure that includes clinical and administrative systems.’’ Under this authority, we incorporated certain leadership and management requirements into the Shared Savings Program, as part of the eligibility requirements for program participation. In the November 2011 final rule (76 FR 67822), we stated that we believed an ACO’s leadership and management structure should align with and support the goals of the Shared Savings Program and the three-part aim of better care for individuals, better health for populations, and lower growth in expenditures. In the November 2011 final rule (76 FR 67825), we established the requirement that the ACO’s operations be managed by an executive, officer, manager, general partner, or similar party whose appointment and removal are under the control of the ACO’s governing body and whose leadership team has demonstrated the ability to influence or direct clinical practice to improve efficiency, processes, and outcomes (see § 425.108(b)). In addition, under § 425.108(c), clinical management and oversight must be managed by a senior-level medical director who is one of the ACO providers/suppliers, who is physically present on a regular basis in an established ACO location (clinic, office or other location participating in the ACO), and who is a board-certified physician licensed in a State in which the ACO operates. In § 425.204(c)(1)(iii), we require ACO applicants to submit materials documenting the ACO’s organization and management structure, including senior administrative and clinical leaders specified in § 425.108. VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 In the November 2011 final rule (76 FR 67825), we provided flexibility for ACOs to request an exception to the leadership and management requirements set forth under § 425.108(b) and (c). We believed that affording this flexibility was appropriate in order to encourage innovation in ACO leadership and management structures. In accordance with § 425.108(e), we reserve the right to give consideration to an innovative ACO leadership and management structure that does not comply with the requirements of § 425.108(b) and (c). We continue to believe that having these key leaders (operational manager and clinical medical director) is necessary for a well-functioning and clinically integrated ACO. We have learned from our experience with the program, over four application cycles, that ACO applicants generally do not have difficulty in meeting the operational manager and clinical medical director requirements. Only one ACO has requested an exception to the medical director requirements. In that case, the ACO sought the exception in order to allow a physician, who had retired after a long tenure with the organization to serve as the medical director of the ACO. We approved this request because, although the retired physician was not an ACO provider/ supplier because he was no longer billing for physician services furnished during the agreement period, he was closely associated with the clinical operations of the ACO, familiar with the ACO’s organizational culture, and dedicated to this one ACO. In addition, we have received a number of questions from ACO applicants regarding the other types of roles for which CMS requires documentation under § 425.204(c)(1)(iii) to evaluate whether an applicant has a ‘‘. . . leadership and management structure that includes clinical and administrative systems’’ that support the purposes of the Shared Savings Program and the aims of better care for individuals, better health for populations, and lower growth in expenditures, as articulated at § 425.108(a)). In response to such inquiries regard, we have indicated that we consider an ACO’s ‘‘. . . leadership and management structure that includes clinical and administrative systems’’ to be comprised of the operational manager and clinical medical director (referenced under § 425.108(b) and (c)) as well as the qualified healthcare professional that is required under § 425.112(a) to be responsible for the ACO’s quality assurance and improvement program. PO 00000 Frm 00019 Fmt 4701 Sfmt 4702 72777 b. Proposed Revisions We propose to amend § 425.108 to provide some additional flexibility regarding the qualifications of the ACO medical director and to eliminate the provision permitting some ACOs to enter the program without satisfying the requirements at § 425.108(b) and (c) for operations and clinical management. In addition, we propose to amend § 425.204(c)(iii) to clarify that applicants must submit materials regarding the qualified health care professional responsible for the ACO’s quality assurance and improvement program. We discuss each proposal later in this section. We believe that it is appropriate to amend the medical director requirement at § 425.108(c) to allow some additional flexibility. Specifically, we propose to remove the requirement that the medical director be an ACO provider/ supplier. This change would permit an ACO to have a medical director who was, for example, previously closely associated with an ACO participant but who is not an ACO provider/supplier because he or she does not bill through the TIN of an ACO participant and is not on the list of ACO providers/ suppliers. Alternatively, we may retain the requirement that an ACO’s medical director be an ACO provider/supplier, but permit ACOs to request CMS approval to designate as its medical director a physician who is not an ACO provider/supplier but who is closely associated with the ACO and satisfies all of the other medical director requirements. We seek comment on whether an ACO medical director who is not an ACO provider/supplier must have been closely associated with the ACO or an ACO participant in the recent past. In addition, we propose to clarify that the medical director must be physically present on a regular basis ‘‘at any clinic, office, or other location of the ACO, ACO participant or ACO provider/supplier.’’ Currently, the provision incorrectly refers only to locations ‘‘participating in the ACO.’’ However, we continue to strongly believe that the medical director of the ACO should be directly associated with the ACO’s clinical operations and familiar with the ACO’s organizational culture. This is one purpose of the provision requiring medical directors to be physically present on a regular basis at any clinic, office, or other ACO location. A close working relationship with the ACO and its clinical operations is necessary in order for the medical director to lead the ACO’s efforts to achieve quality improvement and cost efficiencies. E:\FR\FM\08DEP2.SGM 08DEP2 72778 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules We propose to eliminate § 425.108(e), which permits us to approve applications from innovative ACOs that do not satisfy the leadership and management requirements related to operations management and clinical management and oversight set forth at § 425.108(b) and (c). Based on our experience with the program and the proposed change to the medical director requirement, we believe it is unnecessary to continue to allow ACOs the flexibility to request an exception to the leadership and management requirements related to operations management and clinical management and oversight (§ 425.108(b) and (c)). These requirements are broad and flexible and have not posed a barrier to participation in the Shared Savings Program; in fact, in only one instance has an ACO requested an exception to the operations management criterion (§ 425.108(b)). We are unaware of any alternative operations management structure that might be considered acceptable, and we have modified § 425.108(c) to accommodate the one exception we have granted to date. Accordingly, we propose to revise the regulations by striking § 425.108(e) to eliminate the flexibility for ACOs to request an exception to the leadership and management requirements at § 425.108(b) and (c). Finally, to clarify questions that have been raised by ACO applicants and to reduce the need for application corrections, we propose to modify § 425.204(c)(1)(iii) to require a Shared Savings Program applicant to submit documentation regarding the qualified healthcare professional responsible for the ACO’s quality assurance and improvement program (as required by § 425.112(a)). We seek comment on these changes to the requirements for ACO leadership and management. 8. Required Process To Coordinate Care mstockstill on DSK4VPTVN1PROD with PROPOSALS2 a. Overview Section 1899(b)(2)(G) of the Act requires an ACO to ‘‘define processes to . . . coordinate care, such as through the use of telehealth, remote patient monitoring, and other such enabling technologies.’’ In the November 2011 final rule (76 FR 67829 through 67830), we established requirements under § 425.112(b)(4) that ACOs define their care coordination processes across and among primary care physicians, specialists, and acute and postacute providers. As part of this requirement, an ACO must define its methods and processes to coordinate care throughout an episode of care and during its VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 transitions. In its application to participate in the Shared Savings Program, the ACO must submit a description of its individualized care program, along with a sample care plan, and explain how this program is used to promote improved outcomes for, at a minimum, its high-risk and multiple chronic condition patients. In addition, an ACO’s application must describe target populations that would benefit from individualized care plans. In developing these policies for the November 2011 final rule (76 FR 67819), we received comments acknowledging that requiring ACOs to define processes to promote coordination of care is vital to the success of the Shared Savings Program. Commenters stressed the importance of health information exchanges in coordination of care activities and recommended that CMS allow ACOs the flexibility to use any standards-based electronic care coordination tools that meet their needs. Other commenters suggested that the proposed rule anticipated a level of functional health information exchange and technology adoption that may be too aggressive. As stated in § 425.204(c)(1)(ii), applicants to the Shared Savings Program must provide a description, or documents sufficient to describe, how the ACO will implement the required processes and patient-centeredness criteria under § 425.112, including descriptions of the remedial processes and penalties (including the potential for expulsion) that will apply if an ACO participant or an ACO provider/supplier fails to comply with and implement these processes. Under § 425.112(b), an ACO must establish processes to accomplish the following: promote evidence-based medicine; Promote patient engagement; develop an infrastructure to internally report on quality and cost metrics required for monitoring and feedback; and coordinate care across and among primary care physicians, specialists and acute and postacute providers and suppliers. In addition to the processes described previously, we believe it is important for applicants to explain how they will develop the health information technology tools and infrastructure to accomplish care coordination across and among physicians and providers Adoption of health information technology is important for supporting care coordination by ACO participants and other providers outside the ACO in the following ways: Secure, private sharing of patient information; reporting on quality data and aggregating data across providers and sites to track PO 00000 Frm 00020 Fmt 4701 Sfmt 4702 quality measures; and deploying clinical decision support tools that provide access to alerts and evidence basedguidelines. As ACOs establish more mature processes for risk management, information technology infrastructure allows ACOs and providers to conduct robust financial management of beneficiary populations, deliver cost and quality feedback reporting to individual providers, and streamline the administration of risk based contracts across multiple payers. We believe that requiring ACOs to address health information technology infrastructure in their application to the Shared Savings program would support more careful planning and increased focus on this issue. b. Accelerating Health Information Technology HHS believes all patients, their families, and their healthcare providers should have consistent and timely access to their health information in a standardized format that can be securely exchanged between the patient, providers, and others involved in the patient’s care. (HHS August 2013 Statement, ‘‘Principles and Strategies for Accelerating Health Information Exchange’’) HHS is committed to accelerating health information exchange (HIE) through the use of EHRs and other types of health information technology (HIT) across the broader care continuum through a number of initiatives including: (1) Alignment of incentives and payment adjustments to encourage provider adoption and optimization of HIT and HIE services through Medicare and Medicaid payment policies; (2) adoption of common standards and certification requirements for interoperable HIT; (3) support for privacy and security of patient information across all HIEfocused initiatives; and (4) governance of health information networks. These initiatives are designed to encourage HIE among health care providers, including professionals and hospitals eligible for the Medicare and Medicaid EHR Incentive Programs and those who are not eligible for the EHR Incentive programs as well as those providers that are participating in the Medicare Shared Savings Program as an ACO and those that are not, and are designed to improve care delivery and coordination across the entire care continuum. For example, the Transition of Care Measure #2 in Stage 2 of the Medicare and Medicaid EHR Incentive Programs requires HIE to share summary records for at least 10 percent of care transitions. We believe that HIE and the use of certified EHRs can effectively and E:\FR\FM\08DEP2.SGM 08DEP2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 efficiently help ACOs and participating providers improve internal care delivery practices, support management of patient care across the continuum, and support the reporting of electronically specified clinical quality measures (eCQMs). c. Proposed Revisions We continue to believe that ACOs should coordinate care between all types of providers and across all services, and that the secure, electronic exchange of health information across all providers in a community is of the utmost importance for both effective care coordination activities and the success of the Shared Savings Program. We understand that ACOs will differ in their ability to adopt the appropriate health information exchange technologies, but we continue to underscore the importance of robust health information exchange tools in effective care coordination. ACOs have reported how important access to real time data is for providers to improve care coordination across all sites of care, including outpatient, acute, and postacute sites of care. We believe that providers across the continuum of care are essential partners to physicians in the management of patient care. ACOs participating in the program indicate that they are actively developing the necessary infrastructure and have been encouraging the use of technologies that enable real time data sharing among and between sites of care. We believe having a process and plan in place to coordinate a beneficiary’s care by electronically sharing health information improves care, and that this helps all clinicians involved in the care of a patient to securely access the necessary health information in a timely manner. It also can also be used to engage beneficiaries in their own care. We further believe that Shared Savings Program applicants should provide, as part of the application, their plans for improving care coordination by developing, encouraging, and using enabling technologies and electronic health records to make health information electronically available to all practitioners involved in a beneficiary’s care. Therefore, we propose to add a new requirement to the eligibility requirements under § 425.112(b)(4)(ii)(C) which would require an ACO to describe in its application how it will encourage and promote the use of enabling technologies for improving care coordination for beneficiaries. Such enabling technologies and services may VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 include electronic health records and other health IT tools (such as population health management and data aggregation and analytic tools), telehealth services (including remote patient monitoring), health information exchange services, or other electronic tools to engage patients in their care. We also propose to add a new provision at § 425.112(b)(4)(ii)(D) to require the applicant to describe how the ACO intends to partner with long-term and postacute care providers to improve care coordination for the ACO’s assigned beneficiaries. Finally, we propose to add a provision under § 425.112(b)(4)(ii)(E) to require that an ACO define and submit major milestones or performance targets it will use in each performance year to assess the progress of its ACO participants in implementing the elements required under § 425.112(b)(4). For instance, providers would be required to submit milestones and targets such as: Projected dates for implementation of an electronic quality reporting infrastructure for participants; the number of providers expected to be connected to health information exchange services by year; or the projected dates for implementing elements of their care coordination approach, such as alert notifications on emergency department and hospital visits or e-care plan tools for virtual care teams. We believe this information would allow us to better understand and support ACOs’ plans to put into place the systems and processes needed to deliver high quality care to beneficiaries. We also note that ACOs have flexibility to use telehealth services as they deem appropriate for their efforts to improve care and avoid unnecessary costs. Some ACOs have already reported that they are actively using telehealth services to improve care for their beneficiaries. We welcome information from ACOs and other stakeholders about the use of such technologies. We seek comment on the specific services and functions of this technology that might be appropriately adopted by ACOs. For example, does the use of telehealth services and other technologies necessitate any additional protections for beneficiaries? Are these technologies necessary for care coordination or could other methods be used for care coordination? If a particular technology is necessary, under what circumstances? 9. Transition of Pioneer ACOs Into the Shared Savings Program a. Overview The Center for Medicare and Medicaid Innovation (the Innovation PO 00000 Frm 00021 Fmt 4701 Sfmt 4702 72779 Center) at CMS was established by section 1115A of the Act (as added by section 3021 of the Affordable Care Act) for the purpose of testing ‘‘innovative payment and service delivery models to reduce program expenditures . . . while preserving or enhancing the quality of care’’ for those individuals who receive Medicare, Medicaid, or Children’s Health Insurance Program (CHIP) benefits. The Pioneer ACO Model is an Innovation Center initiative designed for organizations with experience operating as ACOs or in similar arrangements. The Pioneer ACO Model is testing the impact of using different payment arrangements in helping these experienced organizations achieve the goals of providing better care to patients, and reducing Medicare costs. Under section 1899(b)(4) of the Act, to be eligible to participate in the Shared Savings Program, a provider of services or supplier may not also be participating in a program or demonstration project that involves shared savings, such as the Pioneer ACO Model. Thus, Pioneer ACOs are not permitted to participate concurrently in the Shared Savings Program. As Pioneer ACOs complete the model test (the agreement is for a minimum of 3 years with an option to participate for an additional 2 years), they would have an opportunity to transition to the Shared Savings Program. We believe it would be appropriate to establish an efficient process to facilitate this transition in a way that minimizes any unnecessary burdens on these ACOs and on CMS. b. Proposed Revisions In order to do this, we propose to use a transition process that is similar to the transition process we established previously for Physician Group Practice (PGP) demonstration participants applying to participate in the Shared Savings Program. The PGP demonstration, authorized under section 1866A of the Act, was our first experience with a shared savings program in Medicare and served as a model for many aspects of the Shared Savings Program. In the November 2011 final rule (76 FR 67834), we finalized § 425.202(b), which provides that PGP sites applying for participation in the Shared Savings Program will be given the opportunity to complete a condensed application form. This condensed application form requires a PGP site to provide the information that was required for the standard Shared Savings Program application but that was not already obtained through its application for or via its participation in the PGP demonstration. Also, a PGP participant E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 72780 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules would be required to update any information contained in its application for the PGP demonstration that was also required on the standard Shared Savings Program application. Former PGP participants qualified to use a condensed application form if their ACO legal entity and TINs of ACO participant were the same as those that participated under the PGP demonstration. As we continue to implement the Shared Savings program, we will likely have a similar situation with regard to Pioneer ACOs that have completed their current agreement and wish to transition to the Shared Savings Program. Given that we have been working with and have a level of familiarity with these organizations similar to that with the PGP participants, we believe it is also appropriate to consider offering some latitude with regard to the process for applying to the Shared Savings Program for these ACOs. Thus, we propose to revise § 425.202(b) to offer Pioneer ACOs the opportunity to apply to the Shared Savings Program using a condensed application if three criteria are satisfied. First, the applicant ACO must be the same legal entity as the Pioneer ACO. Second, all of the TINs on the applicant’s ACO participant list must have appeared on the ‘‘Confirmed Annual TIN/NPI List’’ (as defined in the Pioneer ACO Model Innovation Agreement with CMS) for the applicant ACO’s last full performance year in the Pioneer ACO Model. Third, the applicant must be applying to participate in a two-sided model. We note that, consistent with the statute and our regulation at § 425.114, any Pioneer ACO transitioning to the Shared Savings Program must apply to participate in the Shared Savings Program for an agreement period that would start after its participation in the Pioneer ACO Model has ceased. We further note that Pioneer ACOs transitioning to the Shared Savings Program would be subject to the standard program integrity screening and an evaluation of their history of compliance with the requirements of the Pioneer ACO Model. Regarding the second criterion, we recognize there are differences between the Pioneer ACO Model and the Shared Savings Program, and that only some of the NPIs within a TIN might have participated in the Pioneer ACO. Therefore, for purposes of determining whether a condensed application will be appropriate under the Shared Savings Program, we will only compare the TINs and not NPIs. We also VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 recognize that some TINs may not be able to obtain the consent of all NPIs billing through the TIN to participate in the Shared Savings Program, which disqualifies the TIN from participating in the program. Therefore, unlike with the PGP demonstration sites, we propose to allow the ACO applicant to complete a condensed application form even if it drops TINs that participated in its Pioneer ACO. However, if the applicant ACO includes TINs that were not on the Pioneer ACO’s Confirmed Annual TIN/NPI List for its last full performance year in the Pioneer ACO Model, the applicant must use the standard application for the Shared Savings Program. A Pioneer ACO applying to the Shared Savings Program using a condensed application form will be required to include a narrative description of the modifications they need to make to fulfill our requirements (for example, making changes to the governing body and obtaining or revising agreements with ACO participants and ACO providers/ suppliers). Because the Pioneer ACO Model is a risk-bearing model designed for more experienced organizations, the third proposed criterion would permit Pioneer ACOs to use the condensed application only if they apply to participate in the Shared Savings Program under a two-sided model. We established Track 1 of the Shared Savings Program as an on-ramp for ACOs while they gain experience and become ready to accept risk. In this case, the Pioneer ACOs are already experienced and will have already accepted significant financial risk. Therefore, under this proposal, former Pioneer ACOs would not be permitted to enter the Shared Savings Program under Track 1. We further note that the rules and methodologies used under the Pioneer ACO Model to assess performance-based risk are different than under the Shared Savings Program. Therefore, we encourage former Pioneer Model ACOs to carefully consider the risk-based track to which they apply under the Shared Savings Program, and to be cognizant of the differences in rules and methodologies. We seek comments on this proposal to establish a condensed application process for Pioneer ACOs applying to participate in the Shared Savings Program and to require such Pioneer ACOs to participate under a track that includes performance-based risk. Pioneer ACOs that do not meet criteria for the condensed application would have to apply through the regular application process. PO 00000 Frm 00022 Fmt 4701 Sfmt 4702 C. Establishing and Maintaining the Participation Agreement With the Secretary 1. Background The November 2011 final rule established procedures for applying to participate in the Shared Savings Program, including the need to submit a complete application, the content of the application, and CMS’s criteria for evaluating applications (see § 425.202 through § 425.206). In addition, § 425.212 specifies which changes to program requirements will apply during the term of an ACO’s participation agreement. In this section we discuss our proposals to clarify and to supplement the rules related to these requirements. In addition, while the current regulations address certain issues with respect to ACOs that wish to reapply after termination or experiencing a loss during their initial agreement period (§ 425.222 and § 425.600(c), respectively). The regulations are generally silent with respect to the procedures that apply to ACOs that successfully complete a 3-year agreement and would like to reapply for a subsequent agreement period in the Shared Savings Program. In this section, we discuss our proposal to establish the procedure for an ACO to renew its participation agreement for a subsequent agreement period. 2. Application Deadlines a. Overview To obtain a determination on whether a prospective ACO meets the requirements to participate in the Shared Savings Program, our rules at § 425.202(a) require that an ACO submit a complete application in the form and manner required by CMS by the deadline established by CMS. Information on the required content of applications can be found in § 425.204, as well as in guidance published at https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ sharedsavingsprogram/ Application.html. Among other requirements, applications must include certain information such as an ACO’s prior participation in or termination from the program (§ 425.204(b)); documents such as participation agreements, employment contracts and operating policies (§ 425.204(c)(1)(i)); and a list of all ACO participants and their Medicare-enrolled TINs (§ 425.204(c)(5)(i)). We determine and publish in advance on our Web site the relevant due dates for the initial submission of applications E:\FR\FM\08DEP2.SGM 08DEP2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 for each application cycle. While ACOs must submit a completed application by the initial application due date specified on our Web site, we recognize that there may be portions of the application where additional information is necessary for CMS to make a determination. Therefore, according to § 425.206(a)(2), we notify an applicant when its application is incomplete and provide an opportunity to submit information to complete the application by the deadline specified by CMS. As stated in § 425.206(a), CMS evaluates an ACO’s application on the basis of the information contained in and submitted with the application. Applications that remain incomplete after the deadline specified by CMS are denied. It is incumbent upon the ACO applicant to submit the information that is required for CMS to decide whether the applicant is eligible to participate in the program. b. Proposed Revisions In implementing the Shared Savings Program, we found that some applicants misunderstood our application process and the need to submit all required information by the specified deadline for submission of applications and supporting information. Thus, we propose to revise our application review process set forth at § 425.206(a) to better reflect our review procedures. First, we propose to consolidate at § 425.206 two similar provisions regarding application review. Currently, § 425.202(c)(1) regarding application review provides that CMS determines whether an applicant satisfies the requirements of Part 425 and is qualified to participate in the Shared Savings Program, and § 425.202(c)(2) provides that CMS approves or denies applications accordingly. We propose to amend § 425.206(a)(1) to address the concept of application review currently set forth at § 425.202(c)(1), and we propose to amend § 425.202(c) by replacing the existing text with language clarifying that CMS reviews applications in accordance with § 425.206. Second, we propose to revise § 425.206(a) to better reflect our application review process and the meaning of the reference to ‘‘application due date.’’ Specifically, we propose to revise § 425.206(a)(1) to clarify that CMS approves or denies an application on the basis of the following: Information contained in and submitted with the application by the deadline specified by CMS; any supplemental information submitted by a deadline specified by CMS in response to CMS’ request for information; and other information VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 available to CMS (including information on the ACO’s program integrity history). In addition, we propose to amend § 425.206(a)(2) to clarify our process for requesting supplemental information and to add a new paragraph (a)(3) to specify that CMS may deny an application if an ACO applicant fails to submit information by the deadlines specified by CMS. We believe that additional clarity may result in more timely submission of the information necessary to evaluate applications. Moreover, it is critical that ACOs submit information on a timely basis so that we can perform other necessary operational processes before the start of the approved ACO’s first performance year (for example, determining the number of beneficiaries assigned to the ACO, screening prospective ACO participants and ACO providers or suppliers, identifying the preliminary prospective list of assigned beneficiaries, and calculating the ACO’s historical benchmark). These proposed changes are consistent with our current regulations and practice. For example, as part of the application review process, CMS provides feedback to the ACO applicant regarding its list of ACO participants, and the number of assigned beneficiaries is determined using this list of ACO participants. If the number of assigned beneficiaries based on the list of ACO participants submitted with the application is under 5,000, which is the threshold for eligibility under § 425.110(a), we give the ACO applicant an opportunity to add ACO participant TINs. However, the ACO applicant must do so by the deadline indicated by CMS or the application is denied. Similarly, CMS denies an application if an ACO applicant fails to timely submit additional information that is required for CMS to determine whether the ACO applicant meets program requirements. 3. Renewal of Participation Agreements a. Overview For ACOs that would like to continue participating in the Shared Savings Program after the expiration of their current agreement period, we propose a process for renewing their existing participation agreements, rather than requiring submission of a new or condensed application for continued program participation. Therefore, we propose to add new § 425.224 to establish procedures for renewing the participation agreements of ACOs. In addition, we propose to modify the definition of ‘‘agreement period’’ at § 425.20 to clarify its meaning in the PO 00000 Frm 00023 Fmt 4701 Sfmt 4702 72781 context of participation agreement renewals. b. Proposed Revisions Under proposed § 425.224(a), an ACO would be permitted to request renewal of its participation agreement prior to its expiration in a form and manner and by the deadline specified by CMS in guidance. An ACO executive who has the authority to legally bind the ACO must certify that the information contained in the renewal request is accurate, complete, and truthful. Further, an ACO that seeks renewal of its participation agreement and was newly formed after March 23, 2010, as defined in the Antitrust Policy Statement, must agree that CMS can share a copy of its renewal request with the Antitrust Agencies. We anticipate that our operational guidance will outline a process permitting renewal requests during the last performance year of an ACO’s participation agreement. For example, an ACO with a participation agreement ending on December 31, 2015 would be offered the opportunity to renew its participation agreement sometime during the 2015 calendar year in preparation to begin a new 3-year agreement period on January 1, 2016. To streamline program operations, we anticipate specifying a timeframe for submission and supplementation of renewal requests that would generally coincide with the deadlines applicable to submission and supplementation of applications by new ACO applicants under § 425.202. Under proposed § 425.224(b), we propose to determine whether to renew a participation agreement based on an evaluation of all of the following factors: • Whether the ACO satisfies the criteria for operating under the selected risk model. • The ACO’s history of compliance with the requirements of the Shared Savings Program. • 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 losses, if applicable. • Whether the ACO met the quality performance standards during at least 1 of the first 2 years of the previous agreement period. • Whether an ACO under a two-sided model has repaid losses owed to the program that it generated during the first 2 years of the previous agreement period. • The results of a program integrity screening of the ACO, its ACO participants, and its ACO providers/ suppliers (conducted in accordance with § 425.304(b)). E:\FR\FM\08DEP2.SGM 08DEP2 72782 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules We solicit comments on these criteria and any additional criteria that would help ensure the success of the program. We further propose to approve or deny a renewal request based on the information submitted in the request and other information available to CMS. We propose to notify the ACO when the request is incomplete or inadequate and to provide an opportunity for the ACO to submit supplemental information to correct the deficiency. The ACO must submit both the renewal request and any additional information needed to evaluate the request in the form and manner and by the deadlines specified by CMS. Under § 425.224(c), we propose to notify each ACO in writing of our determination to approve or deny the ACO’s renewal request. If we deny the renewal request, the notice would specify the reasons for the denial and inform the ACO of any rights to request reconsideration review in accordance with the procedures specified in part 425 subpart I. We believe that a simple renewal process would reduce the burden for ACOs that wish to continue in the program and minimize the administrative burden on CMS, which would allow us to focus our attention on new applicants that have not yet established their eligibility to participate. We intend to establish the deadlines and other operational details for this renewal process through guidance and instructions. Finally, we note that under our proposal to modify the definition of the participation ‘‘agreement period’’ (section II.C.4 of this proposed rule), a new agreement period would begin upon the start of the first performance year of the renewed participation agreement. 4. Changes to Program Requirements During the 3-Year Agreement mstockstill on DSK4VPTVN1PROD with PROPOSALS2 a. Overview In the November 2011 final rule (76 FR 67838), we recognized that we might promulgate changes to the Shared Savings Program regulations that would become effective while participating ACOs are in the middle of an agreement period. Therefore, we promulgated a rule to specify under what conditions an ACO would be subject to regulatory changes that become effective after the start of its agreement period. Specifically, we finalized § 425.212(a)(2), which provides that ACOs are subject to all regulatory changes with the exception of changes to the eligibility requirements concerning ACO structure and governance, the calculation of the VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 sharing rate, and the assignment of beneficiaries (§ 425.212(a)(2)). We did not exempt ACOs from becoming immediately subject to other regulatory changes. For example, we did not exempt changes such as those related to quality measures because we believed that requiring ACOs to adhere to changes related to quality measures would ensure that they keep pace with changes in clinical practices and developments in evidence-based medicine. The November 2011 final rule did not require ACOs to be subject to any regulatory changes regarding beneficiary assignment that become effective during an agreement period because we recognized that changes in the beneficiary assignment methodology could necessitate changes to ACOs’ financial benchmarks. At the time we published the November 2011 final rule (76 FR 67838), we had not developed a methodology for adjusting an ACO’s benchmark to reflect changes in the beneficiary assignment methodology during an agreement period. We anticipated that ACOs would complete their 3-year agreement period with a relatively stable set of ACO participants, and therefore they would all have stable benchmarks during the 3-year agreement period that would require updates only to reflect annual national FFS trends and changes in beneficiary characteristics, consistent with statutory requirements. Without a methodology for adjusting benchmarks to reflect changes in the beneficiary assignment methodology during the agreement period, we were reluctant to subject ACOs to immediate regulatory changes that could impact their benchmarks during the term of a participation agreement. However, in light of the extensive changes that ACOs have made to their lists of ACO participants during the first two performance years, the significant effect that these changes have had upon beneficiary assignment, and our subsequent development of additional policies regarding benchmark adjustment at the start of each performance year to reflect such changes (see https://www.cms.gov/ Medicare/Medicare-Fee-for-ServicePayment/sharedsavingsprogram/ Updating-ACO-Participant-List.html), we wish to revisit the types of regulatory changes an ACO would become subject to during its agreement period. We also propose to clarify § 425.212(a) regarding the applicability of certain regulatory changes and to clarify the definition of ‘‘agreement period’’ under § 425.20. PO 00000 Frm 00024 Fmt 4701 Sfmt 4702 b. Proposed Revisions First, we propose to modify § 425.212(a) to provide that ACOs are subject to all regulatory changes ‘‘that become effective during the agreement period,’’ except for regulations regarding certain specified program areas, ‘‘unless otherwise required by statute.’’ This proposed revision corrects the omission of temporal language in the requirement regarding regulatory changes. In addition, it clarifies that ACOs would be subject to regulatory changes regarding ACO structure and governance, and calculation of the sharing rate during an agreement period if CMS is mandated by statute to implement such changes by regulation in the middle of a performance year. Second, we propose to modify the definition of ‘‘agreement period’’ at § 425.20. The term ‘‘agreement period’’ is currently defined at § 425.20 to mean ‘‘the term of the participation agreement which begins at the start of the first performance year and concludes at the end of the final performance year.’’ However, the reference to ‘‘final performance year’’ in the existing definition is ambiguous in light of our proposal to renew participation agreements (see section II.C.4. of this proposed rule). For example, if the ‘‘final performance year’’ of the agreement period includes the last performance year of a renewed participation agreement, an ACO would never be subject to regulatory changes regarding ACO structure and governance or calculation of the sharing rate. Therefore, we propose to amend the definition to provide that the agreement period would be 3 performance years, unless otherwise specified in the participation agreement. Thus, an ACO whose participation agreement is renewed for a second or subsequent agreement period would be subject, beginning at the start of that second or subsequent agreement period, to any regulatory changes regarding ACO structure and governance that became effective during the previous 3 years (that is, during the preceding agreement period). Third, we propose to require ACOs to be subject to any regulatory changes regarding beneficiary assignment that become effective during an agreement period. Specifically, we propose to remove beneficiary assignment as an exception under § 425.212(a). Consistent with our authority under section 1899(d)(1)(B)(ii) of the Act to adjust the benchmark ‘‘for beneficiary characteristics and other factors as the Secretary determines appropriate,’’ we have now developed operational E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules policies under which we are able to adjust the benchmark on a yearly basis to account for changes in beneficiary assignment resulting from changes in the ACO’s list of ACO participants. For more detailed information on these policies see https://www.cms.gov/ Medicare/Medicare-Fee-for-ServicePayment/sharedsavingsprogram/ Updating-ACO-Participant-List.html. Given that these operational policies enable annual adjustments to ACO benchmarks to account for changes in beneficiary assignment resulting from changes in ACO participants, we believe we would also be able to adjust an ACO’s benchmark to account for regulatory changes regarding beneficiary assignment methodology that become effective during an agreement period. Accordingly, we do not believe our proposal to make regulatory changes regarding beneficiary assignment applicable to ACOs during an agreement period would inappropriately affect the calculation of an ACO’s benchmark or shared savings for a given performance year. Rather, our adjustment methodology would ensure continued and appropriate comparison between benchmark and performance year expenditures. Under this proposal, regulatory changes regarding beneficiary assignment would apply to all ACOs, including those ACOs that are in the middle of an agreement period. However, as discussed in section II.E.6. of this proposed rule, we also propose that any final policies that affect beneficiary assignment would not be applicable until the start of the next performance year. We believe that implementing any revisions to the assignment methodology at the beginning of a performance year is reasonable and appropriate because it would permit time for us to make the necessary programming changes and would not disrupt the assessment of ACOs for the current performance year. Moreover, we would adjust all benchmarks at the start of the first performance year in which the new assignment rules are applied so that the benchmark for an ACO reflects the use of the same assignment rules that would apply in the performance year. We also note that we carefully consider the timing and effect on both current and future ACOs of any new regulatory proposal, and when promulgating new regulatory changes, we intend to solicit comment on these matters. Additionally, when implementing a final rule that changes our processes and methodologies, we intend to alert current and prospective ACOs of such changes via CMS VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 communications and updates to guidance. We request comment on this proposed change to § 425.212(a). D. Provision of Aggregate and Beneficiary Identifiable Data 1. Background Under section 1899(b)(2)(A) of the Act, an ACO must ‘‘be willing to become accountable for the quality, cost, and overall care of the Medicare fee-for-service beneficiaries assigned to it.’’ Further, in order to be eligible to participate in the Shared Savings Program, section 1899(b)(2)(G) of the Act states an ‘‘ACO shall define processes to . . . report on quality and cost measures, and coordinate care. . . .’’ However, section 1899 of the Act does not address what data, if any, we should make available to ACOs on their assigned beneficiary populations to support them in evaluating the performance of ACO participants and ACO providers/ suppliers, conducting quality assessment and improvement activities, or conducting population-based activities relating to improved health. As we explained in the November 2011 final rule (76 FR 67844), in agreeing to become accountable for a group of Medicare beneficiaries, and as a condition of participation in the Shared Savings Program, we expect that ACOs will have, or are working towards having, processes in place to independently identify and produce the data they believe are necessary to best evaluate the health needs of their patient population, improve health outcomes, monitor provider/supplier quality of care and patient experience of care, and produce efficiencies in utilization of services. Therefore, it is our expectation that ACOs are actively working on developing and refining these processes. Moreover, we continue to believe this ability to independently identify and produce data for evaluating, improving, and monitoring the health of their patient population is a critical skill for each ACO to develop, leading to an understanding of the patient population that it serves. Once the ACO achieves an understanding of its patient population, it can work toward redesigning appropriate care processes to address the specific needs of its patient population. However, as we noted previously (76 FR 67844), while an ACO typically should have, or at least be moving towards having complete information for the services its ACO providers/ suppliers furnish to Medicare FFS beneficiaries, we recognize that the ACO may not have access to information PO 00000 Frm 00025 Fmt 4701 Sfmt 4702 72783 about services provided to its assigned beneficiaries by health care providers and suppliers outside the ACO— information that may be key to the ACO’s coordination of care efforts. Therefore, during the original rulemaking process for the Shared Savings Program, we proposed and made final a policy: (1) To distribute aggregate-level data reports to ACOs; (2) upon request from the ACO, to share limited identifying information about beneficiaries who are preliminarily prospectively assigned to the ACO and whose information serves as the basis for the aggregate reports; and (3) upon request from the ACO, to share certain beneficiary identifiable claims data with the ACO to enable it to conduct quality assessment and improvement activities and/or conduct care coordination, on its own behalf as a covered entity, or on behalf of its ACO participants and ACO providers/suppliers that are covered entities, unless the beneficiary chooses to decline to share his or her claims data. As we stated in the November 2011 final rule (76 FR 67844), we believe that access to beneficiary identifiable information would provide ACOs with a more complete picture about the care their assigned beneficiaries receive, both within and outside the ACO. Further, it is our view that this information would help ACOs evaluate providers’/ suppliers’ performance, conduct quality assessment and improvement activities, perform care coordination activities, and conduct population-based activities relating to improved health. In the April 2011 proposed rule (76 FR 19558), we described the circumstances under which we believed that the HIPAA Privacy Rule would permit our disclosure of certain Medicare Part A and B data to ACOs participating in the Shared Savings Program. Specifically, under the Shared Savings Program statute and regulations, ACOs are tasked with working with their ACO participants and ACO providers/suppliers to evaluate their performance, conduct quality assessment and improvement activities, perform care coordination activities, and conduct population-based activities relating to improved health for their assigned beneficiary population. When done by or on behalf of a covered entity, these are functions and activities that would qualify as ‘‘health care operations’’ under the first and second paragraphs of the definition of health care operations at 45 CFR 164.501. As such, these activities can be done by an ACO either on its own behalf, if it is itself a covered entity, or on behalf of its covered entity ACO participants and E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 72784 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules ACO providers/suppliers, in which case the ACO would be acting as the business associate of its covered entity ACO participants and ACO providers/ suppliers. Accordingly we concluded that the disclosure of Part A and B claims data would be permitted by the HIPAA Privacy Rule provisions governing disclosures for ‘‘health care operations,’’ provided certain conditions are met. As we also discussed, upon receipt of a request for protected health information (PHI), a covered entity or its business associate is permitted to disclose PHI to another covered entity or its business associate for the requestor’s health care operations if both entities have or had a relationship with the subject of the records to be disclosed (which is true in the Shared Savings Program), the records pertain to that relationship (which is also true in the Shared Savings Program), and the recipient asserts in its request for the data that it plans to use the records for a ‘‘health care operations’’ function that falls within the first two paragraphs of the definition of ‘‘health care operations’’ in the HIPAA Privacy Rule and that the data requested are the ‘‘minimum necessary’’ to carry out those health care operations. (See, the HIPAA Privacy Rule at 45 CFR 164.502(b) and 164.506(c)(4)). The first two paragraphs of the definition of health care operations under 45 CFR 164.501 include evaluating a provider’s or supplier’s performance, conducting quality assessment and improvement activities, care coordination activities, and conducting population-based activities relating to improved health. With respect to the relationship requirements in 45 CFR 164.506(c)(4), we have a relationship with the individuals who are the subjects of the requested PHI because they are Medicare beneficiaries. The ACO has a relationship with such individuals, either as a covered entity itself or on behalf of its covered entity ACO participants and ACO providers/ suppliers as a business associate, because the individuals are either preliminarily prospectively assigned to the ACO or have received a primary care service during the past 12 month period from an ACO participant upon whom assignment is based. In addition, the requested PHI pertains to the individuals’ relationship with both CMS and the ACO, in that we provide health care coverage for Medicare FFS beneficiaries and have an interest in ensuring that they receive high quality and efficient care, and the ACO is responsible for managing and coordinating the care of these VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 individuals, who are part of the ACO’s assigned beneficiary population. Beneficiary identifiable Medicare prescription drug information could also be used by ACOs to improve the care coordination of their patient populations. Accordingly, consistent with the regulations governing the release of Part D data, in the April 2011 proposed rule (76 FR 19559), we also proposed to make available the minimum Part D data necessary to allow for the evaluation of the performance of ACO participants and ACO providers/ suppliers, to conduct quality assessment and improvement, to perform care coordination, and to conduct population-based activities relating to improved health. In the November 2011 final rule (76 FR 67846 and 67851), we adopted a policy that defined when we would share beneficiary identifiable information (including Part A and B claims data and Part D prescription drug event data) for preliminarily prospectively assigned beneficiaries and those beneficiaries who have a primary care visit with an ACO participant that is used to assign beneficiaries to the ACO. As a basic requirement, in order to receive such data an ACO that chooses to access beneficiary identifiable data is required under 42 CFR 425.704 to request the minimum data necessary for the ACO to conduct health care operations work, either as a HIPAA-covered entity in its own right, or as the business associate of one or more HIPAA-covered entities (where such covered entities are the ACO participants and ACO providers/ suppliers), for ‘‘health care operations’’ activities that fall within the first or second paragraph of the definition of health care operations at 45 CFR 164.501. We note that as part of their application to participate in the Shared Savings Program, ACOs certify whether they intend to request beneficiary identifiable information, and that the requested data reflects the minimum necessary for the ACO to conduct health care operations either on its own behalf or on behalf of its covered entity ACO participants and ACO provider/ suppliers. Thus, the ACO’s formal request to receive data is accomplished at the time of its application to the Shared Savings Program. The ACO must also enter into a data use agreement (DUA) with CMS. If all of these conditions are satisfied, CMS makes available certain limited PHI regarding the preliminarily prospectively assigned beneficiaries whose data were used to generate the aggregate data reports provided to the ACO under § 425.702(b) and other beneficiaries who have a PO 00000 Frm 00026 Fmt 4701 Sfmt 4702 primary care visit during the performance year with an ACO participant upon whom assignment is based. In order to enhance transparency and beneficiary engagement, we also finalized a policy that before ACOs may start receiving PHI in the form of beneficiary identifiable claims data, they must give beneficiaries the opportunity to decline sharing of their claims data as required under § 425.708. Since the publication of the November 2011 final rule, we have gained further experience with sharing data with ACOs participating in the Shared Savings Program. We continue to believe that distributing aggregate reports, paired with making available certain beneficiary identifiable information related to preliminarily prospectively assigned beneficiaries, as well as making available the claims data for preliminarily prospectively assigned FFS beneficiaries and other FFS beneficiaries that have primary care service visits with ACO participants that submit claims for primary care services that are used to determine the ACO’s assigned population, is worthwhile and consistent with the goals of the Shared Savings Program. The aggregate data reports and the beneficiary identifiable information related to preliminarily prospectively assigned beneficiaries give ACOs valuable information that can be used to better understand their patient population, redesign care processes, and better coordinate the care of their beneficiaries. ACOs participating in the Shared Savings Program have reported that the beneficiary identifiable claims data that they receive from us are being used effectively to better understand the FFS beneficiaries that are served by their ACO participants and ACO providers/ suppliers. These data give ACOs valuable insight into patterns of care for their beneficiary population; enable them to improve care coordination among and across providers and suppliers and sites of care, including providers and suppliers and sites of care not affiliated with the ACO; and allow them to identify and address gaps in patient care. However, based upon our experiences administering the Shared Savings Program and feedback from stakeholders, we believe that we can improve our data sharing policies and processes to streamline access to such data to better support program and ACO function and goals and better serve Medicare beneficiaries. It is with this in mind that we propose the following modifications to our data sharing policies and procedures under the Shared Savings Program. E:\FR\FM\08DEP2.SGM 08DEP2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 2. Aggregate Data Reports and Limited Identifiable Data a. Overview Under § 425.702, we share aggregate reports with ACOs at the beginning of the agreement period based on beneficiary claims used to calculate the benchmark, at each quarter thereafter on a rolling 12-month basis, and in conjunction with the annual reconciliation. The aggregate reports provided under § 425.702(a) and (b) contain certain de-identified beneficiary information including all of the following: • Aggregated metrics on the ACO’s preliminarily prospectively assigned beneficiary population, including characteristics of the assigned beneficiary population, the number of primary care services provided to the assigned beneficiary population by the ACO, and the proportion of primary care services provided to the assigned beneficiary population by ACO participants upon whom assignment is based. • Expenditure data for the ACO’s assigned beneficiary population by Medicare enrollment type (ESRD, disabled, aged/dual eligible, aged/nondual eligible) and type of service (for example, inpatient hospital, physician, etc.). • Utilization data on select metrics for the assigned population, such as ambulatory care sensitive conditions discharge rates per 1,000 beneficiaries for conditions such as congestive heart failure (CHF) or uncontrolled diabetes, and utilization rates for imaging, emergency department visits, hospitalizations, and primary care services. In addition, under § 425.702(c), we also provide a report that includes certain beneficiary identifiable information about the beneficiaries who are preliminarily prospectively assigned to the ACO and whose data were used to generate the de-identified aggregate data reports. The information currently contained in this assignment report includes the beneficiary name, date of birth, HICN, and sex. These beneficiary identifiable data are made available to an ACO that has met the conditions previously discussed in detail for purposes of carrying out populationbased activities related to improving health or reducing growth in health care costs, process development (such as care coordination processes), case management, and care coordination for the beneficiary population assigned to the ACO. Under § 425.708(d) these data points are not subject to the requirement that an ACO give beneficiaries an VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 opportunity to decline claims data sharing. Feedback we have received since the November 2011 final rule was issued and during implementation of the Shared Savings Program, confirms there is a strong desire among ACOs and their ACO participants and ACO providers/ suppliers to have as much information about their patients as is possible, in as timely a manner as possible, to better coordinate care and target care strategies toward individual beneficiaries. Moreover, ACOs are actively using the reports provided under § 425.702 to conduct their health care operations work with the expectation that it will result in higher quality and more efficient care for their assigned beneficiary populations. However, ACOs and their ACO participants and ACO providers/suppliers also report that the four data elements currently made available on the assignment reports under § 425.702(c)—that is, beneficiary name, date of birth, HICN, and sex—severely limit their care redesign efforts. They assert that additional data elements are necessary in order to conduct health care operations work under the first or second paragraph of the definition of health care operations at 45 CFR 164.501. For example, an ACO reported that having data not only on the frequency of hospitalizations but also on which specific beneficiaries were hospitalized and in which specific hospitals would better enable it to identify the effectiveness and outcomes of its post-hospitalization care coordination processes. Some stakeholders have made suggestions for beneficiary identifiable data that should be included in the quarterly reports in addition to the current four data elements, such as risk profiles or information on whether the beneficiary had a hospital visit in the past year. Some stakeholders suggested that the report be expanded to include information not only for the beneficiaries that received a plurality of their primary care services from ACO professionals, but also for all FFS beneficiaries that received a primary care service from an ACO participant in the past year. These stakeholders argue that understanding the entire FFS patient population served by the ACO and its ACO participants would improve their ability to redesign care, and reduce the uncertainty associated with a list of preliminarily prospectively assigned beneficiaries that fluctuates from quarter to quarter, based on the population’s use of primary care services. PO 00000 Frm 00027 Fmt 4701 Sfmt 4702 72785 b. Proposed Revisions We considered what additional beneficiary identifiable data might be the minimum necessary to support the ACOs’ health care operations work. Based on our discussions with ACOs and ACO participants and ACO providers/suppliers, we believe that making additional information available to ACOs about the FFS beneficiaries they serve, including for example, on whether a beneficiary visited an emergency room or was hospitalized, would help support such efforts. Thus, we propose to expand the information made available to ACOs under § 425.702(c) to include certain additional beneficiary identifiable data subject to the existing requirements of § 425.702(c)(2), which incorporates the requirements under HIPAA governing the disclosure of PHI. Specifically, in addition to the four data elements (name, date of birth, HICN, and sex) which are currently made available for preliminarily prospectively assigned beneficiaries, we propose to expand the beneficiary identifiable information that is made available under § 425.702(c)(1) to include these data elements (name, date of birth, HICN, and sex) for each beneficiary that has a primary care service visit with an ACO participant that bills for primary care services that are considered in the assignment process in the most recent 12-month period. Additionally, we propose to expand the beneficiary identifiable information made available for preliminarily prospectively assigned beneficiaries to include additional data points. The information would be derived from the same claims used to determine the preliminary prospective assigned beneficiary list. Specifically, we propose that we would make available the minimum data set necessary for purposes of the ACO’s population-based activities related to improving health or reducing health care costs, required process development (under § 425.112), care management, and care coordination for its preliminarily prospectively assigned beneficiary population, at the following times: (1) At the beginning of the agreement period; (2) at the beginning of each performance year and quarterly thereafter; and (3) in conjunction with the annual reconciliation. We would articulate the data elements associated with the minimum data set in operational guidance, and update as needed to reflect changes in the minimum data necessary for ACOs to perform these activities. The information would fall under the following categories: E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 72786 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules • Demographic data such as enrollment status. • Health status information such as risk profile, and chronic condition subgroup. • Utilization rates of Medicare services such as the use of evaluation and management, hospital, emergency, and post-acute services, including dates and place of service. • Expenditure information related to utilization of services. We believe that under this approach the data made available in the aggregate data reports under § 425.702(c) would generally constitute the minimum data necessary for covered entity ACOs or for ACOs serving as the business associate of their covered entity ACO participants and ACO providers/suppliers, to evaluate providers’ and suppliers’ performance, conduct quality assessment and improvement activities, and conduct population-based activities relating to improved health. Finally, we note that these proposals for expansion of the data reports provided under § 425.702(c) to include each FFS beneficiary that has a primary care visit with an ACO participant that submits claims for primary care services that are considered in the assignment process, would apply only to ACOs participating in Tracks 1 and 2, where beneficiaries are assigned in a preliminarily prospective manner with retrospective reconciliation. This is because ACOs in Tracks 1 and 2 have an incentive to redesign care processes for all FFS beneficiaries that receive care from their ACO participants, due to the nature of the preliminarily prospective assignment methodology with retrospective reconciliation. Under our proposed Track 3, which is discussed in detail in section II.F.3.a. of this proposed rule, we believe that the minimum data necessary for ACOs to perform health care operations as defined under the first and second paragraphs of the definition of health care operations at 45 CFR 164.501, would not extend beyond data needed for health operations related to the prospective list of assigned beneficiaries. We believe a prospective assignment approach incentivizes targeting of the specific FFS beneficiaries on the list for care improvement, rather than redesigning care processes for all FFS beneficiaries seen by the ACO participants. As such, the minimum data necessary required for Track 3 ACOs to perform health care operations work would be limited to the data for beneficiaries that are prospectively assigned for a performance year. Thus, for Track 3, we propose to limit the beneficiary VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 identifiable data included in the reports made available under § 425.702(c) to only those beneficiaries that appear on the ACO’s prospective list of beneficiaries at the beginning of a performance year. Specifically, Track 3 ACOs would have access to beneficiary identifiable data elements associated with the list of categories under § 425.702(c) for beneficiaries prospectively assigned to the ACO but would not be able to request any information related to other Medicare FFS beneficiaries who receive primary care services that are considered in the assignment process from ACO participants. We believe this limitation is reasonable because, under Track 3, the prospectively assigned beneficiary list would encompass all beneficiaries for whom the ACO would be held accountable in a given performance year, in contrast to ACOs in Tracks 1 and 2 that would be held accountable for any FFS beneficiaries that choose to receive a plurality of their primary care services from ACO professionals billing through the TINs of ACO participants. We seek comment on our proposal to expand the data set made available to ACOs under § 425.702(c). We seek comment on the categories of information that we have proposed to include and on any other beneficiary identifiable information that should be offered in the aggregate reports provided under § 425.702(c) in order to allow ACOs as covered entities or as the business associate of their covered entity ACO participants and ACO providers/suppliers to conduct health care operations work under paragraphs one or two of the definition of health care operations at 45 CFR 164.501. We also specifically seek comment on our proposal to expand the list of beneficiaries for which data are made available under § 425.702(c) to ACOs participating in Track 1 and Track 2 to include all beneficiaries that had a primary care service visit with an ACO participant that submits claims for primary care services that are considered in the assignment process. 3. Claims Data Sharing and Beneficiary Opt-Out a. Overview Because Medicare FFS beneficiaries have the freedom to choose their health care providers and suppliers, and are not required to receive services from providers and suppliers participating in the ACO, the patients of ACO participants and ACO providers/ suppliers often receive care from other providers and suppliers that are not affiliated with the ACO. As a result, PO 00000 Frm 00028 Fmt 4701 Sfmt 4702 ACOs and their ACO participants and ACO providers/suppliers may not be aware of all of the services an assigned beneficiary is receiving. Furthermore, under Tracks 1 and 2, we perform a retrospective reconciliation at the end of each performance year to determine an ACO’s assigned beneficiary population based on beneficiaries’ use of primary care services using the assignment algorithm described at § 425.402 of the regulations. Therefore, under Tracks 1 and 2, it is possible that an ACO’s preliminary prospective assigned beneficiary list would not be complete and would not include all the beneficiaries that would ultimately be assigned to the ACO at the end of the performance year—that is, all of the beneficiaries for which the ACO ultimately would be held accountable. As we discussed in the April 2011 proposed rule (76 FR 19558) and in the November 2011 final rule (76 FR 67844), we were concerned about ACOs’ ability to do their work in the absence of information about services delivered outside of the ACO. As we stated at that time, we believed that it would be important to give ACOs appropriate access to a beneficiary’s identifiable claims data when the beneficiary has received a primary care service billed through the TIN of an ACO participant, and is thus a candidate for assignment at the time of retrospective reconciliation for the performance year. We believed that sharing beneficiary identifiable claims data would enable ACOs to better coordinate and target care strategies towards the individual beneficiaries seen by ACO participants and ACO providers/suppliers. We ultimately concluded that the bases for disclosure under the HIPAA Privacy Rule were broad enough to cover CMS’s disclosure of Medicare Parts A and B claims data to ACOs for health care operations work when certain conditions are met. Similarly, we concluded that the Part D regulations governing the release of Part D data on prescription drug use would permit the release of Part D prescription drug event data to ACOs for purposes of supporting care coordination, quality improvement, and performance measurement activities. Thus, we concluded that we are permitted to disclose the minimum Medicare Parts A, B, and D data necessary to allow ACOs to conduct the health care operations activities that fall into the first or second paragraph of the definition of health care operations under the HIPAA Privacy Rule when such data is requested by the ACO as a covered entity or as the business E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules associate of its covered entity ACO participants and ACO providers/ suppliers. Accordingly, in the November 2011 final rule (76 FR 67851), we adopted a policy under which an ACO may request Part A and Part B claims data and Part D prescription drug event data for preliminarily prospectively assigned beneficiaries and other beneficiaries who receive primary care services from an ACO participant upon whom assignment is based. In accordance with the terms of the DUA that the ACO must enter into with CMS, data received from CMS under the data sharing provisions of the Shared Savings Program may only be used for the purposes of clinical treatment, care management and coordination, quality improvement activities, and provider incentive design and implementation. In providing the claims data subject to these limitations, we believed that we would ensure compliance with the requirements of the HIPAA Privacy Rule and the regulations governing the release of Part D data. While the disclosure of claims data in this manner is within the bounds of the applicable laws, we also noted concerns about beneficiaries’ interests in controlling access to their individually identifiable health information. Thus, even though we believed that we had legal authority to make the contemplated disclosures without the consent of beneficiaries, in the November 2011 final rule (76 FR 67849) we implemented the additional requirement at § 425.708 that ACOs offer beneficiaries an opportunity to decline to have their claims data shared with the ACO. As such, before requesting access to the beneficiary’s data and as part of its broader activities to notify patients that their health care provider or supplier is participating in an ACO, the ACO is required to inform beneficiaries that the ACO may request access to their claims data, and give beneficiaries an opportunity to decline such claims data sharing. Under the current opt-out system, once the ACO formally requests beneficiary identifiable claims data through the application process, enters into a DUA with CMS, and begins its first performance year, the ACO must supply beneficiaries with a written notification explaining their opportunity to decline claims data sharing. Offering beneficiaries the opportunity to decline claims data sharing may take two forms under current § 425.708. First, if the ACO has formally requested beneficiary identifiable claims data as part of the application process, the ACO must notify each FFS beneficiary of the VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 opportunity to decline data sharing when the beneficiary has his or her first visit with an ACO participant upon whom assignment is based. During this visit, the beneficiary must be provided with written notification informing him or her of the ACO provider/supplier’s participation in the ACO and that the ACO may request claims information from CMS in order to better coordinate the beneficiary’s care and for other health operations activities. This written notification contains template language created by CMS with the assistance of the Medicare Ombudsman’s office and with input from beneficiaries, and explains the beneficiary’s option to decline claims data sharing. Once the beneficiary has expressed a preference at the point of care, the ACO may immediately inform CMS of the beneficiary’s data sharing preference. If the beneficiary has not declined data sharing, CMS makes that beneficiary’s data available to the ACO. We recognized, however, that beneficiaries may not seek primary care services until later in the performance year. Because of this, we offered an alternative option to ACOs who met requirements for receiving beneficiary identifiable claims data. Under the alternative option, ACOs may contact beneficiaries via a mailed notification that is sent to all preliminarily prospectively assigned beneficiaries to notify them of their health care provider’s participation in an ACO under the Shared Savings Program, and the ACO’s intent to request beneficiary identifiable claims data. The mailed notification contains template language that was developed in conjunction with the Medicare Ombudsman’s office with input from beneficiaries. If the beneficiary wishes to decline claims data sharing, the beneficiary is instructed to sign the mailed notification and return it to the ACO or call 1–800–MEDICARE directly. If the ACO chooses to contact beneficiaries via a mailed notification, rather than waiting to notify them at the point of care, the ACO must wait 30 days before submitting the beneficiary’s preference and receiving access to the data for those beneficiaries that have chosen not to decline claims data sharing. The 30day waiting period provides beneficiaries with an opportunity to mail back the notification or to call 1– 800–MEDICARE before the ACO receives access to their claims data. In addition, in order to ensure transparency, beneficiary engagement and meaningful choice, the notification and opportunity to decline claims data sharing must be repeated at the PO 00000 Frm 00029 Fmt 4701 Sfmt 4702 72787 beneficiary’s first primary care visit with an ACO participant upon whom assignment is based (76 FR 67850 and 67851). Finally, in addition to the point of care and mailed notifications provided by ACOs, all Medicare FFS beneficiaries are notified through the Medicare & You Handbook about ACOs and the opportunity to decline claims data sharing by contacting CMS directly at 1–800–MEDICARE. Once the ACO has notified the beneficiaries according to program rules, and any applicable wait periods are over, the ACO submits the beneficiaries’ preferences to CMS. Beneficiary preferences submitted by ACOs are combined with preferences received by CMS through 1–800– MEDICARE. Based on these beneficiary preferences, we generate a claims file containing the beneficiary identifiable claims data of beneficiaries that have not declined data sharing. These claims files are then made available for ACO access on a monthly basis. Once a beneficiary has declined data sharing, the beneficiary may choose to reverse the decision by signing another form and sending it to the ACO (who in turn notifies CMS of the beneficiary’s updated preference) or by calling 1– 800–MEDICARE directly. We then include the beneficiary’s claims data in the claims file provided to the ACO the following month. In the November 2011 final rule (76 FR 67849), we acknowledged that it is possible that a beneficiary may decline to have his or her claims data shared with an ACO but would choose to continue to receive care from ACO participants and ACO providers/ suppliers. In such a case, the ACO would still be responsible for that beneficiary’s care, and, as such, although the beneficiary’s claims data would not be shared with the ACO, CMS would continue to use the beneficiary’s claims data in its assessment of the ACO’s quality and financial performance. In the November 2011 final rule (76 FR 67849 through 67850) we expressed our view that beneficiaries should be notified of their health care provider’s participation in an ACO in order to have some control over who has access to their health information for purposes of the Shared Savings Program. Further, we indicated that the requirement that an ACO provider/supplier engage patients in a discussion about the inherent benefits, as well as the potential risks, of claims data sharing provided an opportunity for true patient-centered care and would create incentives for ACOs, ACO participants, and ACO providers/suppliers to develop E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 72788 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules positive relationships with each beneficiary under their care. Additionally, we stated that this policy would provide ACO participants and ACO providers/suppliers the opportunity to engage with beneficiaries by explaining the Shared Savings Program and its potential benefits for both the beneficiaries and the health care system as a whole. Since implementation of the Shared Savings Program, we have shared claims data on over 5 million beneficiaries with over 300 Shared Savings Program ACOs. We have received informal feedback from ACOs that are putting the opt-out requirement into practice, and from beneficiaries who have received notifications from an ACO that wanted to request access to their claims data. We have learned the following from this feedback: • The option for ACOs to mail notifications and then conduct in-office follow-up adds to ACOs’ financial costs and delays their ability to access claims data in a timely manner. ACOs must wait until January 1 of the first performance year to send out mailings. After waiting the requisite 30 days, the earliest the ACO may submit beneficiary preferences to CMS is in February. The first set of claims data is then available in mid-March. In addition, some ACOs struggle with obtaining current mailing information for preliminarily prospectively assigned beneficiaries, which can delay the mailing of notifications to later in the performance year. Thus, the earliest opportunity for ACOs to receive claims data is midFebruary, and that is only the claims data for beneficiaries who visited primary care providers in early January and were given the opportunity to decline claims data sharing at the point of care. • Stakeholders, including ACOs, ACO participants, and ACO providers/ suppliers, continually confuse the notification regarding the ACO’s intent to request access to claims data with the separate requirement that all FFS beneficiaries must be notified of ACO participants’ and ACO providers/ suppliers’ participation in the program. Beneficiaries must be notified at the point of care of the ACO participants’ and ACO providers/suppliers’ participation in an ACO, regardless of whether the ACO has or intends to request access to claims data. • ACOs have commented that beneficiaries are confused about why their providers do not already have access to information regarding other care they may receive, which potentially erodes rather than strengthens the patient-provider relationship. VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 Beneficiaries often assume their providers have all the information they need to care for them. However, as noted previously, the ACO, its ACO participants, and ACO providers/ suppliers would not have claims data for services rendered outside the ACO, and would not necessarily have knowledge about that care. • Beneficiaries can choose to receive care from providers outside an ACO, so beneficiaries may receive notices regarding data sharing from more than one ACO. This is most likely to occur in markets with high ACO penetration where a beneficiary may receive primary care services from several different ACO professionals, each participating in different ACOs. Beneficiaries report confusion, concern, and annoyance over receiving multiple mailings from ACOs, and question why their health care providers do not already have the information they need to appropriately coordinate their care. • Beneficiaries receiving the notifications giving them the opportunity to decline claims data sharing may mistakenly believe they are being asked to ‘‘opt-out’’ of ACO care and/or Medicare FFS, or that they have been placed in a managed care plan without their consent. • Beneficiaries that receive the letters in the mail notifying them of their provider’s participation in an ACO and offering them the opportunity to decline claims data sharing often mistakenly believe that these letters are fraudulent and do not know what to do. Many ACOs are entities that have been newly formed by providers and suppliers for purposes of participating in the Shared Savings Program. While the beneficiary may have a strong relationship with his or her primary care provider, the beneficiary may not recognize the name of the newly formed ACO and therefore may have concerns and question the legitimacy of the notification. • Our data indicate that approximately 2 percent of beneficiaries have declined claims data sharing. This is consistent with other CMS initiatives that have included data sharing, such as the Medicare Health Support demonstration, the Multi-Payer Advanced Primary Care Practice demonstration, the Physician Group Practice demonstration, and the Physician Group Practice Transition demonstration. As discussed previously, beneficiaries currently have the opportunity to decline claims data sharing by responding to the letters that ACOs send to their preliminarily prospectively assigned beneficiaries, by informing an ACO provider/supplier during a face-to- PO 00000 Frm 00030 Fmt 4701 Sfmt 4702 face primary care service visit, or by contacting 1–800–MEDICARE directly. We continue to be committed to offering beneficiaries some control over ACO access to their beneficiary identifiable information for purposes of the Shared Savings Program. However, in light of the feedback we have received, we were motivated to review our claims data sharing policies and processes to determine what refinements could be made to mitigate the concerns raised by stakeholders regarding the burden imposed on both beneficiaries and those entities participating in the Shared Savings Program. We considered several aspects of our claims data sharing policies, including the use of various formats to communicate with beneficiaries regarding claims data sharing under the program such as: Mailed notifications to the list of preliminarily prospectively assigned beneficiaries by the ACO; face-to-face discussions with healthcare providers during primary care visits; and CMS’s use of 1–800–MEDICARE and the Medicare & You Handbook. As discussed in the April 2011 proposed rule (76 FR 19558) and the November 2011 final rule (76 FR 67846), we are convinced by stakeholders that Medicare claims data provide an important supplement to the data to which the ACO and its ACO participants and ACO providers/ suppliers already have access. Current law allows CMS to share certain beneficiary identifiable claims data with ACOs when those data are necessary for purposes of certain health care operations. HIPAA does not require that beneficiaries be presented with an opportunity to decline claims data sharing before their PHI can be shared. Moreover, several other CMS initiatives, including the Medicare Health Support demonstration, the Multi-Payer Advanced Primary Care Practice demonstration, the Physician Group Practice demonstration, and the Physician Group Practice Transition demonstration, have successfully shared claims data with providers in the absence of an opportunity for beneficiaries to decline claims data sharing. Therefore, we considered how to retain meaningful beneficiary choice in claims data sharing while reducing the confusion and burden caused by our current claims data sharing policies. We believe meaningful beneficiary choice in claims data sharing is maintained when the purpose and rationale for such claims data sharing are transparent and communicated to beneficiaries, and there is a mechanism in place for beneficiaries to decline claims data E:\FR\FM\08DEP2.SGM 08DEP2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 sharing. Thus, in revisiting our claims data sharing policies, we sought to maintain claims data sharing transparency and a mechanism for beneficiaries to decline claims data sharing. b. Proposed Revisions Based on our experiences with data sharing under the Shared Savings Program to date, we are proposing to modify our processes and policy for claims data sharing while remaining committed to retaining meaningful beneficiary choice over claims data sharing with ACOs. First, we propose to provide beneficiaries with the opportunity to decline claims data sharing directly through 1–800– MEDICARE, rather than through the ACO. We note that 1–800–MEDICARE has the capability for beneficiaries to use accessible alternative or appropriate assistive technology, if needed. We would continue to maintain a list of beneficiaries that have declined data sharing and ensure that their claims information is not included in the claims files shared with ACOs. Second, we propose to provide advance notification to all FFS beneficiaries about the opportunity to decline claims data sharing with ACOs participating in the Shared Savings Program through CMS materials such as the Medicare & You Handbook. The Handbook would include information about the purpose of the program, describe the opportunity for ACOs to request beneficiary identifiable claims data for health care operations purposes, and provide instructions on how beneficiaries may decline claims data sharing by contacting CMS directly through 1–800– MEDICARE. The Handbook would also contain instructions on how a beneficiary may reverse his or her preference to decline claims data sharing by contacting 1–800– MEDICARE. Third, to reduce burden for both beneficiaries and ACOs, we propose to remove the option for ACOs to mail notifications to beneficiaries and for beneficiaries to sign and return the forms to the ACO in order to decline claims data sharing. This process would be replaced by a simpler, direct process through notification at the point of care and through 1–800–MEDICARE as described previously. We also propose to continue to require that ACO participants notify beneficiaries in writing at the point of care that their providers and suppliers are participating in the Shared Savings Program as required under § 425.312(a). We propose that ACO participants would continue to be required to post signs in their facilities using required VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 template language. Rather than requiring ACO participants furnishing primary care services to provide a written form regarding claims data sharing to all beneficiaries who have a primary care service office visit, we propose to update the required notification template language for these signs to include information regarding claims data sharing. We would update the template language with the assistance of the Medicare Ombudsman’s Office and beneficiary input to inform beneficiaries about both the Shared Savings Program and also that the ACO may request access to beneficiary identifiable claims data from CMS in order to perform health care operations as defined under the first and second paragraphs of the definition of health care operations at 45 CFR 164.501. The signs would also provide beneficiaries with information about their opportunity to decline this data sharing and instructions to call 1–800– MEDICARE if they would prefer that we not share their claims data with an ACO and its ACO participants and ACO providers/suppliers. The signs would likewise include instructions for how beneficiaries may reverse their opt-outs through 1–800–MEDICARE, if they determine in the future they would prefer to have their claims data made available to ACOs and their ACO participants and ACO providers/ suppliers. Because ACO participants are required to post these signs in their facilities at all times, this written notification through the signs would occur at each visit, including the first visit the beneficiary has with an ACO participant during a performance year. We also anticipate that some beneficiaries may continue to want to have the ability to take the information home or into their visit with their primary care provider for further discussion. Therefore, in addition to the signs, we propose to retain our policy that ACO participants that submit claims for primary care services used to determine the ACO’s assigned beneficiary population be required to make a separate written notification form available to the beneficiary upon request. We propose to modify § 425.312 and § 425.708 for clarity and to reflect these revised notification policies. Finally, under Tracks 1 and 2, we propose to make beneficiary identifiable claims data available in accordance with applicable law on a monthly basis for beneficiaries that are either preliminarily prospectively assigned to the ACO or who have received a primary care service during the past 12month period from an ACO participant PO 00000 Frm 00031 Fmt 4701 Sfmt 4702 72789 upon whom assignment is based. Because Tracks 1 and 2 use a preliminary prospective assignment methodology with retrospective reconciliation, we believe that ACOs, ACO participants, and ACO providers/ suppliers in Tracks 1 and 2 would benefit from access to beneficiary identifiable claims information for all FFS beneficiaries that may be assigned to the ACO at the end of the performance year. In contrast, under Track 3, we propose to make beneficiary identifiable claims data available only for beneficiaries that are prospectively assigned to an ACO, because the beneficiaries on the prospective assignment list are the only beneficiaries for whom the ACO would be held accountable at the end of the performance year. Consistent with the existing requirements at § 425.704, in order to request beneficiary identifiable claims data, and regardless of track, an ACO must: (1) Certify that it is a covered entity or the business associate of a covered entity that has provided a primary care service to the beneficiary in the previous 12 months (2) enter into a DUA with CMS prior to the receipt of these beneficiary identifiable data; (3) submit a formal request to receive beneficiary identifiable claims data for such beneficiaries at the time of application to the Shared Savings Program; and (4) certify that the request reflects the minimum data necessary for the ACO to conduct either its own health care operations work that falls within the first or second paragraph of the definition of health care operations at 45 CFR 164.501 or health care operations work on behalf of its ACO participants and ACO providers/ suppliers that are covered entities (as the business associate of these covered entities) that falls within the first or second paragraph of the definition of health care operations at 45 CFR 164.501. We believe these proposed modifications to our data sharing rules would significantly improve the claims data sharing process. First, we believe the modified process would reduce burden for beneficiaries who would no longer have to mail back forms. In addition, it would minimize beneficiary confusion in situations where an ACO may be newly formed and may not yet have established a relationship with the beneficiary. Instead, the beneficiary would be able decline claims data sharing, and reverse a decision to decline claims sharing, by contacting CMS directly using 1–800–MEDICARE. We believe beneficiaries would be more comfortable expressing their claims data E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 72790 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules sharing preferences directly through CMS, an agency with which beneficiaries have an existing relationship. Moreover, we believe our proposals would streamline ACO operations and would allow ACOs to access beneficiary identifiable claims data earlier in the performance year than is possible under our current policies. Beneficiary identifiable claims data would still be available on a monthly basis, but the new process would be operationally more efficient and less expensive for ACOs. By removing the 30-day delay before ACOs may request beneficiary identifiable claims data for their preliminarily prospectively assigned beneficiaries under Tracks 1 and 2 and prospectively assigned beneficiaries under Track 3, and reducing operational complexities associated with providing these data, ACOs would have access to beneficiary identifiable claims data in a more timely fashion. This may allow ACOs to intervene in the care of beneficiaries earlier during the performance year. In addition, as discussed previously, while we initially believed that requiring ACOs to notify beneficiaries of the opportunity to decline claims data sharing would improve engagement between ACO providers/suppliers that furnish primary care services and their patients, we now realize that this policy unintentionally created burden and confusion for both ACOs and beneficiaries, as many beneficiaries assume that their health care providers already have the information needed to optimally coordinate their care, even though this is not always the case. We believe that the proposed revisions to our claims data sharing policy would reduce beneficiary confusion about the Shared Savings Program and the role an ACO plays in assisting the beneficiary’s health care providers to improve their health and health care experience, while still retaining a beneficiary’s meaningful opportunity to decline claims data sharing. We note that, since implementation of the program, a small percentage of FFS beneficiaries have requested that their identifiable claims data not be shared and have done so either by notifying the ACO or by contacting 1–800– MEDICARE to decline claims data sharing. None of our proposed revisions would have any effect on any existing beneficiary preferences. Previously recorded beneficiary preferences would continue to be honored, unless and until a beneficiary changes his or her preference by contacting 1–800– MEDICARE. Accordingly, our proposal not only preserves the beneficiary’s VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 ability to decline claims data sharing by directly contacting CMS, but also has no effect on existing beneficiary claims data sharing preferences, unless the beneficiary subsequently amends his or her preferences to allow claims data sharing. In summary, we propose to amend § 425.704 to reflect our proposal to begin sharing beneficiary identifiable claims data with ACOs participating under Tracks 1 and 2 that request claims data on beneficiaries that are included on their preliminary prospective assigned beneficiary list or that have received a primary care service from an ACO participant upon whom assignment is based during the most recent 12-month period, at the start of the ACO’s agreement period, provided all other requirements for claims data sharing under the Shared Savings Program and HIPAA regulations are met. We also propose to share beneficiary identifiable claims data with ACOs participating under Track 3 that request beneficiary identifiable claims data on beneficiaries that are included on their prospectively assigned beneficiary list. We also propose to revise § 425.312(a) and § 425.708 to reflect our policy that ACO participants use CMS approved template language to notify beneficiaries regarding participation in an ACO and the opportunity to decline claims data sharing. In addition, we propose to modify § 425.708 to reflect the streamlined process by which beneficiaries may decline claims data sharing. We also propose to add a new paragraph (c) to § 425.708 to reflect our proposal to honor any beneficiary request to decline claims data sharing that is received under § 425.708 until such time as the beneficiary may reverse his or her claims data sharing preference to allow data sharing. We note that the beneficiary identifiable information that is made available under § 425.704 would include Parts A, B and D data, but would exclude any information related to the diagnosis and treatment of alcohol or substance abuse. As we discussed in the April 2011 proposed rule (76 FR 19557), 42 U.S.C. 290dd–2 and the implementing regulations at 42 CFR part 2 restrict the disclosure of patient records by federally conducted or assisted substance abuse programs. Such data may be disclosed only with the prior written consent of the patient, or as otherwise provided in the statute and regulations. We note that we may revisit this approach as technology in the area of consent management advances. PO 00000 Frm 00032 Fmt 4701 Sfmt 4702 We seek comment on these proposals. We also seek comment on other specific modifications that could be made to our existing policies on data sharing to improve the ability of ACOs to access beneficiary identifiable claims data, and to reduce burden and confusion for ACOs, ACO participants, ACO providers/suppliers, and beneficiaries. E. Assignment of Medicare FFS Beneficiaries 1. Background Section 1899(c) of the Act requires the Secretary to ‘‘determine an appropriate method to assign Medicare fee-forservice beneficiaries to an ACO based on their utilization of primary care services provided under this title by an ACO professional described in paragraph (h)(1)(A).’’ Section 1899(h)(1)(A) of the Act constitutes one element of the definition of the term ‘‘ACO professional.’’ Specifically, this provision establishes that ‘‘a physician (as defined in section 1861(r)(1) of the Act)’’ is an ‘‘ACO professional’’ for purposes of the Shared Savings Program. Section 1861(r)(1) of the Act in turn defines the term physician as ‘‘. . . a doctor of medicine or osteopathy legally authorized to practice medicine and surgery by the State in which he performs such function or action . . .’’ In addition, section 1899(h)(1)(B) of the Act defines ‘‘ACO professional’’ to include practitioners described in section 1842(b)(18)(C)(i) of the Act, such as physician assistants (PAs) and nurse practitioners (NPs). As we explained in the November 2011 final rule (76 FR 67851) the term ‘‘assignment’’ refers only to an operational process by which Medicare determines whether a beneficiary has chosen to receive a sufficient level of the requisite primary care services from physicians associated with a specific ACO so that the ACO may be appropriately designated as exercising basic responsibility for that beneficiary’s care. Consistent with section 1899(b)(2)(A) of the Act, an ACO is held accountable ‘‘for the quality, cost, and overall care of the Medicare fee-for service beneficiaries assigned to it.’’ The ACO may also qualify to receive a share of any savings that are realized in the care of these assigned beneficiaries due to appropriate efficiencies and quality improvements that the ACO may be able to achieve. The term ‘‘assignment’’ for purposes of the Shared Savings Program in no way implies any limits, restrictions, or diminishment of the rights of Medicare FFS beneficiaries to exercise freedom of choice in the physicians and other health care E:\FR\FM\08DEP2.SGM 08DEP2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 providers and suppliers from whom they receive their services. In developing the process for assigning Medicare beneficiaries to ACOs, we considered several other elements in addition to the definition of an ACO professional (76 FR 67851): (1) The operational definition of an ACO (see the discussion of the formal and operational definitions of an ACO in section II.B. of this proposed rule) so that ACOs can be efficiently identified, distinguished, and associated with the beneficiaries for whom they are providing services; (2) the definition of primary care services for purposes of determining the appropriate assignment of beneficiaries; (3) whether to assign beneficiaries to ACOs prospectively, at the beginning of a performance year on the basis of services rendered prior to the performance year, or retrospectively, on the basis of services actually rendered by the ACO during the performance year; and (4) the proportion of primary care services that is necessary for a beneficiary to receive from an ACO in order to be assigned to that ACO for purposes of this program. In the November 2011 final rule (76 FR 67851 through 67870), we finalized the methodology that we currently use to assign beneficiaries to ACOs for purposes of the Shared Savings Program. Beneficiaries are assigned to a participating ACO using the assignment methodology in Part 425, subpart E of our regulations. In addition, since the final rule was issued, we have provided additional guidance and more detailed specifications regarding the beneficiary assignment process in operational instructions which are available to the public on the CMS Web site. (https:// www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/ sharedsavingsprogram/Financial-andAssignment-Specifications.html) In this section of this proposed rule, we summarize several key policies and methodological issues to provide background for several revisions to the assignment methodology that we are proposing based on our initial experiences with the program and questions from stakeholders. 2. Basic Criteria for a Beneficiary To Be Assigned to an ACO In order to develop operational procedures needed to implement the Shared Savings Program, and to respond to inquiries from ACOs and other stakeholders, we developed specific criteria to govern beneficiary eligibility for assignment to an ACO which we propose to codify in a new provision at § 425.401. We believe that revising the regulations to include these eligibility VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 criteria would help promote understanding of the assignment methodology. The proposed criteria in new § 425.401 are consistent with the current assignment methodology under § 425.400 and § 425.402 as well as the discussion of the assignment methodology in the preamble to the November 2011 final rule and operational instructions that we have issued since the publication of the final rule (76 FR 67851). First, to determine whether a beneficiary is eligible to be assigned to an ACO, we must have information about the beneficiary’s Medicare enrollment status. As required by section 1899(h)(3) of the Act, and consistent with the definition of Medicare FFS beneficiary in § 425.20, only beneficiaries enrolled in traditional Medicare FFS under Parts A and B are eligible to be assigned to an ACO participating in the Shared Savings Program. Because of this statutory definition and because an important objective of this program is to help align incentives between Part A and Part B, beneficiaries who have coverage under only one of these parts are not eligible to be assigned to an ACO. Beneficiaries enrolled in a group health plan— including beneficiaries enrolled in Medicare Advantage (MA) plans under Part C, eligible organizations under section 1876 of the Act, and Programs of All Inclusive Care for the Elderly (PACE) under section 1894 of the Act— are also not eligible to be assigned. However, we note that Medicare Secondary Payer (MSP) status does not exclude a beneficiary from assignment to an ACO. The statute includes a provision that precludes duplication in participation in initiatives involving shared savings. Section 1899(b)(4) of the Act states that providers of services or suppliers that participate in certain programs that involve shared savings are not eligible to participate in the Shared Savings Program. In the November 2011 final rule (76 FR 67830 through 67833), we finalized a proposal to implement this requirement and to adopt a process for ensuring that providers and suppliers participating in the Shared Savings Program do not concurrently participate in another Medicare program or demonstration involving shared savings at § 425.114. Specifically, applications for participation in the Shared Savings Program are reviewed to assess for overlapping ACO participant TINs. ACO participants that are already participating in another Medicare program, model or demonstration involving shared savings are prohibited from participating in the Medicare PO 00000 Frm 00033 Fmt 4701 Sfmt 4702 72791 Shared Savings Program. An ACO application that contains ACO participants that are already participating in another Medicare program or demonstration involving shared savings is rejected. The statutory prohibition against providers and suppliers participating in multiple programs and initiatives that involve shared savings limits but does not prevent the possibility for a beneficiary to be assigned to more than one shared savings initiative. However, we believe it is important that beneficiaries are not assigned to more than one initiative involving shared savings because we do not believe it is appropriate to make multiple shared savings payments for the same beneficiaries. Therefore, at § 425.114(c), we provide that if the other program or demonstration involving shared savings does not assign beneficiaries based upon the TINs of the health care providers from whom they receive care, but uses an alternate beneficiary assignment methodology, we will work with the developers of the respective demonstrations and initiatives to devise an appropriate method to ensure no duplication in shared savings payments. For example, beneficiaries cannot be assigned to a Shared Savings Program ACO for a performance year if they are associated with another Medicare shared savings initiative at the start of the Shared Savings Program ACO’s performance year. We have also implemented procedures to exclude beneficiaries whose residence is outside the United States, U.S. territories or possessions from assignment to an ACO. We make this determination based on the most recent available data in our beneficiary records regarding the beneficiary’s residence at the end of the assignment window. We do not believe it is appropriate to expect ACOs to be responsible for coordinating the care provided to beneficiaries that reside outside the United States, as required under the Shared Savings Program, or to hold ACOs accountable for the care provided to beneficiaries that reside outside the United States because ACOs may have limited ability to interact with overseas providers and suppliers. In most situations, Medicare does not pay for health care or supplies furnished outside the United States. (Additional guidance about this policy is available at https://www.medicare.gov/Pubs/pdf/ 11037.pdf.) As a result, claims information regarding services received in other countries is not available to ACOs. United States (U.S.) residence includes the 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin E:\FR\FM\08DEP2.SGM 08DEP2 72792 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules Islands, Guam, American Samoa, and the Northern Marianas. (See guidance at https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ sharedsavingsprogram/Downloads/ Shared-Savings-Losses-AssignmentSpec-v2.pdf.) We believe it is appropriate to amend the regulations governing the assignment process to incorporate these limitations. Thus, we propose to add a new provision at § 425.401(a) of the regulations to outline the criteria that a beneficiary must meet in order to be eligible to be assigned to an ACO. Specifically, a beneficiary would be eligible to be assigned to a participating ACO, for a performance year or benchmark year, if the beneficiary meets all of the following criteria during the assignment window (defined in section II.F. of this proposed rule as the 12-month period used for assignment): • Has at least 1 month of Part A and Part B enrollment and does not have any months of Part A only or Part B only enrollment. • Does not have any months of Medicare group (private) health plan enrollment. • Is not assigned to any other Medicare shared savings initiative. • Lives in the U.S. or U.S. territories and possessions as determined based on the most recent available data in our beneficiary records regarding the beneficiary’s residence at the end of the assignment window. If a beneficiary meets all of the criteria in § 425.401(a), then the beneficiary would be eligible to be assigned to an ACO in accordance with the two-step beneficiary assignment methodology in § 425.402 and § 425.404. We also propose to make a conforming change to § 425.400 to reflect the addition of this new provision. We request comment on this proposal to amend the regulations to address specifically the criteria that would be used to determine whether a beneficiary is eligible to be assigned to an ACO. 3. Definition of Primary Care Services mstockstill on DSK4VPTVN1PROD with PROPOSALS2 a. Overview Section 1899(c) of the Act requires the Secretary to assign beneficiaries to an ACO ‘‘based on their utilization of primary care services’’ provided by a physician. However, the statute does not specify which kinds of services may be considered ‘‘primary care services’’ for this purpose, nor the amount of those services that would be an appropriate basis for making assignments. In this section of this proposed rule, we summarize how we currently identify the appropriate primary care services on VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 which we base assignment. In addition, we propose several revisions to our current policies for defining primary care services for this purpose, consistent with our statement in the November 2011 final rule (76 FR 67853), that we intended to monitor this issue and would consider making changes to the definition of primary care services to add or delete codes, if there is sufficient evidence that revisions are warranted. We currently define ‘‘primary care services’’ for purposes of the Shared Savings Program in § 425.20 as the set of services identified by the following HCPCS/CPT codes: 99201 through 99215, 99304 through 99340, 99341 through 99350, the Welcome to Medicare visit (G0402), and the annual wellness visits (G0438 and G0439). In addition, as we will discuss later in this section, we have established a crosswalk for these codes to certain revenue center codes used by FQHCs (prior to January 1, 2011) and RHCs so that their services can be included in the beneficiary assignment process. In the November 2011 final rule (76 FR 67853), we established the current list of codes that constitute primary care services for several reasons. First, we believed the listed codes represented a reasonable approximation of the kinds of services that are described by the statutory language which refers to assignment of ‘‘Medicare fee-for-service beneficiaries to an ACO based on their utilization of primary care services’’ furnished by physicians. Because the statute requires that assignment be based upon the utilization of primary care services furnished by physicians, only primary care services can be considered in the assignment process. In addition, we selected this list to be largely consistent with the definition of ‘‘primary care services’’ in section 5501 of the Affordable Care Act. That section establishes the Primary Care Incentive Payment Program (PCIP) to expand access to primary care services, and thus its definition of ‘‘primary care services’’ provides a compelling precedent for adopting a similar list of codes for purposes of the beneficiary assignment process under the Shared Savings Program. We slightly expanded the list of codes found in section 5501 of the Affordable Care Act to include the Welcome to Medicare visit (HCPCS code G0402) and the annual wellness visits (HCPCS codes G0438 and G0439) as primary care services for purposes of the Shared Savings Program. These codes clearly represent primary care services frequently received by Medicare beneficiaries, and in the absence of the special G codes the services provided during these visits would be described PO 00000 Frm 00034 Fmt 4701 Sfmt 4702 by one or more of the regular office visit codes that are included in the list under section 5501 of the Affordable Care Act. Since the publication of the November 2011 final rule, we have received several suggestions from ACOs and others regarding specific codes that we would consider adding to the definition of primary care services so that they could be considered when assigning beneficiaries to ACOs. For example, commenters have noted that effective January 1, 2013, Medicare pays for two CPT codes (99495 and 99496) that are used to report physician or qualifying non-physician practitioner transitional care management (TCM) services for a patient following a patient’s discharge to a community setting from an inpatient hospital or SNF or from outpatient observation status in a hospital or partial hospitalization. These codes were established to pay a patient’s physician or practitioner to coordinate the patient’s care in the 30 days following a hospital or skilled nursing facility (SNF) stay. We believe that providing separate payment for the work of community physicians and practitioners in treating a patient following discharge from a hospital or nursing facility would ensure better continuity of care for these patients and help reduce avoidable readmissions. We discussed this policy in the CY 2013 Physician Fee Schedule (PFS) final rule with comment period that appeared in the November 16, 2012 Federal Register (77 FR 68978 through 68994). Further, in the CY 2014 PFS final rule with comment period that appeared in the December 10, 2013 Federal Register (78 FR 74414 through 74427), we indicated that for CY 2015, we planned to establish a separate payment for HCPCS code GXXX1 under the PFS for chronic care management (CCM) services furnished to patients with multiple (two or more) chronic conditions. Subsequently, in the CY 2015 PFS final rule with comment period that appeared in the November 13, 2014 Federal Register, we provided more details relating to the implementation of the new PFS policy, including coding, elements of service, and payment rates (79 FR 67715 through 67728). Chronic care management services generally include regular development and revision of a plan of care, communication with other treating health professionals, and medication management. Accordingly, as part of our broader multiyear strategy to appropriately recognize and value primary care and care management services, effective January 1, 2015, we will make a separate E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules payment for CCM services under the PFS. We believe that successful efforts to improve chronic care management for these patients could improve the quality of care while simultaneously decreasing costs, such as through reductions in hospitalizations, use of post-acute care services and emergency department visits. We have also received a few suggestions from hospitalists and others that certain evaluation and management codes used for services furnished in SNFs and other nursing facility settings (CPT codes 99304 through 99318) should be excluded from the definition of primary care services. In some cases, hospitalists that perform evaluation and management services in SNFs requested this change so that their ACO participant TIN need not be exclusive to only one ACO based on the exclusivity policy established in the November 2011 final rule (76 FR 67810 through 67811). The requirement under § 425.306(b) that an ACO participant TIN be exclusive to a single ACO applies when the ACO participant TIN submits claims for primary care services that are considered in the assignment process. However, ACO participant TINs upon which beneficiary assignment is not dependent (that is, ACO participant TINs that do not submit claims for primary care services that are considered in the assignment process) are not required to be exclusive to a single ACO. These requests from hospitalists and others were based on drawing a distinction between evaluation and management services performed in SNFs and those that are performed in other nursing facilities. Specifically, these commenters believe that evaluation and management services furnished in SNFs are more likely to be acute in nature and should not be considered primary care services. In contrast, the evaluation and management services performed in other nursing facilities, where patients tend to stay for longer periods, are arguably more likely to include primary care services. We have also received comments, however, from others who support the inclusion of these services in the definition of primary care for the Shared Savings Program. They suggest that including the codes for evaluation and management services furnished in SNFs in the assignment process could help provide important incentives for ACOs to manage and coordinate the care of these vulnerable patients because ACOs would be held accountable for these patients if they receive the plurality of their primary care services VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 from ACO professionals during a performance year. In the November 2011 final rule, we discussed comments both for and against including the codes for SNF visits in the definition of primary care services (76 FR 67852 through 67853). However, we ultimately concluded that it was appropriate to include these codes. We continue to believe that including the codes for SNF and other nursing facility visits in the list of codes that constitute primary care services for purposes of assignment to an ACO is appropriate for a number of reasons. As we stated in the November 2011 final rule (76 FR 67853), beneficiaries often stay for long periods of time in SNFs (Medicare covers up to 100 days of SNF services in each benefit period) and it is reasonable to conclude that these codes represent basic evaluation and management services that would ordinarily be provided in physician offices if the beneficiaries were not residing in nursing homes. If these services are performed by ACO professionals, we continue to believe that it is reasonable to hold the ACO accountable for the care of these beneficiaries. In addition, as we noted previously, the PCIP program established under section 5501 of the Affordable Care Act was established to expand access to ‘‘primary care services’’. Under this program, beginning January 1, 2011 and continuing through December 31, 2015, we pay an incentive payment of 10 percent of Medicare program payments to qualifying primary care physicians and certain non-physician practitioners who furnish specified primary care services. We believe it is compelling that these SNF codes are included in the definition of ‘‘primary care services’’ in section 5501 of the Affordable Care Act, which established this incentive program. We would also note that CPT codes 99304 through 99318 do not differentiate between evaluation and management services performed in SNFs and other nursing facilities. Thus, services furnished in SNFs and other nursing facilities are included in the definition of ‘‘primary care services’’ for purposes of section 5501. Finally, in the CY 2015 PFS final rule with comment period (79 FR 67910 through 67911), we added the Skilled Nursing Facility 30Day All-Cause Readmission Measure (SNFRM) to the quality performance measure set used to evaluate the quality of the care furnished by ACOs. We believe the addition of this measure helps to fill a gap in the current Shared Savings Program measure set and provides a focus on an area where ACOs PO 00000 Frm 00035 Fmt 4701 Sfmt 4702 72793 are targeting redesign. Therefore, we continue to believe that it is reasonable to conclude that services provided in SNFs with CPT codes 99304 through 99318 represent basic evaluation and management services that would ordinarily be provided in physician offices if the beneficiaries were not residing in nursing homes and should continue to be included in the definition of primary care services used for purposes of beneficiary assignment to an ACO participating in the Shared Savings Program. Although we are not making a proposal at this time regarding CPT codes 99304 through 99318, we welcome comment from stakeholders on the implications of retaining these codes in the definition of primary care services. b. Proposed Revisions We believe that the TCM services represented by CPT codes 99495 and 99496 represent primary care services that should be considered in the beneficiary assignment methodology under the Shared Savings Program. In order to receive payment for these codes, the physician or non-physician practitioner is required to accept care of the beneficiary post-discharge from an inpatient hospital or SNF without a gap and must take responsibility for the beneficiary’s overall care for a period of 30 days following the discharge. Likewise, we believe that the CCM services represented by HCPCS code GXXX1 are primary care services that should also be considered in the beneficiary assignment methodology under the Shared Savings Program. The CCM service includes continuity of care with a designated practitioner or member of the care team with whom the patient is able to get successive routine appointments. The CCM service also includes access to care management services 24-hours-a-day, 7-days-a-week, which means providing beneficiaries with a means to make timely contact with health care providers to address the patient’s urgent chronic care needs regardless of the time-of-day or day of the week. Additional explanation of these and the other required elements for billing CCM services can be found in the CY 2015 PFS final rule with comment period (79 FR 67715 through 67728). Therefore, we propose to update the definition of primary care services at § 425.20 to include both TCM codes (CPT codes 99495 and 99496) and the CCM code (HCPCS code GXXX1) and to include these codes in our beneficiary assignment methodology under § 425.402. Further, in order to promote flexibility for the Shared Savings E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 72794 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules Program and to allow the definition of primary care services used in the Shared Savings Program to respond more quickly to HCPCS/CPT coding changes made in the annual PFS rulemaking process, we propose to make any future revisions to the definition of primary care service codes through the annual PFS rulemaking process. If we intend to add any proposed new HCPCS/CPT or revenue center codes to the definition of primary care services for purposes of the Shared Savings Program, we would include a discussion of the proposed addition in the preamble to the PFS proposed rule to allow an opportunity for comment before we announce our final decision in the PFS final rule. Such an approach would enable the Shared Savings Program to be more flexible and responsive to incorporate any changes to primary care oriented codes that are made through the PFS rulemaking process. We believe this process for making changes to the Shared Savings Program’s definition of primary care services under § 425.20 would help to ensure that the definition of primary care services used under the Shared Savings Program properly reflects the full range of primary care services that beneficiaries may receive under Medicare and that the assignment methodology accurately aligns beneficiaries with the entities that are responsible for managing their overall care. In addition, revising the definition of primary care services for purposes of the Shared Savings Program through the annual rulemaking for the PFS would enable us to efficiently update and revise primary care service codes used for purposes of beneficiary assignment under the Shared Savings Program to reflect any administrative HCPCS/CPT coding changes, such as changes to reflect successive coding changes. Accordingly, we also propose to amend the definition of primary care services at § 425.20 to include additional codes designated by CMS as primary care services for purposes of the Shared Savings Program, including new HCPCS/CPT codes or revenue codes and any subsequently modified or replacement codes. We seek comments on these proposals. In addition, we seek comments as to whether there are any additional existing HCPCS/CPT codes that we should consider adding to the definition of primary care services in future rulemaking for purposes of assignment of beneficiaries to ACOs under the Shared Savings Program. It would be most helpful if such comments include a detailed discussion of the basis for such an addition. VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 4. Consideration of Physician Specialties and Non-Physician Practitioners in the Assignment Process a. Overview Primary care services can generally be defined based on the type of service provided, the type of provider specialty that provides the service, or both. In the November 2011 final rule establishing the Shared Savings Program (76 FR 67853 through 67856), we adopted a balanced assignment process that simultaneously maintains the requirement to focus on primary care services in beneficiary assignment, while recognizing the necessary and appropriate role of specialists in providing primary care services, such as in areas with primary care physician shortages. Under § 425.402, after identifying all patients that had a primary care service with a physician who is an ACO professional (and who are thus eligible for assignment to the ACO under the statutory requirement to base assignment on ‘‘utilization of primary care services’’ furnished by physicians), we employ a step-wise approach as the basic assignment methodology. This step-wise assignment process takes into account two particular decisions that we described in the November 2011 final rule (76 FR 67853 through 67858): (1) Our decision to base assignment on the primary care services of specialist physicians in the second step of the assignment process; and (2) our decision also to take into account the plurality of all primary care services provided by ACO professionals, including both primary care and specialist physicians and certain non-physician practitioners, in determining which ACO is truly responsible for a beneficiary’s primary care in the second step of the assignment process. Our current stepwise assignment process thus occurs in the following two steps: Step 1: In this step, the beneficiary would be assigned to the ACO if the allowed charges for primary care services furnished to the beneficiary by primary care physicians who are ACO professionals are greater than the allowed charges for primary care services furnished by primary care physicians who are ACO professionals in any other ACOs, and greater than the allowed charges for primary care services billed to Medicare by any other solo practice/group containing primary care physicians, identified by a Medicare-enrolled TIN, that is unaffiliated with any ACO. In other words, first we add up the allowed charges for primary care services billed by primary care physicians through the PO 00000 Frm 00036 Fmt 4701 Sfmt 4702 TINs of ACO participants in the ACO. Next, we add up the allowed charges for primary care services furnished by primary care physicians that are billed through other Medicare-enrolled TINs (or through a collection of ACO participant TINs in the case of another ACO). If the allowed charges for the services furnished by ACO participants are greater than the allowed charges for services furnished by the participants in any other ACO or by any non-ACO participating Medicare-enrolled TIN, then the beneficiary is assigned to the ACO in the first step of the assignment process. Step 2: This step applies only for beneficiaries who have not received any primary care services from a primary care physician. We assign a beneficiary to an ACO in this step if the beneficiary received at least one primary care service from a physician participating in the ACO, and more primary care services (measured by Medicare allowed charges) from ACO professionals (physician regardless of specialty, nurse practitioner, physician assistant or clinical nurse specialist) at the ACO than from ACO professionals in any other ACO or solo practice/group of practitioners identified by a Medicareenrolled TIN or other unique identifier, as appropriate, that is unaffiliated with any ACO. Since publication of the November 2011 final rule (76 FR 67853 through 67858), we have gained further experience with this assignment methodology. We have learned from its application for the first 220 ACOs participating in the program that, on average, about 92 percent of the beneficiaries assigned to ACOs are assigned in step 1, with only about 8 percent of the beneficiaries being assigned in step 2. We have adopted a similar beneficiary assignment approach for some other programs, such as the PQRS Group Practice Reporting Option via the GPRO web interface (77 FR 69195 through 69196). We would note that in the CY 2015 PFS final rule with comment period that appeared in the November 13, 2014 Federal Register, we revised the Value Modifier (VM) beneficiary attribution methodology and the PQRS GPRO web interface beneficiary assignment methodology to make them slightly different from the Medicare Shared Savings Program assignment methodology, namely—(1) eliminating the primary care service pre-step that is statutorily required for the Shared Savings Program; and (2) including NPs, PAs, and CNSs in step 1 rather than in step 2 of the attribution process (see 79 FR 67790 and 79 FR 67962). E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules b. Proposed Revisions We continue to believe that the current step-wise assignment methodology generally provides a balance between maintaining a strong emphasis on primary care while ultimately allowing for assignment of beneficiaries on the basis of how they actually receive their primary care services. However, we have received several suggestions for possible improvements to the assignment methodology for consideration. Some stakeholders have suggested that primary care services by nonphysician practitioners (NPs, PAs, and CNSs) should be included in step 1 of the assignment methodology rather than only in step 2 as they are under the current process. These stakeholders have indicated that non-physician practitioners very often serve as a beneficiary’s sole primary care provider, based on beneficiary preferences or other factors, especially in rural areas and other areas where there is a shortage of primary care physicians. We considered this recommendation for a number of reasons. As previously explained in the November 2011 final rule (76 FR 67853 through 67858), in establishing the Shared Savings Program, we adopted certain key features of the Shared Savings Program (for example, the decision not to include physician specialties in step 1 of the assignment methodology and the definition of primary care physician under § 425.20) to align with other Affordable Care Act provisions that place a strong emphasis on primary care. In particular, we referred to section 5501 of the Affordable Care Act which established the PCIP. For purposes of section 5501 of the Affordable Care Act, a ‘‘primary care practitioner’’ is defined as a physician who has a primary specialty designation of family medicine, internal medicine, geriatric medicine, or pediatric medicine or as a ‘‘nurse practitioner, clinical nurse specialist, or physician assistant.’’ Therefore, we believe it would be appropriate to better align the assignment methodology under the Shared Savings Program with the primary care emphasis in other provisions of the Affordable Care Act by including these non-physician practitioners in step 1 of the assignment process. Further, we believe that including these non-physician practitioners in step 1 would be supported by the statute as long as we continue under § 425.402 to first identify all patients that have received a primary care service from a physician who is an ACO professional and who VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 are thus eligible for assignment to the ACO under the statutory requirement to base assignment on ‘‘utilization of primary care services’’ furnished by physicians. Finally, we believe that it would be appropriate to include primary services furnished by NPs, PAs, and CNSs in step 1 of the beneficiary assignment methodology (after satisfying the statutory criterion that assignment be based on primary care services by physicians). Under section 1899(b)(2)(D), the ACO is required to have sufficient primary care ACO professionals to care for the number of FFS beneficiaries assigned to the ACO. The statute includes NPs, PAs, and CNSs in its definition of ACO professional; thus recognizing the important role played by these nonphysician practitioners in managing and coordinating the care of Medicare FFS beneficiaries. We believe including these practitioners in step one of the assignment process could also further strengthen our current assignment process, which we designed to simultaneously maintain a primary care centric approach to beneficiary assignment, by including services furnished by physicians from all of the primary care specialties in step 1, while also recognizing the necessary and appropriate role of specialists in providing primary care services by including services furnished by specialist physicians in step 2. Including services furnished by NPs, PAs, and CNSs in determining the plurality of primary care services in step 1 of the assignment process may help ensure that beneficiaries are assigned to the ACO (or non-ACO entity) that is actually providing the plurality of primary care for that beneficiary and thus, should be responsible for managing the patient’s overall care. In this way, all primary care services furnished by ACO professionals, including the entire primary care physician and practitioner team (including NPs, PAs, and CNSs working in clinical teams in collaboration with or under the supervision of physicians), would be considered for purposes of determining where a beneficiary received the plurality of primary care services under step 1 of the assignment methodology. Accordingly, we are proposing to amend the assignment methodology to include primary care services furnished by NPs, PAs, and CNSs in step 1 of the assignment process. However, we would note that there could also be some concerns about adding NPs, PAs, and CNSs to step 1 of the assignment methodology. Unlike for PO 00000 Frm 00037 Fmt 4701 Sfmt 4702 72795 physicians, the CMS self-reported specialty codes reported on claims for NPs, PAs, and CNSs are not further broken down by specific specialty areas and therefore do not allow practitioners to indicate whether they are typically functioning as primary care providers or as specialists. Therefore, we are concerned that by considering services furnished by NPs, PAs, and CNSs in step 1, we may ultimately assign some beneficiaries to an ACO inappropriately based on specialty care over true primary care. Thus, while we invite comments on our proposal to include primary care services furnished by NPs, PAs, and CNSs in step 1 of the assignment methodology, we also seek comment on the extent to which these non-physician practitioners provide non-primary care services and whether there are ways to distinguish between primary care services and non-primary care services billed by these nonphysician practitioners. Some other stakeholders have suggested that certain physician specialties are inappropriately included in the assignment process and therefore request that we exclude certain physician specialties from step 2 of the assignment process. These stakeholders are concerned that by being included in step 2 of the assignment process, the ACO participants that submit claims for services furnished by these specialists are inappropriately limited to participating in only one ACO because of the exclusivity requirement under § 425.306(b) of the regulations. This requirement is discussed in the November 2011 final rule (76 FR 67810 through 67811). Further, some stakeholders have indicated that they are confused by the current exclusivity requirement and inappropriately believe that an ACO participant can participate in more than one ACO as long as none of the beneficiaries for whom the ACO participant has submitted claims for primary care services have been assigned to the ACO. We would like to emphasize that under § 425.306(b), the requirement that an ACO participant must be exclusive to a single ACO applies whenever primary care service claims submitted by the ACO participant are considered in the beneficiary assignment process. The application of the current exclusivity requirement to an ACO participant is not affected by whether or not a FFS beneficiary for whom an ACO participant has submitted claims for primary care services is ultimately assigned to the ACO. Rather, an ACO participant that submits claims to Medicare for primary care services must be exclusive to a single ACO because E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 72796 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules the claims for primary care services submitted by the ACO participant are used to determine beneficiary assignment to the ACO. Additionally, the current exclusivity requirement is not affected by whether or not the primary care services for which the ACO participant submits claims are services furnished by primary care physicians, specialist physicians, or NPs, PAs, and CNSs. Furthermore, this exclusivity requirement applies only to the ACO participant and not to individual practitioners. Individual practitioners are free to participate in multiple ACOs, provided they are billing under a different Medicareenrolled TIN for each ACO in which they participate. (See 76 FR 67810 through 67811). For example, there may be practitioners who work in multiple settings and bill Medicare for primary care services through several different TINs, depending on the setting. If each of these TINs represents an ACO participant in a different ACO, then the practitioner would be an ACO professional in more than one ACO. Some stakeholders have argued that certain specialties that bill for some of the evaluation and management services designated as primary care services under § 425.20 do not actually perform primary care services. This is because most of the CPT and other HCPCS codes that are included in the definition of primary care services under § 425.20 are actually more general purpose codes used for a wide variety of clinical practices that are not specific to primary care, such as CPT office visit codes. For example, cataract surgeons bill for some of the office visit codes included in the definition of ‘‘primary care’’ but in actual practice these surgeons do not perform primary care when they report these codes. These commenters believe that the wide spread use of these codes is the reason that for purposes of PCIP, the CPT code-based definition of ‘‘primary care services’’ is paired with the definition of ‘‘primary care practitioners’’ under that statute. In other words, to identify true primary care services, the CPT codes for primary care services must be billed by practitioners that render primary care services. We agree that although some specialties such as surgeons and certain others bill Medicare for some of the Shared Savings Program ‘‘primary care’’ codes, in actual practice the services such specialists perform when reporting these codes do not typically represent primary care services because the definitions of HCPCS/CPT codes for office visits and most other evaluation and management services are not based VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 on whether primary care is provided as part of the service. Accordingly, we agree that to identify primary care services more accurately, the CPT codes for primary care services should be paired with the specialties of the practitioners that render those services and that it would be appropriate to exclude services provided by certain physician specialties from the beneficiary assignment process. Therefore, we are proposing to exclude services provided by certain CMS physician specialties from the beneficiary assignment process. The net effect of this proposal would be to exclude certain claims from determining the ACO’s assigned population. The proposed lists of physician specialties that would be included in and excluded from the assignment process (provided in Tables 1 through 4 of this proposed rule) are based on recommendations by CMS medical officers knowledgeable about the services typically performed by physicians and non-physician practitioners. However, we note that given the many requests and comments from specialists and specialty societies asking to have their services included in the assignment methodology that we received during the original rulemaking to establish the Shared Savings Program, we attempted to limit the list of physician specialty types that would be excluded from the assignment process to those physician specialties that would very rarely, if ever, provide primary care to beneficiaries. As a general rule, for example, we expect that physicians with an internal medicine subspecialty such as nephrology, oncology, rheumatology, endocrinology, pulmonology, and cardiology would frequently be providing primary care to their patients. Especially for beneficiaries with certain chronic conditions (for example, certain heart conditions, cancer or diabetes) but who are otherwise healthy, we expect that these specialist physicians often take the role of primary care physicians in the overall treatment of the beneficiaries if there is no family practitioner or other primary care physician serving in that role. In contrast we expect that most surgeons, radiologists, and some other types of specialists would not typically provide a significant amount of primary care, if any, and therefore we propose to exclude their services from the assignment process. More specifically, the following 4 tables display the specific CMS physician specialty codes that we are proposing to include and exclude for beneficiary assignment purposes under the Shared Savings Program. PO 00000 Frm 00038 Fmt 4701 Sfmt 4702 • Table 1 shows the CMS physician specialty codes that would continue to be included in step 1. • Table 2 lists the physician specialties that we are proposing would continue to be included in step 2. • Table 3 lists the physician specialties that we are proposing to exclude from the beneficiary assignment methodology under step 2. Under this proposal, services furnished by these physician specialties would also be excluded for purposes of determining if a beneficiary has received a primary care service from a physician who is an ACO professional, which under § 425.402(a) is a precondition for assignment to an ACO. • Table 4 shows the CMS specialty codes for NPs, PAs, and CNSs that under our proposal would be included in beneficiary assignment step 1. TABLE 1—CMS PHYSICIAN SPECIALTY CODES THAT WOULD CONTINUE TO BE INCLUDED IN ASSIGNMENT STEP 1 Code 01 08 11 38 ............. ............. ............. ............. Specialty name General Practice. Family Practice. Internal Medicine. Geriatric Medicine. TABLE 2—CMS PHYSICIAN SPECIALTY CODES THAT WOULD CONTINUE TO BE INCLUDED IN ASSIGNMENT STEP 2 Code 03 06 10 13 16 17 23 25 ............. ............. ............. ............. ............. ............. ............. ............. 29 37 39 44 46 66 70 ............. ............. ............. ............. ............. ............. ............. 82 83 84 90 98 ............. ............. ............. ............. ............. E:\FR\FM\08DEP2.SGM Specialty name Allergy/immunology. Cardiology. Gastroenterology. Neurology. Obstetrics/gynecology. Hospice and palliative care. Sports medicine. Physical medicine and rehabilitation. Pulmonary disease. Pediatric medicine. Nephrology. Infectious disease. Endocrinology. Rheumatology. Multispecialty clinic or group practice. Hematology. Hematology/oncology. Preventive medicine. Medical oncology. Gynecology/oncology. 08DEP2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules TABLE 3—CMS PHYSICIAN SPECIALTY participate in more than one ACO if the CODES THAT WE PROPOSE TO EX- ACO participant does not submit claims for any primary care services performed CLUDE FROM ASSIGNMENT STEP 2 Code 02 04 05 07 09 12 ............. ............. ............. ............. ............. ............. 14 18 20 21 22 24 ............. ............. ............. ............. ............. ............. 26 ............. 27 ............. 28 ............. 30 ............. 33 ............. 34 ............. 36 ............. 40 ............. 72 ............. 76 ............. 77 ............. 78 ............. 79 ............. 81 ............. 85 ............. 86 ............. 91 ............. 92 ............. 93 ............. 94 ............. 99 ............. C0 ............ Specialty name General surgery. Otolaryngology. Anesthesiology. Dermatology. Interventional pain management. Osteopathic manipulative therapy. Neurosurgery. Ophthalmology. Orthopedic surgery. Cardiac electrophysiology. Pathology. Plastic and reconstructive surgery. Psychiatry. Geriatric psychiatry. Colorectal surgery. Diagnostic radiology. Thoracic surgery. Urology. Nuclear medicine. Hand surgery. Pain management. Peripheral vascular disease. Vascular surgery. Cardiac surgery. Addiction medicine. Critical care (intensivists). Maxillofacial surgery. Neuro-psychiatry. Surgical oncology. Radiation oncology. Emergency medicine. Interventional radiology. Unknown physician specialty. Sleep medicine. TABLE 4—CMS NON-PHYSICIAN SPECIALTY CODES THAT WOULD BE INCLUDED IN ASSIGNMENT STEP 1 Code mstockstill on DSK4VPTVN1PROD with PROPOSALS2 50 ............. 89 ............. 97 ............. Specialty name Nurse practitioner. Clinical nurse specialist. Physician assistant. The primary benefit of this proposal is that it could help ensure that beneficiaries are correctly assigned to the ACO or other entity that is actually providing primary care and managing the patient’s overall care. Otherwise, for example, a beneficiary could inadvertently be assigned to an ACO based on services furnished by a surgeon who had not provided primary care but had provided a number of consultations for a specific clinical condition. Another important benefit of this proposal is that the ACO participants that submit claims solely for services performed by the categories of specialists that we are proposing to exclude from the assignment process would have greater flexibility to VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 by other physicians or non-physician practitioners that are included in the assignment process. This could especially be the case for small physician practices which only submit claims for specialty services. Allowing such ACO participants that are composed solely of excluded specialists to participate in more than one ACO would support our goal of facilitating competition among ACOs by increasing the number of specialists that can participate in more than one ACO. This proposal would not be expected to have a significant impact on the overall number of beneficiaries assigned to each ACO because we believe most of the specialties that we propose to exclude from the assignment methodology provide a relatively modest number of services under the codes included in the definition of primary care services or are not typically the only physician that a beneficiary sees. For example, patients that are furnished consultations by a thoracic surgeon would typically also concurrently receive care from a primary care physician, cardiologist or other medical specialist. We propose to amend § 425.402 to reflect these proposed changes to the assignment methodology. Specifically, we propose to revise § 425.402(a) to include NPs, PAs, and CNSs as ACO professionals that would be considered in step 1 of the assignment process. In addition, we propose to amend § 425.402 by adding a new paragraph (b) to identify the physician specialty designations that would be considered in step 2 of the assignment process. We also propose to modify the exclusivity requirement at § 425.306(b) to clarify how the exclusivity rules would be affected by this proposal to exclude certain specialists from step 2 of the assignment methodology. Specifically, we propose to revise § 425.306(b) to indicate that each ACO participant that submits claims for primary care services used to determine the ACO’s assigned population (that is, services rendered by the primary care physicians or ACO professionals listed in Tables 1, 2, and 4) must be exclusive to one Medicare Shared Savings Program ACO. In addition, we propose to make several conforming and technical changes to § 425.402(a). First, we propose a modification to provide that for purposes of determining whether a beneficiary has received a primary care service from a physician who is an ACO professional, we would consider only services furnished by primary care physicians or physicians with a PO 00000 Frm 00039 Fmt 4701 Sfmt 4702 72797 specialty listed in new paragraph (b). Second, we propose to make modifications to conform with changes in the definitions of ‘‘assignment’’, ‘‘ACO professional’’, and ‘‘ACO provider/supplier’’ in addition to our proposal to adopt a prospective assignment approach under proposed Track 3 in section II.F. of this proposed rule. We seek comment on these proposals. Finally, as part of our process of reviewing both recommendations discussed previously, we considered another alternative approach to assignment. We considered whether it might be preferable, after excluding the specialties listed in Table 3 from step 2 of the assignment process, to further simplify beneficiary assignment by establishing an assignment process that involves only a single step. More specifically, we considered whether we should replace the current two step assignment methodology with a new one step assignment process in which the plurality of primary care services provided by the physicians listed in Tables 1 and 2, and the non-physician practitioners in Table 4, would all be considered in a single step. Arguably, this approach could at least partially address the comments we have received about the current assignment methodology and also help further simplify the assignment process. However, while it has some attractive features, we also have some important concerns about this approach. For example, beneficiaries receiving concurrent care from both primary care physicians and specialists could inappropriately be assigned to an ACO or other entity that is not responsible for managing their overall care. To illustrate, under an assignment process with only one step, if a beneficiary has a long term, continuing relationship with a family practitioner who is an ACO professional but also requires specialty care for a chronic allergy condition from an allergist who is not participating in an ACO, then in any given performance year the beneficiary could be assigned to the ACO or not depending merely on the allowed charges for primary care services furnished by the family practitioner versus the allowed charges for services furnished by the allergist. Under our current two step assignment methodology, this beneficiary would be consistently and appropriately assigned to the ACO in which the beneficiary’s family practitioner participates. We believe this result would be appropriate because, in this example, the family practitioner is responsible for managing the overall care of this patient whereas E:\FR\FM\08DEP2.SGM 08DEP2 72798 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 the allergist is providing more specialized care. A similar problem would exist for some other beneficiaries, such as those who temporarily require specialty care for an acute condition during a performance year. Therefore, we are concerned that by establishing an assignment methodology based on a single step, we may reduce our focus on primary care and ultimately assign some beneficiaries to an ACO inappropriately based on specialty care over true primary care. A one-step assignment methodology could also introduce additional instability into the assignment process. Therefore, we are not proposing to combine the two steps used under the current assignment methodology. Although we are not proposing this change at this time, we seek comments as to whether it would be preferable, after excluding the physician specialties listed in Table 3 from the assignment process, to further simplify the assignment methodology by establishing an assignment process that involves only a single step. We will consider comments on this issue during the development of the final rule. We also welcome any comments about the possible impact these potential changes to the assignment methodology might have on other CMS programs that use an assignment methodology that is generally aligned with the Shared Savings Program, such as PQRS GPRO reporting via the GPRO web interface and VM. We note that as previously discussed, we revised the assignment methodology for PQRS GPRO reporting via the GPRO web interface and VM in the CY 2015 PFS final rule with comment period that appeared in the November 13, 2014 Federal Register (79 FR 67790 and 79 FR 67962). 5. Assignment of Beneficiaries to ACOs That Include FQHCs, RHCs, CAHs, or ETA Hospitals In this section, we summarize the regulatory policies in § 425.404 for assignment of beneficiaries to ACOs that include FQHCs and RHCs as ACO participants and subsequent operational procedures and instructions that we have established in order to allow FQHCs and RHCs as well as CAHs billing under section 1834(g)(2) of the Act (referred to as Method II), and ETA hospitals to fully participate in the Shared Savings Program. These types of providers may submit claims for physician and other professional services when certain requirements are met, but they do not submit their claims through the standard Part B claims payment system. Accordingly, we have VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 established operational processes so that we can consider claims for professional services submitted by these providers in the process for assigning beneficiaries to ACOs. However, each of these four provider types (that is, FQHCs, RHCs, CAHs, ETA hospitals) generally have differing circumstances with respect to their provider and medical service code reporting requirements, claims forms used, and the payment methodology that applies to professional services. Although there are important differences between the payment policy and claims processing for FQHCs and RHCs, they do share some key characteristics. Therefore, we will discuss FQHCs and RHCs jointly, and then address CAHs and ETA hospitals separately. a. Assignment of Beneficiaries to ACOs That Include FQHCs and RHCs (1) Overview FQHCs and RHCs are facilities that furnish services that are typically furnished in an outpatient clinic setting. They are currently paid an all-inclusive rate (AIR) per visit for qualified primary and preventive health services furnished to Medicare beneficiaries. On October 1, 2014, FQHCs began to transition to a new FQHC prospective payment system (PPS). FQHCs have been required to use HCPCS coding on all their claims since January 1, 2011, to inform the development of the PPS and for limited other purposes, and would be required to use HCPCS coding for payment purposes under the FQHC PPS. Under the current payment methodology, FQHCs and RHCs submit claims for each encounter with a beneficiary and receive an interim payment based on their AIR for qualifying visits. The claims contain revenue codes that distinguish general classes of services (for example, clinic visit, home visit or mental health service). Claims submitted by FQHCs and RHCs also identify the beneficiary to whom the service was provided, and include other information relevant to determining whether the AIR can be paid for the service. The claims contain very limited information regarding the individual practitioner, or the type of health professional (for example, physician, PA or NP) who provided the service. Based on detailed comments from some FQHC and RHC representatives, in the November 2011 final rule, we established a beneficiary assignment process that allows primary care services furnished in FQHCs and RHCs to be considered in the assignment process for any ACO that includes an PO 00000 Frm 00040 Fmt 4701 Sfmt 4702 FQHC or RHC as an ACO participant. This process is codified in the regulations at § 425.404. (This assignment process also enables FQHCs and RHCs to form ACOs independently, without the participation of other types of eligible entities, provided they meet all other eligibility requirements (76 FR 67814)). Operationally we assign beneficiaries to ACOs that include FQHCs or RHCs in a manner generally consistent with how we assign beneficiaries to other ACOs based on primary care services performed by physicians as described previously. However, to address the requirement under section 1899(c) of the Act that beneficiaries be assigned to an ACO based on their use of primary care services furnished by physicians, we require ACOs that include FQHCs or RHCs to identify, through an attestation (see § 425.404(a)), the physicians that provide direct patient primary care services in their ACO participant FQHCs or RHCs. This additional step is not necessary in the case of other types of ACO participants that bill Medicare for primary care services because the claims clearly identify the practitioner furnishing the service. The attestation must be submitted to CMS as part of the application process for all ACOs that include FQHCs or RHCs as ACO participants and must include the NPIs and other identifying information for the physicians that directly provide primary care services in the ACO participant FQHCs or RHCs (see § 425.204(c)(5)(iii)(A)). Subsequently, we use the combination of the FQHC or RHC ACO participant TIN (and other unique identifier such as CCN, where appropriate) and the NPIs of the FQHC or RHC physicians provided to us through the attestation process to identify those beneficiaries that received a primary care service from a physician in the FQHC or RHC and who are therefore eligible to be assigned to the ACO as provided under § 425.402(a)(1). Then, we assign those beneficiaries to the ACO, using the step-wise assignment methodology under § 425.402(a)(3) and (4), if they received the plurality of their primary care services, as determined based on allowed charges for the HCPCS codes and revenue center codes included in the definition of primary care services at § 425.20, from ACO professionals. We are able to crosswalk the revenue center codes reported by RHCs (and FQHCs for services performed prior to January 1, 2011) to comparable ‘‘primary care’’ HCPCS codes based on their code definitions. For example, CPT codes 99201 through 99215 (office/ E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules outpatient visits) are cross-walked to revenue center code 0521. Because the focus of FQHCs and RHCs is on primary care, we continue to believe these revenue center codes, when reported by FQHCs/RHCs, represent primary care services and not more specialized care. This crosswalk allows us to use the available revenue center codes as part of the beneficiary assignment process for RHC services (and for FQHC services furnished prior to January 1, 2011, when FQHCs were required to start submitting HCPCS codes) in place of the HCPCS codes which are used more generally. We established and have updated this crosswalk through contractor instructions. For claims submitted by FQHCs on or after January 1, 2011, we use the HCPCS codes which are included on the claims to identify the service provided. To summarize, the special procedures that we have established in the November 2011 final rule and through operational program instructions (see program specifications on our Web site at https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ sharedsavingsprogram/Downloads/ Shared-Savings-Losses-AssignmentSpec-v2.pdf) for processing FQHC and RHC claims in order to allow these services to be considered in the beneficiary assignment process for the Shared Savings Program are as follows: • FQHC and RHC services are billed on an institutional claim form and require special handling to incorporate them into the beneficiary assignment process. In general, ACO participants are identified through their TIN(s). However, the TINs for FQHCs and RHCs are not included in the CMS claims files. Therefore, we require that the CCNs also be reported for FQHCs and RHCs that are ACO participants. We use the CCN as the unique identifier for an individual FQHC or RHC. We require ACOs to include the CCN, the TIN, and the organizational NPI for FQHCs and RHCs that are participating in the ACO on their ACO participant lists. For example, the instructions for entities applying to the Shared Savings Program for 2015 were provided on our Web site at https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ sharedsavingsprogram/Downloads/ HowTo-Participant-List-Template.pdf. • For FQHCs/RHCs that are ACO participants, we treat a FQHC or RHC service reported on an institutional claim as a primary care service performed by a primary care physician if the claim includes a HCPCS or revenue center code that is included in the definition of a primary care service at § 425.20 and the service was VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 furnished by a physician that was identified as providing direct primary care services in the attestation submitted as part of the ACO’s application. All such physicians are considered primary care physicians for purposes of the assignment methodology and no specialty code is required for these claims. • A primary care physician is any physician NPI included in the attestation provided as part of the application submitted by an ACO that includes an FQHC or RHC as an ACO participant. • For FQHCs/RHCs that are ACO participants, if the claim is for a primary care service furnished by someone other than a physician listed on the attestation, we treat the service as a primary care service furnished by a nonphysician ACO professional. We established this operational policy in order to be able to include these FQHC/ RHC primary care services in step 2 of the current beneficiary assignment methodology, as long as all other assignment requirements are met. We believe this is a reasonable assumption because FQHC/RHC covered services represented by the primary care HCPCS or revenue center codes would primarily represent services furnished by a non-physician ACO professional, if not by a primary care physician. We would note that covered services in RHCs or FQHCs include services furnished by certain other professionals who are not ACO professionals (that is, a certified nurse midwife, clinical psychologist, clinical social worker or, in very limited situations, a visiting nurse). However, such services are not reported under the HCPCS codes and revenue center codes that we have defined as being primary care services at § 425.20 for purposes of the Shared Savings Program. (See RHC/FQHC general billing requirements in the Medicare Claims Processing Manual, Chapter 9—Rural Health Clinics/ Federally Qualified Health Centers, section 100 at https://www.cms.gov/ Regulations-and-Guidance/Guidance/ Manuals/Downloads/clm104c09.pdf). • For FQHCs/RHCs that are not ACO participants, we treat a FQHC or RHC service reported on an institutional claim as a primary care service performed by a primary care physician if the claim includes a HCPCS or revenue center code that meets the definition of a primary care service at § 425.20. That is, for non-ACO participant FQHCs and RHCs, we assume a primary care physician performed all primary care services. As we explained previously in the November 2011 final rule (76 FR 67860), PO 00000 Frm 00041 Fmt 4701 Sfmt 4702 72799 FQHC/RHC claims contain limited information as to the type of practitioner providing a service because such information is not necessary to determine payment rates for services in FQHCs/RHCs. Further, the attestation requirement at § 425.404(a) does not, of course, apply to FQHCs/RHCs that are not participating in an ACO. As a result, for non-ACO participant FQHCs/RHCs we are not able to determine whether a primary care service was furnished by a primary care physician, and thus should be considered in step 1, or was furnished by a specialist physician or NP/PA/CNS, and thus should be considered under step 2 of the assignment methodology. We chose to assume such primary care services were furnished by primary care physicians so that these services would be considered in step 1 of the assignment methodology. We established this operational procedure to help make sure we do not disrupt established relationships between beneficiaries and their care providers in non-ACO participant FQHCs and RHCs, by inappropriately assigning beneficiaries to ACOs that are not primarily responsible for coordinating their overall care. To illustrate, we offer the following example: Assume Medicare is billed for five primary care services (all with equal allowable charges) for a particular beneficiary during a given performance year. One of those primary care services was provided by a primary care physician who is an ACO provider/ supplier not affiliated with an FQHC. Four of the services were provided by an FQHC that is not an ACO participant. In this case, if we had assumed that the FQHC services were performed by NPs/ PAs/CNSs, then the beneficiary would have been assigned to the ACO under step 1 of the assignment methodology and not the FQHC. Instead, by assuming the non-ACO participant FQHC services were performed by primary care physicians, this beneficiary would be assigned to the FQHC under step 1 and not to the ACO. In this scenario we believe it would be more appropriate for the beneficiary to be assigned to the FQHC since the FQHC is the entity that is primarily responsible for overseeing the care for this beneficiary. Also, we do not believe it would be appropriate to hold the ACO accountable for the beneficiary in this example given that the ACO is not providing the plurality of primary care. (2) Proposed Revisions As currently drafted, § 425.404(b) conflates the question of whether a service billed by an FQHC or RHC is E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 72800 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules provided by a physician with the question of whether the service is a primary care service. As a consequence, the provision arguably does not address situations where the FQHC/RHC claim is for a primary care service as defined under § 425.20, but the NPI reported on the claim is not the NPI of a physician included in the attestation submitted under § 425.404(a). As with other types of ACO participants, under the stepwise assignment methodology we believe it is appropriate to separately address the questions of whether the service is a primary care service, whether the service is a primary care service provided by an ACO professional who is a primary care physician, and whether the service is a primary care service provided by another ACO professional. Therefore, we propose to revise § 425.404(b) to better reflect the program rules and operational practices as previously outlined. In addition, we propose to revise § 425.404(b) to reflect the proposal discussed earlier to revise § 425.402(a)(1) to include services furnished by NPs, PAs, and CNSs as services that will be considered in step 1 of the assignment process. Under these proposals, we would assign beneficiaries to ACOs that include FQHCs and RHCs in the following manner. To address the requirement under section 1899(c) of the Act that beneficiaries be assigned to an ACO based on their use of primary care services furnished by physicians, we would continue to require ACOs that include FQHCs and RHCs to identify, through an attestation (see § 425.404(a)), the physicians that provide direct patient primary care services in their ACO participant FQHCs or RHCs. Previously, we used this attestation information both for purposes of determining whether a beneficiary was ‘‘assignable’’ to an ACO and also for purposes of assigning beneficiaries to the ACO under step 1. However, we now propose to use this attestation information only for purposes of determining whether a beneficiary is assignable to an ACO. We refer to this determination under § 425.402(a)(1) as being the assignment ‘‘pre-step’’. If a beneficiary is identified as an ‘‘assignable’’ beneficiary in the assignment pre-step, then we would use claims for primary care services furnished by all ACO professionals submitted by the FQHC or RHC to determine whether the beneficiary received a plurality of his or her primary care services from the ACO under Step 1. We propose to make VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 revisions to § 425.404(b) to reflect these policies. To illustrate the assignment methodology for an ACO that includes FQHCs/RHCs we offer the following example. Assume Medicare is billed for five primary care services (all with equal allowable charges) for a particular beneficiary during a given performance year. One of those primary care services was provided by a specialist physician who is an ACO professional not affiliated with the FQHC. Two of the services were provided in an FQHC that is an ACO participant in the same ACO. Under the presumption discussed previously, these services are assumed to have been provided by NPs, PAs, or CNSs in the FQHC. The remaining two services were provided by specialist physicians billing under a common TIN but unaffiliated with the ACO. In this case, the beneficiary would be assignable to the ACO because the beneficiary had at least one primary care service with a physician who is an ACO professional. The beneficiary would be assigned to the ACO in Step 1 because two of the beneficiary’s five primary care services during the performance year were provided by NPs, PAs, or CNSs who are ACO professionals in the ACO. These two services would be considered in step 1, consistent with the proposal to include NP, PA, and CNS primary care services in step 1 of the assignment methodology. In this hypothetical example, if we did not consider the FQHC claims for the services performed by NPs, PAs, or CNSs, the beneficiary would appear to have had only three valid claims to be used for assignment and would be assigned outside the ACO under Step 2 because there is only one claim for primary care services furnished by the specialist physician who is an ACO professional in the ACO but two of the claims were for services furnished by specialist physicians outside the ACO. However, by considering the FQHC claims, the beneficiary would have five claims for primary care services and would be assigned to the ACO under step 1 because two of the services were rendered by NPs, PAs, or CNSs who are ACO professionals, in contrast to the two claims for primary care services furnished by specialist physicians outside the ACO. We have also encountered instances where an assignable beneficiary has received primary care services from FQHCs or RHCs that are not participants in an ACO. For non-ACO participant FQHCs and RHCs, we have previously assumed that all of their primary care services are performed by primary care physicians. We believe that this PO 00000 Frm 00042 Fmt 4701 Sfmt 4702 assumption, which we established in operational guidance as noted previously, has helped to assure that while beneficiaries are appropriately assigned to ACOs, we do not disrupt established relationships between beneficiaries and their care providers in FQHCs and RHCs that are not ACO participants. However, we note that this special assumption for non-ACO FQHCs/RHCs would no longer be necessary under the proposed revision to the assignment methodology at § 425.402 to consider primary care services furnished by NPs, PAs, and CNSs in step 1 of the assignment methodology rather than step 2 because: (1) As indicated earlier we believe that when a physician provides a service in an FQHC or RHC, the physician is functioning as a primary care physician, regardless of his or her specialty designation in the CMS enrollment records, and (2) there is no need to differentiate between primary care services performed by physicians and primary care services furnished by NPs, PAs, and CNSs for non-ACO FQHCs/ RHCs because the requirement under section 1899(c) of the Act that beneficiaries be assigned to an ACO based on their use of primary care services furnished by physicians does not apply to entities that are not participating in an ACO. Instead, for all FQHCs/RHCs regardless of whether or not they are ACO participants, we would we treat all such claims for primary care services that are furnished by someone other than a physician listed on the attestation submitted by the ACO under § 425.404(a) as a service furnished by an NP, PA or CNS. Therefore, all primary care services furnished by non-ACO FQHCs/RHCs would be considered in step 1 of the assignment methodology, and there would no longer be a need to assume such primary care services were provided by primary care physicians in order to achieve this result. We recognize the unique needs and challenges of rural communities and the importance of rural providers in assuring access to health care. FQHCs, RHCs and other rural providers play an important role in the nation’s health care delivery system by serving as safety net providers of primary care and other health care services in rural and other underserved areas and for low-income beneficiaries. We have attempted to develop and implement regulatory and operational policies to facilitate full participation of rural providers in the Shared Savings Program, within the statutory requirements for the program. We welcome comments on our E:\FR\FM\08DEP2.SGM 08DEP2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 proposed revisions to § 425.404(b) and our current procedures for using claims submitted by FQHCs and RHCs in the assignment methodology and suggestions on how we might further support participation of FQHCs and RHCs in the Shared Savings Program in a manner that is consistent with the statutory requirements. b. Assignment of Beneficiaries to ACOs That Include CAHs We briefly addressed certain issues regarding ACOs that include CAHs in both the proposed rule (76 FR 19538 through 19539) and final rule (76 FR 67812 through 67814) establishing the Shared Savings Program. We indicated that we determined that current Medicare payment and billing policies could generally support the participation of CAHs in ACOs. However, we explained that the situation is somewhat complicated with regard to CAHs because section 1834(g) of the Act provides for two different payment methods for outpatient CAH services. CAHs billing under section 1834(g)(1) of the Act (referred to as method I) can participate in the Shared Savings Program by establishing partnerships or joint venture arrangements with ACO professionals, just like other hospitals. CAHs billing under section 1834(g)(2) of the Act (referred to as method II) may form independent ACOs if they meet the eligibility requirements specified in the regulations. Professional services billed by method II CAHs are reported using HCPCS/CPT codes and are paid using a methodology based on the PFS. As a result, it is possible to use claims submitted by method II CAHs in the assignment methodology under § 425.402. However, method II CAH claims that include professional services require special processing because they are submitted as part of institutional claims. Therefore, we have developed operational procedures that allow these claims to be considered in the assignment process under § 425.402. Although we are not making any proposals at this time regarding the use of services billed by method II CAHs in the assignment process, we note that our procedures for incorporating claims billed by method II CAHs into the assignment methodology are available on our Web site at https://www.cms.gov/ Medicare/Medicare-Fee-for-ServicePayment/sharedsavingsprogram/ Downloads/Shared-Savings-LossesAssignment-Spec-v2.pdf (see section 3.3.) These technical specifications allow interested parties to understand how these claims are considered in the assignment methodology under VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 § 425.402 and to compare the manner in which claims submitted by method II CAHs are processed with the processing of claims submitted by other providers that also require special processing before they can be considered in the assignment process. We believe this additional information in the technical specifications allows for a better understanding of the differences in our procedures, and the reasons for these differences. One question we frequently receive from ACO applicants is about the identification numbers we use for different provider types. In general, ACO participants are identified by Medicare-enrolled TINs. However, the TINs for method II CAHs are not included in the CMS claims files. Therefore, in accordance with § 425.204(c)(5)(ii), we require that as part of their application, ACO applicants also include the CCNs for any CAHs that are included as ACO participants. In the assignment methodology under § 425.402, we use the CCN as the unique identifier for an individual method II CAH. c. Assignment of Beneficiaries to ACOs That Include ETA Hospitals After finalizing the beneficiary assignment rules established at § 425.400 through § 425.404 in the November 2011 final rule (76 FR 67851 through 76 FR 67870), we received inquiries regarding whether primary care services performed by physicians at ETA hospitals would be included in the assignment of beneficiaries to ACOs. ETA hospitals are hospitals that, under section 1861(b)(7) of the Act and § 415.160 of our regulations, have voluntarily elected to receive payment on a reasonable cost basis for the direct medical and surgical services of their physicians in lieu of Medicare PFS payments that might otherwise be made for these services. As a result of this election, we do not receive separate claims for such physician services furnished in ETA hospitals. However, ETA hospitals do bill separately for their outpatient hospital facility services, and these bills include the information needed to assign beneficiaries to an ACO. Therefore, we have developed operational instructions and processes (available at Section 3.5 of the specification document available on our Web site at https://www.cms.gov/ Medicare/Medicare-Fee-for-ServicePayment/sharedsavingsprogram/ Downloads/Shared-Savings-LossesAssignment-Spec-v2.pdf) that enable us to include primary care services performed by physicians at ETA PO 00000 Frm 00043 Fmt 4701 Sfmt 4702 72801 hospitals in the assignment of beneficiaries to ACOs under § 425.402. • We include TINs and other identifiers (including the hospital CCN) for ETA hospitals in the assignment algorithm in both steps 1 and 2 of the assignment process using claims from the outpatient (institutional) file. • It is necessary for us to use institutional claims submitted by ETA hospitals in the assignment process because ETA hospitals are paid for physician professional services on a reasonable cost basis through their cost reports and no other claim is submitted for such services. However, ETA hospitals bill us for their separate facility services when physicians and other practitioners provide services in the ETA hospital and the institutional claims submitted by ETA hospitals include the HCPCS code for the services provided. We use the HCPCS code included on this institutional claim to identify whether a primary care service was rendered to a beneficiary in the same way as for any other claim. • To determine the rendering physician for ETA institutional claims, we use the NPI listed in the ‘‘other provider’’ NPI field. • Then we use PECOS to obtain the CMS specialty for the NPI listed on the ETA institutional claim. • These institutional claims do not include allowed charges, which are necessary to determine where a beneficiary received the plurality of primary care services as part of the assignment process. Accordingly, we use the amount that would otherwise be payable under the PFS for the applicable HCPCS code, in the applicable geographic area as a proxy for the allowed charges for the service. We believe it is appropriate to use ETA institutional claims for purposes of identifying primary care services furnished by physicians in ETA hospitals in order to allow these services to be included in the stepwise methodology for assigning beneficiaries to ACOs. We believe including these claims increases the accuracy of the assignment process by helping ensure that beneficiaries are assigned to the ACO or other entity that is actually managing the beneficiary’s care. ETA hospitals are often located in underserved areas and serve as providers of primary care for the beneficiaries they serve. We believe it is appropriate that their patients benefit from the opportunity for ETA hospitals to fully participate in the Shared Savings Program. Therefore, we propose to revise § 425.402 by adding a new paragraph (c) to provide that when considering services furnished by E:\FR\FM\08DEP2.SGM 08DEP2 72802 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules physicians in ETA hospitals in the assignment methodology, we would use the amount payable under the PFS for the specified HCPCS code as a proxy for the amount of the allowed charges for the service. In addition, because we are able to consider claims submitted by ETA hospitals as part of the assignment process, we also propose to amend § 425.102(a) to add ETA hospitals to the list of ACO participants that are eligible to form an ACO that may apply to participate in the Shared Savings Program. We invite comments on the use of institutional claims submitted by ETA hospitals for purposes of identifying primary care services furnished by physicians in order to allow these services to be considered in the assignment of beneficiaries to ACOs. We also invite comments on whether there are any other types of potential ACO participants that submit claims representing primary care services that CMS should also consider including in (or excluding from) its methodology for assigning beneficiaries to ACOs participating in the Shared Savings Program. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 6. Effective Date for Finalization of Proposals Affecting Beneficiary Assignment As indicated in section II.A. of this proposed rule, the effective date for the final rule would be 60 days after the final rule is published. However, we propose that any final policies that affect beneficiary assignment would be applicable starting at the beginning of the next performance year. We believe that implementing any revisions to the assignment methodology at the beginning of a performance year is reasonable and appropriate because it would permit time for us to make the necessary programming changes and would not disrupt the assessment of ACOs for the current performance year. Moreover, we propose to adjust all benchmarks at the start of the first performance year in which the new assignment rules are applied so that the benchmark for the ACO reflects the use of the same assignment rules as would apply in the performance year. For example, any new beneficiary assignment policies that might be included in a final rule issued in early 2015 would apply to beneficiary assignment starting at the beginning of the following performance year, which in this example would be January 1, 2016. In this hypothetical example, we would also adjust performance benchmarks that apply for the 2016 and subsequent performance years, as VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 applicable, to reflect changes in our assignment methodology. In addition, we would not retroactively apply any new beneficiary assignment policies to a previous performance year. For example, if the assignment methodology is applied beginning in 2016, we would not use it in mid-2016 to reconcile the 2015 performance year. In other words, the assignment methodology used at the start of a performance year would also be used to conduct the final reconciliation for that performance year. F. Shared Savings and Losses 1. Background Section 1899(d) of the Act establishes the general requirements for payments to participating ACOs. Specifically, section 1899(d)(1)(A) of the Act provides that ACO participants will continue to receive payment ‘‘under the original Medicare fee-for-service program under parts A and B in the same manner as they would otherwise be made,’’ and that an ACO is eligible to receive payment for shared Medicare savings provided that the ACO meets both the quality performance standards established by the Secretary, and demonstrates that it has achieved savings against a benchmark of expected average per capita Medicare FFS expenditures. Additionally, section 1899(i)(3) of the Act authorizes the Secretary to use other payment models in place of the one-sided model outlined in section 1899(d) of the Act as long as the Secretary determines these other payment models will improve the quality and efficiency of items and services furnished to Medicare beneficiaries without additional program expenditures. In our November 2011 final rule (76 FR 67904 through 67909) establishing the Shared Savings Program, we considered a number of options for using this authority. For example, commenters suggested we consider such options as blended FFS payments, prospective payments, episode/case rate payments, bundled payments, patient centered medical homes or surgical homes payment models, payments based on global budgets, full or partial capitation, and enhanced FFS payments for care management. However, in the November 2011 final rule (76 FR 67905), we opted not to use our authority under section 1899(i) of the Act to integrate these kinds of alternative payment models at that time, noting that many of the suggested payment models were untested. We expressed concern that immediately adopting untested and/or unproven models with which we had PO 00000 Frm 00044 Fmt 4701 Sfmt 4702 little experience on a national scale could lead to unintended consequences for the FFS beneficiaries we serve or for the health care system more broadly. We also noted that the Affordable Care Act had established a new Center for Medicare and Medicaid Innovation (Innovation Center) at CMS. The Innovation Center is charged with developing, testing, and evaluating innovative payment and service delivery models in accordance with the requirements of section 1115A of the Act. Many of the approaches suggested by stakeholders and commenters on the Shared Savings Program rule are the subject of ongoing testing and evaluation by the Innovation Center. In the November 2011 final rule (76 FR 67905), we noted that while we did not yet have enough experience with novel payment models to be comfortable integrating them into the Shared Savings Program at the time, we anticipated that what we learned from these models might be incorporated into the program in the future. 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: A one-sided risk model (Track 1) that incorporates 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 qualify to share in savings but are not responsible for losses. Under the two-sided model, ACOs qualify to share in savings with an increased sharing rate, but also must take on risk for sharing in losses. In the November 2011 final rule (76 FR 67904), we discussed our belief that offering these two 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 in losses. We expressed 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. Another reason we included the option for a one-sided track with no downside risk was our belief that this model would be accessible to and attract smaller group participation. Indeed, commenters persuaded us that ACOs new to the E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules accountable care model—particularly small, rural, safety net, and physicianonly ACOs—would benefit from spending time under a one-sided model before being required to accept performance-based risk (76 FR 67907). We also noted, however, that while 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). Therefore, we used our authority under section 1899(i)(3) of the Act to create a performance-based risk option, Track 2, where ACOs would not only be eligible to share in savings, but also must share in losses. We believed a performancebased risk option would have the advantage of providing more experienced ACOs an opportunity to enter a sharing arrangement that provides greater reward for greater responsibility. Commenters supported our belief that models where ACOs bear a degree of financial risk hold the potential to induce more meaningful systematic change. This input from commenters underscored our own views regarding the importance of offering a pathway for ACOs to transition from the one-sided model to risk-based arrangements. These comments persuaded us that having Track 1 as a shared savings only option, while offering Track 2 as a shared savings/ losses model, would be the most appropriate means to achieve our objectives. Thus, we made final these two tracks which offered the two-sided model under Track 2 to ACOs willing and able to take on performance-based risk in exchange for a greater share of any savings, and also a shared savings only model under Track 1 for the duration of an ACO’s first 3-year agreement period for entities needing more experience before taking on risk. In the final rule, we required that ACOs that participate in Track 1 during their first agreement period must transition to Track 2 for all subsequent agreement periods. We noted our belief that offering the two tracks, but requiring a transition to Track 2 in subsequent agreement periods, would increase interest in the Shared Savings Program by providing a gentler ‘‘on ramp’’ while maintaining the flexibility for more advanced ACOs to take on greater performance-based risk in return for a greater share of savings immediately upon entering the program (76 FR 67907). Therefore, as specified in the November 2011 final rule (76 FR 67909), ACOs may enter the program in one of two tracks: VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 Track 1: Under Track 1, the ACO operates under the one-sided shared savings only model for its initial 3-year agreement period. Track 2: Under Track 2, the ACO operates under the two-sided shared savings/losses model for the 3-year agreement period. Although most of the program requirements that apply to ACOs in Track 1 and Track 2 are the same, the financial reconciliation methodology was designed so that ACOs that accept performance-based risk under Track 2 would have the opportunity to earn a greater share of savings. Thus, the same eligibility criteria, beneficiary assignment methodology, benchmark and update methodology, quality performance standards, data reporting requirements, data sharing provisions, monitoring for avoidance of at-risk beneficiaries, provider screening, and transparency requirements apply to ACOs under both models. However, the financial reconciliation methodology was modified for Track 2 in order to allow an opportunity for ACOs to earn a greater share of savings, in exchange for their willingness to accept performance-based risk. Specific differences between the two tracks include the minimum savings rate (MSR), the sharing rate based on quality performance, and the performance payment limit. Table 7 summarizes the differences between the existing onesided and two-sided models. In this section, we discuss various proposals for modifications to the program tracks and the financial model based on our experience to date, and propose to offer organizations an additional two-sided model (Track 3) as a further option for participation. 2. Modifications to the Existing Payment Tracks a. Overview Because we believe that payment models where ACOs bear a degree of financial risk have the potential to induce more meaningful systematic change in the behavior of providers and suppliers, it was our intent in the November 2011 final rule to establish the Shared Savings Program to encourage ACOs not only to enter the program, but also to progress to increased risk. Therefore, as discussed previously, we established a requirement that an ACO entering the program under Track 1 may only operate under the one-sided model for its first agreement period. For subsequent agreement periods, an ACO would not be permitted to operate under the one-sided model (§ 425.600(b)). If PO 00000 Frm 00045 Fmt 4701 Sfmt 4702 72803 the ACO wishes to participate in the program for a second agreement period, it must do so under Track 2 (shared savings/losses). Additionally, an ACO experiencing a net loss during its initial agreement period may reapply to participate in the program, but the ACO must identify in its application the cause(s) for the net loss and specify what safeguards are in place to enable the ACO to potentially achieve savings in its next agreement period (§ 425.600(c)). In our view, this allowance for a full first agreement period under the one-sided model and required transition to performancebased risk in the subsequent agreement period struck a balance between our intent to encourage program participation by small, rural, or physician-only ACOs with the need to ensure that ACOs quickly transition to taking downside risk. We are encouraged by the popularity of the Shared Savings Program, particularly the popularity of the onesided model. Over 98 percent of ACOs participating in the Shared Savings Program (over 330 ACOs) have chosen Track 1, with only 5 ACOs participating under Track 2 as a starting option. About half of the ACOs participating in the program are small, provider-based, or rural ACOs, each having less than 10,000 assigned beneficiaries. We continue to believe that one 3-year agreement period under Track 1 is sufficient for many organizations to progress along the on-ramp to performance-based risk. We also continue to believe, as discussed in the November 2011 final rule (76 FR 67907), 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, so it remains our intent to continue to encourage forward movement up the ramp. However, based on our experience with the program, we recognize that many of the organizations that are currently participating in the program are risk averse and lack the infrastructure and readiness to manage increased performance-based risk. Given the short time period between finalization of the November 2011 final rule and the first application cycles, is it our impression that many ACOs, particularly smaller ACOs, focused initially on developing their operational capacities rather than on the implementation of care redesign processes. Therefore, we have some concerns about the slope of the on-ramp to performance-based risk created by the two existing tracks and the policy that requires ACOs in Track 1 (shared E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 72804 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules savings only) to transition to Track 2 (shared savings/losses) for their second agreement period. We are particularly concerned that the current transition from one- to two-sided risk may be too steep for some organizations, putting them into a situation where they must choose between taking on more risk than they can manage or dropping out of program participation altogether. For instance, we believe that some smaller and less experienced ACOs are likely to drop out of the program when faced with this choice, because the smaller an ACO’s assigned beneficiary population, the greater the chances that shared losses could result from normal variation. Also, we are aware of the concern among some stakeholders that one agreement period under the onesided model may be not be a sufficient amount of time for some ACOs to gain the level of experience with population management or program participation needed for them to be comfortable taking on performance-based risk. For some organizations, having additional experience in the Shared Savings Program under Track 1 could help them be in a better position to take on performance-based risk over time. We are also concerned that the existing features of Track 2 may not be sufficiently attractive to ACOs contemplating entering a risk-based arrangement. Finally, some ACOs have reported that establishing the repayment mechanism required to participate under the two-sided model is difficult and ties up capital that otherwise could be used to implement the care processes necessary to succeed in the program. We continue to believe the requirement that ACOs entering the two-sided model demonstrate an adequate repayment mechanism is important for protecting the Medicare program. However, as discussed in more detail later in this section, we are proposing certain modifications to the repayment mechanism requirements applicable to ACOs under the program’s two-sided model(s) (Track 2 and proposed Track 3). These proposed modifications are based on our experience with the repayment mechanism requirements and are intended to reduce the burden of these requirements on ACOs. Hence, we are revisiting our policies related to Tracks 1 and 2 in order to smooth the on ramp for organizations participating in the Shared Savings Program. First, we propose to remove the requirement at § 425.600(b) for Track 1 ACOs to transition to Track 2 after their first agreement period. Second, we propose to modify the financial thresholds under Track 2 to VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 reduce the level of risk that ACOs must be willing to accept. Taken together, we believe there are a number of advantages to smoothing the on ramp by implementing these proposed policies. We believe that removing the requirement that ACOs transition to a two-sided model in their second agreement period will provide organizations, especially newly formed, less experienced, and smaller organizations, more time to gain experience in the program before accepting performance-based risk. In particular, we believe the proposed changes would encourage continued participation in the program by potentially successful ACOs that would otherwise drop out because of the requirement to transition to the twosided model in their second agreement period. We further believe the proposal to allow organizations to gain more experience under a one-sided model before moving forward to a two-sided model would encourage earlier adoption of the shared savings model by organizations concerned about being required to transition to performancebased risk before realizing savings under a one-sided model. We believe incorporating the opportunity for ACOs to remain in Track 1 beyond their first agreement period could have a beneficial effect with respect to the care that beneficiaries receive. Specifically, to the extent that more ACOs are able to remain in the program, a potentially broader group of beneficiaries will have access to better coordinated care through an ACO. In addition, allowing ACOs additional time to make the transition to performance-based risk would reduce the chances that a highperforming ACO, which believes that it is not yet ready to assume greater financial risk, will either cease to participate in the program to avoid risk or find it necessary to engage in behaviors primarily intended to minimize that risk rather than improve patient care. Further, we believe that ACOs that accept financial responsibility for the care of beneficiaries have the greatest beneficial effects for the Medicare program and its beneficiaries. Therefore, we expect that ACOs participating in the Shared Savings Program move in the direction of accepting performancebased risk. Thus, while we believe it is appropriate to offer additional time for ACOs under a one-sided model, we also believe there should be incentives for participants to voluntarily take on additional financial risk. There should also be disincentives to discourage organizations from persisting in a PO 00000 Frm 00046 Fmt 4701 Sfmt 4702 shared savings only risk track indefinitely. Therefore, we believe that distinguishing the financial attractiveness of the one-sided model from the two-sided model by dropping the sharing rate in Track 1 for ACOs participating in Track 1 for a subsequent agreement period and modifying the risk inherent in Track 2 would signal to ACOs the importance of moving toward performance-based risk and encourage ACOs to voluntarily enter the two-sided model as soon as they are able. Finally, we believe that adopting restrictions to prevent organizations that have not achieved certain minimum performance requirements with respect to cost and quality of care, based on their experience to date, from obtaining additional agreement periods under Track 1 can serve as an appropriate program safeguard against entities remaining in the program that are not fully committed to improving the quality and efficiency of health care service delivery. b. Proposals Related to Transition From the One-Sided to Two-Sided Model We considered several options to better balance both our intent to encourage continued participation by ACOs that entered the program under the one-sided model but that are not ready to accept performance-based risk after 3 years of program participation with our concern that allowing a shared savings only option will discourage ACOs capable of taking risk from moving to a two-sided model. We considered the following options: (1) Revising the regulations to allow ACOs that enter the program under the onesided model to continue participation in Track 1 for more than one agreement period; (2) extending the initial 3-year agreement period for an additional 2 years for ACOs that enter the program under Track 1, but that do not believe that they are ready to advance to a riskbased track; and (3) allowing ACOs to continue participation in Track 1 for more than one agreement period, but revising the one-sided model to decrease the financial attractiveness of the model, so as to encourage ACOs ready to accept performance-based risk to transition to a two-sided model. Among these options, we believe the third option offers a good balance of encouraging continued participation in addition to encouraging progression along the on-ramp to performance-based risk. Therefore, we propose to remove the requirement at § 425.600(b) that ACOs that enter the program under Track 1 (one-sided model) must transition to Track 2 (two-sided model) after one agreement period, if they wish E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules to continue participating in the Shared Savings Program. Instead, we propose to revise the regulation to permit ACOs that have completed a 3-year agreement under Track 1 to enter into one additional 3-year agreement under Track 1. We believe that continued participation in the Shared Savings Program, generally, should be made available to ACOs that demonstrate they have been compliant with the program requirements, or are working through corrective action plans to CMS’ satisfaction, with safeguards in place to ensure they will meet program requirements in the future. In section II.C.3. of this proposed rule, we proposed criteria for determining whether to allow ACOs that are currently participating in the program to renew their participation agreements for subsequent agreement periods. We seek to encourage the continued participation of ACOs that are successful and have the potential to move toward accepting greater responsibility for the care of their beneficiaries, but also encourage their progression along the risk continuum. Thus, we propose to make the option of participating in Track 1 for a second agreement period available to only those Track 1 ACOs that—(1) meet the criteria established for ACOs seeking to renew their agreements (as proposed in section II.C.3 of this proposed rule, including demonstrating to CMS that they satisfied the quality performance requirements under Subpart F such that they were eligible to share in savings in at least one of the first two performance years of the previous agreement period) and (2) in at least one of the first two performance years of the previous agreement period, they did not generate losses in excess of the negative MSR. For example, assume a Track 1 ACO has 15,000 assigned beneficiaries with an MSR of 2.7 percent. If we calculate that this ACO’s expenditures exceeded the ACO’s benchmark by 2.7 percent or more in both of the first two performance years, then CMS would not accept this ACO’s request to renew its agreement under the one-sided model. If the ACO’s financial performance results in expenditures in excess of the negative MSR in only one of the first two performance years, then we would accept this ACO’s request to renew its participation agreement under the onesided model, provided all other requirements for renewal were satisfied. We believe that requiring ACOs to meet these requirements in order to remain in Track 1 will prevent consistently poor performers from being able to seamlessly continue in program VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 participation under the one-sided model while permitting some leeway for ACOs that are new to the program and may have had some difficulty in cost or quality performance in one of the two first performance years. We also believe that these additional eligibility criteria serve as an important safeguard to reduce the potential for ACOs to participate in the program for reasons other than a commitment to improving the value of health care services. We recognize that because our assessment would be based on only 2 years of data, we would not have a complete picture of the ACO’s performance during the agreement period. That is, an ACO may financially perform very poorly, exceeding the negative MSR in its first and second performance years, but demonstrate a trend in a direction that could ultimately lead to better performance in the third year. Under our proposal this ACO would not be permitted to renew its agreement under Track 1 for a second agreement period. However, an argument could be made that this ACO simply needed the additional time under a one-sided model to gain experience and start improving. We therefore seek comment on whether we should also consider the direction the ACO’s performance is trending when determining whether to permit renewal of an ACO’s participation agreement under Track 1. We also seek comment on whether other options for such ACOs, short of refusing their participation in a second agreement period under Track 1, would better serve program goals. We note that such ACOs would not be precluded from renewing their participation agreement in order to participate under a two-sided risk track, consistent with § 425.600(c). We also emphasize that in addition to meeting the specific criteria to be eligible to continue in Track 1, the ACO must also demonstrate that it meets the requirements to renew its agreement under proposed § 425.224, which would include the requirement that the ACO establish that it is in compliance with the eligibility and other requirements of the Shared Savings Program. In addition, as part of our proposal to allow ACOs to participate in a second agreement period under the one-sided model, we propose 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. As a result, the maximum sharing rate for an ACO in a second agreement period under Track 1 would be 40 percent. PO 00000 Frm 00047 Fmt 4701 Sfmt 4702 72805 Accordingly, in addition to our proposed change to § 425.600(b) to allow ACOs to participate under Track 1 for a second agreement period, we propose to modify § 425.604(d) to provide that the maximum sharing rate during a second agreement period under Track 1 will be 40 percent. As a result, ACOs that continue to participate under the one-sided model and are eligible for shared savings will receive a smaller share of those savings compared to ACOs participating under the one-sided model in their first agreement period and ACOs participating under a twosided model. We believe permitting one additional agreement period under Track 1, but at a reduced sharing rate, will encourage the continued participation of ACOs that are successful and have the potential to move toward accepting greater responsibility for the care of their beneficiaries, but also encourage their progression along the risk continuum. However, as discussed later in this section, we also recognize that limiting ACOs to only two agreement periods under Track 1 may encourage ACOs to progress along the on-ramp to risk earlier than they otherwise might if they were permitted to remain under the onesided model for several agreement periods. We further note that this option to participate under the one-sided model agreement in a subsequent agreement period is only available to ACOs that have completed or are in the process of completing an agreement under the onesided model. That is, we will not permit an ACO under a two-sided model to subsequently participate under a onesided model. We seek comment on this proposal. In particular, we request input on whether a 40 percent sharing rate in a second agreement period under the one-sided model is sufficient to incentivize an ACO that may need more time to prepare to take on two-sided performance-based risk while also encouraging ACOs that are ready to take on performance-based risk to choose to continue participation in the Shared Savings Program under a two-sided model. We also considered other variations and options for allowing ACOs additional time in the one-sided model. For example, we considered allowing ACOs to continue under Track 1 for a second agreement period without any changes to the sharing rate (that is, retaining the 50 percent sharing rate in the second agreement period); however, we do not believe this approach would provide sufficient incentive for ACOs to be moving in the direction of adopting E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 72806 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules performance-based risk. We continue to believe that participating in a model with two-sided risk offers stronger incentives for ACOs to improve the quality of care and reduce costs. Currently, ACOs in their first agreement period under Track 1 may share in up to 50 percent of the savings generated for the Medicare program. We are concerned that if ACOs are able to continue to receive up to 50 percent of savings in a second agreement period there may be insufficient incentive for many ACOs that may be ready to take on two-sided risk to move to a track with two-sided risk after their first agreement period. As a result, under our proposal we would reduce the sharing rate for ACOs participating in Track 1 for a second agreement period in order to discourage prolonged participation under Track 1 and encourage progression along the on ramp to risk where an ACO may qualify for a higher sharing rate. We also considered permitting ACOs to participate in multiple agreement periods under Track 1 and reducing the maximum sharing rate by 10 percentage points for each subsequent agreement. Such a policy may encourage more ACOs to continue to participate in the program, but also may reduce the urgency for ACOs to progress quickly along the on-ramp to risk if they are permitted to remain under the one-sided model for several agreement periods. We also considered offering the opportunity to ACOs participating under Track 1 to extend their initial 3year participation agreement under Track 1 by an additional 2 years. However, we note that under this option, we would not be able to rebase the benchmark, making it more likely that organizations would achieve savings without further improvements in care redesign; yet at the same time, it would be more difficult for ACOs with losses to turn around their performance. Moreover, we are concerned that limiting ACOs to only 2 additional years under Track 1 may not be sufficient for all ACOs to take the steps necessary to prepare to move to performance-based risk. We seek comment on our proposal to permit ACOs to participate under Track 1 for a second agreement period and to reduce the maximum sharing rate to 40 percent for ACOs participating under Track 1 for a second agreement period. We also specifically seek comments on the other options we considered, including extending an ACO’s Track 1 agreement period for an additional 2years rather than permitting two 3-year agreement periods under Track 1, permitting ACOs to participate in a VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 second agreement period under Track 1 with no change to the sharing rate, and offering multiple agreement periods under Track 1 while reducing the sharing rate by 10 percentage points for each subsequent agreement. In the November 2011 final rule, we also addressed the possibility that an ACO may terminate or be terminated from participation in the Shared Savings Program, and the consequences for the ACO’s choice of tracks in the event it reapplies to the program. We finalized a policy that would permit such ACOs to reapply to participate in the program again only after the date on which the term of their original participation agreement would have expired if the ACO had not been terminated (§ 425.222(a)). Under § 425.222(b), to be eligible to participate in the Shared Savings Program after a previous termination, the ACO must demonstrate in its application that it has corrected the deficiencies that caused it to be terminated and that it has processes in place to ensure it will remain in compliance with the terms of the new participation agreement. We note that, all applicants undergo screening with regard to their program integrity history that may result in denial of the application (§ 425.304(b)). We also provided that an ACO under the onesided model whose participation agreement was previously terminated may reenter the program only under the two-sided model, unless it was terminated less than half–way through its agreement period under the onesided model, in which case the ACO would be allowed to reenter the onesided model (§ 425.222(c)). An ACO under Track 2 whose agreement was terminated may only re-apply to participate in Track 2 (§ 425.222(c)). In light of our proposed revisions to § 425.600 to permit an ACO to participate under Track 1 for a second agreement period, we are proposing to make conforming changes to § 425.222(c) to permit previously terminated Track 1 ACOs to reapply under the one-sided model. We propose that, consistent with our existing policy under § 425.222(c), an ACO whose agreement was terminated less than half way through the term of its participation agreement under Track 1 would be permitted to reapply to the one-sided model as if it were applying for its first agreement period. If the ACO is accepted to reenter the program, the maximum sharing rate would be 50 percent. However, in the case of an ACO that was terminated more than half way through its initial agreement under the one-sided model, we propose to revise § 425.222(c) to permit this ACO to PO 00000 Frm 00048 Fmt 4701 Sfmt 4702 reapply for participation under the onesided model, but to provide that the ACO would be treated as if it were applying for a second agreement period under Track 1. Thus, if the ACO is approved to participate in the program again, the reduced sharing rate of 40 percent would apply. An ACO whose prior agreement under Track 2 was terminated would still be precluded from applying to participate under Track 1. We seek comment on this proposal. c. Proposals for Modifications to the Track 2 Financial Model To complement the proposals to smooth the on ramp to risk, we are also proposing to modify the financial model under Track 2 for ACOs choosing this two-sided option to further encourage ACOs to accept increased performancebased risk. Specifically, we are proposing to modify the threshold that Track 2 ACOs must meet or exceed in order to share in savings (minimum savings rate (MSR)) or losses (minimum loss rate (MLR)). We believe this modification would improve the track’s attractiveness for ACOs, particularly for ACOs that may be cautious about entering a performance-based payment arrangement such as some ACOs with smaller assigned beneficiary populations or those with less experience with managing the health of populations across sites of care. Track 2 was designed to allow more advanced ACOs the opportunity to take on greater performance-based risk in exchange for greater reward immediately, as early as their first agreement period. In the November 2011 final rule (76 FR 67904 through 67905), we discussed concerns that had been raised about allowing ACOs to participate immediately in a risk-based arrangement. Specifically, ACOs might try to avoid at-risk beneficiaries in order to minimize the possibility of realizing losses against their benchmarks or might be unable to repay the Medicare program if they have losses. We explained our belief that the use of retrospective beneficiary assignment for financial reconciliation and the program’s beneficiary notification requirements would be sufficient safeguards against the prospect that ACOs participating in the two-sided model might try to avoid at-risk beneficiaries (76 FR 67904). Further, the requirement that ACOs participating in Track 2 establish an adequate repayment mechanism provides further assurance about their ability to repay shared losses to the Medicare program. Currently, ACOs participating in Track 2 are eligible to share in a greater E:\FR\FM\08DEP2.SGM 08DEP2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules percentage of savings than ACOs participating in Track 1, but are also accountable for a share of losses compared to their benchmark. ACOs may elect to enter Track 2 in their first 3-year agreement period, or after completing one agreement period under Track 1. Under the Track 2 financial model, an ACO must have savings that meet or exceed a 2 percent threshold to be eligible to share in savings or additional expenditures that meet or exceed a 2 percent threshold to be held accountable for sharing in losses (§ 425.606(b)). As compared to the MSR used for Track 1, this fixed percentage generally offers a lower savings threshold for Track 2 ACOs to meet in order to share in savings, and was established in recognition of the Track 2 ACOs’ willingness to assume the risk of incurring shared losses (76 FR 67929). In contrast, although organizations participating under the Track 1 financial model must also meet or exceed a MSR in order to be eligible to share in savings (§ 425.604(b)), the MSR under the one-sided model is established for each ACO using increasing nominal confidence intervals (CI) based on the size of the beneficiary population assigned to the ACO. Thus, 72807 an ACO with the minimum 5,000 assigned beneficiaries would have a MSR based on a 90 percent CI; an ACO with 20,000 assigned beneficiaries would have a MSR based on a 95 percent CI and an ACO with 50,000 assigned beneficiaries would have an MSR based on a 99 percent CI. In addition, the MSR under the one-sided model is not allowed to fall under 2 percent for larger ACOs. Table 5 displays the MSR an ACO participating under Track 1 would have to achieve before savings could be shared based on its number of assigned beneficiaries. TABLE 5—MINIMUM SAVINGS RATE FOR TRACK 1 MSR (low end of assigned beneficiaries) (percent) Number of beneficiaries 5,000–5,999 ............................................................................................................................................. 6,000–6,999 ............................................................................................................................................. 7,000–7,999 ............................................................................................................................................. 8,000–8,999 ............................................................................................................................................. 9,000–9,999 ............................................................................................................................................. 10,000–14,999 ......................................................................................................................................... 15,000–19,999 ......................................................................................................................................... 20,000–49,999 ......................................................................................................................................... 50,000–59,999 ......................................................................................................................................... 3.9 3.6 3.4 3.2 3.1 3.0 2.7 2.5 2.2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 60,000 + ................................................................................................................................................... As we described in the rulemaking establishing the Shared Savings Program (76 FR 67927), the MSR thresholds that apply under Track 1 were established on the basis of standard inferential statistics and provide confidence that, once the savings achieved by the ACO meet or exceed the MSR, the change in expenditures represents actual performance improvements by the ACO as opposed to normal variations. Our experience with the program suggests that some ACOs, particularly ACOs with small assigned populations or those with less experience, are hesitant to elect Track 2 given the risk of losses and their inexperience with population management. Therefore, we have explored ways to reduce financial risk for ACOs participating under Track 2. One way to reduce financial risk under Track 2 would be to modify the current MSR and MLR under this track. By increasing the MSR and MLR thresholds beyond the current 2 percent, financial risk would be reduced for Track 2 ACOs because they would have to incur higher losses in order to be held accountable for shared losses. However, an ACO would also have to achieve a VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 greater level of savings under a higher MSR in order to share in savings. In exploring potential modifications to the MSR and MLR under Track 2, we also considered increasing them using a fixed percent. For example, we considered using an MSR and MLR threshold of 3 or 4 percent that would apply to all ACOs participating in Track 2. After considering these options, we concluded that using the same methodology currently used to establish the MSR under the one-sided model, which is based upon the size of the beneficiary population assigned to the ACO, to establish both the MSR and MLR under Track 2, would serve two purposes. Specifically, in comparison with the existing fixed 2 percent MSR and MLR that currently apply to ACOs in Track 2, it would further protect ACOs against the risk of losses likely due to normal variation while offering further protection to the Medicare program from paying for shared savings likely due to normal variation. The methodology that we used to establish the MSRs for Track 1 based upon the size of the assigned beneficiary PO 00000 Frm 00049 Fmt 4701 Sfmt 4702 MSR (high end of assigned beneficiaries) (percent) 3.6 3.4 3.2 3.1 3.0 2.7 2.5 2.2 2.0 2.0 population was intended to provide confidence that shared savings would not be earned by random chance alone (76 FR 67928). Similarly, basing the MLR under Track 2 on the size of an ACO’s assigned beneficiary population would serve to statistically protect ACOs with smaller assigned populations from losses that result from normal variation, and we believe this change would make it more likely that such ACOs will be willing to take on performance-based risk under Track 2. Therefore, we are proposing to retain the existing features of Track 2 with the exception of revising § 425.606(b) to allow the MSR and MLR to vary based on the ACO’s number of assigned beneficiaries according to the methodology outlined for setting the MSR under the one-sided model in § 425.604(b) as shown in Table 6. We believe that by building in greater downside protection, this proposal may help smooth the on-ramp to performance-based risk for ACOs, particularly ACOs with smaller assigned populations, making the transition to a two-sided model more attractive. E:\FR\FM\08DEP2.SGM 08DEP2 72808 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules TABLE 6—PROPOSED MINIMUM SAVINGS RATE AND MINIMUM LOSS RATE FOR TRACK 2 MSR/MLR (low end of assigned beneficiaries) (percent) Number of beneficiaries 5,000–5,999 ............................................................................................................................................. 6,000–6,999 ............................................................................................................................................. 7,000–7,999 ............................................................................................................................................. 8,000–8,999 ............................................................................................................................................. 9,000–9,999 ............................................................................................................................................. 10,000–14,999 ......................................................................................................................................... 15,000–19,999 ......................................................................................................................................... 20,000–49,999 ......................................................................................................................................... 50,000–59,999 ......................................................................................................................................... 3.9 3.6 3.4 3.2 3.1 3.0 2.7 2.5 2.2 60,000 + ................................................................................................................................................... With the proposed addition of Track 3 to the program, discussed later in this section, Track 2 can be viewed as a first step for some organizations to accepting performance-based risk. As such, providing an MLR that is more protective of ACOs may attract greater participation in performance-based risk under Track 2, particularly by ACOs with smaller assigned populations or those with less experience managing populations. We seek comments on this proposal as well as other options that could potentially make Track 2 more financially attractive to ACOs. We request that commenters indicate why they believe an alternative option would be more attractive to ACOs than the one proposed and the specific reason why the option would be beneficial. We also request that commenters consider whether additional safeguards should be implemented to appropriately protect the Medicare Trust Fund, if an alternative approach were to be adopted. We also seek comment on whether we should consider implementing the prospective assignment approach proposed for Track 3 under Track 2 and whether doing so would enhance or erode the incentives for organizations to take on risk. 3. Creating Options for ACOs That Participate in Risk-Based Arrangements mstockstill on DSK4VPTVN1PROD with PROPOSALS2 a. Overview As noted previously, we are pleased with the overall interest in the Shared Savings Program. However, we would also like to increase interest in the program by expanding the range of opportunities and models for organizations to improve the cost and quality of care delivered to Medicare FFS beneficiaries by assuming greater financial risk for their assigned beneficiaries. VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 In January 2012, the Innovation Center began testing the Pioneer ACO Model. The Shared Savings Program and the Pioneer ACO Model incorporate the same fundamental structure with a group of healthcare providers and suppliers coming together to form an ACO that agrees to be accountable for the care provided to a population of Medicare FFS beneficiaries. The quality reporting requirements are the same for Shared Savings Program ACOs and Pioneer ACOs. However, the Pioneer ACO Model and Shared Savings Program differ on several key elements, including the methodologies used for benchmarking, payment reconciliation, and assignment. For instance, the Pioneer ACO Model offers ACOs a greater sharing rate (up to 70 percent based on quality performance in performance year 2 of the model) compared to the Shared Savings Program, which currently offers a maximum sharing rate of 60 percent for ACOs choosing Track 2. Under the Pioneer ACO Model, beneficiaries are aligned to a Pioneer ACO prospectively at the start of each performance year and can only be removed from the list of aligned beneficiaries retrospectively based on certain exclusion criteria. In contrast, under the Shared Savings Program, beneficiaries are assigned to an ACO under Track 1 or Track 2 based upon a preliminary prospective assignment methodology with retrospective reconciliation after the end of the performance year that ultimately assigns a beneficiary to the ACO based on whether ACO professionals provided the plurality of primary care services to that beneficiary during the performance year. All Pioneer ACOs must agree to accept performance-based risk, and the financial risk increases over the course of their agreement period, whereas ACOs participating in the Shared Savings Program have an option to participate in a shared savings only PO 00000 Frm 00050 Fmt 4701 Sfmt 4702 MSR/MLR (high end of assigned beneficiaries) (percent) 3.6 3.4 3.2 3.1 3.0 2.7 2.5 2.2 2.0 2.0 model (Track 1) and for those ACOs that choose to accept performance-based risk (Track 2), the shared loss rate for which the ACO is at risk remains same throughout the agreement period. There are also a number of other differences between the two initiatives. Key features of the Pioneer ACO Model are explained in the Request for Application available online at https://innovation.cms.gov/ Files/x/Pioneer-ACO-Model-RequestFor-Applications-document.pdf, and an updated table on payment arrangements is available online at https:// innovation.cms.gov/Files/x/PioneerACO-Model-Alternative-PaymentArrangements-document.pdf. In the November 2011 final rule (76 FR 67907), we expressed our intent to gain experience with alternative payment models through the Innovation Center before potentially adopting them more widely in the Shared Savings Program. Currently, testing of the Pioneer ACO Model is still underway, and we do not yet have a completed evaluation of that test. However, we have heard from stakeholders that there are certain aspects of the Pioneer ACO Model that may be appealing to some organizations and that we might consider incorporating into the Shared Savings Program. Therefore, in light of our experience with the Shared Savings Program, comments from stakeholders, and early responses to the Pioneer ACO Model, we have considered certain modifications to the financial models and arrangements available under the Shared Savings Program that might encourage organizations to take on increasing financial risk in order to motivate even greater improvements in care, and also minimize the barriers faced by some ACOs that limit their willingness to accept performance-based risk. In evaluating what features might encourage ACOs to take on increasing financial risk, we considered several E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules options, including modifying Track 1, modifying or eliminating Track 2, adding a Track 3 to supplement the existing ones, or a combination of these options. After reviewing these options, we are proposing to use our authority under section 1899(i)(3) of the Act to create an additional risk-based option for ACOs ready to take on increased performance-based risk. To exercise our authority under section 1899(i)(3) of the Act, we must demonstrate that this policy; (1) ‘‘ . . . does not result in spending more for such ACO for such beneficiaries than would otherwise be expended . . . if the model were not implemented . . . .’’ and (2) ‘‘will improve the quality and efficiency of items and services furnished under this title.’’ We applied this authority when proposing a twosided risk-based model in our April 2011 proposed rule (76 FR 19603), which was modified and made final in in our November 2011 final rule (76 FR 67909). As discussed in our final rule (76 FR 67904), we believed that Track 2 would provide an opportunity for organizations more experienced with care coordination and risk models that are ready to accept performance-based risk to enter a sharing arrangement that provides greater reward for greater responsibility. We believe that proposed Track 3 would offer an additional opportunity for ACOs to accept greater responsibility for beneficiary care in exchange for the possibility of greater reward. Moreover, we do not believe that adding a second two-sided risk model would result in an increase in spending beyond what would otherwise occur. To the contrary, as discussed later in our Regulatory Impact Analysis, our initial estimates suggest that the inclusion of Track 3 along with the other proposals made in this rule would improve savings for the Trust Funds resulting from this program. Further, we believe that adding Track 3 would improve the quality of care furnished to Medicare FFS beneficiaries because ACOs participating under Track 3 would have an even greater incentive to perform well on the quality measures in order to maximize the percentage of savings they may receive, while limiting their liability for any losses that might be incurred. Hence, we are proposing to develop a new risk-based Track 3 under § 425.610, which would be based on the current payment methodology under Track 2, but would also incorporate some different elements that may make it more attractive for entities to accept increased performance-based risk. In general, unless otherwise stated, we are proposing to model Track 3 off VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 the current provisions governing Track 2, which in turn are modeled on Track 1, to have the same general eligibility requirements, quality performance standards, data sharing requirements, monitoring rules, and transparency requirements. However, as we discuss later in this section, we are proposing certain discrete features for Track 3 that will differentiate it from Track 2. Specifically, we propose to make modifications to the beneficiary assignment methodology, sharing rate, MSR and MLR, and performance payment and loss sharing limits. These proposals are discussed in detail in the following sections. b. Proposals for Assignment of Beneficiaries Under Track 3 (1) Background Currently, beneficiaries are assigned to Shared Savings Program ACOs participating under Track 1 and Track 2 based on the assignment methodology that is described in detail in the November 2011 final rule and in section II.E. of this proposed rule. Beneficiary assignment is based on the certified ACO participant list and drives a variety of program operations described in more detail in section II.B. of this proposed rule. An assigned beneficiary population is determined for each of the benchmark years as well as each performance year and used to determine the average per capita costs of the ACO’s assigned FFS population in each of those years. Additionally, when an ACO enters the program, and on a quarterly basis thereafter, we perform a preliminary prospective assignment, based on the most recent 12 months of available claims data, to provide the ACO with information about the FFS population it has served in the past and that is likely to be assigned to the ACO at the end of the performance year. After the end of each performance year, we perform a final retrospective reconciliation to generate the final list of beneficiaries that chose to receive the plurality of their primary care services from ACO professionals applying the assignment methodology established under Subpart E of the regulations. Under this methodology, in developing the final list of assigned beneficiaries for the performance year, beneficiaries are both added to and removed from the preliminary prospectively assigned beneficiary lists provided to ACOs. This final list of assigned beneficiaries becomes the basis for calculating the average per capita expenditures for the performance year, and is used for financial reconciliation. PO 00000 Frm 00051 Fmt 4701 Sfmt 4702 72809 In this section, we discuss our proposals to apply a methodology to assign beneficiaries prospectively to Track 3 ACOs. However, since the program’s operations currently center on retrospective assignment, we also considered a number of issues important to implementing prospective assignment for Track 3 ACOs. Specifically, we discuss our proposals for: (1) A prospective assignment methodology; (2) the timing for performing prospective assignment; (3) exclusion criteria to be applied to the prospective list at the end of the benchmark or performance year; and (4) addressing overlap and interactions between prospective assignment for Track 3 ACOs and the preliminary prospective assignment and retrospective reconciliation for Track 1 and Track 2 ACOs. (2) Proposal for prospective assignment under Track 3 In the November 2011 final rule that established the Shared Savings Program, we adopted a preliminary prospective assignment model with retrospective reconciliation because we believed it would provide ACOs with adequate information to redesign their care processes while also encouraging ACOs to standardize these care processes for all Medicare FFS beneficiaries instead of focusing care management activities on a small subset of their FFS population. Further, we expressed our view that this approach would provide sufficient incentives for each ACO to provide quality care to its entire beneficiary population (76 FR 67864). We continue to believe that the current Shared Savings Program assignment methodology offers strong incentives for health system redesign to impact the care for all FFS beneficiaries that receive care from ACO professionals. As a result, we believe the assignment methodology currently used for the Shared Savings Program limits the potential for gaming and reduces the motivation to target beneficiaries for avoidance. This methodology may also improve care for beneficiaries who are newly diagnosed with high cost health problems during a performance year. For example, a FFS beneficiary diagnosed with cancer during a performance year would benefit from interacting with ACO providers/ suppliers that have incentives to be vigilant for beneficiaries who are likely to be assigned to their ACO retrospectively. Intervening early in the care of such patients may improve the quality and coordination of their care and reduce the cost of that care compared to what it might have been E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 72810 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules without the early intervention by the ACO and its ACO providers/suppliers. On the other hand, while many beneficiaries routinely see the same providers and suppliers from year to year, FFS beneficiaries that are assigned to an ACO have freedom to choose their healthcare providers and, unlike patients enrolled in many managed care plans, are not locked into seeing only ACO providers/suppliers. As a result, there is no absolute certainty that preliminarily prospectively assigned beneficiaries will continue to receive the plurality of their primary care services from ACO professionals during the performance year. Thus, there can potentially be differences between the preliminary assigned beneficiary list that the ACO receives at the start of the performance year, and every quarter thereafter, and the final assigned beneficiary list that is generated at the time of retrospective reconciliation, which is based on the actual utilization of primary care services by beneficiaries during the performance year. Given our experience with the Shared Savings Program and Physician Group Practice Demonstration before it, this is not an unexpected or unanticipated result of the methodology used to assign FFS beneficiaries who retain their freedom to choose providers under traditional FFS Medicare. That being said, the need to account for both the ebb and flow of assigned beneficiaries under the preliminary prospective assignment methodology with retrospective reconciliation used in the Shared Savings Program may discourage participation in risk-based arrangements by ACOs that seek greater certainty about the population on whom they will be assessed. As an alternative, beneficiaries could be prospectively assigned to an ACO prior to the start of the performance year. An example of prospective alignment can be found in the Pioneer ACO Model, where beneficiaries are aligned to Pioneer ACOs prior to the start of each performance year. Under the Pioneer ACO Model, the list of prospectively aligned beneficiaries is reconciled at the end of the year to exclude certain beneficiaries from the list, for example, beneficiaries who were not eligible for alignment during the performance year; however, no new beneficiaries are added to the list. This alternative assignment methodology arguably provides Pioneer ACOs with a more targeted set of FFS beneficiaries on whom to focus their care redesign efforts during the performance year. The beneficiary alignment methodology used under the Pioneer Model can be reviewed in more detail on the VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 Innovation Center Web site: https:// innovation.cms.gov/initiatives/PioneerACO-Model/ A prospective assignment methodology may offer ACOs a more narrowly defined target population and greater certainty about where to focus their care redesign processes. This improved certainty may be an important factor in an ACO’s willingness to take on greater performance-based risk because the ACO may be better positioned to make decisions regarding where to make investments in infrastructure to deliver enhanced services. Given the higher levels of performance-based risk associated with the Pioneer ACO Model, the Innovation Center elected to use a prospective assignment methodology specifically to provide participating ACOs with greater certainty regarding their assigned beneficiary populations in order to allow them to better target their care coordination efforts to those patients. Potential disadvantages of a prospective assignment methodology, such as the one used under the Pioneer ACO Model, are that it may encourage ACOs to narrowly focus on a subset of FFS beneficiaries in the care of their ACO providers/suppliers while not doing as much to incentivize organizations to broadly redesign care processes to improve the care for all FFS beneficiaries under the care of providers and suppliers participating in the ACO. These incentives arise because ACOs know in advance the subset of their patients for which their performance will be measured. However, despite these concerns, we acknowledge that a prospective assignment methodology may offer greater certainty and a more narrowly defined target population for some ACOs, and these may be important factors in an ACO’s willingness to take on greater performance-based risk where the ACO must make decisions regarding where to make investments in infrastructure to deliver enhanced services. We further believe that ACOs will have strong incentives to provide their prospectively assigned beneficiaries high-quality, low-cost care in order to discourage them from seeking care outside of the ACO and that beneficiaries that are prospectively assigned to an ACO will continue to be protected from concerns related to inappropriate limitations on care under traditional FFS Medicare because of their ability to choose their providers. Under the Shared Savings Program, there is no lock in for beneficiaries, therefore, we believe a prospective assignment methodology under the Shared Savings Program presents PO 00000 Frm 00052 Fmt 4701 Sfmt 4702 limited risks to FFS beneficiaries. Thus, having considered the relative advantages and disadvantages of prospective and retrospective assignment methodologies for FFS beneficiaries, we are proposing to implement a prospective assignment methodology for Track 3 ACOs. This prospective assignment methodology would use the same stepwise assignment methodology under § 425.402 to assign beneficiaries to ACOs in Track 3 as is currently used to assign beneficiaries to ACOs participating under Track 1 and Track 2. The major difference would be that beneficiaries would be assigned to Track 3 ACOs prospectively, at the start of the performance year, and there would be no retrospective reconciliation resulting in the addition of new beneficiaries at the end of the performance year. The only adjustments that would be made at the end of the performance year would be to exclude beneficiaries that appeared on the prospective assignment list provided to the ACO at the start of the performance year that no longer meet eligibility criteria. For the reasons discussed in the November 2011 final rule (76 FR 67851), we believe that this proposed prospective assignment methodology meets the requirement under section 1899(c) of the Act that assignment be based on the ‘‘utilization of primary care services’’ provided by physicians that are ACO professionals. We propose to codify this methodology in the regulations at § 425.400(a)(3). In summary, while we have concerns that prospective assignment may inadvertently increase incentives for gaming and avoidance of at-risk beneficiaries, we have taken steps to minimize these incentives by retaining other Shared Savings Program policies and procedures such as risk-adjusting expenditures and monitoring ACOs to ensure they are not engaging in gaming or avoidance of at-risk beneficiaries. Moreover, our proposal to exclude only those beneficiaries that no longer meet the eligibility criteria for assignment to an ACO should reduce the probability that attempts by the ACO to ‘‘cherry pick’’ or avoid at-risk beneficiaries during the performance year would succeed. Therefore, we believe the concerns associated with a prospective assignment methodology are balanced by the potential that establishing a new Track 3 has to encourage ACOs to accept greater responsibility and financial risk for the care provided to their patients in return for the possibility of achieving greater rewards. We seek comment on these proposals. In particular, we seek comment on ways to E:\FR\FM\08DEP2.SGM 08DEP2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 mitigate concerns regarding gaming and avoidance of at-risk beneficiaries under a prospective assignment methodology, whether implementing a prospective approach to assignment will dilute the program goals of delivery system redesign, and whether there are additional programmatic considerations that should be taken into account as a result of our proposal to apply a prospective assignment methodology in Track 3. Because of the differences between the Shared Savings Program and the Pioneer ACO Model, we emphasize that the proposed prospective assignment methodology under Track 3 is not identical to the methodology used under the Pioneer ACO Model, but is tailored to the Shared Savings Program. Specifically, we propose to assign beneficiaries to an ACO participating under Track 3 using the assignment algorithm that is specified in Subpart E of the Shared Savings Program regulations, and described in more detail in section II.E. of this proposed rule. c. Proposed Exclusion Criteria for Prospectively Assigned Beneficiaries Next we considered how to reconcile the prospective beneficiary assignment list at the conclusion of the performance year. We recognize that changes in circumstances may cause prospectively assigned beneficiaries to no longer be eligible for assignment to an ACO at the end of a performance year. For instance, during the course of a benchmark or performance year a beneficiary may fall under one of the assignment exclusion criteria specified in proposed § 425.401(b). The proposed exclusion criteria, found at § 425.401(b), mirror the proposed eligibility criteria under § 425.401(a) with the exception of assignment to another Medicare initiative involving shared savings. This is because we believe it is appropriate to exclude only those prospectively assigned beneficiaries that are no longer eligible to be assigned to an ACO. We do not believe, however, that it will be necessary to exclude beneficiaries that are assigned to another shared savings initiative because we intend to adopt procedures to ensure that a beneficiary who is prospectively assigned to an ACO participating under Track 3 would not be assigned to another Medicare initiative involving shared savings. Therefore, we propose to perform a limited reconciliation where beneficiaries would only be removed from the prospective assignment list at the end of the year if they were not eligible for assignment at that time under the criteria in proposed VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 § 425.401(b). For example, if a prospectively assigned beneficiary chose to enroll in Medicare Advantage (MA) at the beginning of the performance year, that beneficiary would be removed from the beneficiary assignment list at the end of the year and the beneficiary’s expenditures would not be used in determining the ACO’s financial performance for that year. We note that under this proposal, beneficiaries would be removed from the prospective list, but would not be added as they are in the retrospective reconciliation used under Tracks 1 and 2. Additionally, unlike the preliminary prospective assignment methodology with retrospective reconciliation used in Tracks 1 and 2, we note that under this proposal, similar to the methodology used under the Pioneer ACO Model, beneficiaries would not be removed from the prospective beneficiary assignment list because the beneficiary chose to receive primary care services during the performance year from practitioners other than those participating in the ACO. In other words, the ACO will be held accountable for all beneficiaries that appear on the prospective assignment list, with the narrow exception of those beneficiaries who are not eligible for assignment at the time of reconciliation based on the limited set of proposed exclusion criteria under proposed § 425.401(b). We believe that this methodology will help to mitigate concerns that ACOs may attempt to avoid caring for high risk beneficiaries that appear on their prospective beneficiary assignment list because the ACO will continue to be held accountable for the quality and cost of the care furnished to these beneficiaries even if the ACO providers/suppliers are not directly involved in their care. However, we note that this may mean that ACOs will be held accountable for beneficiaries with whom their ACO providers/suppliers have had little contact during the year, and therefore may have limited opportunity to affect their care. We seek comment on our proposal to assign FFS beneficiaries prospectively to ACOs and to apply limited exclusion criteria to reconcile the beneficiary assignment list at the end of the performance year. d. Proposed Timing of Prospective Assignment We believe it is important to provide Track 3 ACOs with their lists of prospectively assigned beneficiaries close to the start of each performance year so that these ACOs may begin to target their care coordination processes and to support ACO operations. Ideally, PO 00000 Frm 00053 Fmt 4701 Sfmt 4702 72811 the prospective list of assigned beneficiaries would be generated based on the 12 months immediately preceding the performance year. However, we need a certain amount of time to generate and validate assignment lists and provide the information to the ACOs. Therefore, we must find a balance between allowing time to produce and deliver prospective assignment lists to Track 3 ACOs as near as possible to the start of each performance year with our desire to base prospective assignment on the most recent available data. For Tracks 1 and 2, we assign beneficiaries based on a 12 month period. We similarly propose to use a 12-month assignment period for Track 3. Under Tracks 1 and 2, we use the most recent available 12 months of data to determine the list of preliminarily prospectively assigned beneficiaries and data from the 12 months of the performance year to determine final assignment at the time of reconciliation. Ideally, under Track 3, we would determine prospective assignment for an ACO’s performance year based on complete data for the most recent prior calendar year, for example, the third benchmark year or the previous performance year. For instance, in prospectively assigning beneficiaries to a Track 3 ACO for the performance year that begins in January 1, 2016, we would ideally have complete claims data for 2015. However, if we were to wait to obtain complete claims data for the prior calendar year, we would not be able to produce and deliver lists of prospectively assigned beneficiaries to Track 3 ACOs before the start of the performance year. In performing beneficiary assignment, we determine whether ACO professionals participating in an ACO have provided the plurality of a beneficiary’s primary care services as compared to ACO professionals in all other ACOs and individual practitioners or groups of practitioners identified by TINs that are not participating in an ACO. We treat ACOs as a collection of TINs for the purpose of determining whether the ACO provided the plurality of the beneficiary’s primary care services. Further, we accept new ACOs into the Shared Savings Program annually, with a participation agreement start date of January 1 of the following year. To most accurately and fairly prospectively assign beneficiaries, it is important to perform assignment by taking into consideration existing ACOs as well as new entrants to the program. Therefore, to assure that we can accurately prospectively assign beneficiaries to E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 72812 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules ACOs under Track 3, our timeline for producing the prospective assignment lists for Track 3 ACOs must factor in the time frames associated with the program’s application cycle (which typically concludes in late November/ early December of each calendar year). We considered several options for establishing the 12-month period for prospective assignment under Track 3. One option would be to use the most recent 12-month period prior to the relevant performance year for which data are available. That is, we would use a 12-month assignment window that is offset from the calendar year. For instance, to establish the assignment list for the performance year beginning January 1, 2016, we could use an assignment window from October 1, 2014 through September 30, 2015. We also considered the option of using complete claims data for the calendar year prior to the performance year (this would synchronize with the timing of the financial calculations for setting the ACO’s benchmark, as discussed in more detail in II.F.3.f. of this section); however, under these parameters Track 3 ACOs would receive their prospective assignment lists well into the first quarter of each performance year. We believe Track 3 ACOs would find such a delay in their receipt of their prospective assignment list burdensome for carrying out the ACO’s health care operations, including care coordination processes and data analysis. We believe the first option best balances the availability of claims data with our belief that it is important to produce and deliver these prospective beneficiary assignment lists near the start of each performance year. Therefore, we are proposing to base prospective assignment on a 12-month assignment window (off-set from the calendar year) prior to the start of the performance year. We further propose to define an ‘‘assignment window’’ at § 425.20 as the 12-month period used to assign beneficiaries to an ACO. The assignment window for Tracks 1 and 2 would be based on a calendar year while the assignment window for Track 3 would be based on the most recent 12 months for which data are available, and which would be off-set from the calendar year. We propose to make conforming changes to the regulations to refer to the assignment window where appropriate. e. Proposals for Addressing Interactions Between Prospective and Retrospective Assignment Models Because there are markets in which there are multiple ACOs, we anticipate that there will be interactions between prospective assignment for Track 3 VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 ACOs and preliminary prospective assignment with retrospective reconciliation for Track 1 and Track 2 ACOs. Under the Shared Savings Program, a beneficiary may only be assigned to a single ACO for purposes of determining the ACO’s financial and quality performance during a performance year. Accordingly, a beneficiary that is prospectively assigned to a Track 3 ACO would remain assigned to the Track 3 ACO for the performance year even if the beneficiary chose to receive a plurality of his or her care outside the ACO. Furthermore, we propose that the beneficiary would remain assigned to the Track 3 ACO even if we determine as part of the retrospective reconciliation for Track 1 and Track 2 ACOs that the beneficiary actually received the plurality of his or her care from ACO professionals in another ACO. Similarly, a beneficiary prospectively assigned to a Track 3 ACO would remain assigned to that ACO even if we subsequently determine the beneficiary actually received the plurality of his or her primary care from ACO professionals participating in another Track 3 ACO. In other words, we propose that once a beneficiary is prospectively assigned to a Track 3 ACO, the beneficiary will not be eligible for assignment to a different ACO, even if the beneficiary chose to receive a plurality of his or her primary care services from ACO professionals in that ACO during the relevant performance year. As an aside, we note that it is unlikely that such a beneficiary would be assigned prospectively to that same Track 3 ACO for the next performance year. f. Proposals for Determining Benchmark and Performance Year Expenditures Under Track 3 As specified in the November 2011 final rule, we establish the historical benchmark for ACOs in Tracks 1 and 2 by determining the per capita Parts A and B fee-for-service expenditures for beneficiaries that would have been assigned to the ACO in any of the 3 most recent years prior to the start of the agreement period using the ACO participant TINs identified at the start of the agreement period (§ 425.602(a)). For each benchmark year that corresponds to a calendar year, this includes calculating the payment amounts included in Parts A and B fee-for-service claims using claims received within 3 months following the end of the calendar year (referred to as a ‘‘3 month claims run out’’) with a completion factor, excluding IME and DSH payments and considering individually PO 00000 Frm 00054 Fmt 4701 Sfmt 4702 beneficiary-identifiable payments made under a demonstration, pilot or time limited program (§ 425.602(a)(1)). Similarly in determining shared savings and losses for Tracks 1 and 2 (under § 425.604 and § 425.606), we use a 3month claims run out with a completion factor to calculate an ACO’s per capita expenditures for each performance year. Calculations of the ACO’s performance year expenditures include the payment amounts of Part A and B fee-for-service claims. These calculations similarly exclude IME and DSH payments, and take into consideration individually beneficiary identifiable payments made under a demonstration, pilot or time limited program. We believe this approach is well accepted and therefore propose to use the same general methodology for determining benchmark and performance year expenditures under Track 3. We also propose to add a new regulation at § 425.610 to address the calculation of shared savings and losses under Track 3. In establishing the historical benchmark for Track 3 ACOs, we propose to determine the beneficiaries that would have been prospectively assigned to the ACO during each of the 3 most recent years prior to the start of the agreement period; basing benchmark year assignment on a 12-month assignment window offset from the calendar year prior to the start of each benchmark year. However, we propose that we would still determine the Parts A and B fee-for-service expenditures for each calendar year, whether it is a benchmark year or a performance year, using a 3-month claims run out with a completion factor for these prospectively assigned beneficiaries. We would exclude IME and DSH payments and account for individually beneficiary-identifiable payments made under a demonstration, pilot or time limited program during the calendar year that corresponds to the benchmark or performance year. For example, for an ACO entering Track 3 beginning January 1, 2016, we would determine the benchmark based on CYs 2013, 2014, and 2015. We would determine a prospective list of beneficiaries using the assignment window for each year (based on an off-set 12 month period such as October 1, 2011 through September 30, 2012 for BY1) as discussed previously. However, the claims used to determine the per capita expenditures for BY1 would be based on claims submitted during the calendar year from January 1, 2013 through December 31, 2013. The same pattern would be used to determine the E:\FR\FM\08DEP2.SGM 08DEP2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 assignment and per capita expenditures for BY2 and BY3. We would apply the same pattern going forward to calculate per capita expenditures for the performance years. We believe this methodology is advantageous for several reasons. First, this methodology would remove actuarial bias between the benchmarking and performance years for assignment and financial calculations, since the same method would be used to determine the assignment and financial calculations for each benchmark and performance year. Second, basing the financial calculations on the calendar year is necessary to align with actuarial analyses with respect to risk score calculations and data inputs based on national FFS expenditures used in program financial calculations that depend on the calendar year (for example, national FFS trend factors for the historical benchmark, national FFS growth factors used in creating the updated benchmark, and truncation points). We note that the timing of the generation of historical benchmark reports for Track 3 ACOs would also be consistent with the current schedule for generating these reports for ACOs in Tracks 1 and 2. That is, for an ACO that begins Track 3 in 2016, the prospective beneficiary assignment list would be available immediately at the beginning of the performance year and the historical benchmark report would be available following the 3 month claims run out, sometime after the first quarter of 2016. g. Proposals for Risk Adjusting the Updated Benchmark for Track 3 ACOs Another aspect of the financial models used under the Shared Savings Program that we considered when developing Track 3 is our methodology for risk adjusting an ACO’s updated benchmark expenditures to account for changes in severity and case mix for beneficiaries assigned in the current performance year. Currently, under Track 1 and Track 2, the risk adjustment methodology differentiates between newly and continuously assigned beneficiaries, as defined under § 425.20. A newly assigned beneficiary is a beneficiary assigned in the current performance year who was neither assigned to nor received a primary care service from any of the ACO participants during the most recent prior calendar year. A continuously assigned beneficiary is a beneficiary assigned to the ACO in the current performance year who was either assigned to or received a primary care VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 service from any of the ACO participants during the most recent prior calendar year. As specified under § 425.604(a), and § 425.606(a), we use updated CMS–HCC prospective risk scores to account for changes in severity and case mix for newly-assigned beneficiaries. We use demographic factors to adjust for these changes in severity and case mix for continuously assigned beneficiaries. However, if the CMS–HCC prospective risk scores for the continuously assigned population show a decline, we use the lower risk score to adjust for changes in severity and case mix for this population. As we explained in the November 2011 final rule (76 FR 67918), we believe that this approach to risk adjustment strikes a fair balance between accounting for changes in the health status of an ACO’s population while not encouraging changes in coding practices for care provided to beneficiaries who remain continuously assigned to the ACO or avoidance of high risk beneficiaries. We believe that the existing risk adjustment methodology has been effective in achieving this balance under Tracks 1 and 2, which use a retrospective assignment methodology for purposes of financial reconciliation, and that it would be appropriate to apply a similar approach to risk adjusting the updated benchmark for Track 3 ACOs, even though we are proposing a prospective beneficiary assignment methodology. We believe that this risk adjustment methodology is relevant to updating ACO benchmarks under both a retrospective assignment model and a prospective assignment model. We believe that as in the existing Tracks, it is important to ensure that ACOs participating under the proposed Track 3 are not encouraged to modify their coding practices in order to increase the likelihood of earning shared savings; rather, shared savings should result from actual reductions in Medicare expenditures for assigned beneficiaries. Therefore, we carefully considered the risk adjustment methodology in the context of our proposal to use a prospective assignment methodology under Track 3. We determined that while the same general risk adjustment methodology could be used, there are certain minor modifications that must be made to accommodate the prospective assignment approach. Specifically, we determined that the existing definitions of newly and continuously assigned beneficiaries must be adjusted for Track 3 ACOs. Both definitions refer to determining whether the beneficiary was assigned to the ACO or received primary care services from an ACO participant in the PO 00000 Frm 00055 Fmt 4701 Sfmt 4702 72813 ‘‘prior calendar year’’. However, our proposal for Track 3 assignment does not correspond to the 12 months in a calendar year. Instead, as proposed in the section, we would use an off-set 12month period prior to the relevant performance or benchmark year to prospectively assign beneficiaries. If we continue to use a calendar year as the basis for determining continuously and newly assigned beneficiaries, very few beneficiaries would be designated as newly assigned for each performance year and we would expect that the majority of assigned beneficiaries would be designated as continuously assigned. As a consequence, the major risk adjustment applied under Track 3 would be based on demographic factors only. We do not believe this policy would strike the same balance achieved when applied under a model with retrospective assignment (Track 1 and Track 2). Therefore, we propose refining our definitions of newly and continuously assigned beneficiaries at § 425.20 to also be consistent with our proposed prospective assignment approach for Track 3. Specifically, we propose to replace the reference to ‘‘most recent prior calendar year’’ with a reference to ‘‘the assignment window for the most recent prior benchmark or performance year.’’ Thus, for Track 3 the reference period for determining whether a beneficiary is newly or continuously assigned will be most recent prior prospective assignment window (the off-set 12 months) before the assignment window for the current performance year and the reference period for determining whether a Track 1 or 2 beneficiary is newly or continuously assigned will continue to be the most recent prior assignment window (the most recent calendar year). Our proposed risk adjustment methodology for Track 3 is reflected in the proposed new regulation at § 425.610(a). h. Proposals for Final Sharing/Loss Rate and Performance Payment/Loss Recoupment Limit under Track 3 Currently, an ACO that meets all the requirements for receiving shared savings payments under the one-sided (Track 1) model can qualify to receive a shared savings payment of up to 50 percent of all savings under its updated benchmark, not to exceed 10 percent of its updated benchmark, as determined on the basis of its quality performance. Likewise, 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. The higher sharing rate and performance E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 72814 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules payment limit under Track 2 were established as incentives for ACOs to accept greater financial risk for their assigned beneficiaries in exchange for potentially higher financial rewards. Additionally, a Track 2 ACO is accountable for between 40 to 60 percent of all losses under its updated benchmark, depending on the ACO’s quality performance. The amount of shared losses for which an ACO is liable, however, may not exceed 5 percent of its updated benchmark in the first performance year, 7.5 percent in the second performance year, and 10 percent in the third performance year and any subsequent performance year (§ 425.606(g)). In the November 2011 final rule (76 FR 67937), we stated that we believe these progressively higher caps on losses ‘‘achieve an appropriate balance between providing ACOs with security about the limit of their accountability for losses while encouraging ACOs to take increasing responsibility for their costs and protecting the Medicare Trust Funds.’’ We note that under one of the payment arrangements available under the Pioneer ACO Model, a Pioneer ACO can qualify to receive up to 75 percent of shared savings, not to exceed 15 percent of its benchmark. Under this payment arrangement, Pioneer ACOs may also be responsible for shared losses of up to 15 percent of their benchmark. Currently, only five of the ACOs participating in the Medicare Shared Savings Program are participating under Track 2. Given this level of ACO participation under this model, we considered options for improving the attractiveness of the final sharing rate and performance payment limit in a risk model. For example, we considered whether the current sharing rate under Track 2 is insufficient to encourage ACO participation under a risk-based model and whether increasing the sharing rate would better attract organizations to take on performance-based risk. We also observed that the higher sharing rates available under the Pioneer ACO model have appeared to be helpful in encouraging ACO participation. Further, we believe it is important to draw a distinction between the sharing rates available under Track 2 and the proposed Track 3. As discussed later in this section, we are proposing that ACOs participating in Track 3 would be subject to a fixed 2 percent MLR (compared to the proposed revisions that would allow the MSR and MLR under Track 2 to vary between 2.0 percent and 3.9 percent). Thus, we believe it is important to reward Track 3 ACOs with a greater level of savings VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 for taking on this greater level of risk. Accordingly, we are proposing to set the sharing rate under Track 3 at 75 percent. Likewise, we considered whether the current 15 percent performance payment limit for Track 2 ACOs may discourage participation under a riskbased model. In our November 2011 final rule (76 FR 67935 through 67936), we noted a range of commenters had urged us either to eliminate the limits on shared savings or to apply higher payment limits for both models, with limits as high as 25 percent. We explained that retaining the performance payment limits is necessary to comply with the statute and important for ensuring against providing an overly large incentive that may encourage ACOs to generate savings through inappropriate limits on necessary care. As was the case when we issued that rule, we continue to believe that retaining a performance payment limit is necessary. However, we believe that a modest increase in the performance payment limit for ACOs willing to take on the greater level of risk under Track 3 may balance our concerns while increasing the attractiveness of the model. Accordingly, for Track 3 ACOs, we are proposing a performance payment limit not to exceed 20 percent of the ACO’s updated benchmark. We note that the shared loss rate would similarly increase to a maximum of 75 percent to retain symmetry within the model which is comparable to the approach we used to establish the shared loss rate for Track 2 ACOs. To establish even stronger incentives for encouraging ACOs to assume greater responsibility for the quality and cost of the care furnished to their assigned beneficiaries, we are also considering variations on the previous proposals. Currently, under the two-sided model, an ACO’s quality score is taken into account when calculating the ACO’s final sharing rate. Under Track 2, an ACO with poor quality performance may be responsible for repaying Medicare up to 60 percent of losses while an ACO with very high quality performance may be responsible for repaying Medicare only 40 percent of the losses incurred (see § 425.606(f)). If we retain symmetry between the shared savings and shared losses methodologies under Track 3, an ACO with very low quality performance could be responsible for repaying Medicare up to 75 percent of losses while a Track 3 ACO with very high quality performance would only be responsible for 25 percent of losses. However, it may not be desirable under Track 3 to allow such a broad PO 00000 Frm 00056 Fmt 4701 Sfmt 4702 range for shared losses, which could be viewed as increasing the potential reward without similarly increasing risk. Therefore, we considered other options for increasing potential shared savings while also increasing risk, or holding risk constant compared to Track 2. Under one option we considered, Track 3 ACOs would be responsible for the maximum percentage of losses, that is, 75 percent, but quality performance would only protect them to the same extent it protects Track 2 ACOs, such that ACOs with very high quality scores would limit their percentage of losses to 40 percent. Alternatively, we could retain the minimum and maximum shared loss rates found under Track 2 (that is, the range of 40 percent to 60 percent, depending on quality performance) but the maximum shared savings rate would be increased to 75 percent in order to encourage participation in a model with increased risk. After considering these options, in § 425.610(d) and (f) we are proposing to increase the sharing rate for Track 3 ACOs so that they may qualify for up to 75 percent of all savings under their updated benchmark in conjunction with accepting risk for up to 75 percent of all losses, depending on the quality performance of the organization for the reasons articulated previously. We are also proposing under new § 425.610(e)(2) to increase the performance payment limit to 20 percent of an ACO’s updated benchmark. Additionally, rather than gradually increasing the cap on shared losses for Track 3 ACOs (as is done under Track 2), in § 425.610(g), we are proposing that the amount of shared losses for which an ACO may be liable may not exceed 15 percent of its updated benchmark in each year of the ACO’s 3-year agreement period. We believe that capping losses at 15 percent would provide adequate protection to the Medicare Trust Funds while limiting risk to ACOs, thereby encouraging them to progress along the risk continuum. We also propose that ACOs with high quality performance would not be permitted to reduce the percentage of shared losses for which they would be responsible for each year of the agreement period below 40 percent. We believe it is important for Track 3 ACOs to be held responsible for at least the same amount of downside risk as Track 2 ACOs. We seek comment on whether this percentage is high enough to protect the Trust Funds or whether it should be increased, for example, to 50 percent or 60 percent. We also seek comment on whether our E:\FR\FM\08DEP2.SGM 08DEP2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 proposal to establish a range of 40 percent to 75 percent for shared losses should, in turn, impact the amount of shared savings available to Track 3 ACOs. For example, should we permit Track 3 ACOs to earn a parallel range of 40 percent to 75 percent of shared savings. In other words, once the ACO has met criteria for sharing in savings, the minimum guaranteed amount of shared savings would be 40 percent with a maximum of 75 percent. We seek comments on these proposals and the proposed new regulation at § 425.610. In particular, we request comment on the appropriate minimum percentage of shared losses under Track 3. We also seek comment on the appropriate percentage for the performance payment limit and loss recoupment limit and whether there are reasons to set these at 15 percent and 10 percent respectively, rather than our proposal of 20 percent and 15 percent respectively. Finally, we are also proposing to make certain technical, conforming changes to § 425.606, which governs the calculation of shared savings and losses under Track 2, to reflect our proposal to incorporate a second two-sided risk model into the Shared Savings Program. We seek comments on these proposed changes and on any other technical changes to our regulations that may be necessary in order to reflect the proposal to add a new Track 3. i. Proposals for Minimum Savings Rate and Minimum Loss Rate in Track 3 In this proposed rule, we are proposing to replace the current fixed 2 percent minimum savings rate (MSR) and minimum loss rate (MLR) under Track 2 with a MSR and MLR that will vary based on the number of beneficiaries assigned to the ACO, mirroring the methodology currently used to determine the MSR under Track 1. We proposed this change as a way to reduce financial risk and thereby increase the attractiveness of Track 2 to prospective ACOs and ACOs continuing in the program for a second or subsequent agreement period. Specifically, we believe it is important to offer a risk-based option attractive to smaller ACOs that may be hesitant to take on performance-based risk. Under the proposed modifications to Track 2, smaller ACOs would have an MLR greater than 2 percent, which would provide additional protection to these ACOs against incurring losses as a result of normal variations in expenditures. Moreover, while reducing financial risk for Track 2 ACOs, the proposal would also offer greater protection to the Medicare program by raising the savings VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 threshold that must be achieved before an ACO would be eligible to share in savings for all but the largest ACOs. As discussed previously in this section, we are proposing to establish a new Track 3 as an additional option for participation in the Shared Savings Program with stronger incentives to encourage ACOs to accept greater responsibility and risk for their beneficiaries. Hence, for Track 3 ACOs, we are proposing to apply the same fixed 2 percent MSR and MLR that currently apply to Track 2 ACOs. As we discussed in the November 2011 final rule (76 FR 67929), establishing the Shared Savings Program, the use of an MSR and MLR remains important under a two-sided risk model to guard against normal variations in costs, so that ACOs share savings or losses with the program only under those circumstances in which we can be confident that those savings and losses are the result of the ACOs’ actions rather than normal variation. As we noted in that final rule, it is more appropriate to employ a fixed MSR under a two-sided model than under the one-sided model. First, given the potential for shared loss, the greater predictability of a fixed MSR is more likely to attract organizations to participate under the model. Second, there is greater protection for the Medicare Trust Fund from normal variation under a two-sided model because ACOs accept the risk of repaying the Medicare program for shared losses. Therefore, in the November 2011 final rule (76 FR 67929), we adopted a fixed 2 percent MSR and MLR for ACOs participating under Track 2. We selected 2 percent because this is the lowest MSR under the oneside model and was also the MSR that was used in the PGP demonstration. As discussed previously in this section, we are now proposing to modify the MSR and MLR under Track 2 to vary based upon the size of the ACO. We believe this change would improve the attractiveness of Track 2 by offering ACOs that may be less experienced with performance-based risk greater protection against shared losses. However, because Track 3 is intended for ACOs that are willing to accept a greater degree of risk in exchange for the opportunity to share in a greater percentage of shared savings, we believe it is appropriate to use a fixed 2 percent MSR and MLR under this track. We believe that setting the MSR and MLR at this level would offer greater predictability, which may attract more ACOs to participate in Track 3. In addition, as we discussed in the November 2011 final rule (76 FR 67929), PO 00000 Frm 00057 Fmt 4701 Sfmt 4702 72815 the requirement that ACOs repay shared losses offers additional protection to the Medicare Trust Funds, which allows for the application of a lower, fixed MSR. Accordingly, we propose to apply the same fixed 2 percent MSR and MLR that currently apply to Track 2 ACOs to ACOs that elect to participate in Track 3. This proposal is reflected in paragraph (b) of the proposed new regulation at § 425.610. We seek comments on this proposal. Although we are proposing to apply a fixed MSR and MLR of 2 percent under Track 3, we also considered other options for establishing the MSR and MLR for Track 3 ACOs, including an option that would remove the MSR and MLR entirely. Under this option, ACOs would be subject to normal variation around their benchmark so that they would be held responsible for all losses when performance year expenditures were above the benchmark in addition to sharing in any savings if performance year expenditures fell below the benchmark. Another option could be to set both the MSR and MLR to 1 percent instead of 2 percent. This would serve to increase both risk of sharing losses and savings, but not as much as doing away with the MSR and MLR entirely. We specifically seek comment on whether it would be desirable to remove the MSR and MLR entirely under Track 3 as well as alternative levels at which to set the MSR and MLR for ACOs participating under Track 3. We will consider comments that are received regarding these alternatives in determining the final MSR and MLR that would apply under Track 3. 4. Seeking Comment on Ways To Encourage ACO Participation in Performance-Based Risk Arrangements We are encouraged by stakeholder interest in the Shared Savings Program. Since implementation of the Shared Savings Program in 2012, there are now more than 330 organizations participating. Based on the initial experience we have gained with the Shared Savings Program, however, we believe ACOs are very reluctant to accept two-sided performance-based risk arrangements in which ACOs would share in both Medicare savings and losses because only a small number of ACOs have agreed to participate in the Shared Savings Program under Track 2, which provides for two-sided performance-based risk. Ninety-eight percent of the ACOs participating in the Shared Savings Program have elected to participate under Track 1 (shared savings only). We believe that under a two-sided performance-based risk model, ACOs have much stronger E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 72816 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules incentives to achieve high quality and to avoid unnecessary costs, which is why we are proposing Track 3 as a possibly more attractive alternative to Track 2. The incentive for ACOs to achieve high quality and avoid unnecessary costs under a two-sided performance-based risk model is supported by the impact analyses performed by the CMS actuary provided in section V. of this proposed rule. Accordingly, in order for the Shared Savings Program to be effective and sustainable over the long term, we believe we may need to further strengthen our efforts to transition the Shared Savings Program to a two-sided performance-based risk program in which ACOs would share in both Medicare savings and losses. We received a wide range of suggestions from ACOs, the Brookings Institution, MedPAC, and other stakeholders of ways to improve the Shared Savings Program and to address ACO concerns that they believe are essential to the longer term success of the program. The Brookings Institution has identified a number of critical issues that warrant further discussion and consideration for ensuring the continued success of ACOs in the Medicare Program. See ‘‘Issue Brief: How to Improve the Medicare Accountable Care Organization (ACO) Program’’ at: https://www.brookings.edu/ ∼/media/research/files/papers/2014/06/ 16%20medicare%20aco%20 challenges%20and%20alternatives/ 2%20mcclellan%20et% 20al%20%20medicare% 20aco%20program%2062014.pdf. In a June 16, 2014 letter to CMS (https://www.medpac.gov/documents/ 06162014_ACO_issue_letter_2014_ COMMENT.pdf), MedPAC raises several issues for consideration in connection with CMS ACO models in the short and long term. MedPAC indicates that ACOs represent an opportunity to transform the delivery system, but MedPAC believes that realizing that opportunity would require providers to change their practices and take a risk on this new payment system, and that we would need to be flexible and responsive as the program evolves. MedPAC’s recommendations are based on discussions with representatives from many ACOs, structured interviews and case studies with Pioneer ACOs, analysis of early data on ACO performance, and reviewing progress with CMS staff. MedPAC reports that many ACO providers/suppliers who they have spoken with have patients in both MA plans and FFS Medicare. Under MA, providers can furnish services and use techniques that are not available under FFS Medicare or, by VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 extension, under the current rules governing the Shared Savings Program. For example, pursuant to section 1861(i) of the Act, FFS Medicare requires a 3day inpatient hospital stay before a SNF services will be covered under Medicare Part A, but MA plans can offer a waiver of the 3 day prior inpatient hospitalization requirement as a supplemental benefit. ACOs have indicated that they like the flexibility that capitated payments would give them to redesign care and benefits to meet the needs of their patient populations. Under the current Medicare FFS system, providers have a financial incentive to increase their volume of services. As a result, many current Medicare regulations are designed to prevent overuse of services and the resulting increase in Medicare spending in this context. In brief, MedPAC believes that moving to two-sided performance-based risk under the Shared Savings Program would provide strong incentives for organizations to control costs, which should, in turn, open up the opportunity for regulatory relief across a broad range of issues. Removing certain regulatory requirements may provide ACOs with additional flexibility to innovate further, which could in turn lead to even greater cost savings. These views are supported by analyses performed by CMS actuaries that suggest two-sided performancebased risk provides stronger incentives for ACOs to achieve savings. Thus, ACOs and MedPAC have encouraged us to consider relaxing certain specific FFS Medicare payment and other rules under two-sided performance-based risk models in the Shared Savings Program. In the sections that follow, we solicit comment on several options that are currently under consideration for inclusion in the Shared Savings Program. We first consider options that would implicate the waiver authority under section 1899(f) of the Act and then consider other options that could be implemented independent of waiver authority. Although we are not specifically proposing these options at this time, we will consider the comments that are 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. a. Payment Requirements and Other Program Requirements That May Need To Be Waived in Order To Carry Out the Shared Savings Program As noted previously, few organizations have chosen to participate in the Shared Savings Program under PO 00000 Frm 00058 Fmt 4701 Sfmt 4702 two-sided performance-based risk. In addition to the elements designed to enhance participation in a two-sided performance-based risk track under the proposed new Track 3, we believe it may be necessary and appropriate to provide for additional program flexibilities to increase ACOs’ willingness to participate in the Shared Savings Program under two-sided performance-based risk arrangements to increase quality and decrease cost growth. These possible additional flexibilities could include use of our waiver authority to waive certain Medicare Program rules under section 1899(f) of the Act, which provides authority for the Secretary to waive ‘‘such requirements of . . . title XVIII of this Act as may be necessary to carry out the provisions of this section.’’ This provision affords broad authority for the Secretary to waive statutory program requirements as necessary to carry out the provisions of section 1899 of the Act. In order to waive FFS payment or other program rules, the waiver must be determined to be necessary for CMS to carry out the provisions of section 1899 of the Act, which govern the Shared Savings Program. (The authority at section 1899(f) of the Act has been used by the Office of Inspector General and CMS to issue an interim final rule with comment period setting forth waivers of certain fraud and abuse authorities (76 FR 67992), which was published concurrently with the November 2011 final rule establishing the Shared Savings Program. This rulemaking does not address fraud and abuse waivers, and we are not soliciting comment on such waivers.) As noted previously, we are encouraged by the robust participation of organizations under the one-sided model of the Shared Savings Program. However, we continue to believe that the long term effectiveness and sustainability of the program depend on encouraging ACOs to progress along the performance-based risk continuum. Given the very limited ACO interest thus far in two-sided performance-based risk, and the comments and suggestions by stakeholders, we now believe that the authority under section 1899(f) of the Act to waive certain payment or other program requirements may be necessary to carry out the provisions of the Shared Savings Program and to permit effective implementation of two-sided performance-based risk tracks under the program. As discussed previously, on the April 2011 proposed rule, both we and many commenters believe that models where ACOs bear a degree of financial risk hold the potential to E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules induce more meaningful systematic change than one-sided models. We believe that ACOs that bear financial risk would 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. In these circumstances, waiver of certain payment and other programmatic rules for ACOs with two-sided risk may be appropriate to give providers more flexibility under FFS Medicare to provide appropriate care for beneficiaries. We would point out that while we are considering these waiver issues under the Shared Savings Program, we are also actively moving forward with testing certain payment rule and other waivers as part of models tested by the Innovation Center under section 1115A of the Act, including the Pioneer ACO Model. For example, as explained below, we already have a few months of data from our initial test of the waiver of the SNF 3-day rule under the Pioneer ACO Model, and we are in the process of testing beneficiary attestation under the Pioneer ACO Model. In addition, under the demonstration authority in section 402 of Public Law 90–248, as amended (42 U.S.C. 1395b–1), we granted Massachusetts General Hospital (MGH) the ability to admit certain patients enrolled in its Care Management for High Cost Beneficiaries Demonstration directly into a SNF without a 3-day prior inpatient hospitalization, and we intend to release a report evaluating this waiver later this year. Based on our experience with the waiver of the SNF 3-day rule in the MA program, and an initial, limited assessment of the MGH waiver performed by CMS actuaries, we expect that the waiver of the SNF 3-day rule under the Pioneer ACO Model will result in savings for the Medicare Trust Funds. We are learning from these tests and would seek to refine our policies as we move forward. Through such testing we frequently identify issues that neither we nor stakeholders had previously identified. Developing and implementing such policies in a test environment provides an opportunity for us to better understand the effects on providers, beneficiaries, and Medicare as well as to further fine tune the operations. We welcome comments on possible waivers under section 1899(f) of the Act of certain Medicare payment or other program requirements suggested by stakeholders that might be necessary to permit effective implementation of twosided performance-based risk in the VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 Shared Savings Program. As noted previously, we will consider the comments that are received during the development of the final rule, and in the final rule may consider waiving certain requirements if we conclude that such a waiver is necessary in order to carry out the Shared Savings Program. We are especially interested in comments explaining how such waivers may be necessary to encourage ACOs to accept performance-based risk arrangements under the Shared Savings Program, and how such waivers could provide ACOs with additional ways to increase quality of care and reduce unnecessary costs that are not permitted under FFS Medicare, but that could be appropriately used in the context of an ACO model that incorporates two-sided performance-based risk. What program integrity and beneficiary protection risks could be introduced by waivers of the payment and program rules described later in this section of this proposed rule and how could we mitigate those risks? Would a waiver of these requirements impact notification to beneficiaries of participation in the Shared Savings Program as required under § 425.312? What operational issues do ACOs and CMS need to consider and what processes would ACOs need to have in place to implement these alternative payment and other program policies? What implications would there be for ACO infrastructure including IT and other systems and processes? What provider education would be needed? What other issues should be considered when making use of waiver authority with respect to payment and program rules? Should any waivers apply to all twosided performance-based risk tracks or should they be limited to a specific twosided risk track? Should waivers be available only for those organizations willing to take on the greatest performance-based risk under the Shared Savings Program? For example, should waivers be limited to the use of organizations participating in Track 3 because participants in Track 3 would agree to be held accountable for up to 75 percent of shared losses compared to participants in Track 2 who would agree to be held accountable for up to 60 percent of shared losses? Should the waivers be made available to all organizations participating in the applicable risk tracks or only to those ACOs that have successfully participated in the Shared Savings Program or another ACO model previously? We also note that the ability to implement any waivers of payment or PO 00000 Frm 00059 Fmt 4701 Sfmt 4702 72817 program rules may vary for ACOs participating under Track 2 and Track 3 because of the differences in how beneficiaries are assigned to ACOs under those Tracks. We are considering whether a waiver that applies only to beneficiaries assigned to the ACO would perhaps be more appropriately implemented under a model in which there is prospective assignment of beneficiaries, such as proposed Track 3. Under prospective assignment, beneficiaries would be assigned to the ACO for the entire performance year, and it would thus be clear as to which beneficiaries the waiver applied. Having clarity as to the beneficiary to which a waiver applies may be important for the ACO to comply with the conditions of the waiver and could also improve CMS’ ability to monitor waivers for misuse. Another option would be to apply the waivers to any FFS beneficiary cared for by an eligible ACO. Then the waiver could be available to all ACOs participating in a two-sided risk track, regardless of whether the assignment is prospective or retrospective. Another option would be to apply such waivers to beneficiaries that appear on the quarterly lists of preliminarily prospectively assigned beneficiaries. Under this approach, the population for whom the waiver is available would likely change from quarter to quarter. We seek comment on whether any waivers of payment or program rules would be more viable under proposed Track 3, which includes prospective beneficiary assignment, versus Track 2 in which beneficiaries are assigned using a preliminary prospective assignment methodology with final retrospective reconciliation. Specifically, would a waiver require a fully prospective list of assigned beneficiaries for the performance year or would it be feasible to use a preliminary prospective list of beneficiaries that is likely to change at the end of the performance year? What are the other operational issues we should consider? Specific payment and program rules for which we believe waivers could be necessary under the Shared Savings Program to support ACO efforts to increase quality and decrease costs under two-sided performance-based risk arrangements and for which we invite comments are as follows: (1) SNF 3-Day Rule The Medicare SNF benefit is for beneficiaries who require a short-term intensive stay in a SNF, requiring skilled nursing and/or skilled rehabilitation care. Pursuant to section 1861(i) of the Act, beneficiaries must have a prior inpatient hospital stay of no E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 72818 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules fewer than 3 consecutive days in order to be eligible for Medicare coverage of inpatient SNF care. We refer to this as the SNF 3-day rule. As discussed previously, we believe that the long term effectiveness and sustainability of the Shared Savings Program depend on encouraging ACOs to progress along the performance-based risk continuum. Given the very limited ACO interest thus far in two-sided performance-based risk, and the comments and suggestions by stakeholders, we now believe that the authority under section 1899(f) of the Act to waive certain payment or other program requirements may be necessary to carry out the provisions of the Shared Savings Program and to permit effective implementation of two-sided performance-based risk tracks under the program. Models where ACOs bear a degree of financial risk hold the potential to induce more meaningful systematic change. We believe that under a two-sided performance-based risk ACO model it could be medically appropriate and more efficient for some patients to receive skilled nursing care and or skilled rehabilitation services provided at SNFs without a prior inpatient hospitalization or with an inpatient hospital length of stay of less than 3 days. A waiver of this requirement could allow ACOs to realize cost savings and improve care coordination, such that they could be more willing to accept two-sided risk, which we believe is required to promote the long term effectiveness and sustainability of the Shared Savings Program. We note that the SNF 3-day rule has been waived or is not a requirement for Medicare SNF coverage under a few CMS models or programs. For instance, the Pioneer ACO Model has recently started testing whether a tailored waiver of the SNF 3-day rule will enable the Pioneer ACOs to improve quality of care for a subset of beneficiaries requiring skilled nursing and/or skilled rehabilitation care while also reducing expenditures. ACOs under the Pioneer Model are accountable for the total costs of care furnished to their assigned beneficiary population, and must accept performance-based risk in the event that costs exceed their benchmark. This type of performance-based risk arrangement has the potential to mitigate the incentive to overuse SNF benefits. MA plans already have the flexibility not to apply the SNF 3-day rule, and we believe this flexibility is appropriate because of the financial incentives for MA plans, which operate under a capitated payment arrangement, to control total cost of patient care. As in VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 the case of the MA program, the Pioneer ACO Model’s use of shared risk arrangements is expected to deter unnecessary referral of patients to SNFs, as Pioneer ACOs are accountable for the total cost of care furnished to their assigned beneficiaries. While the financial incentive to control total cost of care in a shared savings model is not as great as in a capitated model, all Pioneer ACOs are at significant performance-based risk for exceeding their expenditure benchmarks and are clearly focused on reducing total cost of care. The waiver of the SNF 3-day rule under the Pioneer ACO Model went into effect on April 7, 2014, for Pioneer ACOs that demonstrate through an application process that they have the capacity and infrastructure to identify and manage clinically eligible beneficiaries prospectively assigned to Pioneer ACOs who may be admitted to a SNF without the required 3-day inpatient hospital stay. All other requirements for coverage of the Medicare SNF benefit remain unchanged under the Pioneer ACO Model. Only beneficiaries that require skilled nursing and/or skilled rehabilitation care are eligible for SNF coverage without a prior 3-day inpatient hospitalization under the Pioneer ACO Model waiver. All Pioneer ACOs are eligible to apply for a waiver of the SNF 3-day rule for their prospectively assigned beneficiaries, but must demonstrate that they have the capacity to identify and manage patients who would be either directly admitted to a SNF or admitted to a SNF after an inpatient hospitalization of fewer than 3 days, by describing the staff and processes involved in the clinical management of these beneficiaries. Further, patients eligible for coverage of SNF admissions under the terms of the waiver include only FFS Medicare beneficiaries prospectively aligned to a Pioneer ACO who do not reside in nursing homes for long-term custodial care at the time of the decision to admit to a SNF. Patients must be medically stable, have certain and confirmed diagnoses and thus not require additional diagnostic testing, not require an inpatient evaluation or treatment, and have a skilled nursing or rehabilitation need that could not be provided as an outpatient. Eligible beneficiaries must be admitted to SNFs at the direction of admitting Pioneer providers/suppliers and not at the direction of SNFs or non-Pioneer providers/suppliers. Pioneer ACOs are required to submit to CMS for approval a SNF or group of SNFs with which they wish to partner for purposes of this PO 00000 Frm 00060 Fmt 4701 Sfmt 4702 waiver. The designated SNFs must have the appropriate staff capacity and necessary infrastructure to carry out the activities proposed in the Pioneer ACO’s application. The SNF may be, but is not required to be, a Pioneer provider/ supplier. The SNF must also have, at the time of application submission, a quality rating of 3 or more stars under the CMS 5-Star Quality Rating System as reported on the Nursing Home Compare Web site. Commenters suggest that a similar waiver of the SNF 3-day rule would be appropriate for certain ACOs under the Shared Savings Program. When Congress enacted the original Medicare legislation in 1965, it created SNF coverage as a less expensive alternative to what would otherwise be the final, convalescent portion of a beneficiary’s inpatient hospital stay. Accordingly, the Medicare SNF benefit was narrowly focused on ‘‘post-hospital extended care’’ to serve as a relatively brief and skilled ‘‘extension’’ of an acute care stay in a hospital. Thus, the requirement for a prior 3-day qualifying stay in an inpatient hospital was included to effectively target the limited population that the SNF benefit was designed to cover: Beneficiaries who require a shortterm, intensive stay in a SNF, requiring skilled care. Because of changes in medical care over the half century since enactment of the original Medicare legislation, it may now be medically appropriate for some patients to receive skilled nursing care and or rehabilitation services provided by SNFs without a prior inpatient hospitalization, or with an inpatient hospital length of stay of less than 3 days. It may be medically appropriate for patients to go to SNFs earlier, due to changes in medical care, given that hospital lengths of stay are shorter than they were decades ago, and the types of patients that were staying 3 days in an inpatient hospital in 1965 are no longer staying 3 days in an inpatient hospital now. Because of this, over time, we have repeatedly expressed interest in testing alternatives to the SNF 3-day rule. We have found that financial incentives need to properly align so that the appropriate patients receive SNF care. That is, we believe care must be coordinated in a manner that allows for control of total patient cost and mitigates the incentive to overutilize the SNF benefit. If alternatives to the SNF 3-day rule were to be implemented, we believe that most treatment would continue to be appropriately furnished in a hospital, either on an inpatient or outpatient basis, rather than furnished at a SNF. Therefore, we do not believe E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules that application of such a waiver should result in overutilization of SNF care at the expense of appropriate acute hospital care. We would also note that under a model of accountability for total costs of care for assigned beneficiaries such as the Pioneer ACO Model or a two-sided risk track under the Shared Savings Program, the greatest savings would most likely be achieved by permitting the elimination, where appropriate, of the entire prior hospital stay (and therefore the hospital DRG payment) and improving quality of care for patients who can instead receive appropriate care through direct admission to a SNF. Permitting a shortened (less than 3 days) inpatient hospital stay prior to SNF admission would not necessarily produce significant savings to the Medicare Trust Funds, as Medicare would still pay the applicable MS–DRG amount to the hospital. Commenters, however, suggested that allowing ACOs to carefully identify beneficiaries with a prior hospital stay of less than 3 days, for whom SNF care would be clinically appropriate, could still produce cost savings for hospitals that improve their financial performance, and could contribute to ACOs’ success and continued participation in the Shared Savings Program. We believe it could be necessary to waive the SNF 3-day rule for ACOs participating under a two-sided risk track in the Shared Savings Program because the financial incentives for such ACOs to control total patient costs for their prospectively assigned beneficiaries are arguably similar to certain incentives that currently exist for MA plans and Pioneer ACOs. If we were to conclude that a waiver of the requirement for a prior 3-day qualifying stay in an inpatient hospital under waiver authority in section 1899(f) of the Act is necessary for purposes of implementing two-sided performancebased risk models under the Shared Savings Program, we would likely initially limit this waiver to ACO participants and ACO providers/ suppliers under proposed Track 3. Under Track 3 beneficiaries would be prospectively assigned to the ACO for the entire year and it would thus be clear as to which beneficiaries the waiver applied. In addition, under Track 3 as proposed, organizations would agree to be held accountable for up to 75 percent of any losses compared to organizations participating under Track 2 who agree to be held accountable for up to 60 percent of any losses. Since a few organizations have been willing to participant under Track VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 2 without waivers, this may represent the limit of risk organizations are willing to take on without waiving the SNF 3-day rule. As mentioned previously, we believe a prospective assignment approach creates a potential pathway for improving the appropriate use of waivers by ACOs and a method for CMS to monitor its use, in addition to offering a higher sharing rate. For these reasons, we believe Track 3 may make it a better candidate for these waivers than Track 2. However, we seek comment on whether such a waiver should apply to all performance-based risk tracks. Another option would be to allow the waiver to apply to any FFS beneficiary cared for by the ACO and then the waiver could be available to all ACOs participating in a two-sided risk track, regardless of whether assignment is prospective or retrospective. Another option would be to apply any waiver to beneficiaries that appear on the quarterly lists of preliminarily prospectively assigned beneficiaries. In this case, the beneficiaries to whom the waiver applies would likely change from quarter to quarter. We anticipate that we would offer the opportunity to apply for such a waiver to ACOs using a framework similar to the one currently being tested under the Pioneer ACO Model, with appropriate revisions as necessary to accommodate the differences in beneficiary assignment methodology, as needed. Under such a waiver, ACOs would be required to submit to CMS for approval of a SNF or group of SNFs with which they wish to partner. The designated SNFs must have the appropriate staff capacity and necessary infrastructure to carry out the activities described in the ACO’s application for the waiver. The SNF would likely be required to be an ACO participant or ACO provider/ supplier. We believe it would be appropriate to limit such a waiver to SNFs that are ACO participants or ACO providers/suppliers, because we believe these entities would have incentives that are most directly aligned with those of the ACO. ACOs also have stronger control and oversight over such entities because such entities are subject to Shared Savings Program requirements. Under such a waiver, we would anticipate establishing additional requirements to ensure program transparency and help reduce the possibility for abuse of the waiver. For example, we would anticipate requiring ACOs to indicate their intent to use the waiver as part of their applications or requests for renewal of their participation agreement, and remain in compliance with program rules. To further substantiate an ACO’s intent to PO 00000 Frm 00061 Fmt 4701 Sfmt 4702 72819 use the waiver, we anticipate requiring that the ACO submits as part of its application documentation showing that its governing body has made and duly authorized a bona fide determination that the ACO will use the waiver (if approved by CMS) and will comply with all requirements of the waiver. As part of its application for the waiver, we would require the ACO to submit a written plan describing how it would use the waiver to meet the clinical needs of its assigned beneficiaries. We would reserve the right to deny or revoke a waiver to an ACO if it is not in compliance with requirements under the Shared Savings Program, if it does not use the waiver as described in its application, or if it does not successfully meet the quality reporting standard. ACOs with approved waivers would be required to post their use of the waivers as part of public reporting (see § 425.308) on the dedicated ACO Web page. Use of the waiver and its authorization by the governing body would be required to be documented and the documentation retained, consistent with § 425.314. We would anticipate that any waiver would be effective on the start date of the ACO’s participation agreement and would not extend beyond the end of the ACO’s participation in the Shared Savings Program. However, if CMS terminates the participation agreement, then the waiver would end on the date of the termination notice. We also reserve the authority to withdraw the waiver in the event we determine that there has been an abuse of the waiver. The proposed payment waivers would not protect financial arrangements between ACOs, ACO participants, ACOs providers/ suppliers, or other individuals or entities providing services to ACO patients from liability under the fraud and abuse laws or any other applicable laws. We note that we would retain the right to monitor and audit the use of such waivers. We would anticipate implementing heightened monitoring of entities that bill under payment waivers to help reduce the possibility for abuse of the waiver. We seek comment on what specific activities should be monitored to ensure that items and services are properly delivered to eligible patients, that patients are not being discharged prematurely to SNFs, and that patients are able to exercise freedom of choice and are not being steered inappropriately. We would also likely consider monitoring ACOs’ marketing of services subject to payment waivers to prevent coercive or E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 72820 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules misleading marketing and to assess the effect on the delivery of care. We invite comments on whether it is necessary to provide for a waiver of the SNF 3-day rule using our authority under Section 1899(f) of the Act for ACOs that choose to participate in the Shared Savings Program under twosided performance-based risk financial arrangements. If so, what criteria would be appropriate to determine waiver eligibility under the Shared Savings Program? We note that any waiver under the Shared Savings Program for this purpose would have to be implemented consistently across all eligible ACOs. In other words, application of the waiver would be uniformly applied, and there would not be customization of the waiver or conditions for the waiver for particular eligible ACOs. With this in mind, would it be appropriate to apply the same criteria discussed earlier that are currently being used under the Pioneer ACO Model? If not, how would the criteria have to be modified? What assurances should ACOs have to make in order to be eligible to use the waiver? Are there current Shared Savings Program rules and requirements that would have to be modified to permit this waiver? Should we require that a beneficiary be admitted to a SNF that is an ACO participant or ACO provider/ supplier in order for the waiver to apply? We invite comment on whether or not the SNF should be required to be an ACO provider/supplier. Would a waiver under certain conditions create any unexpected concerns about access to SNF services for the patients who need them most (that is, those beneficiaries admitted following a 3-day or longer hospital stay). Would a waiver of the SNF 3-day rule align with our policy of including primary care services furnished in SNFs in the beneficiary assignment process? Would the ACO quality measures such as the new Skilled Nursing Facility 30-Day All-Cause Readmission Measure (79 FR 67910) and the other measures used in establishing the quality performance standards that ACOs must meet in order to be eligible for shared savings provide sufficient beneficiary protections from inappropriate care or withheld care? Are there other quality standards that should apply to ACOs or post-acute care facilities that use this waiver? What other monitoring activities should be considered to guard against unintended consequences of a waiver of the SNF 3day rule? What other criteria, operational issues or other concerns should we consider? We invite comment on these issues. VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 (2) Billing and Payment for Telehealth Services Under section 1834(m) of the Act, Medicare pays for 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. The telehealth services must be furnished to a beneficiary located in one of the eight types of originating sites specified in section 1834(m)(4)(C)(ii) of the Act and the site must satisfy at least one of the requirements of section 1834(m)(4)(C)(i)(I) through (III) of the Act. Generally, for Medicare payment to be made for telehealth services under the Physician Fee Schedule several conditions must be met (§ 410.78(b)). Specifically, the service must be on the Medicare list of telehealth services and meet all of the following other requirements for payment: • The service must be furnished via an interactive telecommunications system. • The service must be furnished to an eligible telehealth individual. • The individual receiving the services must be in an eligible originating site. When all of 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. For the list of Medicare telehealth services, see the CMS Web site at www.cms.gov/ teleheath/. 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. We also note that a number of CMS demonstrations include or have included testing of interventions that use electronic health records, remote monitoring, and mobile diagnostic technology as part of strategies to increase quality of care and decrease costs. For example, for the Medicare Health Support Programs (see https:// www.cms.gov/Medicare/MedicareGeneral-Information/CCIP/), participants utilized a variety of telephonic care management services and related interventions. These services included nurse-based health PO 00000 Frm 00062 Fmt 4701 Sfmt 4702 advice for the management and monitoring of symptoms, health education (via health information, videos, online information), health coaching to encourage self-care and selfmanagement of chronic health conditions and medications, and health promotion and disease prevention coaching. Likewise, under the Independence at Home Demonstration, physician and nurse practitioner directed home-based primary care teams use electronic health records, remote monitoring, and mobile diagnostic technology to help reduce expenditures and improve health outcomes for Medicare beneficiaries with multiple chronic conditions (see CMS Web site at https://www.cms.gov/Medicare/ Demonstration-Projects/ DemoProjectsEvalRpts/MedicareDemonstrations-Items/ CMS1240082.html). As discussed previously in section II.B.8.a of this proposed rule, section 1899(b)(2)(G) of the Act requires a Shared Savings Program ACO to ‘‘define processes to . . . coordinate care, such as through the use of telehealth, remote patient monitoring, and other such enabling technologies.’’ Commenters suggest that technologies that enable health care providers to deliver care to patients in locations remote from providers are being increasingly used to complement face-to-face patientprovider encounters in both urban and rural areas. In these cases, the use of remote access technologies may improve the accessibility and timeliness of needed care, increase communication between providers and patients, enhance care coordination, and improve the efficiency of care. ACOs and other commenters have suggested that a waiver of certain Medicare telemedicine payment requirements would help encourage a broader range of ACOs to more fully utilize telehealth, remote patient monitoring, and other such enabling technologies. We note that certain professional services that are commonly furnished remotely using telecommunications technology are paid under the same conditions as in-person physicians’ services, and thus do not require a waiver. Such services that do not require the patient to be present in person with the practitioner when they are furnished are covered and paid in the same way as services delivered without the use of telecommunications technology when the practitioner is inperson at the medical facility furnishing care to the patient. Such services typically involve circumstances where a practitioner is able to visualize some aspect of the patient’s condition without E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules the patient being present and without the interposition of a third person’s judgment. Visualization by the practitioner can be possible by means of x-rays, electrocardiogram or electroencephalogram tracings, tissue samples, etc. For example, the interpretation by a physician of an actual electrocardiogram or electroencephalogram tracing that has been transmitted via telephone (that is, electronically, rather than by means of a verbal description) is a covered physician’s service. These remote services are not Medicare telehealth services as defined under section 1834(m)(4)(F)(i) of the Act. Rather, these remote services that utilize telecommunications technology are considered physicians’ services in the same way as services that are furnished in person without the use of telecommunications technology, and they are paid under the same conditions as in-person physicians’ services, with no requirements regarding permissible originating sites. A waiver of certain Medicare telehealth requirements could be supported by section 1899(b)(2)(G) of the Act in that it gives the use of enabling technologies, such as telehealth, as an example of a process to coordinate care, and the statute does not limit ACOs to being in rural or shortage areas where Medicare payment is available for telehealth services. As we indicated in section II.B.8.a. of this proposed rule, we welcome information from ACOs and other stakeholders about the use of such technologies to coordinate care for assigned beneficiaries. If we conclude that a waiver of certain telehealth requirements under section 1899(f) of the Act is necessary in order to carry out the Shared Savings Program, we would likely provide for a waiver of the originating site requirements of section 1834(m)(4)(C)(i)(I) through (III) of the Act that limit telehealth payment to services furnished within specific types of geographic areas or in an entity participating in a Federal telemedicine demonstration project approved as of December 31, 2000, and would also likely provide for a waiver of the originating site requirements of section 1834(m)(4)(C)(ii)(I) through (VIII) of the Act that specify the particular sites at which the eligible telehealth individual must be located at the time the service is furnished via a telecommunications system. Waiver of this requirement could allow ACOs to realize cost savings and improve care coordination, such that they would more willing to take on two-sided risk which we believe is VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 required to promote the long term effectiveness and sustainability of the Shared Savings Program. If we were to implement a waiver then we believe it would be appropriate to limit the use of such waivers to beneficiaries that are assigned to the ACO during the applicable performance year. We believe this would be best accomplished by permitting ACOs to use these waivers when they have a prospectively assigned population. In other words, the waivers would be limited to ACOs participating in Track 3. Prospectively assigned beneficiaries under Track 3 would be assigned to the ACO for the entire year and it would thus be clear to ACOs and CMS as to the beneficiaries for which a waiver applied. As mentioned previously, we believe a prospective assignment approach creates a potential pathway for improving the appropriate use of waivers by ACOs and a method for CMS to monitor its use. In addition, under Track 3 there would be greater opportunity for risk. For these reasons, we believe that Track 3 is potentially a better candidate for such a waiver than Track 2. However, we seek comment on whether these waivers should apply to all two-sided performance-based risk tracks. Another option would be for the waivers would apply to any FFS beneficiary cared for by an ACO and then the waiver could be available to ACOs participating in any two-sided risk track, regardless of whether the assignment is prospective or retrospective. Another option would be to apply such waivers to beneficiaries that appear on the quarterly lists of preliminarily prospectively assigned beneficiaries. Under this approach, the population for whom the waiver is available would likely change from quarter to quarter. Under a waiver of the telehealth requirements, we would anticipate establishing additional requirements to ensure program transparency and help reduce the possibility for abuse of the waiver. For example, we would anticipate requiring ACOs to indicate their intent to use the waiver in a form and manner specified by CMS, as part of either their applications or requests for renewal of their participation agreement, and to remain in compliance with program rules. To further substantiate an ACO’s intent to use the waiver, we anticipate requiring that the ACO submit as part of its application documentation showing that its governing body has made and duly authorized a bona fide determination that the ACO will use the waiver (if approved by CMS) and will comply with all requirements of the waiver. As PO 00000 Frm 00063 Fmt 4701 Sfmt 4702 72821 part of its application for the waiver, we would require the ACO to submit a written plan describing how it would use the waiver to meet the clinical needs of its assigned beneficiaries. We would reserve the right to deny or revoke a waiver to an ACO if it is not in compliance with requirements under the Shared Savings Program, if it does not use the waiver as described in its application, or if it does not successfully meet the quality reporting standard. ACOs with approved waivers would be required to post their use of the waivers as part of public reporting (see § 425.308) on the dedicated ACO Web page. Use of the waiver and its authorization by the governing body would be required to be documented, and the documentation retained, consistent with § 425.314. We would anticipate that any waiver would be effective on the start date of the ACO’s participation agreement and would not extend beyond the end of the ACO’s participation in the Shared Savings Program. However, if CMS terminates the participation agreement, then the waiver would end on the date of the termination notice. We also reserve the authority to withdraw the waiver in the event we determine that there has been an abuse of the waiver. The proposed payment waivers would not protect financial arrangements between ACOs, ACO participants, ACOs providers/ suppliers, or other individuals or entities providing services to ACO patients from liability under the fraud and abuse laws or any other applicable laws. We note that we would retain the right to monitor and audit the use of such waivers. We would anticipate implementing heightened monitoring of entities that bill under payment waivers to help reduce the possibility for abuse of the waiver. We seek comment on what specific activities should be monitored to ensure that items and services are properly delivered to eligible patients. We would also likely consider monitoring ACOs’ marketing of services subject to payment waivers to prevent coercive or misleading marketing and to assess the effect on the delivery of care. In addition to welcoming comments related to the questions we raised in section II.B.8.a of this proposed rule, we also welcome specific comments on whether it is necessary to use our authority under Section 1899(f) of the Act to provide for a waiver for ACOs participating in the Shared Savings Program of any Medicare telehealth rules, especially for those ACOs that have elected to participate under a twosided performance-based risk E:\FR\FM\08DEP2.SGM 08DEP2 72822 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 arrangement. We seek comment on the telehealth rules that would require a waiver and the circumstances under which a waiver would be necessary. Specifically, what aspects of current Medicare telehealth payment and other rules would it be necessary to waive in order to effectively incorporate twosided performance-based risk into the Shared Savings Program? What factors should CMS consider if it were to provide for such a waiver to allow ACOs additional flexibility to provide a broader range of telehealth services or services in a broader range of geographic areas? Also, how should telehealth be defined? While ‘‘telehealth’’ is not consistently defined across payers, ‘‘telehealth’’ typically refers to a broader set of services, including ‘‘store and forward’’ services, which are not currently covered by Medicare outside of demonstration projects. Under what circumstances should payment for telehealth and related services be made? What types of services should be included—remote monitoring, remote visits and/or e-consults? What capabilities or additional criteria should ACOs meet in order to qualify for payments for telehealth services under such a waiver? In your comments, please consider quality and outcomes metrics, other requirements to ensure protection of beneficiaries and the Medicare Trust Funds, and any other design factors you think may be important. (3) Homebound Requirement Under the Home Health Benefit In order for Medicare to pay for home health services, a beneficiary must be determined to be ‘‘home-bound.’’ Specifically, sections 1835(a) and 1814(a) of the Act require that a physician certify (and recertify) that in the case of home health services under the Medicare home health benefit, such services are or were required because the individual is or was ‘‘confined to the home’’ and needs or needed skilled nursing care on an intermittent basis, or physical or speech therapy or has or had a continuing need for occupational therapy. A beneficiary is considered to be confined to the home if the beneficiary has a condition, due to an illness or injury, that restricts his or her ability to leave home except with the assistance of another individual or the aid of a supportive device (such as crutches, a cane, a wheelchair, or a walker), or if the beneficiary has a condition such that leaving his or her home is medically contraindicated. While a beneficiary does not have to be bedridden to be considered confined to the home, the condition of the VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 beneficiary must be such that there exists a normal inability to leave home and leaving home requires a considerable and taxing effort by the beneficiary. Absent this condition, it would be expected that the beneficiary could typically get the same services in an outpatient or other setting. Thus, the homebound requirement provides a way to help differentiate between patients that require medical care at home versus patients who could more appropriately receive care in a less costly outpatient setting. Additional information regarding the homebound requirement is available in the Medicare Benefit Manual (Pub 100–02); Chapter 7, ‘‘Home Health Services’’, Section 30.1.1, ‘‘Patient Confined to the Home’’. Some ACOs and other commenters have suggested that a waiver of this requirement would be appropriate under the Shared Savings Program, especially for ACOs that have elected to participate under a two-sided performance-based risk arrangement. They suggest that home health care would be appropriate for additional beneficiaries and could result in lower overall costs of care in some instances. For example, commenters suggest, based on their experiences outside of the Medicare FFS program, that if a beneficiary is allowed to have home health care visits, even if the beneficiary is not considered home-bound, the beneficiary may avoid a hospital admission. If we conclude that a waiver of the homebound requirement under section 1899(f) of the Act is necessary in order to carry out the Shared Savings Program, we would expect to offer the opportunity to provide home health services to additional beneficiaries to ACOs participating under Track 3 using a process similar to the approach we discussed above for a waiver of the SNF 3-day rule for ACOs in Track 3. Specifically, ACOs participating under Track 3 have a significant financial incentive to control total patient costs. In addition, under Track 3 beneficiaries would be prospectively assigned to the ACO for the entire year, and it would thus be clear as to which beneficiaries the waiver applied. As mentioned previously, we believe a prospective assignment approach creates a potential pathway for improving the appropriate use of waivers by ACOs and a method for CMS to monitor its use. In addition, under Track 3 there would be greater opportunity for risk. For these reasons, we believe that Track 3 is potentially making a better candidate for such a waiver than Track 2. All ACOs participating under Track 3 would be eligible to apply for a waiver of the PO 00000 Frm 00064 Fmt 4701 Sfmt 4702 home-bound requirement for their prospectively assigned beneficiaries; however, we seek comment on whether these waivers should apply to all performance-based risk tracks. Another option would be that the waivers would apply to any FFS beneficiary cared for by the ACO and then the waiver could be available to all ACOs participating in a two-sided risk track, regardless of whether assignment is prospective or retrospective. Another option would be to apply any waiver to beneficiaries that appear on the quarterly lists of preliminarily prospectively assigned beneficiaries. In this case, the beneficiaries to whom the waiver applies would likely change from quarter to quarter. We believe we could authorize waiver of the homebound requirement under the home health benefit for those ACOs that demonstrate through the application process or in a request for renewal of their participation agreement that they have the capacity and infrastructure to identify and manage clinically beneficiaries who are not homebound, but are otherwise eligible for services under the home health benefit, and would benefit from receiving these services. As part of the application for the waiver, we would expect to require ACOs to describe the staff and processes that would be involved in the clinical management of beneficiaries receiving services pursuant to the waiver. All other requirements for the Medicare home health benefit would remain unchanged. Thus, under such a waiver, only beneficiaries that otherwise meet all program requirements to receive home health services would be eligible for coverage of home health services without being homebound. In addition, we would require that home health services provide pursuant to the waiver at the direction of an ACO provider/supplier that is not a home health agency, to help ensure that the waiver is used appropriately. The home health agency would also likely be required to be an ACO provider/ supplier. We believe it would be appropriate to limit such a waiver to home health agencies that are ACO participants or ACO providers/ suppliers, because we believe these entities would have incentives that are most directly aligned with those of the ACO. ACOs also have stronger control and oversight over such entities and such entities are subject to Shared Savings Program requirements. We invite comment on whether or not the home health agency should be required to be an ACO provider/supplier. In either case, an ACO would be required to submit to CMS for approval the home E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules health agency or group of home health agencies with which it wishes to partner in providing services pursuant to this waiver. The designated home health agency or agencies would be required to have the appropriate staff capacity and necessary infrastructure to carry out the processes described in the ACO’s application for the waiver. In addition, a designated home health agency would be required to have, at the time of application submission, a quality rating of 3 or more stars under the CMS 5-Star Quality Rating System as reported on the Home Health Compare Web site. (For detailed information, see https:// blog.cms.gov/2014/06/18/star-qualityratings-coming-soon-to-compare-siteson-medicare-gov/.) Under such a waiver, we would anticipate establishing additional requirements to ensure program transparency and help reduce the possibility for abuse of the waiver. For example, we would anticipate requiring ACOs to indicate their intent to use the waiver in a form and manner specified by CMS, as part of either their applications or requests for renewal of their participation agreement, and to remain in compliance with program rules. To further substantiate an ACO’s intent to use the waiver, we anticipate requiring that the ACO submit as part of its application documentation showing that its governing body has made and duly authorized a bona fide determination that the ACO will use the waiver (if approved by CMS) and will comply with all requirements of the waiver. As part of its application for the waiver, we would require the ACO to submit a written plan describing how it would use the waiver to meet the clinical needs of its assigned beneficiaries. We would reserve the right to deny or revoke a waiver to an ACO if it is not in compliance with requirements under the Shared Savings Program or if it does not successfully meet the quality reporting standard. ACOs with approved waivers would be required to post their use of the waivers as part of public reporting (see § 425.308) on the dedicated ACO Web page. Use of the waiver and its authorization by the governing body would be required to be documented, and documentation retained, consistent with § 425.314. We would anticipate that any waiver would be effective on the start date of the ACO’s participation agreement and would not extend beyond the end of the ACO’s participation in the Shared Savings Program. However, if CMS terminates the participation agreement, then the waiver would end on the date of the VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 termination notice. We would also reserve the authority to withdraw the waiver in the event we determine that there has been an abuse of the waiver. The proposed payment waivers would not protect financial arrangements between ACOs, ACO participants, ACOs providers/suppliers, or other individuals or entities providing services to ACO patients from liability under the fraud and abuse laws or any other applicable laws. We note that we would retain the right to monitor and audit the use of such waivers. We would anticipate implementing heightened monitoring of entities that bill under payment waivers to help reduce the possibility for abuse of the waiver. We seek comment on what specific activities should be monitored to ensure that items and services are properly delivered to eligible patients, and that patients are able to exercise freedom of choice and are not being steered inappropriately. We would also likely consider monitoring ACOs’ marketing of services subject to payment waivers to prevent coercive or misleading marketing and to assess the effect on the delivery of care. We invite comments on whether it is necessary to waive the homebound requirement under the home health benefit using our authority under Section 1899(f) of the Act for ACOs that choose to participate in the Shared Savings Program under two-sided performance risk financial arrangements. We also welcome comments on the potential waiver requirements discussed previously. For example, what criteria would be appropriate to determine eligibility for such a waiver under the Shared Savings Program? Are there specific categories of providers or beneficiaries to whom the waiver should (or should not) apply? If implemented under a two-sided performance-based risk model, are there additional protections for the Medicare Trust Funds or for beneficiaries that should be considered? How would a waiver complement Medicare payment for physician home visits for medically complex patients? What considerations, if any, should we take into account when adapting current 60-day episode payment amounts that require patients to be homebound in applying them to services furnished to a non-homebound population? What quality metrics should be incorporated into the quality measure framework for ACOs and our monitoring program to measure the quality of care for non-homebound home health recipients? When should the waiver be applied? Would there be specific circumstances when home health services should be available at PO 00000 Frm 00065 Fmt 4701 Sfmt 4702 72823 any point without first being triggered by some health event? If so, what criteria would be necessary to differentiate these circumstances from non-covered custodial care? What other criteria or operational issues or other concerns should we also consider? We are also concerned that under a homebound waiver, beneficiaries may, in effect, be steered toward those agencies that can provide enhanced home health services to patients who are not homebound. Any such homebound waiver would not override Medicare patients’ freedom of choice and that beneficiaries would remain free to select any eligible home health agency. We seek comments on ways to ensure that beneficiaries retain their freedom of choice in practice under a waiver. We would also note that the Independence at Home (IAH) Demonstration builds on existing Medicare benefits by providing chronically ill patients with a complete range of primary care services in the home setting. Medical practices led by physicians or nurse practitioners provide primary care home visits tailored to the needs of beneficiaries with multiple chronic conditions and functional limitations. See the CMS Web site at https://innovation.cms.gov/ initiatives/independence-at-home/. How could the findings from Independence at Home demonstration apply to the population of beneficiaries assigned to ACOs or receiving care furnished by ACO providers/suppliers? (4) Waivers for Referrals to Postacute Care Settings As a condition of participation (CoP) in Medicare, a hospital must have in effect a discharge planning process that applies to all patients, as required under § 482.43. The Interpretative Guidelines for this requirement found in the State Operations Manual, Publication 100–07, Appendix A—Survey Protocol, Regulations and Interpretive Guidelines for Hospitals, section A–0799, define hospital discharge planning as a process that involves determining the appropriate post-hospital discharge destination for a patient; identifying what the patient requires for a smooth and safe transition from the hospital to his or her discharge destination; and beginning the process of meeting the patient’s identified postdischarge needs. Alternative terminology, such as ‘‘transition planning’’ or ‘‘community care transitions’’ is preferred by some, since it moves away from a focus primarily on a patient’s hospital stay to consideration of transitions among the multiple types of patient care settings E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 72824 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules that may be involved at various points in the treatment of a given patient. This approach recognizes the shared responsibility of health care professionals and facilities as well as patients and their support persons throughout the continuum of care, and the need to foster better communication among the various groups. At the same time, the term ‘‘discharge planning’’ is used both in section 1861(ee) of the Act as well as in § 482.43. The discharge planning CoP specifically addresses the role of the patient, or the patient’s representative, by requiring the hospital to develop a discharge planning evaluation at the patient’s request and to discuss the evaluation and plan with the patient. This is consistent with the hospital patient’s rights CoP regulations at § 482.13(b)(1) and (2), which provide that the patient has the right to participate in the development and implementation of his or her plan of care, and to make informed decisions regarding his or her care. Accordingly, hospitals must actively involve patients or their representatives throughout the discharge planning process. Further, the specific discharge planning evaluation requirement to assess a patient’s capability for post-discharge self-care requires the hospital, as needed, to actively solicit information not only from the patient or the patient’s representative, but also from family, friends, or other support persons. The hospital must include in the discharge plan, when applicable in terms of the types of post-discharge care needs identified, a list of home health agencies (HHAs) or SNFs that are available to the patient, that are participating in the Medicare program and that serve the geographic area (as defined by the HHA) in which the patient resides, or in the case of a SNF, in the geographic area requested by the patient. HHAs must request to be listed by the hospital as available (see § 482.43(c)(6)) for further details). Further, under the CoP regulations at § 482.43(c)(7), a hospital, as part of the discharge planning process, must inform the patient or the patient’s family of their freedom to choose among participating Medicare providers of post-hospital care services and must, when possible, respect patient and family preferences when they are expressed. The hospital must not specify or otherwise limit the qualified providers that are available to the patient. The discharge plan must identify any HHA or SNF to which the patient is referred in which the hospital has a disclosable financial interest, as specified by the Secretary, and any HHA VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 or SNF that has a disclosable financial interest in a hospital under Medicare (See § 482.43(c)(8)). The State Operations Manual (SOM), Appendix A at Section A–0823, provides additional guidance for these requirements. During the discharge planning process the hospital must inform the patient of his or her freedom to choose among Medicare-participating post-hospital providers and must not direct the patient to specific provider(s) or otherwise limit which qualified providers the patient may choose among. Hospitals have the flexibility either to develop their own lists or to print a list of skilled nursing facilities and home health agencies in the applicable geographic areas from the CMS Web sites, Nursing Home Compare (www.medicare.gov/NHcompare) and Home Health Compare (www.medicare.gov/ homehealthcompare). If hospitals develop their own lists, they are expected to update them at least annually (69 FR 49226). Hospitals may also refer patients and their families to the Nursing Home Compare and Home Health Compare Web sites for additional information regarding Medicarecertified SNFs and HHAs, as well as Medicaid-participating nursing facilities. The data on the Nursing Home Compare Web site include an overall performance rating, nursing home characteristics, performance on quality measures, inspection results, and nursing staff information. Home Health Compare provides details about every Medicare-certified home health agency in the country. Included on the Web site are quality indicators such as managing daily activities, managing pain and treating symptoms, treating wounds and preventing pressure sores, preventing harm, and preventing unplanned hospital admissions. The hospital might also refer the patient and his or her representatives to individual State agency Web sites, the Long-Term Care Ombudsman Program, Protection and Advocacy Organizations, Citizen Advocacy Groups, Area Agencies on Aging, Centers for Independent Living, and Aging and Disability Resource Centers for additional information on long term care facilities and other types of providers of post-hospital care. Having access to the information found at these sources may assist beneficiaries and their families and other caregivers in the decision making process regarding post-hospital care options. When the patient or the patient’s family has expressed a preference, the hospital must attempt to arrange post-hospital care with an HHA or SNF, as applicable, PO 00000 Frm 00066 Fmt 4701 Sfmt 4702 consistent with that preference. If the hospital is unable to make the preferred arrangement, (for example, if there is no bed available in the preferred SNF), it must document the reason the patient’s preference could not be fulfilled and explain that reason to the patient. ACOs and MedPAC have indicated that as ACOs have started to analyze claims data on their beneficiaries, they are recognizing that certain providers may deliver higher-quality and lowercost care than others. For example, some SNFs may deliver higher-quality care and thus appropriately lower rates of readmissions to hospitals. ACOs have indicated that they would like to have the ability to recommend high-quality SNF and HHA providers with whom they have established relationships, rather than presenting all options equally. In particular, ACOs and their ACO providers/suppliers would like to have the ability to clearly state to beneficiaries which providers they believe are best and why. However, it is not clear to them that they have the authority to do so, especially for referrals to post-acute care. ACOs suggest that the ability to make more specific recommendations would enable them to build robust networks across the continuum of care, and thus help them to give beneficiaries as much continuity as possible as they move across sites of care. Therefore, ACOs have asked that we provide clear direction on how preferred providers can be presented to beneficiaries and what represents clear notification of the beneficiary’s freedom to choose among participating Medicare providers. Based on these comments from ACOs and MedPAC, we have reviewed the relevant statutory provisions, regulations, and guidance. While we believe these materials make clear the requirements regarding how preferred providers can be represented to beneficiaries and what represents clear notification of beneficiary freedom of choice of providers, we believe we have identified one requirement that might be need to be waived. Specifically, we are considering whether it might be necessary to waive the requirement under section 1861(ee)(2)(H) of the Act that a hospital ‘‘not specify or otherwise limit the qualified provider which may provide post-hospital home services’’ and the portions of the hospital discharge planning CoP at § 482.43 that implement this requirement, using our waiver authority under Section 1899(f) of the Act for ACOs participating in two-sided risk tracks under the Shared Savings Program. If we were to implement such a waiver, we would anticipate making it a very narrow E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules waiver. In addition, we are considering whether such a waiver would be most appropriately implemented under Track 3 in which there is prospective assignment of beneficiaries. Under Track 3 beneficiaries would be prospectively assigned to the ACO for the entire year and it would thus be clear as to which beneficiaries the waiver applied. As mentioned previously, we believe a prospective assignment approach creates a potential pathway for improving the appropriate use of waivers by ACOs and a method for CMS to monitor its use. In addition, under Track 3 there would be greater opportunity for risk. For these reasons, we believe that Track 3 is potentially a better candidate for such a waiver than Track 2. Another option is that the waiver would apply to any FFS beneficiary cared for by the ACO and then the waiver could be available to all ACOs participating in a two-sided risk track, regardless of whether the assignment is prospective or retrospective. Another option would be to apply any waiver to beneficiaries that appear on the quarterly lists of preliminarily prospectively assigned beneficiaries. In this case, the beneficiaries to whom the waiver applies would likely change from quarter to quarter. We would also anticipate imposing additional documentation requirements upon those ACOs that seek to use the waiver. Specifically, because the Shared Savings Program is built on FFS Medicare, and because we continue to support and protect beneficiaries’ right to choose their providers under FFS Medicare, we are not considering a complete waiver of the requirement that a hospital, as part of the discharge planning process, not specify or otherwise limit the qualified providers that are available to the patient. This requirement is reflected in the hospital CoPs at § 482.43(c)(7). In other words, under the terms of any waiver, hospitals still would be required to inform the patient or the patient’s family of their freedom to choose among participating Medicare providers of post-hospital care services and must, when possible, respect patient and family preferences when they are expressed. In addition, the hospital must also present a complete list and may not limit the qualified providers that are available to the patient. However, under a waiver of the prohibition on the specification of qualified providers, discharge planners in hospitals that are ACO participants or ACO providers/suppliers would have the flexibility to recommend high quality post-acute providers with whom VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 they have relationships (either financial and/or clinical) for the purpose of improving continuity of care across sites of care. Such a waiver would not cover a situation in which a post-acute provider paid the ACO participant or ACO provider/supplier to be included as a recommended post-acute provider. We believe it would be appropriate to limit such a waiver to hospitals that are ACO participants or ACO providers/ suppliers because we believe these entities would have incentives that are most directly aligned with those of the ACO. ACOs also have stronger control and oversight over such entities and such entities are subject to Shared Savings Program requirements. We anticipate that under a such waiver discharge planners would be required to document that the patient or the patient’s family was informed of their freedom to choose a provider of posthospital services and presented with a complete list of participating Medicare providers of post-hospital care services as well as information regarding the Medicare provider of post-hospital care services recommended by the discharge planner. We also anticipate that under such a waiver discharge planners would be required to document the data and the rationale they used as the basis for recommending any specific provider of post-hospital services. If implemented across all risk tracks, we anticipate it would apply to all FFS beneficiaries receiving services from hospitals participating in the ACO. We would additionally anticipate requiring the use of certain quality criteria for recommended providers (such as requiring that SNFs meet a minimum Star rating of 3 or more stars under the CMS 5-Star Quality Rating System as reported on the Home Health Compare Web site. For detailed information, see https://blog.cms.gov/2014/06/18/starquality-ratings-coming-soon-tocompare-sites-on-medicare-gov/.) and documentation that the patient or the patient’s family was informed of the recommended provider’s quality of care, the clinical and/or financial relationship that the ACO has with the recommended provider, and any other reasons why the provider is being recommended. Furthermore, we would continue to require that the ACO respect the patient or the patient’s family’s preference regarding the choice of postacute provider. Under such a waiver, we would anticipate establishing additional requirements to ensure program transparency and help reduce the possibility for abuse of the waiver. For example, we would anticipate requiring ACOs to indicate their intent to use the PO 00000 Frm 00067 Fmt 4701 Sfmt 4702 72825 waiver in a form and manner specified by CMS, as part of either their applications or requests for renewal of their participation agreement, and to remain in compliance with program rules. To further substantiate an ACO’s intent to use the waiver, we anticipate requiring that the ACO submit as part of its application documentation showing that its governing body has made and duly authorized a bona fide determination that the ACO will use the waiver (if approved by CMS) and will comply with all requirements of the waiver. As part of its application for the waiver, we would require the ACO to submit a written plan describing how it would use the waiver to meet the clinical needs of its assigned beneficiaries. We would reserve the right to deny or revoke a waiver to an ACO if it is not in compliance with other requirements under the Shared Savings Program, if it does not use the waiver as described in its application, or if it does not successfully meet the quality reporting standard. ACOs with approved waivers would be required to post their use of the waivers as part of public reporting (see § 425.308) on the dedicated ACO Web page. Use of the waiver and its authorization by the governing body would be required to be documented, and the documentation retained, consistent with § 425.314. We would anticipate that any waiver would be effective on the start date of the ACO’s participation agreement and would not extend beyond the end of the ACO’s participation in the Shared Savings Program. However, if CMS terminates the participation agreement, then the waiver would end on the date of the termination notice. We also reserve the authority to withdraw the waiver in the event we determine that there has been an abuse of the waiver. The proposed payment waivers would not protect financial arrangements between ACOs, ACO participants, ACOs providers/suppliers, or other individuals or entities providing services to ACO patients from liability under the fraud and abuse laws or any other applicable laws. We would retain the right to monitor and audit the use of such waivers. We would implement heightened monitoring of entities that bill under payment waivers to help reduce the possibility for abuse of the waiver. We seek comment on what specific activities should be monitored to ensure that items and services are properly delivered to eligible patients, and that patients are able to exercise freedom of choice and are not being steered inappropriately. We would also likely E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 72826 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules consider monitoring ACOs’ marketing of services subject to payment waivers to prevent coercive or misleading marketing and to assess the effect on the delivery of care. We seek comment on this potential approach to using our waiver authority to permit ACOs flexibility in specifying certain Medicare providers of posthospital care services to patients and their families. We further seek comment on the criteria discussed above. Are there other cost and quality criteria that should be considered? Specifically to what hospitals and post-hospital providers should the waiver apply? For example, as discussed above, should the ability to recommend a post-hospital provider be available only to those hospitals that are ACO participants or ACO provider/suppliers, since these entities would have incentives that are most directly aligned with those of the ACO? Should a hospital be permitted to recommend any post-hospital provider or only post-hospital providers that are ACO participants or ACO provider/ suppliers? We anticipate that if a waiver is found to be necessary, we would establish a waiver that would apply to all hospitals that are ACO participants or ACO providers/suppliers and that these hospitals would have the ability to recommend any post-hospital provider; however, we would be interested to receive comments on alternative approaches. Overall, we are supportive of hospitals recommending certain posthospital providers based on quality and a beneficiary’s specific needs, as long as the beneficiaries understand their other options and retain their freedom of choice. In the event a waiver is found to be necessary, are there other parameters that should be established around how hospitals formulate their lists of post-acute providers and what information would be shared with beneficiaries? Under such a waiver would it be appropriate for hospitals to share only information on quality that is publically reported, such as on Home Health Compare, or would it be appropriate for hospitals to also share information that they have generated internally? We would be concerned if hospitals might steer beneficiaries to providers based on quality information that has not been properly vetted. Also, we would be concerned if hospitals recommended only their partnering providers, when there may be other providers of equal or better quality. Since the CoP requirements apply to all patients of a participating hospital regardless of their insurer or insured status, we are also seeking comment on whether it would be feasible to VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 implement a system where the CoP requirement to not make recommendations is waived for the ACO participating hospitals only in the case of certain Medicare FFS beneficiaries. We are further seeking comments on whether it might be necessary for purposes of carrying out the Shared Savings Program and what benefits and risks might arise for non-Medicare inpatients if we were to waive this portion of the regulation for ACO participating hospitals with respect to all of their patients. We welcome comments on whether it would be appropriate to limit any such a waiver to ACOs participating under two-sided risk financial arrangements, or whether such a waiver should be available more broadly to all ACOs participating in the Shared Savings Program. Alternatively, should the waiver apply only to beneficiaries that are prospectively assigned to ACOs participating in Track 3? What operational considerations/ concerns would implementation of such a waiver raise? What additional beneficiary protections and safeguards should be considered and put in place to prevent abuse of such a waiver? (5) Waiver of Other Payment Rules We welcome suggestions on whether there are any additional Medicare FFS payment rules that it may be necessary to waive using our authority under section 1899(f) of the Act in order to effectively implement two-sided risk financial arrangements under the Shared Savings Program by providing additional mechanisms for ACOs to increase quality and decrease costs. We would establish any such waivers through the rulemaking process. As a result, any suggestions submitted by commenters would be helpful to CMS in developing future proposals regarding the waiver of any Medicare FFS rules that might be necessary to carry out the provisions of the Shared Savings Program, and in particular to implement two-sided risk models under the program. b. Other Options for Improving the Transition to Two-Sided PerformanceBased Risk Arrangements (1) Beneficiary Attestation Under 1899(c) of the Act, beneficiaries are required to be assigned to an ACO participating in the Shared Savings Program based on the beneficiary’s utilization of primary care services rendered by physicians. Thus, beneficiary choice, as indicated by their utilization of primary care service furnished by physicians, must determine beneficiary assignment to an PO 00000 Frm 00068 Fmt 4701 Sfmt 4702 ACO under the Shared Savings Program. Therefore, we developed a methodology for assigning beneficiaries based on whether the ACO provided the plurality of the beneficiary’s primary care during a particular performance year. In the November 2011 final rule (76 FR 67851 through 67870), we outlined the major considerations in beneficiary assignment to an ACO. First, we emphasized that unlike managed care programs, Medicare FFS beneficiaries do not enroll in the Shared Savings Program, and they retain the right to seek treatment from any Medicare-enrolled provider of their choosing. Thus, the ‘‘assignment’’ methodology in no way implies a lockin or enrollment process. To the contrary, the statutory term ‘‘assignment’’ in this context refers only to an operational process by which we determine whether a beneficiary has chosen to receive a sufficient level of the requisite primary care services from a specific ACO so that the ACO may be appropriately designated as being accountable for that beneficiary’s care, and we can measure its quality and financial performance on patients for whom it is in the best position to direct and influence their care. No exclusions or restrictions based on health conditions or similar factors are applied in the assignment of Medicare FFS beneficiaries. Additionally, we noted that the statute requires that assignment be based on beneficiary utilization of primary care services furnished by physicians. We explored several options for assigning beneficiaries to an ACO based on whether the beneficiary received the plurality of primary care services from providers and suppliers participating in the ACO. The primary options we considered were whether to assign beneficiaries to an ACO prospectively, at the beginning of the performance year, or whether to assign beneficiaries to an ACO retrospectively, at the end of the performance year. Under the retrospective approach, the ACO would be held accountable for beneficiaries that chose to receive the plurality of their primary care services from practitioners in the ACO during the course of the performance year. These beneficiaries necessarily would be identified at the end of the performance year. The advantage of this approach is that the ACO is assessed based on beneficiaries with whom its providers and suppliers had visits with during the performance year and had the greatest opportunity to impact care. Another advantage is that this methodology encourages organizations to improve care for all Medicare FFS E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules patients seen by ACO professionals during a performance year. The disadvantage that some ACOs have articulated is that retrospective assignment can pose challenges when an organization has limited resources. Such organizations may prefer to target specific FFS beneficiaries for enhanced care improvement activities, and be confident that those specific beneficiaries will be the population used to determine the ACO’s performance on cost and quality at the end of the year. Under a prospective assignment approach, a beneficiary’s utilization of primary care services during a timeframe prior to the start of the performance year would be used to assign a list of beneficiaries to the ACO at the beginning of a particular performance year (as we have proposed under Track 3). The total cost and quality of the care furnished to beneficiaries on the prospective assignment list would be used at the end of the performance year to determine the ACO’s performance. As some ACOs have articulated, an advantage to this approach is that the organization can target its resources and care coordination activities to the specific FFS beneficiaries that appear on the prospective assignment list, confident that these are the beneficiaries that will determine the ACO’s quality and efficiency performance at the end of the year. However, in the November 2011 final rule, we discussed several disadvantages to this approach. First, we believed that such an approach would erode the incentive for ACOs to improve their care processes to benefit the broader Medicare FFS population served by the ACO and its ACO participants and ACO providers/ suppliers. We stated that since the goal of the Shared Savings Program is to change the care experience for all FFS beneficiaries, ACO participants and ACO provider/suppliers should have incentives to treat all patients equally; using standardized evidence-based care processes, to improve the quality and efficiency of the care they provide to all FFS beneficiaries (76 FR 67861). Second, we noted that since FFS beneficiaries retain the freedom to choose their providers, it was likely that some prospectively assigned beneficiaries would choose not to obtain the plurality of their primary care services from ACO professionals during the performance year; however, the ACO would still be held accountable for the total cost and quality of the care furnished to those beneficiaries. After considering stakeholder comments on these main approaches, VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 we finalized a hybrid policy that provided for a preliminary prospective assignment methodology with final retrospective reconciliation (76 FR 67867). We finalized this hybrid approach in an effort to realize the most positive aspects of both prospective and retrospective assignment and avoid, to the extent possible, the major disadvantages of each. Therefore, we finalized a policy in which we prospectively assign beneficiaries to ACOs in a preliminary manner at the beginning of a performance year based on most recent 12 months of data. We then update this information quarterly, based on a rolling 12 months of data. Final assignment is determined after the end of each performance year based on the 12 months of data from the performance year. This policy determines assignment to an ACO under the Shared Savings Program based on a statistical determination of a beneficiary’s utilization of primary care services, rather than on a process of enrollment or ‘‘voluntary selection’’ by beneficiaries. Beneficiaries are assigned to no more than one ACO, and the specific methodology (the ‘‘step-wise’’ approach) is described in § 425.402. We finalized this policy because we believed that the methodology would balance beneficiary freedom to choose providers under FFS Medicare with the ACO’s desire to have information about the FFS beneficiaries that were likely to be assigned at the end of the performance year. We also felt this approach would provide adequate incentives for each ACO to redesign care processes for and provide high quality care to its entire FFS beneficiary population instead of just focusing on a subset of patients. Finally, the ACO’s performance would be assessed on the basis of the care furnished to those beneficiaries that chose to receive the plurality of primary care services from ACO professionals during the performance year, and for whom the ACO had the greatest opportunity to impact care. A retrospective claims-based assignment methodology necessarily creates more year-to-year variability or ‘‘churn’’ in the list of assigned beneficiaries compared to managed care programs where patients enroll in and are locked in at the beginning of the year. Based on our experience and the data generated from the Physician Group Practice Demonstration (which used a similar retrospective assignment methodology), approximately 75 percent of beneficiaries assigned at the end of one performance year remained assigned at the end of the next PO 00000 Frm 00069 Fmt 4701 Sfmt 4702 72827 performance year. The other 25 percent of beneficiaries were no longer assigned to the PGP site because they either were no longer eligible to be assigned or chose not to receive the plurality of their primary care services from the PGP practitioners. This statistic was recently confirmed when evaluating ‘‘churn’’ in the Shared Savings Program context. On average, 76 percent (range = 58 percent to 88 percent) of beneficiaries assigned to a Shared Savings Program ACO at the end of one year are assigned to the same ACO at the end of the subsequent performance year. In other words, ACOs experience a ‘‘churn rate’’ of 24 percent on average. However, when combined with the information provided on quarterly updates to the assigned beneficiary list, ‘‘churn’’ from quarter to quarter decreases to an average of 10 percent. In other words, on average, 91 percent of the beneficiaries assigned in one quarter appear on the next quarter’s assignment list (range = 77 percent to 95 percent). These data indicate that ‘‘churn’’ varies from ACO to ACO, and that our hybrid assignment methodology performed according to expectations, that is, the quarterly assignment reports provide the ACO with relevant information during the performance year about its patient population for purposes of more effectively planning and coordinating care. As in the PGP demonstration, the 24 percent ‘‘churn rate’’ found in the Shared Savings Program reflects beneficiaries that either became ineligible to be assigned or chose not to receive the plurality of their primary care services from ACO professionals. Beneficiaries who were assigned in one performance year, but fall off the assignment list at the end of the subsequent performance year may do so for a variety of reasons including: • Beneficiary did not seek primary care services from any Medicareenrolled physicians during the subsequent performance year. • Beneficiary chose to receive all primary care services or the plurality of his or her primary care services from providers outside the ACO during the subsequent performance year. Reasons for this could include: ++ The beneficiary received short term care (for example, referral care, SNF care) from ACO professionals during the earlier performance year but did not continue the relationships in the subsequent year. ++ Beneficiary moved his/her residence and now seeks care from practitioners unaffiliated with the ACO. • Beneficiary chose to enroll in MA or is otherwise no longer a FFS Medicare beneficiary in the subsequent E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 72828 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules performance year (that is, the beneficiary is no longer eligible for assignment). • A new ACO entered the market in the subsequent performance year and its ACO professionals furnish the plurality of primary care services to the beneficiary compared to the established ACO. We estimate that on average, 76 percent of beneficiaries assigned to a Shared Savings Program ACO remain assigned from one year to the next. However, the retention rate varies from 58 percent to 88 percent across ACOs, and correspondingly, the turnover varies from 12 percent to 42 percent. On average, 7 percent of previously assigned beneficiaries are no longer eligible for assignment to an ACO and 17 percent of previously assigned beneficiaries remain eligible to be assigned, but do not receive the plurality of their primary care services from ACO professionals the ACO during the subsequent performance year. Of the 17 percent of previously assigned beneficiaries who remain eligible for assignment— • Six percent had at least one primary care physician visit with a physician who is an ACO professional, but the plurality of their primary care services were rendered outside the ACO; • Three percent had no physician or non-physician primary care visits during the subsequent year; • Seven percent had at least one physician or non-physician primary care visit, but none with ACO professionals; • One percent had at least one nonphysician primary care visit with an ACO professional, but had no primary care visits with physicians who are ACO professionals in the ACO; and • Seven percent had at least one primary care visit with a physician in the ACO, but did not receive the plurality of their primary care services from ACO professionals. As suggested by these statistics, some percentage of beneficiaries may believe a certain primary care practitioner affiliated with an ACO has ultimate responsibility for coordinating their care, even when it is necessary for them to receive primary care services from other practitioners, including practitioners who are not participating in the same ACO with which the practitioner is affiliated. Such a beneficiary could become unassigned if his or her primary care service utilization shifted away from practitioners in the ACO in a year. For example, a beneficiary living in a small town may have had a primary care service visit during a performance year VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 with a primary care provider who is an ACO professional with whom the beneficiary has a long-standing relationship and the beneficiary believes this ACO professional is responsible for coordinating his/her care. If this beneficiary chooses to go to a large health system in the next town for primary care services and receives primary care services from practitioners that are unaffiliated with the ACO during the performance year, at the end of the performance year it may be determined that ACO professionals did not render the plurality of the primary care services for that beneficiary and therefore the ACO would not be held accountable for the total quality and cost of the beneficiary’s care for that performance year. However, commenters have suggested that beneficiaries should have the ability to designate which providers (and by extension, the ACOs with which they are affiliated) are responsible for overseeing their overall care, regardless of where the beneficiary received the plurality of his or her primary care services. These commenters argue that creating a methodology that takes into account what provider a beneficiary believes has ultimate responsibility for his or her care could reduce ‘‘churn’’ from year to year, and increase the chances that an ACO would see a return on the investments it makes in the care of specific beneficiaries. Commenters argue this is particularly important in two-sided models where ACOs face amplified levels of performance-based risk. Patient advocacy groups and ACOs have expressed interest in and support for enhancing claims-based assignment of beneficiaries to ACOs by taking into account beneficiary attestation regarding the provider that they consider to be responsible for coordinating their overall care. Stakeholders believe that incorporating this information and giving beneficiaries the opportunity to voluntarily ‘‘align’’ with the ACO in which their primary healthcare provider participates will improve the patientcenteredness of the assignment methodology. To begin to address these concerns, the Pioneer ACO Model is currently conducting a test of beneficiary attestation for the 2015 performance year. Specifically, the Innovation Center has designed a test in which participating ACOs mail cover letters to beneficiaries aligned to the Pioneer ACO in either the 2013 or 2014 performance years, explaining the process by which a beneficiary may indicate whom they consider to be their ‘‘main doctor’’, each with a form that asks the beneficiary to PO 00000 Frm 00070 Fmt 4701 Sfmt 4702 confirm their ‘‘main doctor’’. In the form the beneficiary is asked to confirm whether or not the listed provider or supplier is their ‘‘main doctor.’’ Beneficiaries who confirm a care relationship with the provider/supplier listed on the form (who is an ACO participating provider/supplier identified by the Pioneer ACO) and meet all other eligibility criteria for alignment (or example, they did not drop either Part A or B coverage or join a MA plan), would be aligned to the Pioneer ACO for the following performance year, regardless of whether or not the practitioners participating in the Pioneer ACO rendered the plurality of the beneficiary’s primary care services during the performance year. The Innovation Center will conduct claims-based attribution using the methodology established for the Pioneer ACO Model, but will include in the Pioneer’s aligned beneficiary population not only those beneficiaries aligned through claims, but also those beneficiaries who returned the form confirming that a Pioneer ACO provider/supplier is their main doctor. Beneficiaries who do not return the form or who return the form, but indicate the provider listed is not their main doctor, will not be included in the ACO’s assigned beneficiary population unless they are assigned through the existing claims-based attribution methodology. This means that if the beneficiary does not return the form and the beneficiary is not assigned to the Pioneer ACO through the claims-based attribution methodology, then the beneficiary would not be assigned to the Pioneer ACO. Due to program integrity concerns and the additional administrative burden for ACOs participating in the Pioneer Model, discussions of beneficiary attestation or receipt of confirmation forms at the point of care were precluded under this first test of beneficiary attestation. Rather, in this initial test, the Innovation Center seeks only to evaluate the effectiveness of different types of mailed forms with respect to beneficiary willingness to attest that a particular practitioner has the primary responsibility for their care. Additional testing in the future is planned under the Pioneer ACO Model that will build upon lessons learned from this initial test and in which we would seek to enhance the meaningfulness of dialogue between beneficiaries and their providers regarding the nature of the care relationship. Although we are not making any specific proposals related to beneficiary attestation, we welcome comments on E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules whether it would be appropriate to offer a beneficiary attestation process to ACOs that choose to participate in the Shared Savings Program under twosided risk financial arrangements. We intend to carefully consider any comments on this issue during the development of the final rule, and will make an assessment at that time as to whether any change to our assignment methodology to include beneficiary attestation would be appropriate. We are interested in receiving comments and suggestions on a wide variety of policy and operational issues related to beneficiary attestation. For example, which beneficiaries should be eligible to attest into an ACO? Should this option be available to all beneficiaries or only to currently or previously aligned beneficiaries? What implications would attestation or voluntary alignment have for the assignment of beneficiaries to an ACO under a prospective versus a preliminary prospective method? Which types of care relationships should be considered—those with primary care physicians, specialists or other types of providers? How should beneficiaries receive communications about claimsbased and voluntary alignment and who would provide the information? What method or process should be used to obtain beneficiary confirmation and when would this occur? Under what circumstances and how could beneficiaries reverse their decisions? Although we believe the option suggested would protect beneficiary freedom to choose, we seek comment on whether there are additional ways to protect beneficiaries from coercion and ensure proper monitoring and safeguards under the Shared Savings Program. What implications would there be for ACO information or other administrative systems? What provider education would be needed? Should there be additional application or eligibility requirements for ACOs in tracks under which beneficiary attestation is offered? We would note that if we were to offer a beneficiary attestation process for ACOs that choose to participate in the Shared Savings Program under two-sided risk financial arrangements, such beneficiaries would be eligible to be included in the sample for GPRO quality reporting by ACOs participating in the Shared Savings Program (76 FR 67900), even if the beneficiary did not chose to receive care from the ACO professionals during the performance year, as might be the case under Track 3 under the proposed prospective assignment methodology. Also, we are concerned about creating additional administrative burdens for VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 ACOs that might discourage them from accepting two-sided risk arrangements. Are there ways that beneficiary attestation could be operationally implemented to reduce administrative burdens on ACOs and CMS and limit beneficiary confusion? We anticipate that if we were to offer a beneficiary attestation process for ACOs that choose to participate in the Shared Savings Program under two-sided risk financial arrangements, then at least initially we would anticipate implementing this beneficiary attestation in a manner consistent with the current beneficiary attestation under the Pioneer ACO Model. We believe this would be an appropriate starting point for beneficiary attestation under the Shared Savings Program because it allows us to take advantage of the policies and processes that have already been developed for the Pioneer ACO Model. Additionally, we believe it is unlikely that such a policy would impact ‘‘churn’’ for Track 3 ACOs during a performance year, given our proposals for prospectively assigning beneficiaries. However, beneficiary attestation may have a minor impact on ‘‘churn’’ during a performance year related to the preliminary prospective with retrospective reconciliation approach such as the methodology employed under Track 2. This process may also have a minor impact in stabilizing the beneficiary assignment list from one performance year to the next for all ACOs. In addition, we seek comments on whether a beneficiary attestation process under the Shared Savings Program could bias performance year results compared to the ACO’s benchmark. For example, we believe that such biases could occur because the beneficiaries used to establish performance benchmarks would not have had the same opportunity to designate their ‘‘main doctor.’’ Rather, for purposes of the benchmark years, all beneficiaries would be assigned using the established claims-based assignment methodology. Would it be appropriate for us to use our authority to adjust an ACO’s benchmark to account for ‘‘beneficiary characteristics’’ to address any such potential biases? In connection with any implementation of beneficiary attestation, we would revise our regulations as necessary, to protect beneficiaries from undue coercion or influence in connection with whether they choose to attest or not. Beneficiary attestation is not intended to be used as a mechanism for ACOs (or ACO participants, ACO providers/suppliers, ACO professionals, or others) to target PO 00000 Frm 00071 Fmt 4701 Sfmt 4702 72829 potentially lucrative beneficiaries or avoid those less likely to produce savings. To this end, we do not believe ACOs or others should be permitted to offer gifts or other inducements to beneficiaries, nor should they be allowed to withhold or threaten to withhold items or services, for the purpose of coercing or influencing their alignment decisions. The current regulations at § 425.304(a)(1) prohibit 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 inducements for receiving items or services from, or remaining in, an ACO. The regulation at § 425.304(a)(2) permits certain in-kind items or services to be provided to beneficiaries if there is a reasonable connection between the items and services and the medical care of the beneficiary and certain other conditions are met. We would consider any inducement intended to coerce or influence a beneficiary attestation decision to be prohibited under § 425.304(a)(1) and not be considered reasonably connected to medical care under § 425.304(a)(2). We would not, however, prohibit an ACO or its ACO participants and ACO providers/ suppliers from providing a beneficiary with accurate descriptive information about the potential patient care benefits of aligning with an ACO. We are also soliciting comments on this issue. (2) Seeking Comment on a Step-Wise Progression for ACOs To Take on Performance-Based Risk Under the current Shared Savings Program rules, an ACO may not include an entity on its list of ACO participants unless all ACO providers/suppliers billing through the entity’s Medicareenrolled TIN have agreed to participate in the program and comply with the program rules (see discussion in section II.B. of this proposed rule). Furthermore, it is not possible under our current regulations for some ACO providers/ suppliers to participate in Track 1, while other ACO providers/suppliers that may be more ready to accept performance-based risk participate under Track 2. Some stakeholders have commented that requiring all ACO providers/suppliers billing through an ACO participant TIN to participate in the same risk track could deter some ACOs from entering higher risk arrangements (Tracks 2 or 3) if they do not believe that all of the ACO providers/suppliers billing through a given ACO participant TIN are prepared to operate under high levels of risk. E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 72830 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules Conversely, we have heard from other stakeholders that requiring all ACO providers/suppliers billing though an ACO participant TIN to enter the same risk track can motivate an organization to work toward a common performance goal and implement uniform care processes that streamline patient care within and between various sites of care. We believe that the program works best when the incentives within an organization are aligned among all providers and suppliers in that organization. Given our policy objectives to encourage ACOs to redesign their care processes and move to increasing levels of financial risk, we are not proposing at this time to change our regulations in order to allow providers and suppliers billing through the same ACO participant TIN to participate in different tracks under the Shared Savings Program. However, we are interested in stakeholder opinion on this issue and seek comment on what options the program might consider in the future to encourage organizations to participate in the program while permitting the providers and suppliers within that organization to accept varying degrees of risk. In particular, we are interested in stakeholders’ input on the advantages and disadvantages of allowing Shared Savings Program ACOs that wish to enter a track with increased risk to split their ACO participants into different tracks or split ACO provider/ suppliers billing through a given Medicare-enrolled TIN so that a subset participate in a track that offers a higher sharing rate in exchange for taking on a greater degree of performance-based risk, while the remainder participate in a lower risk track. We intend to carefully review any comments that are received on these issues during the development of the final rule and will make an assessment at that time as to whether any change to our current policy is necessary and appropriate. For reasons already stated in the November 2011 final rule (76 FR 67808 through 67811), we believe it is appropriate to use the Medicareenrolled TINs that make up each ACO as the basis for a number of operational processes under the Shared Savings Program, including beneficiary assignment, and that, as a result, all providers and suppliers billing through the TIN of an ACO participant must agree to participate in the ACO and comply with program regulations in order for the ACO to include the entity on its ACO participant list. Therefore, we do not believe it would be necessary or ideal to adopt an approach under which ACOs would be permitted to pick VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 and choose ACO provider/suppliers for participation. However, we are considering ways to encourage organizations to move in a step-wise progression to taking on performancebased risk when some entities on its ACO participant list are ready. Therefore, if we were to make modifications to our current policies to permit organizations to split their ACO participant TIN list into different risk tracks, we would anticipate the following: • The ACO must have completed a full agreement period under Track 1 and meet requirements for renewing its agreement under Track 1 as proposed in this proposed rule. • The ACO must submit an ACO participant list in the form and manner designated by CMS and by a deadline established by us. • The ACO must indicate, in the form and manner specified by CMS, which ACO participants would continue under Track 1 and which would participate under a performance-based risk track. We would consider this list to be a ‘‘segmented list’’ of ACO participants. • The ACO as a whole would be required to meet the eligibility requirements to participate in the program, including the requirement that the ACO have at least 5,000 assigned beneficiaries and the governance requirements. • Regarding quality measures submission, we considered whether the ACO as a whole would be responsible for submitting quality data in accordance with subpart F of the Shared Savings Program regulations. On the one hand, the ability of the ACO to report quality measures once on behalf of both segmented lists would reduce quality reporting burden with the same aggregate quality score applying to each segment of the ACO participants. On the other hand, if each segmented list was required to report quality separately, we may be able to get a more accurate assessment of the quality of care by each segmented list leading to a more accurate determination of shared savings or losses. • Regarding benchmarking and assignment of beneficiaries, we considered whether each half of the segmented list of ACO participants would have its own benchmark and list of assigned beneficiaries. Under this option, the two groups of ACO participants would each receive their own performance reports from CMS and be subject to the data sharing rules appropriate for their track, and the determination of shared savings would occur according to the rules of the chosen track. Another option would be PO 00000 Frm 00072 Fmt 4701 Sfmt 4702 to develop one benchmark and list of assigned beneficiaries for the ACO as a whole. This option would require a uniform assignment methodology to be applied, regardless in which track the segmented lists are participating. Alternatively, we could limit segmented lists to participation in only Tracks 1 and 2 because these tracks have an assignment methodology that does not conflict. • Regarding changes in the ACO participant lists during the agreement period, we considered whether an ACO would be permitted to add or delete ACO participants from the segmented list of ACO participants. One option considered would be to permit an ACO to add or delete ACO participants from the segmented lists pursuant to the proposed regulation at § 425.118(b), but ACO participants would not be permitted to change risk tracks during the agreement period. Another option we considered and seek specific comments on is the option to require such organizations to articulate and carry out the transition of their Track 1 ACO participants to the list of ACO participants that are under a risk-based arrangement during the course of the agreement period. For example, in each year of the agreement period, the ACO would be required to remove ACO participants from the Track 1 list and add them to the list of ACO participants under the two-sided risk model. In this way, the ACO and its ACO participants would be better prepared to reapply to the Shared Savings Program under a two-sided risk model in its third agreement period. Although we are not specifically proposing to allow for different risk tracks within the same ACO, we seek comments on these options and other considerations for permitting organizations to move forward to performance-based risk in a step-wise manner. We specifically seek comment on ways to mitigate selection bias when considering these options, in other words, we seek comment on whether additional considerations should be made with regards to organizations that may choose to create two different ACO participant lists in an effort to advantage the part of the organization that is participating in the two-sided model at the expense of the part of the organization participating in the onesided model. We believe the concern is minimized by the option we considered that we would only make this option available under an ACO’s second agreement period. Moreover, we note that our proposed criteria for renewal include a review of the ACO’s history of program integrity. We intend to E:\FR\FM\08DEP2.SGM 08DEP2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules carefully review any comments that are received on these issues during the development of the final rule and will make an assessment at that time as to whether any change to our current policy is necessary and appropriate. 5. Modifications to Repayment Mechanism Requirements mstockstill on DSK4VPTVN1PROD with PROPOSALS2 a. Overview In the November 2011 final rule (76 FR 67937), we discussed the importance of a program requirement that ensures ACOs entering the two-sided model will be capable of repaying Medicare for shared losses. The final rule established a requirement that ACOs applying to participate in the two-sided model must establish a repayment mechanism to assure CMS that they can repay losses for which they may be liable (§ 425.204(f)). For an ACO’s first performance year, the repayment mechanism must be equal to at least 1 percent of its total per capita Medicare Parts A and B FFS expenditures for its assigned beneficiaries, as determined based on expenditures used to establish the ACO’s benchmark (§ 425.204(f)). Further, to continue participation in the program, each Track 2 ACO must annually demonstrate the adequacy of its repayment mechanism before the start of each performance year in which it takes risk (§ 425.204(f)(3)). The repayment mechanism for each performance year must be equal to at least 1 percent of the ACO’s total per capita Medicare Parts A and B FFS expenditures for its assigned beneficiaries, as determined based on expenditures for the ACO’s most recent performance year. An ACO may demonstrate its ability to repay losses, or other monies determined to be owed upon first year reconciliation, by obtaining reinsurance, placing funds in escrow, obtaining surety bonds, establishing a line of credit (as evidenced by a letter of credit that the Medicare program can draw upon), or establishing another appropriate repayment mechanism that will ensure its ability to repay the Medicare program (§ 425.204(f)(2)). Given our experience in implementing the program, we are proposing to revisit our requirements to simplify them and to address stakeholder concerns regarding the transition to risk, as discussed in the previous sections. b. Proposals for Amount and Duration of the Repayment Mechanism As noted previously, under the current regulations, ACOs entering a two-sided risk track must submit an adequate repayment mechanism at the VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 time of application and again at the beginning of each performance year. The amount must be equal to at least 1 percent of the ACO’s total per capita Medicare Parts A and B FFS expenditures for its assigned beneficiaries, as determined based either on expenditures used to establish the ACO’s benchmark or expenditures for the ACO’s most recent performance year. This amount is estimated by CMS and reported to the ACO so that it can set up its required mechanism. We have heard from stakeholders that establishing multiple repayment mechanisms during the agreement period can be very burdensome and ties up capital that could otherwise be used to support ACO operations. Therefore, we have considered whether it would be possible to streamline the repayment mechanism requirements. Specifically, we considered whether it would be feasible for an organization to establish a single repayment mechanism to cover the entire 3-year agreement period. Initially we were concerned that requiring an organization to establish a single repayment mechanism to cover 3 performance years would involve repayment amounts that were excessive and overly burdensome for organizations. However, our actuaries have determined that this may not be the case. We believe that rather than requiring ACOs to create and maintain two separate repayment mechanisms for two consecutive performance years, which would effectively double the amount of the repayment mechanism during the overlapping time period between the start of a new performance year and settlement of the previous performance year, the repayment mechanism that is established for the first performance year of an agreement period under a two-sided risk model can be rolled over for subsequent performance years. Thus, we propose to require an ACO to demonstrate at the time of its application to the Shared Savings Program or participation agreement renewal for a two-sided risk model and upon request thereafter that it would be able to repay shared losses incurred at any time within the agreement period, that is, upon each performance year reconciliation during the agreement period. Thus, an ACO would be required to establish a repayment mechanism for the required amount as discussed in this section to cover the entire agreement period under a twosided risk model (that is, under Track 2 or under proposed Track 3) and a reasonable period of time after the end of the agreement period (the ‘‘tail PO 00000 Frm 00073 Fmt 4701 Sfmt 4702 72831 period’’). The tail period shall 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. The length of the tail period shall be established by CMS in guidance. Under this approach, an ACO would be required to establish a repayment mechanism once at the beginning of a 3year agreement period. We propose that an ACO must demonstrate the adequacy of its repayment mechanism and maintain the ability to repay 1 percent of the ACO’s total per capita Medicare Parts A and B FFS expenditures for its assigned beneficiaries based on the expenditures used to establish the benchmark for the applicable agreement period, as estimated by CMS at the time of application or participation agreement renewal. If the repayment mechanism is used to repay any portion of shared losses owed to CMS, the ACO must promptly replenish the amount of funds available through the repayment mechanism within 60 days. This would ensure continued availability of funds to cover any shared losses generated in subsequent performance years. Given that we propose in section II.B. of this proposed rule to adjust an ACO’s benchmark annually to account for changes in the ACO participant list, it is possible that an ACO’s benchmark could change such that the repayment mechanism amount established at the beginning of the 3-year agreement period no longer represents one percent of the ACO’s benchmark expenditures. Therefore, we are considering whether we should require the ACO to adjust the repayment mechanism to account for this change, or whether a threshold should be established that triggers a requirement for the ACO to add to its repayment mechanism. We seek comment on this issue, including the appropriate threshold that should trigger a requirement that the ACO increase the amount guaranteed by the repayment mechanism. These proposals are reflected in the proposed modifications to § 425.204(f). We note that the reference to ‘‘other monies determined to be owed’’ in the current provision directly relates to the interim payments that were available in the first performance year only for ACOs that started participating in the program in 2012. Because interim payments are no longer offered to ACOs, we also propose to remove the reference to ‘‘other monies determined to be owed’’ from § 425.204(f). E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 72832 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules c. Proposals Regarding Permissible Repayment Mechanisms Under our current rules, ACOs may demonstrate their ability to repay shared losses by obtaining reinsurance, placing funds in escrow, obtaining surety bonds, establishing a line of credit (as evidenced by a letter of credit that the Medicare program can draw upon), or establishing another appropriate repayment mechanism that will ensure their ability to repay the Medicare program. Based on our experience with the program, we are proposing to remove the option that permits ACOs to demonstrate their ability to pay using reinsurance or an alternative mechanism. First, no Shared Savings Program ACOs have obtained reinsurance for the purpose of establishing their repayment mechanism. ACOs that have explored this option have told us that it is difficult to obtain reinsurance, in part, because of insurers’ lack of experience with the Shared Savings Program and the ACO model, and because Shared Savings Program ACOs take on performance-based risk not insurance risk. Additionally, the terms of reinsurance policies obtained by ACOs could vary greatly and prove difficult for CMS to effectively evaluate. Second, based on our experience to date, 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 rejected by CMS than one of the specified repayment mechanisms. Therefore, we propose to revise § 425.204(f)(2) to limit the types of repayment mechanisms ACOs may use to demonstrate their ability to repay shared losses to the following: Placing funds in escrow; establishing a line of credit; or obtaining a surety bond. Under this proposed revision, ACOs would retain the flexibility to choose a repayment mechanism that best suits their organization. We also believe that CMS would be more readily able to evaluate the adequacy of these three types of arrangements, as compared to reinsurance policies and other alternative repayment mechanisms. For instance, escrow account agreements, letters of credit, and surety bonds typically have standard terms, that CMS can more readily assess as compared to the documentation for alternative repayment mechanisms, which tends to be highly variable. In addition, we propose to clarify that ACOs may use a combination of the designated repayment mechanisms, if needed, such as placing certain funds in VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 escrow, obtaining a surety bond for a portion of remaining funds, and establishing a line of credit for the remainder. Thus, we are proposing to revise our rule at § 425.204(f)(2) to indicate that an ACO may demonstrate its ability to repay shared losses owed by placing funds in escrow, obtaining surety bonds, establishing a line of credit, or by using a combination of these mechanisms. We seek comment on our proposed modifications to the repayment mechanism requirements and also welcome comments on the availability and adequacy of reinsurance as a repayment mechanism. 6. Seeking Comment on Methodology for Establishing, Updating, and Resetting the Benchmark a. Background on Establishing, Updating, and Resetting the Benchmark Section 1899(d)(1)(B)(ii) of the Act addresses how ACO benchmarks are to be established and updated. 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 and updated by the projected absolute amount of growth in national per capita expenditures for parts A and B services under the original Medicare fee-for-service program, as estimated by the Secretary. Such benchmark shall be reset at the start of each agreement period. Accordingly, through the initial rulemaking establishing the Shared Savings Program, we adopted policies for establishing, updating and resetting ACO benchmarks at § 425.602. As described later in this section, under this methodology, we establish ACOspecific benchmarks that account for national FFS trends. As the statute requires the use of historical expenditures to establish an ACO’s benchmark, the per capita costs for each benchmark year must be trended forward to current year dollars and then a weighted average is used to obtain the ACO’s historical benchmark for the first agreement period. The statute further requires that we update the benchmark for each year of the agreement period based on the projected absolute amount of growth in national per capita expenditures for parts A and B services under the FFS program, as estimated by the Secretary. In the April 2011 proposed rule (76 FR 19609 PO 00000 Frm 00074 Fmt 4701 Sfmt 4702 through 19611), we considered a variety of options for establishing the trend factors used in establishing the historical benchmark and for accounting for FFS trends in updating the benchmark during the agreement period. In addition to the statutory benchmarking methodology established in section 1899(d), section 1899(i)(3) of the Act grants the Secretary the authority to use other payment models, including payment models that would 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. As described later in this section, in the November 2011 final rule, we considered whether to invoke this authority to modify certain aspects of the statutory benchmarking methodology, but elected not to do so. We note that we did invoke this authority to help create two-sided risk under Track 2. (1) Background on Use of National Growth Rate as a Benchmark Trending Factor The statute does not specify the trending factor to be used in establishing the benchmark. In the April 2011 proposed rule (76 FR 19610), we considered use of either national, or state or local growth factors for trending the benchmark. We explained that using the national growth rate in Medicare A and B FFS expenditures appeared to be more consistent with the statutory methodology for updating an ACO’s benchmark. Further, a national growth rate would allow a single growth factor to be applied to all ACOs regardless of their size or geographic area. However, a national rate could also disproportionately encourage the development of ACOs in areas with historical growth rates below the national average that would benefit from having a relatively higher base, which increases the chances for shared savings, while discouraging the development of ACOs in areas with historically higher growth rates above the national average that would have a relatively lower base. In contrast, we explained in April 2011 proposed rule that trending expenditures based on State or local area growth rates in Medicare A and B expenditures may more accurately reflect the experience in an ACO’s area and mitigate differential incentives for E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules participation based on location. Therefore, we considered an option to trend the benchmark by the lower of the national projected growth rate or the State or the local growth rate. This option balanced providing a more accurate reflection of local experience with not rewarding historical growth higher than the national average. We believed this method would instill strong saving incentives for ACOs in both high-cost growth and low-cost growth areas. We proposed to employ the national growth rate in Medicare Parts A and B expenditures for FFS beneficiaries for trending forward the most recent 3 years of per beneficiary expenditures for Parts A and B services in order to establish the historical benchmark for each ACO. We believed this approach would help to ensure that ACOs in both high spending, high growth and low spending, low growth areas would have appropriate incentives to participate in the Shared Savings Program. We further indicated that this approach would allow us to move toward establishing a national standard to calculate and measure ACO financial performance. We sought comment on this proposal and on the alternatives to using a national growth rate to establish the benchmark. Some commenters supported our proposal to employ a national growth rate for setting the benchmark and recognized the importance of using national growth rates for rationalizing overall spending across regions nationwide. Many more favored the use of either local, regional, or State growth rates, and some favored our proposal to use the lower of either the national or State or local growth rates. Commenters also offered a number of alternative approaches for trending benchmark expenditures, including the following: • Use a blend of national average growth and absolute dollar growth. • Use the ACO’s own percentage growth rate to trend forward the historical benchmark data. • Account for local variation after analyzing national and local growth rates. (76 FR 67925). In the end, we finalized our policy under § 425.602 of using the national growth rate in Medicare Parts A and B expenditures for FFS beneficiaries for trending forward the most recent 3 years of per beneficiary expenditures for Parts A and B services in order to establish the benchmark for each ACO. In doing so, we make calculations for separate cost categories for each of the following populations of beneficiaries: ESRD, disabled, aged/dual eligible and aged/ non-dual eligible. We stated our belief VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 that implementing a historical benchmark trending factor using the national growth rate for Parts A and B FFS expenditures appropriately balanced commenters’ concerns that benchmark trending should encourage participation among providers that are already efficient or operating in low cost regions without unduly rewarding ACOs in high-cost areas. We further stated that we anticipated the net effect of using the same trending factor for all ACOs would be to provide a relatively higher expenditure benchmark for lowgrowth/low spending ACOs and a relatively lower benchmark for high growth/high spending ACOs. ACOs in high cost, high growth areas would therefore have an incentive to reduce their rate of growth more to bring their costs more in line with the national average; while ACOs in low cost low, growth areas would have an incentive to continue to maintain or improve their overall lower spending levels. Over 330 ACOs entered the Shared Savings Program between 2012 and 2014 and are located throughout the country—across diverse geographies—in a mix of high-cost/high-growth and lowcost/low-growth areas. Further, within local markets where multiple ACOs have formed, we have observed that ACOs can be a mix of both high- and low-cost and high- and low-growth organizations. We are encouraged by the continued interest in the program: Of the ACOs that entered the program, only two voluntarily terminated at the end of the performance year concluding December 31, 2013. (One was eligible for a performance payment of shared savings and the other merged with another participating ACO.) In addition, we continue to see strong interest in new entrants for the January 2015 start date. Under the Pioneer ACO model, we adopted a different methodology for establishing an ACO’s historical expenditure baseline for its first three performance years. See https:// innovation.cms.gov/Files/x/ PioneerACOBmarkMethodology.pdf. The Pioneer model benchmarking methodology trends forward baseline years 2009 and 2010 to 2011 by applying the growth in expenditures for the reference population. The reference population is defined as alignmenteligible beneficiaries with the same state of residence, eligibility status, age and sex as the ACO’s aligned beneficiaries. The 3 historical baseline years under the Pioneer ACO Model also correspond to the 3 years prior to when ACOs entered the model, specifically 2009, 2010, and 2011. Further, baseline expenditures in 2011 dollars are updated to the PO 00000 Frm 00075 Fmt 4701 Sfmt 4702 72833 appropriate performance year using a 50/50 blend of the national growth rate and the absolute dollar equivalent of that national growth rate. However, the benchmarking methodology used in the Pioneer ACO Model was revised for performance years four and five of the model to be more consistent with the benchmarking approach used in the Shared Savings Program, in part due to stakeholder feedback. (2) Background on Use of National FFS Growth Factors in Updating the Benchmark During the Agreement Period Section 1899(d)(1)(B)(ii) of the Act states that the benchmark shall be updated by the projected absolute amount of growth in national per capita expenditures for parts A and B services under the original Medicare fee-forservice program, as estimated by the Secretary. In the April 2011 proposed rule (76 FR 19610 through 19611), we proposed to use a flat dollar amount equivalent of the absolute amount of growth in the national FFS expenditures to update the benchmark during an agreement period. We explained our view that in enacting section 1899(d)(1)(B)(ii) of the Act, Congress demonstrated interest in mitigating some of the regional differences in Medicare spending among ACOs and that this approach would help to ensure that ACOs in both high spending/high growth and low spending/low growth areas would have appropriate incentives to participate in the Shared Savings Program. We described the effect this update methodology might have in the 2nd and 3rd years of an agreement period: Using a flat dollar increase, which would be the same for all ACOs, provides a relatively higher expenditure benchmark for low growth, low spending ACOs and a relatively lower benchmark for high growth, high spending ACOs. All else being equal, an ACO can more likely share in savings when its actual expenditures are judged against a higher, rather than a lower benchmark. Thus, with a flat dollar increase to the benchmark, ACOs in high cost/high growth areas must reduce their rate of growth more to bring their costs more in line with the national average. We acknowledged that this approach to updating the benchmark could contribute to selective program participation by participants in low growth areas, as well as result in Medicare costs due to an increase in the amount of performance payments for unearned savings. We also considered and sought comment on a second option, which E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 72834 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules would be to use our authority under section 1899(i)(3) of the Act to update the benchmark by the lower of the national projected absolute amount of growth in national per capita expenditures or the local/State projected absolute amount of growth in per capita expenditures. We explained our belief that this option could instill strong saving incentives for ACOs in low-cost areas, as well as for those in high-cost areas. Incorporating more localized growth factors reflects the expenditure and growth patterns within the geographic area served by ACO participants, potentially providing a more accurate estimate of the updated benchmark based on the area from which the ACO derives its patient population. Capping the update at the projected absolute amount of growth in national per capita expenditures, however, can advantage ACOs in low cost/low growth areas that have already achieved greater efficiencies, while still offering a strong incentive for those in high cost/high growth areas to reduce their spending. Commenters were mixed in their preference for either the proposed policy of updating the benchmark by absolute growth in national FFS expenditures, or use of the lower of the national projected absolute amount or the local/State projected absolute amount. For example, one commenter disagreed with the option to use the lower of the national projected absolute amount or the local/State projected absolute amount, suggesting it negatively prejudges all high growth sectors without regard to the underlying clinical or quality issues. However, another commenter favored this approach because this adjustment would afford ACOs the greatest potential for achieving shared savings and minimize the threat of an ACO being disadvantaged by virtue of pricing within its geographic location. Along these lines, one commenter stated the proposed approach offered insufficient incentives for efficient providers to form an ACO. More generally, many commenters urged CMS to adopt policies to encourage participation by organizations that are already efficient or in low cost areas. Several commenters urged use of regional or market-specific expense data for calculating the benchmark update. In the November 2011 final rule (76 FR 67926 through 67927), we finalized a policy of using the flat dollar amount equivalent of the projected absolute amount of growth in national per capita FFS expenditures to update the benchmark. We stated our belief that this method for updating the benchmark VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 could best address the program’s goals and commenters’ overall concerns about the participation of efficient/low cost ACOs. The net effect of using the same update for all ACOs is to provide a relatively higher expenditure benchmark for low growth/low spending ACOs and a relatively lower benchmark for high growth/high spending ACOs. Further, with a flat dollar increase to the benchmark equivalent to the absolute amount of growth in the national FFS expenditures, ACOs in high cost, high growth areas must reduce their rate of growth more (compared to ACOs in low cost, low growth areas) to bring their costs in line with the national average. We stated that in light of the alternatives we considered, we believed that the policy of updating benchmarks by the absolute amount of growth in national FFS expenditures offers sufficient incentives for efficient providers to form ACOs. Thus, under the final update methodology, ACOs in low cost areas would achieve a greater amount of savings, based on the same performance, than a comparable ACO in a higher cost area. Moreover, we stated we believed that a benchmark methodology that encourages providers in higher cost areas to bring their spending more in line with the national average is a desirable outcome in furtherance of the program’s goal of lowering Medicare expenditures. Finally, we noted that updating the benchmark during the agreement period using a national growth factor aligns with our approach of using a national growth rate to trend forward base year expenditures when establishing the historical benchmark. We stated that we believed this alignment could facilitate analysis of trends in ACO financial performance relative to national trends in Medicare expenditures. For these reasons, we finalized a policy of using the flat dollar amount equivalent of the projected absolute amount of growth in national FFS expenditures to update the benchmark. In applying these policies for ACOs that joined the program in 2012 and 2013, we observed that the national growth factors used to trend the historical benchmark were declining, highlighted by negative annual per capita expenditure growth in three of four Medicare eligibility categories in 2012. We also found during the first performance year reconciliation that the national update amounts applied to the historical benchmark continued to reflect historically low growth in cost even after an adjustment to restore the effect of sequestration on 2013 claim PO 00000 Frm 00076 Fmt 4701 Sfmt 4702 payments. These updates reflected the slow or negative FFS growth environment due to a number of factors, including demographic changes in program enrollment, low price updates for physician, skilled nursing, and other services, and a broad decrease in inpatient utilization. This resulted in ACOs having very low or even negative updates to their historical benchmarks. Recent projections estimate total Medicare per capita expenditure trends are likely to remain historically low through 2015 followed by a gradual return to historically-familiar positive trend rates starting in 2016. (3) Background on Managing Changes to ACOs During the Agreement Period Section 425.214 of the Shared Savings Program regulations addresses the circumstance under which an ACO adds or removes ACO participants or ACO providers/suppliers (identified by TINs and NPIs, respectively) during the term of the participation agreement. The regulation specifies that the ACO’s benchmark, risk scores, and preliminary prospective assignment may be adjusted for this change at CMS’ discretion (§ 425.214(a)(3)). Subregulatory guidance further describes our use of this discretion. See ‘‘Changes in ACO participants and ACO providers/ suppliers during the Agreement Period’’ available online at https://www.cms.gov/ Medicare/Medicare-Fee-for-ServicePayment/sharedsavingsprogram/ Updating-ACO-Participant-List.html. This guidance explains: After acceptance into the program and upon execution of the participation agreement with CMS, the ACO must certify the completeness and accuracy of its list of ACO participants. We set the ACO’s historical benchmark at the start of the agreement period based on the assigned population in each of the three benchmark years by using the ACO Participant List certified by the ACO. The ACO must submit a new certified ACO Participant List at the start of each new performance year. CMS will adjust the ACO’s historical benchmark at the start of a performance year if the ACO Participant List that the ACO certified at the start of that performance year differs from the one it certified at the start of the prior performance year. CMS will use the updated certified ACO Participant List to assign beneficiaries to the ACO in the benchmark period (the 3 years prior to the start of the ACO’s agreement period) in order to determine the ACO’s adjusted historical benchmark. As a result of changes to the ACO’s certified ACO Participant List, we may adjust the historical benchmark upward or downward. We’ll use the new certified list of ACO participants and the adjusted benchmark for the new performance year’s assignment, quality measurement and sampling, reports for the new performance E:\FR\FM\08DEP2.SGM 08DEP2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 year, and financial reconciliation. We will provide ACOs with the adjusted Historical Benchmark Report. During the program’s first performance years, we experienced a high volume of change requests from ACOs, both adding and removing ACO participants. For example, cumulatively ACOs with 2012 and 2013 start dates requested the addition of over 2,800 ACO participants and removal of over 1,200 ACO participants. The ACO’s composition of ACO participant TINs is used to determine the ACO’s assigned beneficiary population. Changes to an ACO’s participant list will result in changes to the ACO’s assigned beneficiary population. As a result, it is necessary to make adjustments to the ACO’s historical benchmark to account for these changes. In accordance with our guidance, we adjusted the historical benchmarks for 162 of 220 ACOs with 2012 and 2013 start dates for their second performance year to reflect changes in ACO participants. When an ACO adds new ACO participants or deletes existing ACO participants, the adjustments that are made to its historical benchmark will impact the ACO’s performance in subsequent years, and can make forecasting performance more challenging. As noted in the guidance, when we adjust historical benchmarks during the agreement period to account for changes in beneficiary assignment arising from ACO participant list changes, the benchmark period (the 3 years prior to the start of the ACO’s agreement period) remains the same. For instance, if an ACO with an agreement start date of January 1, 2013, added ACO participants for its second performance year, then the adjustments made to the historical benchmark to reflect the ACO’s certified ACO participant list for performance year 2 would have been based on the same three benchmark years (2010, 2011, and 2012) originally used to calculate the historical benchmark for the ACO based on its ACO participant list certified when it entered the program (for its first performance year). Further, changes in the ACO participant TINs that compose ACOs are relevant to determining beneficiary assignment across the program. A beneficiary is assigned to an ACO if the beneficiary received the plurality of his or her primary care services (measured in allowed charges) from ACO professionals billing under the TINs of ACO participants in the ACO rather than outside the ACO (such as from ACO professionals billing under the TINs of ACO participants in other ACOs, individual providers, or provider VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 organizations). We perform the assignment process for ACOs simultaneously, including all eligible organizations. To determine where a beneficiary got the plurality of his or her primary care services, we compare the total allowed charges for each beneficiary for primary care services provided by the ACO (in total for all ACO participants) to the allowed charges for primary care services provided by ACO participants in other ACOs and by non-ACO providers and suppliers. See ‘‘Medicare Shared Savings Program: Shared Savings and Losses and Assignment Methodology Specifications’’ available online at https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ sharedsavingsprogram/Financial-andAssignment-Specifications.html. Therefore, in the case where a beneficiary is receiving primary care services from ACO participants in multiple ACOs or from both ACO participants and non-ACO providers and suppliers, an ACO’s participant composition is important in determining whether the beneficiary is assigned to the ACO at all, and in determining to which (among several) ACO the beneficiary may be assigned. In summary, in making adjustments to the historical benchmarks for ACOs within an agreement period to account for ACO participant list changes: The historical benchmark period remains constant, but beneficiary assignment reflects the influence of ACO participant list changes. Under this methodology, the historical benchmarks for ACOs with participant list changes from one performance year to the next continue to reflect the ACOs’ historical costs in relation to their current composition. (4) Background on Resetting the Benchmark In the November 2011 final rule (see 76 FR 67915) establishing the Shared Savings Program, some commenters expressed concerns that rebasing the benchmark at the start of each agreement period would make savings more difficult to attain and eventually make savings unattainable by ACOs. Stakeholders have continued to express concerns about this methodology for rebasing the benchmark. They assert that the current methodology may also reduce the incentive for ACOs to achieve savings since any savings achieved during a given agreement period would result in lower future benchmarks, generating an offsetting reduction in the shared savings payments the ACO would receive in those future agreement periods. PO 00000 Frm 00077 Fmt 4701 Sfmt 4702 72835 During the initial rulemaking, commenters suggested a variety of alternatives to rebasing the benchmark for each agreement period, as well as technical suggestions on how to reset the benchmark (76 FR 67915 through 76 FR 67916). In the November 2011 final rule, we adopted a policy under which an ACO’s benchmark would be reset at the start of each agreement period, as required under section 1899(d)(1)(B)(ii) of the Act. In finalizing this policy, we explained our belief that resetting the benchmark at the beginning of each agreement period would most accurately account for changes in an ACO’s beneficiary population over time. We explained that because of turnover in an ACO’s assigned beneficiary population, by the end of the agreement period, an ACO’s assigned population may be significantly different from the historically assigned beneficiary population used to calculate the ACO’s initial benchmark. Further, resetting the benchmark at the beginning of subsequent agreement periods would allow the benchmark to more accurately reflect the composition of an ACO’s population, and therefore protect both the Trust Funds and ACOs. We acknowledged commenters’ concerns that resetting the benchmark after 3 years could ultimately make it more challenging for ACOs to achieve savings, particularly for low-cost ACOs. However, we explained our belief that one of the fundamental purposes of the Shared Savings Program is to provide incentives for ACOs to strive continually to make further advances in the quality and efficiency of the care they provide (76 FR 67916). Under § 425.602(c) of the rule, an ACO’s benchmark would be reset at the start of its second or subsequent agreement period using the same methodology for establishing the historical benchmark under § 425.602(a). The existing regulations do not specify any alternative methodology for rebasing the benchmarks for ACOs that have completed one or more agreement periods in the Shared Savings Program. For example, for an ACO with a January 2013 agreement start date that continues in the program for a second agreement period beginning January 1, 2016, we would establish the ACO’s historical benchmark for its second agreement period according to the methodology set forth in § 425.602(a). In particular, we would compute the ACO’s benchmark for its second agreement period based on per capita Parts A and B fee-for-service expenditures for beneficiaries that would have been assigned to the ACO E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 72836 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules in any of the 3 most recent years prior to the agreement period using the ACO participants’ TINs identified at the start of the agreement period (§ 425.602(a)). In the example of an ACO with an initial agreement period beginning January 1, 2013 and a second agreement beginning January 1, 2016: The ACO’s historical benchmark for its first agreement period would have been based on the historical years of 2010, 2011 and 2012 and the ACO’s historical benchmark for its second agreement period would be based on the historical years of 2013, 2014 and 2015. In resetting the benchmark, the time period for the benchmark shifts forward to capture the ACOs participants’ more recent historical spending. As noted previously, we adjust an ACO’s benchmark based on the ACO participant list that it certifies at the start of each performance year, which may reflect changes during the course of the prior performance year. Similarly, in resetting the ACO’s benchmark at the start of a second agreement period, we would effectively account for any ACO participant list changes between the ACO’s third performance year under its first agreement period and its first performance year under its second agreement period. Early experience for ACOs participating in the Shared Savings Program is limited to financial performance results for the first performance year of ACOs with 2012 and 2013 start dates. However, we anticipate that the trend for ACOs participating in the Shared Savings Program will be similar to the trend for sites in the Physician Group Practice (PGP) demonstration, with more organizations generating savings as they gain experience in a shared savings model. In the initial performance year of the PGP Demonstration, two sites were eligible for shared savings payments. As the demonstration progressed, more PGP sites demonstrated savings. Over the course of the 5-year demonstration, 7 of the 10 PGP sites were eligible for shared savings payments in one or more performance years. The experience of PGP demonstration sites is also an indication that resetting ACO benchmarks at the start of the second and each subsequent agreement period would not deter ongoing participation in the program by ACOs. We note, however, that unlike the update methodology currently used in the Shared Savings Program, the benchmarks used in the PGP demonstration were updated using regional factors, as opposed to national factors. This approach is similar to some of the alternatives discussed later in this VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 section, on which we are seeking comment. The benchmarks for the PGP sites were reset as they moved from the PGP demonstration to the PGP Transition Demonstration, and again when they transitioned into the Pioneer ACO Model or the Shared Savings Program. We note that most of the organizations participating in the PGP demonstration elected to continue their voluntary participation under these shared savings models, even though their benchmarks would be reset under the applicable benchmarking methodology. Based on this experience, we conclude that these organizations must have believed there was a sufficient opportunity to share in savings as well as other strategic and competitive advantages to warrant their continued participation in a shared savings initiative, even under a rebased benchmark that reflected the cost savings achieved by the site under the PGP demonstration. However, while the PGP experience establishes that the current approach to rebasing is consistent with continued participation, at least in some cases, it is possible that additional organizations would have continued into the Pioneer ACO Model or the Shared Savings Program under an alternative rebasing methodology. The PGP experience cannot rule out the possibility that an alternative rebasing methodology could induce ACOs to achieve greater savings, particularly as providers gain more familiarity with the payment model, or could prove more sustainable over time. (5) Background on Stakeholders’ Concerns about Benchmarking Methodology Since the initial rulemaking, stakeholders have continued to express their concern that resetting ACO benchmarks at the start of each agreement period, as required under the existing methodology, may disadvantage ACOs, particularly those that have generated shared savings. A closely related concern is that because savings achieved during one agreement period would lead to a lower benchmark in future agreement periods, achieving savings could hypothetically be financially unattractive for ACOs in some circumstances. Under the existing benchmarking methodology, an ACO that performs well in its first agreement period as a result of its effective strategies for lowering Medicare expenditures may have a significantly lower historical benchmark in its subsequent agreement period. Consequently, some stakeholders believe that achieving savings may sometimes be financially unattractive PO 00000 Frm 00078 Fmt 4701 Sfmt 4702 for ACOs because these savings would reduce their benchmarks for future periods. They are concerned that the value proposition of the program may diminish over time as ACOs become lower-cost entities, and, as a result, face increased difficulty in achieving additional efficiencies (hence savings) when judged against decreasing benchmarks. Further, some stakeholders have expressed concern that the existing benchmarking methodology does not sufficiently account for the influence of cost trends in the surrounding region or local market on the ACO’s financial performance. In particular, some stakeholders voiced concerns about the low or negative update amounts used during first performance year reconciliation under the existing benchmarking methodology, and favor alternative approaches, which they believe are more certain to yield positive updates to ACOs’ historical benchmarks. Others have suggested that we move away from an approach for setting ACO-specific benchmarks and toward an approach for setting regionally-specific benchmarks for ACOs. These concerns, as with those raised regarding the methodology for resetting benchmarks in subsequent agreement periods, center on whether the benchmarks are set at a level ACOs perceive to be sufficient to make program participation financially viable. We believe it is timely to consider these issues in the context of encouraging continued participation by ACOs in the program and continued improvement in ACO performance, particularly as ACOs with 2012 and 2013 start dates begin to contemplate whether to continue in the program for a second agreement period. Further, we believe there may be important interactions between the way in which the benchmarks for ACOs are set in their initial agreement period and reset in their subsequent agreement periods and encouraging participation by ACOs in the program’s two-sided models (particularly ACOs that entered the program under Track 1 and are contemplating moving to a risk based track); namely in terms of the value proposition of moving to a performancebased risk track. b. Factors To Use in Resetting ACO Benchmarks and Alternative Benchmarking Methodologies We considered whether modifying the methodology used for establishing, updating, and resetting ACO benchmarks to account for factors relevant to ACOs that have participated in the program for 3 or more years E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules would help ensure that the Shared Savings Program remains attractive to ACOs and continues to encourage ACOs to improve their performance, particularly those that have achieved shared savings. As discussed later in this section, we considered a range of modifications to the benchmarking methodology in order to expand the methodology for resetting benchmarks to account for factors relevant to continued participation by ACOs in subsequent agreement periods and to increase incentives to achieve savings in a current agreement period, specifically: (1) Equally weighting the 3-benchmark years; (2) accounting for shared savings payments in benchmarks; (3) using regional FFS expenditures (as opposed to national FFS expenditures) to trend and update the benchmarks; (4) implementing an alternative methodology for resetting ACO benchmarks that would hold an ACO’s historical costs, as determined for purposes of establishing the ACO’s initial historical benchmark for its first agreement period, constant relative to costs in its region for all of the ACO’s subsequent agreement periods; and (5) implementing an alternative methodology for resetting ACO benchmarks that would transition ACOs to benchmarks based only on regional FFS costs, as opposed to the ACO’s own historical costs, over the course of multiple agreement periods. Further, we considered whether to apply these changes broadly to all ACOs or to apply these changes only when resetting benchmarks for ACOs entering their second or subsequent agreement periods. We also considered whether to apply these changes to a subset of ACOs, such as ACOs participating under a two-sided model (Tracks 2 and 3) or Track 3 ACOs only. In considering these potential options for modifying the benchmarking methodology, it is necessary to balance the desire to make the program more financially attractive to ACOs, against the need to protect the Medicare Trust Funds. Although we are not proposing any changes to our benchmarking methodology at this time, we are seeking comment on these alternatives for how we approach establishing, updating and resetting benchmarks, as well as suggestions regarding alternative approaches not described here. We will carefully consider the comments that are 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. We note, however, that any option that relies upon the use of the authority VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 under section 1899(i)(3) of the Act to adopt alternate payment models must be determined to improve quality and efficiency and not to increase program spending. (1) Equally Weighting the 3 Benchmark Years Pursuant to section 1899(d)(1)(B)(ii) of the Act, in the November 2011 final rule, we adopted a methodology for establishing ACO benchmarks under which we weight benchmark expenditures at 60 percent for Benchmark Year (BY) 3, 30 percent for BY2, and 10 percent for BY1 (§ 425.602(a)(7)). As we explained in the November 2011 final rule (76 FR 67915), this weighting helps ensure that the benchmark reflects more accurately the latest expenditures and health status of the ACO’s assigned beneficiary population. We indicated that giving BY3 the greatest weight would most accurately reflect recent cost trends for the Medicare beneficiaries who receive the plurality of their primary care from ACO providers/suppliers, and thus result in a more accurate benchmark. To establish an ACO’s benchmark for an agreement period, we determine the per capita Parts A and B fee-for-service expenditures for beneficiaries that would have been assigned to the ACO in any of the 3 most recent years prior to the agreement period using the ACO participants’ TINs identified at the start of the agreement period (§ 425.602(a)). Therefore, an ACO’s benchmark under a second or subsequent agreement period will reflect, to some degree, its previous performance under the program. For example, for ACOs with 2013 start dates that continue in the program for a second agreement period beginning January 1, 2016, BY1 will be based on expenditures for beneficiaries who were assigned to the ACO based on CY 2013 (the timeframe corresponding to performance year 1 under the first agreement period). Likewise, BY2 will be based on assignment for CY 2014 (performance year 2) and BY3 will be based on assignment for CY 2015 (performance year 3). We note, however, that a number of factors will affect beneficiary assignment for purposes of establishing ACO benchmarks in subsequent agreement periods, which may cause an ACO’s benchmark year assigned population to deviate from its assigned population for the corresponding performance year. For example, an ACO may add or remove ACO participant TINs in its second or subsequent agreement period. Further, participation in the program by other organizations in an ACO’s market may also change in the time between when PO 00000 Frm 00079 Fmt 4701 Sfmt 4702 72837 we performed assignment for the performance year under the prior agreement and when we assign beneficiaries for the purpose of resetting the ACO’s benchmark for the next agreement period, leading to changes in the ACO’s assigned beneficiary population for purposes of establishing its benchmark for the new agreement period. The impact of these kinds of changes in the assigned beneficiary population between the performance year and the time the benchmark is established for a subsequent agreement is uncertain, and could result in either upward or downward adjustments to expenditures for purposes of establishing the benchmark. Among ACOs whose assigned beneficiary populations for purposes of resetting the benchmark closely match their assigned beneficiary population for the corresponding performance years, those ACOs that generated savings during a prior agreement period will have comparatively lower benchmarks for their next agreement period. This is because the ACOs were effective in lowering expenditures for these assigned beneficiaries. We assume, for example, that if an ACO generates savings in its first agreement period it is likely that the impact on claims would be most significant in the second or third performance year as opposed to being uniformly distributed across all three performance years. This hypothesis is supported by following factors: • There may be a lag between when an ACO starts care management activities and when these activities have a measurable impact upon expenditures for the ACO’s assigned beneficiary population. • ACOs may improve their effectiveness over time as they gain experience with population management and improve processes. • There may be higher care costs during the early period of performance to treat or stabilize certain patients, as the ACO’s care management activities involving these patients commence. Once stabilized, these patients may show relatively lower care costs over the course of time due to more effective, coordinated and quality care. Under these circumstances, resetting the benchmark for ACOs starting a second or subsequent agreement period under the Shared Savings Program becomes a trade-off between the accuracy gained by weighting the benchmark years at 60 percent for BY3, 30 percent for BY2 and 10 percent for BY1 and the potential for further reducing the benchmarks for these ACOs by giving greater weight to the E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 72838 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules later performance years of the preceding agreement period. Unchanged, the application of this methodology for weighting the benchmark years when resetting benchmarks could 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 to reduce incentives for ACOs to achieve savings in their first agreement period. For instance, ACOs that have previously performed well under the program may be discouraged from continuing to participate in the program if their rebased benchmark is so low that they would have difficulty continuing to lower expenditures sufficiently to exceed their MSR in order to be eligible for shared savings during their next agreement period. We considered an alternative methodology for resetting benchmarks where we would weigh the benchmark years equally (ascribing a weight of onethird to each benchmark year). We believe that equally weighting the benchmark years could more gradually lower the benchmarks of ACOs that perform well in their first agreement period, in contrast to giving the greatest weight to the most recent prior benchmark year, which, for the reasons discussed previously, is likely to be the year in which an ACO would have been most effective in lowering expenditures for its assigned population. This alternative approach would have the most significant impact upon ACOs whose assigned population during the three performance years of the preceding agreement period most closely approximates the assigned population used to determine their benchmark for the subsequent agreement period. This approach may be less accurate, and therefore less protective of the Trust Funds, since it may not sufficiently account for an ACO’s most recent historical cost experience, particularly in the case of an ACO whose ACO participant composition (and therefore its assigned beneficiary population) changed over the course of the agreement period, such that its assigned beneficiary population in the subsequent agreement period is significantly different from the beneficiary population in the early years of its prior agreement period; this effect could be counteracted to the extent that this approach encourages greater participation in the Shared Savings Program or encourages ACOs to achieve greater shared savings. VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 (2) Accounting for Shared Savings Payments in Benchmarks We also considered revising the methodology for resetting ACO benchmarks to account for shared savings earned by an ACO in its prior agreement period, as a way to encourage ongoing participation by successful ACOs and improve the incentive to achieve savings. Similar to the option of equally weighting the benchmark years discussed above, accounting for an ACO’s shared savings during its prior agreement period would more gradually lower the benchmarks of ACOs that perform well in their prior agreement period. The statute outlines the scope of Medicare expenditures to be used in calculating ACO benchmarks. Section 1899(d)(1)(B)(ii) of the Act specifies that the benchmark is established ‘‘. . . using the most recent available 3 years of per-beneficiary expenditures for parts A and B services for Medicare fee-forservice beneficiaries assigned to the ACO.’’ This provision of the Act further specifies: ‘‘Such benchmark shall be adjusted for beneficiary characteristics and such other factors as the Secretary determines appropriate.’’ In the November 2011 final rule establishing the Shared Savings Program, we explained that in implementing section 1899(d)(1)(B)(ii) of the Act, we would take into account payments made from the Medicare Trust Funds for Parts A and B services, for assigned Medicare fee-for-service beneficiaries, including payments made under a demonstration, pilot or time limited program when computing average per capita Medicare expenditures under the ACO. Our policies for determining per capita expenditures for purposes of establishing the benchmark are specified at § 425.602(a)(1). Shared savings payments are paid from the Medicare Trust Funds for the beneficiary population assigned to an ACO and are intended to recognize the costs incurred by the ACO and its ACO participants and ACO providers/ suppliers in coordinating care and improving the quality of care for the assigned beneficiaries. Accordingly, we are considering whether it would be appropriate to revise our methodology under § 425.602(a)(1) for establishing an ACO’s benchmark to incorporate the ACO’s share of savings for those ACOs that receive shared savings payments under the prior agreement period. We considered how to account for these payments in ACOs’ 3-year weighted average per capita benchmarks since ACO shared savings payments are determined at the population-level, PO 00000 Frm 00080 Fmt 4701 Sfmt 4702 reflecting aggregated per capita expenditures that have been truncated and annualized and weighted by the proportion of assigned beneficiaries in each of the four Medicare enrollment types: ESRD, disabled, aged/dual and aged/non-dual. For instance, we could develop a per-beneficiary average based on the shared savings payment for the particular performance year under the prior agreement period and apply this adjustment on a per beneficiary basis to the assigned population for the corresponding benchmark year. We also considered whether to make a symmetric adjustment in benchmarks for ACOs that owed losses in a previous agreement period. We believe there are merits to upwardly adjusting benchmarks for ACOs in a second or subsequent agreement period to reflect any shared savings payments in the most recent prior agreement period. An adjustment that reflects the ACO’s share of savings—based on its final sharing rate, which is a function of its quality performance—in the computation of the benchmark would increase the ACO’s benchmark for the subsequent agreement period. This increase in the benchmark, relative to the ACO’s prior success in the program, may address concerns expressed by some stakeholders (described previously) that under the existing benchmarking methodology achieving savings may sometimes be financially unattractive for ACOs because of the potential impact on their benchmarks in future agreement periods. There are clear advantages of this adjustment for ACOs and the Medicare program. In particular, ACOs would have an increased incentive to continue to generate shared savings and improve quality because of the prospect of having a higher benchmark in future agreement periods. Consequently, ACOs may demonstrate improved performance over longer term participation in the program. Further, ACOs may be encouraged to enter the program’s twosided models (such as the proposed Track 3), which offer higher final sharing rates because making an adjustment to the benchmark for these ACOs to reflect successful participation during one agreement period may improve their potential to receive shared savings in the next agreement period. Other implications of this adjustment for consideration include the following: • Not all ACOs would benefit. By making the adjustment only for ACOs that receive shared savings payments in their prior agreement period, some ACOs that reduce expenditures would E:\FR\FM\08DEP2.SGM 08DEP2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 not receive the benefit of this adjustment. Specifically, ACOs whose performance year expenditures are lower than their benchmark expenditures by an amount that did not meet or exceed their MSR, and ACOs that generated savings outside their MSRs, but that failed to satisfy the quality reporting standard, would not receive the adjustment. • Availability of performance data relative to timely creation of benchmarks. We anticipate completing financial reconciliation for an ACO’s most recent prior performance year (for example, PY3 under the first agreement period which corresponds to BY3 for the second agreement period) mid-way through its current performance year (for example, PY1 under the second agreement period). As a result, one downside of relying on the availability of performance data from the most recent prior performance year is that it would delay the finalization of an ACO’s historical benchmark for its first performance year during its subsequent agreement period. (3) Use of Regional Factors (as Opposed to National Factors) in Establishing and Updating Benchmarks Some stakeholders have expressed concern that the existing benchmarking methodology does not sufficiently account for the influence of cost trends in the surrounding region or local market on the ACO’s financial performance. We considered addressing these concerns by using regional FFS expenditures, instead of national FFS expenditures, to trend forward the most recent 3 years of per beneficiary expenditures for Parts A and B services in order to establish the historical benchmark for each ACO under section 1899(d)(1)(B)(ii) of the Act. In addition, we considered making this modification in combination with an alternative payment model under section 1899(i)(3) of the Act under which we would use regional FFS expenditures, instead of national FFS expenditures, to update the benchmark for each performance year during an agreement period. We also considered other approaches to address this concern, as discussed later in this section describing alternative benchmarking methodologies. In considering how to establish and update benchmarks based on regional factors, we favor use of an approach similar to the method for updating benchmarks used under the PGP demonstration, which has been tested and validated with physician groups across the country, including groups in rural, urban and suburban areas. Under this approach, much of the Shared VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 Savings Program’s existing benchmarking methodology would remain the same. Instead of using national Medicare FFS expenditure data to trend expenditures in establishing the historical benchmark (§ 425.602(a)(5)) and to update the benchmark for each performance year (§ 425.602(b)(1)), we would use regional FFS expenditure data to make these adjustments. We would calculate the ACO’s regional expenditure trend and update factors according to the cost experience of a reference population. Specifically, in establishing benchmarks under the PGP demonstration, a comparison group was created using the PGP’s service area. The growth rate of the comparison group expenditures was calculated and used as the growth rate for updating the PGP’s benchmark. Specifically, we used each PGP’s annual assigned beneficiary population to determine the PGP’s service area. A PGP’s service area was defined as all counties where one percent or more of assigned PGP beneficiaries reside. We identified which beneficiaries residing in each service area met the comparison group assignment criteria and assigned them to the PGP comparison group. The service area and comparison group for the PGP were re-determined each year to account for changes in the PGP’s assigned beneficiaries. The expenditure growth rate for the PGP’s comparison group was calculated and used to update the PGP’s historical benchmark for purposes of determining each PGP’s performance under the shared savings calculation methodology used in the demonstration. This benchmarking methodology was used over the course of the 5-year PGP demonstration. Given that we have already tested and refined this methodology, we believe that a similar approach could be implemented within the Shared Savings Program. As noted previously, over the course of the PGP demonstration, 7 of 10 sites were eligible for shared savings payments in one or more performance years. Taking these factors into consideration, we believe stakeholders may welcome this approach to revising the program’s benchmarking methodology. However, we have also identified a number of additional factors that must be considered in using this approach in the Shared Savings Program: • Whether the comparison group counties should be weighted by the percent of assigned beneficiaries in the county out of all assigned beneficiaries in all comparison group counties. For example, for an ACO in a rural or suburban county near a large metropolitan area: On a weighted basis, the large metropolitan area would PO 00000 Frm 00081 Fmt 4701 Sfmt 4702 72839 contribute less to the comparison group than on an unweighted basis. Alternatively, an ACO with high penetration in a specific county would have its regional factors significantly influenced by that county. • Whether to establish a minimum sample size for the comparison group, such as equal to or greater than 25,000. Smaller comparison groups are more likely to demonstrate idiosyncratic expenditure trends, for instance, if an ACO has a high penetration in its service area, the remaining population may be non-representative compared to the ACO’s patient population. These factors would seem to support the use of a minimum sample size threshold. Based on statistical modeling for an effective sample size, we anticipate that the minimum sample size threshold would be set not lower than 25,000 beneficiaries. In turn, a minimum sample size raises a question of what criteria should be used to ensure the ACO’s comparison group is large enough. For instance, in markets where the ACO’s assigned beneficiaries represent a substantial share (for example, more than 40 percent) of Medicare FFS beneficiaries, should the region be expanded—perhaps to include the entire corresponding metropolitan statistical area (MSA), hospital referral region (HRR), or another regional grouping approach? Similarly, in markets where multiple ACOs represent a substantial share (for example, more than 50 percent) of Medicare FFS beneficiaries, should the region be similarly expanded as described previously? We also considered whether to lock-in the counties composing the comparison group at the start of the agreement period, since over the course of the agreement the counties where one percent or more of assigned ACO beneficiaries reside may fluctuate (for example, just above or just below 1 percent). (4) Alternative Benchmark Resetting Methodology: Holding the ACO’s Historical Costs Constant Relative to its Region Some stakeholders have also expressed a preference for further changes in the methodology used to reset ACO benchmarks to address the concerns described previously. For example, some stakeholders have suggested that ACOs would have stronger incentives to achieve shared savings during a given agreement period and to continue to participate in the program in subsequent agreement periods if we used a methodology for resetting benchmarks that held the ACO’s historical per assigned E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 72840 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules beneficiary spending constant relative to its local market so that improvements in efficiency that the ACO achieved during an agreement period would not lower its benchmark for a subsequent agreement period. Accordingly, we considered using the authority under section 1899(i)(3) of the Act to establish an approach to resetting an ACO’s benchmark at the start of a new agreement period under which the ACO’s benchmark from the prior agreement period would be updated according to trends in FFS costs in the ACO’s region, effectively holding a portion of the ACO’s benchmark constant relative to its region. Under this approach, an ACO’s benchmark for its initial agreement period would be set according to an approach similar to the existing methodology. For subsequent agreement periods, the trend in regional costs would be calculated using an approach based on the PGP demonstration, described previously, and the historical benchmark would be updated by increasing it by a percentage equal to the percentage increase in regional costs. This approach would prevent an ACO’s improved efficiency during an agreement period from lowering its benchmark in a future agreement period. We also considered a similar approach that would use information regarding the ACO’s historical costs under its first agreement period to adjust regional FFS benchmarks developed for future agreement periods by developing a scaling factor. The scaling factor could be calculated as the ratio of—(1) an ACO’s historical benchmark under its first agreement period (computed using an approach similar to the existing methodology) divided by; (2) the regional FFS benchmark that would have been calculated for the ACO for the third benchmark year of its first agreement period. We would compute an ACO’s benchmark for each subsequent performance year by multiplying this scaling factor by the ACO’s regional FFS benchmark for that performance year to account for the difference originally exhibited between the ACO expenditures and the regional FFS benchmark expenditures in the year prior to the beginning of the ACO’s first agreement period. The regional FFS benchmark for an ACO in a given performance year would be computed using an approach based on the PGP demonstration described above. For example, if the ACO’s assigned beneficiaries expenditures were 10 percent higher than what its regional FFS benchmark would have been in its most recent base year of its initial VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 agreement period, the ACO’s future benchmark based on regional FFS expenditures would be adjusted by 10 percent to account for this baseline difference. This approach would likely generate benchmarks very similar to those described in the previous paragraph and thus have a similar effect on an ACO’s incentives to improve efficiency. Under both of these approaches, we considered whether to adjust the benchmark or scaling factor to reflect changes in the list of ACO participant TINs over time, as we do now based on our authority under § 425.602((a)(8). We considered two approaches to making such adjustments, each of which could be used with either of the basic approaches to holding benchmarks constant relative to an ACO’s region that were previously described. Under the first approach, we considered basing such adjustments off our current method of adjusting the benchmark on an annual basis to reflect ACO participant changes. Under the second approach, we considered an adjustment method to reflect the historical cost experience of any ACO participant TINs that are added to the ACO and to remove the influence of the cost experience of those ACO participant TINs that leave the ACO, but not incorporate updated cost information for ACO participants that have continued in the ACO. First, we considered using an approach similar to our existing method for adjusting the ACO’s benchmark during the course of its agreement period to account for changes in its ACO participant list as described previously. Under this approach, each performance year that the ACO’s participant list changed, we would recompute its initial historical benchmark or scaling factor using cost information from the benchmark period corresponding to the ACO’s initial agreement period. This approach has the advantage that it is similar to the approach we have used successfully to adjust ACO benchmarks within an agreement period in response to changes in ACO participant lists. However, we recognize that not all ACO participants joining the ACO in subsequent agreement periods may have historical claims data during the 3 years prior to the start of the ACO’s first agreement period. Therefore, we considered the need to expand this approach to include adjustments to the benchmark or scaling factor to account for ACO participant list changes. Second, we considered an approach that would adjust an ACO’s benchmark (or scaling factor) after each annual PO 00000 Frm 00082 Fmt 4701 Sfmt 4702 change in the ACO participant list based on the relative cost experience of patient populations associated with the new performance year’s set of TINs relative to the prior performance year’s set of TINs, as measured during a period immediately preceding the change in the ACO participant list. We note that under our current benchmarking methodology, assigned beneficiaries and benchmark expenditures are determined in aggregate at the ACO level rather than at the individual ACO participant TIN level. Therefore, under this alternative approach, we would develop a methodology for associating assigned beneficiary costs to individual ACO participant TINs that continue in the program so as not to incorporate updated cost information for the patient populations associated with the continuing ACO participants, as well as to incorporate updated cost information for the patient populations associated with new ACO participants or remove the influence of cost information for patient populations associated with departing ACO participants. The advantage of this type of approach is that it could generate more accurate benchmarks in cases where an ACO adds many participant TINs that were not active during the ACO’s initial agreement period. However, this approach could be more complicated to implement and could reintroduce a limited ability for ACOs to influence future benchmarks through current decisions. A potential disadvantage of approaches that determine benchmarks by holding an ACO’s costs constant relative to its region is that future benchmarks are influenced to a large degree by holding the cost experience for the ACO participants that continue in the ACO static. This static cost experience would become dated and would not necessarily reflect the evolving complex factors that influence the cost profile of the beneficiary populations assigned to the ACO in future agreement periods. By holding costs static for existing ACO participants, there would be incentives for successful ACOs to continue to participate in the program (with the same ACO participant composition) against more favorable benchmarks. Moreover, some ACOs may ‘‘shop’’ for a particularly advantageous benchmark, for instance by delaying program entry, and only improving their expenditure and utilization trends in later years. As a result, these approaches might continue to yield shared savings for some ACOs despite marginal effort to improve efficiency, and push out ACOs for whom cumulative variation creates a E:\FR\FM\08DEP2.SGM 08DEP2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 predictable and unrealistically low expenditure target. To the extent that this approach for resetting ACO benchmarks also incorporates elements of the other approaches described in this section, we would be faced with related concerns. For instance, when trending the benchmark according to regional FFS costs based on the PGP demonstration approach described above, we would need to determine what criteria to use in establishing the comparison group. Further, as discussed under the alternative benchmarking methodology later in this section, we may need to consider whether the risk adjustment methodology would need to be modified, in this case to account for changes in each ACO’s risk profile relative to the risk profile of its regional comparison population. The types of approaches described in this section would require use of our authority under section 1899(i)(3) of the Act because we would be deviating from the requirement at section 1899(d)(1)(B)(ii) of the Act that the benchmark be reset at the start of each agreement period. Specifically, the benchmark would not be reset using the most recent available 3 years of per beneficiary expenditures for parts A and B services for those Medicare FFS beneficiaries that were assigned to the ACO during the preceding agreement period. (5) Alternative Benchmark Methodology: Transitioning ACOs to Benchmarks Based Only on Regional FFS Costs Over the Course of Multiple Agreement Periods We also considered using our authority under section 1899(i)(3) of the Act to transition ACOs from benchmarks based on their historical costs toward benchmarks based only on regional FFS costs, an approach suggested by stakeholders, including MedPAC. We recognize that under the existing benchmarking methodology, ACOs in the same market would have unique benchmarks, which may vary widely depending on the historical expenditures for the beneficiaries that receive care from the ACO participants in each ACO. As a result, ACOs within the same market may have substantially different benchmarks, such as the case of a historically low-cost ACO within a traditionally high cost market. Under the existing benchmarking methodology, the program may be more attractive (initially) to historically highcost ACOs able to enter the program and achieve substantial shared savings by bringing costs down compared to their historical cost performance. ACOs with historically low costs may be less likely VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 to enter and continue in the program because of their perceived difficulty in further reducing their assigned beneficiaries’ costs relative to a benchmark based on their assigned beneficiaries populations’ past experiences. However, as noted previously, the current benchmarking methodology may provide additional opportunity for increased shared savings for ACOs with low costs relative to the national average through the use of a flat dollar update for growth in national FFS expenditures, assuming program expenditure trends return to historically-familiar positive rates as compared to the unusually low growth experienced in the first several years of the program. Under this alternative approach, over the course of several agreement periods, we would transition to using regional FFS cost data to make ACO benchmarks gradually more independent of the ACO’s past performance and gradually more dependent on the ACO’s success in being more cost efficient relative to its local market. For example, for the ACO’s first agreement period, we may use the existing benchmarking methodology or one of the options described previously, which accounts for regional FFS expenditures. Starting in an ACO’s second agreement period, we would calculate each ACO’s benchmark as a weighted average of the ACO benchmark using the existing approach or one of the alternative approaches described above and risk adjusted regional FFS costs. The weight placed on risk adjusted regional FFS costs would increase over time. ACOs’ assigned beneficiaries would be counted in the calculation of regional FFS costs and the definition of an ACO’s region would require careful consideration so that the ACO’s assigned beneficiary population would not be allowed to make up an unreasonable proportion of the region itself. This benchmarking methodology would help ensure the program remains attractive to ACOs, particularly those who have achieved shared savings in previous agreement periods, and strengthen the connection between the determination of the amount of shared savings earned by the ACO and an ACO’s actual success in achieving savings relative to its region and local market. An approach where we transition from ACO-specific benchmarks based on each ACO’s historical costs to benchmarks based on regional FFS spending may be attractive to low-cost ACOs in high-cost regions because they would likely transition to a relatively higher (regional) benchmark over time against which they could likely show PO 00000 Frm 00083 Fmt 4701 Sfmt 4702 72841 more savings because they have lower relative costs. However, high-cost ACOs in low-cost regions may find a regional benchmark unattractive because they would be required to create new efficiencies to fully offset their higher costs relative to their region in order to show savings under the benchmark. To mitigate the cost of any resulting selective participation by favored lowcost ACOs in high cost regions we considered whether a benchmark transition process could be employed over a number of agreement periods involving a gradual shift from the current methodology to one where benchmarks are set based on regional FFS spending (for example, using a weighted average of the two approaches whereby the weight for the regional FFS benchmark is gradually increased over several agreement periods). Using regional FFS spending to establish benchmarks could reward low-cost, high-quality ACOs, and further encourage them to attract more ACO participants and Medicare FFS beneficiaries over the course of time. We would also expect that a gradual transition may at least initially maintain an incentive for existing ACOs with high costs relative to their region to remain in the program because the initial ACO-specific benchmark would allow the ACOs to achieve shared savings for lowering their costs compared to their own historical performance. As they transition to a benchmark based on regional FFS spending, these ACOs’ benchmarks would likely decline (given the overall experience of the market), encouraging these ACOs to continue to reduce their costs, while maintaining high quality care under the program. However, we also note that some ACOs may not perceive an ability to reduce their beneficiary expenditures below the regional average and therefore there remains a risk that the eventual transition to a regional benchmark would result in selective participation regardless of how the transition is performed. For instance, an ACO that perceives its patient population as having high relative costs may perceive itself as disadvantaged under this approach. Therefore, to further mitigate selective participation and improve the accuracy of the benchmarks, we considered whether the regional FFS benchmark should be adjusted to reflect a regional or local reference population, similar to the method used in the PGP demonstration. However, as described previously, additional adjustment may be necessary to ensure the comparison E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 72842 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules population is sufficiently large and representative of the ACO’s assigned patient population, particularly in the cases where ACOs make up a significant portion of their regional market. We also considered whether the risk adjustment methodology would need to be modified to account for changes in the risk profile of the regional population rather than the national population. For instance, it may be necessary to account for coding intensity differences relative to the ACO’s region rather than just the change in coding intensity by the ACO. As we explained in the November 2011 final rule (see 76 FR 67916), it may be necessary to guard against changes that result from more specific or comprehensive coding as opposed to improvements in the coordination and quality of health care. Thus, we considered the need for normalization of risk scores for ACO assigned beneficiaries and the comparison group beneficiaries relative to the regionally based comparison group. For instance, the benchmark could be normalized to the mix of beneficiaries assigned across the four Medicare enrollment types (ESRD, disabled, aged/dual, aged/nondual) to the same strata within the regional comparison population. We also considered risk adjusting the growth rates, for example based upon risk scores for the comparison group, in combination with using a regional coding intensity adjustment or independently. We also considered how to account for ACO participant TIN changes, over time, under a methodology where we transition ACOs from ACO-specific to regionally based benchmarks. For instance, we considered whether to continue to adjust the benchmark at the start of each performance year to reflect changes in the set of ACO participant TINs that constitutes the ACO, perhaps similar to our current approach to managing changes to ACO participants during the agreement period. We also considered the pace for transitioning ACOs from ACO-specific to regional benchmarks, including the following factors: • The period of time for transitioning to regional FFS benchmarks: For instance, should the transition occur over two agreement periods, or five agreement periods, or longer. • Whether to consider the ACO’s performance during a prior agreement period in determining the pace of its transition to regional FFS benchmarks. For example, should we delay downward adjustments to an ACO’s benchmark if the ACO fails to achieve shared savings. VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 • Whether to consider the ACO’s historical costs, relative to regional Medicare FFS average per capita costs, in determining the pace of its transition to regional FFS benchmarks. For example, should low-cost ACOs (those below the risk adjusted regional Medicare FFS average per capita costs) transition more quickly to regional FFS benchmarks than high-cost ACOs. Another consideration was whether this kind of benchmarking methodology would allow the Shared Savings Program to maintain a fiscal balance. For instance, would the shared savings paid to low-cost ACOs (treating beneficiaries at below average costs) be more than offset with savings from lower than expected spending in highcost ACOs and further control of spending growth in low-cost ACOs. We also recognize that more customized benchmarking approaches make it more difficult to provide ACOs with information they can use to predict their performance. (6) Seeking Comment on the Benchmarking Alternatives Considered and the Applicability of These Approaches In general we seek comment on the approaches to adjusting the methodology for establishing, updating and resetting ACO benchmarks discussed in detail above. In particular, we seek comment on the following: • Using combinations of these approaches, as opposed to any one approach. Specifically, we considered revising the methodology for resetting ACO benchmarks by equally weighting the three benchmark years, and/or accounting for shared savings payments received by an ACO in its prior agreement period, and/or using regional FFS expenditures instead of national FFS expenditures in establishing and updating the benchmark. We also considered and seek comment on revising the benchmarking methodology more broadly, shifting either to a methodology that resets ACOs’ benchmarks between agreement periods by holding an ACO’s historical costs constant relative to costs in its region or to a methodology that transitions ACOs from benchmarks based on their historical costs toward benchmarks based only on regional FFS costs, potentially in combination with some or all of the other revisions we are considering to the benchmarking methodology. • How broadly or narrowly to apply these alternative benchmarking approaches to the program’s Tracks. Specifically, we envisioned that the revisions in the benchmarking PO 00000 Frm 00084 Fmt 4701 Sfmt 4702 methodology under section 1899(d)(1)(B)(ii) of the Act. (for example, equally weighing the three benchmark years, and accounting for shared savings payments received by an ACO in its prior agreement period) would be applied when resetting the benchmarks for all ACOs, regardless of the model they participate under (Tracks 1, 2, and 3). We envisioned applying the approaches requiring use of our authority under section 1899(i)(3) of the Act to ACOs participating under performance-based risk models (Tracks 2 and Track 3) because stakeholders’ concerns about resetting the benchmarks were closely related to ensuring the program remains sustainable over time, and we envision ACOs would be transitioning to the performance-based risk models over time, specifically given our proposal to limit the number of agreement periods an ACO can remain under Track 1. We also considered and seek comment on applying these alternative benchmarking methodologies more broadly, specifically to all ACOs participating in a risk-based model (Tracks 2 and 3), or to all ACO financial models (Tracks 1, 2, and 3). • Whether to use regional FFS expenditures instead of national FFS expenditures in establishing and updating the benchmark and/or a methodology for transitioning ACOs from benchmarks based on their historical costs toward benchmarks based only on regional FFS costs only when resetting ACO benchmarks under their second or subsequent agreement period, or when establishing the benchmark for all participating ACOs (regardless of agreement start date) the next full performance year after the effective date of the final rule. In other words, if a final rule adopting a revised benchmarking methodology is issued in early 2015, should the revised methodology be used to determine the benchmark that will apply during the 2016 performance year for all ACOs. • The criteria for defining the comparison group for using regional FFS expenditure data to establish, update or reset the historical benchmark. In particular we welcome comments on the criteria we described previously and welcome commenters’ suggestions for different criteria. • We believe the concerns about risk adjustment raised in this section in the context of the alternative benchmarking methodology for establishing, updating and/or transitioning from ACO-specific benchmarks to regionally based benchmarks are also relevant to the approach where we would use regional FFS expenditures (as opposed to E:\FR\FM\08DEP2.SGM 08DEP2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 national FFS expenditures) in establishing or in updating the benchmark. We welcome comments on these concerns and commenters’ suggestions about the use of regional normalization or coding intensity adjustments to guard against regional or other coding differences that may affect the characteristics of the ACOs’ assigned beneficiary population in relation to the comparison group. • We welcome commenters’ detailed suggestions on our considerations of factors to use in resetting ACO benchmarks and for the alternative benchmark methodology; as well as considerations or concerns not described; and suggestions for alternative approaches for a benchmarking methodology that transition to use of regional benchmarks over the course of time. In particular, we seek commenters’ input on whether an approach that transitions ACOs to regional benchmarks would encourage continued participation by existing lowcost and high-cost ACOs. We also request commenters’ input on alternatives not described here for resetting benchmarks to encourage ongoing participation by ACOs who perform well in the program and are successful in reducing expenditures for their assigned beneficiaries. We seek comment on whether these alterative benchmarking approaches would have unintended consequences for ACO participation in the program, for the Medicare Trust Funds, or for Medicare FFS beneficiaries. We intend to carefully review any comments that are received on these issues during the development of the final rule and will make an assessment at that time as to whether any change to our current methodology for establishing benchmarks is necessary and appropriate. 7. Seeking Comment on Technical Adjustments to the Benchmark and Performance Year Expenditures When computing average per capita Medicare expenditures for an ACO during both the benchmark period and performance years under § 425.602, § 425.604, and § 425.606, we take into account all Parts A and B expenditures, including payments made under a demonstration, pilot or time limited program, with the exception of IME and DSH adjustments, which are excluded from these calculations. In the November 2011 final rule (76 FR 67919 through 67923), we considered whether to make adjustments to benchmark and performance year expenditures to exclude certain adjustments to Part A and B expenditures, including IME and VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 DSH payments, geographic payment adjustments and some bonus payments and penalties. In the final rule, we acknowledged that taking into consideration payment changes could affect ACOs’ financial performance and their ability to realize savings. However, with the exception of the adjustment to account for IME and DSH payments, we ultimately declined to make any adjustments to account for various differences in payment rates among providers and suppliers. We explained that while section 1899(d)(1)(B)(ii) of the Act provides a way of adjusting an ACO’s benchmark for such payments, the statute does not include similar authority to adjust performance year expenditures. Therefore, we noted that while we could make adjustments to the ACO’s benchmark to exclude certain payments under our authority in section 1899(d)(1)(B)(ii) of the Act, we did not have a similar authority to make adjustments in our calculation of an ACO’s performance year expenditures, which would create a mismatch in expenditure calculations. However, we were persuaded by commenters that not excluding IME and DSH payments in determining ACO financial performance could adversely affect the care of beneficiaries by creating an incentive for ACOs to avoid making appropriate referrals to teaching hospitals in an effort to demonstrate savings. Therefore, we considered using our authority under section 1899(i)(3) of the Act, which authorizes us to use other payment models for making payments under the Shared Savings Program that the agency ‘‘determines will improve the quality and efficiency of items and services’’ furnished under Medicare. Specifically we considered whether it would be appropriate to use this authority to include an adjustment to performance year expenditures to exclude IME and DSH payments. To exercise our authority under section 1899(i)(3) of the Act, we must also determine that the alternative payment model ‘‘. . . does not result in spending more for such ACO for such beneficiaries than would otherwise be expended . . . if the model were not implemented . . .’’ In the November 2011 final rule (76 FR 67921 through 67922), we stated that we believed excluding IME and DSH payments would be consistent with the requirements under section 1899(i)(3) of the Act. That is, excluding these payments would both improve the care for beneficiaries while also not resulting in greater payments to ACOs than would otherwise have been made if these payments were included. Specifically, we stated that removing PO 00000 Frm 00085 Fmt 4701 Sfmt 4702 72843 IME and DSH payments from benchmark and performance year expenditures would allow us to more accurately reward actual decreases in unnecessary utilization of healthcare services, rather than decreases arising from changes in referral patterns. In addition, we believed that excluding these payments from our financial calculations would help to ensure participation in ACOs by hospitals that receive these payments. Taken in combination, we believed these factors could result in Medicare beneficiaries receiving higher quality, better coordinated, and more cost-efficient care. As a result, we did not expect that excluding IME and DSH payments from the determination of ACOs’ financial performance would result in greater payments to ACOs than would otherwise have been made. We also found that excluding these amounts was operationally feasible since they are included in separate fields on claims allowing them to be more easily excluded from financial calculations than certain other payments that are included on Part A and B claims. Therefore, we finalized a policy of excluding IME and DSH payments from both the benchmark and performance year expenditure calculations. We stated that we intended to monitor this issue and would revisit it if we determine that excluding these payments has resulted in additional program expenditures (76 FR 67922). In addition to IME and DSH payments, we also considered whether standardizing payments to account for other types of payment adjustments would alleviate concerns resulting from changes in the Medicare payment systems. However, in light of the numerous payment adjustments included throughout the Medicare payment systems, we were concerned about the complexity resulting from standardizing payments and whether standardized payment information would provide meaningful and consistent feedback regarding ACO performance. We stated that we intended to evaluate this issue and would potentially address it in future rulemaking. We also considered requests from commenters that we make adjustments to ACO benchmark and performance year expenditures to account for a number of other payments (76 FR 67922). We specifically considered how geographic payment adjustments, applied under Medicare payment systems (for example, the IPPS wage index adjustments and the physician fee schedule geographic practice cost index (GPCI) adjustments) could affect an E:\FR\FM\08DEP2.SGM 08DEP2 72844 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules ACO’s ability to realize savings. These adjustments increase and decrease payments under the applicable payment systems to account for the different costs of providing care in different areas of the country. We further noted that there have been a number of temporary legislative adjustments to the wage indexes for various parts of the country during recent years. In some cases these have been extended on virtually an annual basis while others have been updated more intermittently. We recognized that the timing of these adjustments could result in changes being made during an ACO’s agreement period and between the benchmark and the performance years, thus influencing an ACO’s ability to realize savings under the program. Additionally, there have been cases where hospitals have moved in and out of reclassification status which can either increase or decrease the wage index in the state. Of the comments received, most favored excluding geographic payments from benchmark and performance year expenditures (76 FR 67923). Commenters suggested specific adjustments, such as exclusion of payments based on the area wage index, low cost county payment adjustments, GPCI, and the frontier States policy adjustment. Some commenters, however, expressed concerns that variations in cost growth across geographic areas as well as the current CMS methods for accounting for differences in local input and practice costs may create incentives that reward ACO formation in some markets but not in others. Others suggested that inclusion of these geographic payment adjustments could have unintended consequences for referral patterns by ACOs, such as driving referrals based on geographic wage adjustments rather than performance. Yet others were generally concerned that making geographic payment adjustments would disproportionately disadvantage some ACOs. Ultimately, we disagreed with commenters’ suggestions that we adjust expenditures to account for various differences in cost and payment. We stated that we believed that making such extensive adjustments, or allowing for benchmark adjustments on a caseby-case basis, would create an inaccurate and inconsistent picture of ACO spending and may limit innovations in ACOs’ redesign of care processes or cost reduction strategies (76 FR 67920). Unlike the IME/DSH adjustments, we stated we did not believe these other payment adjustments that are made to Part A and B payments (such as geographic payment adjustments) would result in a significant incentive to steer patients away from particular hospitals or providers since an ACO’s financial performance would be compared to its own historical expenditure benchmark, as updated. Since the publication of the November 2011 final rule, some questions have persisted regarding the most appropriate way to handle payment differences and changes under Medicare FFS; including whether to take into consideration certain payment changes that could affect ACO financial performance. We are not proposing to make any further adjustments at this time. However, now that both CMS and external stakeholders have some experience with our policies, we are interested in seeking further comment from stakeholders on this issue that we could potentially consider in future rulemaking. We are particularly interested in comments regarding standardization of payments, including which elements to adjust for, the impact of value-based payment adjustments on payments to physicians and hospitals, and the value of providing feedback on nonstandardized results while using standardized results to perform financial reconciliation. Table 7 summarizes certain provisions of the current regulations and our proposals to change them as discussed in this section. TABLE 7—SHARED SAVINGS FINANCIAL MODEL OVERVIEW Track 1: One-sided risk model Issue Current Tracks 2 and 3: Two-sided risk models Proposed Current Track 2 Transition to Two-Sided Model. First agreement period under one-sided model. Subsequent agreement periods under two-sided model. Remove requirement to transition to two-sided model for a second agreement period. Assignment ........ Preliminary prospective assignment for reports; retrospective assignment for financial reconciliation. Reset at the start of each agreement period. No change ......................... mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Benchmark ........ VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 Seeking comment on alternative methodology. PO 00000 Frm 00086 Proposed Track 2 ACOs may elect Track 2 without completing a prior agreement period under a one-sided model. Once elected, ACOs cannot go into Track 1 for subsequent agreement periods. Preliminary prospective assignment for reports; retrospective assignment for financial reconciliation. Same as Track 1 ............... No change ......................... Same as Track 2. No change ......................... Prospective assignment for reports and financial reconciliation. Seeking comment on alternative methodology. Same as Tracks 1 and 2 and seeking comment on alternative methodology. Fmt 4701 Sfmt 4702 E:\FR\FM\08DEP2.SGM 08DEP2 Proposed Track 3 72845 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules TABLE 7—SHARED SAVINGS FINANCIAL MODEL OVERVIEW—Continued Track 1: One-sided risk model Tracks 2 and 3: Two-sided risk models Issue Current Proposed Current Track 2 Proposed Track 2 Adjustments for health status and demographic changes. Historical benchmark expenditures adjusted based on CMS–HCC model. Updated historical benchmark adjusted relative to the risk profile of the performance year. Performance year: Newly assigned beneficiaries adjusted using CMS–HCC model; continuously assigned beneficiaries adjusted using demographic factors alone unless CMS–HCC risk scores result in a lower risk score. IME and DSH excluded from benchmark and performance year expenditures.. Include other payment adjustments included in Part A and B claims such as, geographic payment adjustments and HVBP payments, in benchmark and performance year expenditures. Up to 50 percent based on quality performance. No change ......................... Same as Track 1 ............... No change ......................... Same as Tracks 1 and 2. No change ......................... Same as Track 1 ............... No change ......................... Same as Tracks 1 and 2. Seeking comment on other technical adjustments. Same as Track 1 ............... Seeking comment on other technical adjustments. Same as Tracks 1 and 2. Up to 50 percent based on quality performance for first agreement period, reduced by 10 percentage points for each subsequent agreement period under the one-sided model. No change ......................... Up to 60 percent based on quality performance. No change ......................... Up to 75 percent based on quality performance. Fixed 2.0 percent .............. Fixed 2.0 percent. No change ......................... Fixed 2.0 percent .............. No change ......................... 15 percent ......................... 2.0 percent to 3.9 percent depending on number of assigned beneficiaries. 2.0 percent to 3.9 percent depending on number of assigned beneficiaries. No change ......................... 20 percent. First dollar sharing once No change ......................... MSR is met or exceeded. Not applicable .................... No change ......................... Same as Track 1 ............... No change ......................... Same as Tracks 1 and 2. Not applicable .................... Limit on the amount of No change ......................... losses to be shared in phases in over 3-years starting at 5 percent in year 1; 7.5 percent in year 2; and 10 percent in year 3 and any subsequent year. Losses in excess of the annual limit would not be shared. Adjustments for IME and DSH. Other payment adjustments. Quality Sharing Rate. Minimum Savings Rate. 2.0 percent to 3.9 percent depending on number of assigned beneficiaries. Not applicable .................... Minimum Loss Rate. Performance Payment Limit. Shared Savings 10 percent ......................... Shared Loss Rate. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Loss Sharing Limit. No change ......................... G. Additional Program Requirements and Beneficiary Protections 1. Background Section 1899(a)(1)(A) of the Act authorizes the Secretary to specify criteria that ACOs must satisfy in order to be eligible to participate in the Shared Savings Program. In the VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 One minus final sharing No change ......................... rate applied to first dollar losses once minimum loss rate is met or exceeded; shared loss rate not to exceed 60 percent. November 2011 final rule, we finalized policies regarding how ACOs will be monitored with respect to program requirements and what actions will be taken against ACOs that are not in compliance with the requirements of the Shared Savings Program. Based on our initial experience with the Shared Savings Program, we propose several PO 00000 Frm 00087 Fmt 4701 Sfmt 4702 Proposed Track 3 Fixed 2.0 percent. One minus final sharing rate applied to first dollar losses once minimum loss rate is met or exceeded; shared loss rate may not be less than 40 percent or exceed 75 percent. 15 percent. Losses in excess of the annual limit would not be shared. refinements and clarifications to our policies on— • Public reporting (§ 425.308); • Termination of the participation agreement (§§ 425.218 and 425.220); • Enforcement of ACO compliance with quality performance standards (§ 425.316(c)); and E:\FR\FM\08DEP2.SGM 08DEP2 72846 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules • Reconsideration review procedures (§§ 425.802 and 425.804)). mstockstill on DSK4VPTVN1PROD with PROPOSALS2 2. Public Reporting and Transparency a. Overview Section 1899 of the Act sets forth a number of requirements for ACOs. Section 1899(b)(2)(H) of the Act requires ACOs to demonstrate that they meet patient-centeredness criteria specified by the Secretary. We believe that one important aspect of patient-centeredness is patient engagement and transparency. Increasingly, transparency of information in the health care sector is seen as a means to help patients become more active in their health care choices and to generate feedback that may improve the quality of care and lower the cost of care. In addition, transparency may improve oversight and program integrity. Public reporting also supports the mandate for ACOs to be willing to ‘‘become accountable for the quality, cost, and overall care’’ of the Medicare beneficiaries assigned to them. Reports on ACO quality and costperformance hold ACOs accountable and contribute to the dialogue on how to drive improvement and innovation in health care. Public reporting of ACO cost and quality data may improve a beneficiary’s ability to make informed health care choices and facilitate an ACO’s ability to improve the quality and efficiency of its care. Therefore, for these reasons, which are described in more detail in the November 2011 final rule, we finalized requirements specified at § 425.308 that ACOs must make certain information publicly available. Since publication of the Shared Savings Program final rule, minor updates were made to § 425.308(e) in the 2013 PFS final rule with comment period (77 FR 69164 through 69170) and in the 2015 PFS final rule with comment period (79 FR 67769). For purposes of the Shared Savings Program, each ACO is currently required at § 425.308 to publicly report certain organizational information (such as the identification of ACO participants and governing body members), the amount of any shared savings or shared losses incurred, the proportion of shared savings invested in resources that support the three-part aim and certain quality performance information. (Specifically, ACOs are required to report the results of the claims-based quality measures while CMS will report the CAHPS and GPRO measure results on Physician Compare.) We recommend that ACOs publicly report the specified information in a standardized format that we have made available to ACOs through guidance at: https:// VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/ sharedsavingsprogram/Statutes_ Regulations_Guidance.html. Our guidance recommended that ACOs report the required information on a Web site that complies with the marketing requirements set forth at § 425.310. Because Web pages used to publicly report the information specified in § 425.308 constitute ‘‘marketing materials and activities,’’ as defined at § 425.20, any changes to such Web pages must be submitted for CMS review in accordance with § 425.310. Thus, if an ACO changes any of the information on its public reporting Web page, such as adding an ACO participant or replacing a member of the governing body, the ACO must submit its Web page to us for marketing review. We believe this policy creates undue burden on the ACO as well as on CMS. b. Proposed Revisions We continue to believe that publicly reporting the information identified in § 425.308 supports our goals of program transparency and patient centeredness. We also continue to believe that it is important for the ACO to be responsible for making this information available to the public. We believe that the best way to do this is via an ACO-maintained Web site, the mechanism through which most ACOs have chosen to publicly report. However, based on our initial experience with the Shared Savings Program and requests from some ACOs, we propose some refinements to the requirements related to public reporting and transparency. We propose to modify § 425.308 to reflect these new requirements. In § 425.308(a), we propose to require that each ACO maintain a dedicated Web page on which the ACO must publicly report the information listed in paragraph (b). In addition, we propose that an ACO must report to us the address of the Web page on which it discloses the information set forth in § 425.308 and apprise us of changes to that Web site address in the form and manner specified by CMS. We solicit comment on when an ACO should be required to inform us of such changes (for example, within 30 days after the change has occurred). In § 425.308(b), we require ACOs to report certain information in a standardized format to be specified by CMS. Although we currently set forth a recommended standardized format in guidance, we intend to make a specific template available that ACOs must use so that ACOs report information uniformly. This would minimize the compliance burden on ACOs, enhance PO 00000 Frm 00088 Fmt 4701 Sfmt 4702 transparency for the public, and improve our oversight of ACO compliance with the public reporting requirement. We envision that the template would have fields in which the ACO must insert the applicable public reporting information. Additionally, because the ACOs would report information using a standard template, we do not believe the information would require marketing review each time the information is updated. Therefore, we propose in § 425.308(c) that information reported on an ACO’s public reporting Web page which is in compliance with the requirements of the standardized format specified by CMS, (that is, through use of the template) is not subject to marketing review and approval under § 425.310. ACOs should keep in mind that although information reported using the template would not be subject to marketing review, we intend to monitor both the use of the template and the information inserted by ACOs into the template as part of our ongoing program monitoring and compliance oversight efforts. Using a standardized format, such as a template, for this purpose has several advantages over the way ACOs currently make this information publicly available. First, using a template would improve the usefulness of this information for the public by standardizing the way the information is made available across ACOs. Second, using a template would minimize the compliance burden on ACOs by ensuring the information is reported in the way we intend. Finally, the use of a standardized format also affords CMS a more streamlined approach for our monitoring and compliance oversight activities. We seek comment on the proposal to use a standardized format for public reporting purposes. We also propose to make a few changes to the information that must be publicly reported. In § 425.308(b), we propose to add two categories of organizational information that must be publicly reported. First, we propose to add a requirement at § 425.308(b)(3)(iv) that ACOs publicly identify key clinical and administrative leaders within their organization as part of the public reporting requirements. ACOs are already required to identify the members of their governing body, associated committees and committee leadership. However, key members of the ACO’s clinical and administrative leadership might not be members of the governing body or committee leadership. For example, the ACO’s medical director may be a stand-alone leadership position but not hold a committee leadership position or be a E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules member on the ACO’s governing body. Because clinical and administrative leadership is an eligibility requirement for program participation, we believe that requiring the ACO to publicly report its clinical and administrative leadership would lend additional transparency and insight into the ACO’s organization. Second, we believe it would be helpful for the public to have a better understanding of the types of ACO participants or combinations of ACO participants that have joined to form the ACO. At § 425.102(a), we articulate the following types of ACO participants or combinations of ACO participants that are eligible to form an ACO: • ACO professionals in group practice arrangement. • Networks of individual practices of ACO professionals. • Partnerships or joint venture arrangements between hospitals and ACO professionals. • Hospitals employing ACO professionals. • CAHs that bill under Method II. • RHCs and FQHCs. We note that if revised by our proposals in section II.E. of this proposed rule, this list would also include teaching hospitals. On the application to the Shared Savings Program, each ACO must indicate the types of entities that formed the ACO. We propose to add a provision at § 425.308(b)(3)(vi) requiring ACOs to publicly report the types of ACO participants or combinations of ACO participants, as listed in § 425.102(a), that form the ACO. Stakeholders have requested information about the composition of ACOs. Providing the types and combinations of ACO participants would assist stakeholders in understanding the composition of ACOs. In addition, we propose at § 425.308(b)(5) to require each ACO to publicly report its performance on all quality measures used to assess the quality of care furnished by the ACO. We currently require ACOs to post only the results of their performance on claims-based measures. The results of quality measures are reported by CMS on Physician Compare. We agree with the comments made by stakeholders that requiring an ACO to publicly report its performance on all quality measures (as defined at § 425.20) would assist stakeholders in getting a more accurate picture of the ACO’s performance. Therefore, we propose to broaden the public reporting requirement to require ACOs to publicly report performance on all quality measures. VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 We also note a technical modification to our rules. Currently, we require ACOs to report the amount of any ‘‘shared savings performance payment’’ (§ 425.308(d)(1)). However, to conform this provision to the definition of ‘‘shared savings’’ at § 425.20, we propose to remove the term ‘‘performance payment’’ from the phrase. The new language is found at revised § 425.308(b)(4)(i). Finally, for purposes of program transparency, we find it useful to post on Physician Compare and our Web site (www.cms.gov/sharedsavingsprogram/) certain information about ACOs, such as ACO public contact information, ACO public reporting Web page addresses, the amount of any shared savings or losses incurred, and quality performance results. Therefore, in addition to information we already post on our Web site and Physician Compare, we propose at § 425.308(d) to post ACOspecific information, including information the ACO is required to publicly report under § 425.308, as is necessary to support program goals and transparency. We solicit comment on what other information should be published on our Web site. Because proposed § 425.308(d) encompasses our ability to publicly report ACO performance on all quality measures, we propose to remove § 425.308(e) or reserve it for future use. We intend to continue reporting ACO quality measure performance on Physician Compare in the same way as for group practices that report under PQRS. 3. Terminating Program Participation a. Overview Section 425.218 of our regulations sets forth the grounds for terminating an ACO for failure to comply with the requirements of the Shared Savings Program (§ 425.218(a)). For example, an ACO’s or ACO participant’s failure to notify beneficiaries of their provider’s participation in the program as required under § 425.312 would constitute grounds for terminating the ACO. In addition, we may terminate an ACO for a number of other violations, such as those related to certain fraud and abuse laws, the antitrust laws, or other applicable Medicare laws and regulations relevant to ACO operations, or if certain sanctions have been imposed on the ACO by an accrediting organization or a federal, state or local government agency (§ 425.218(b)). Prior to termination, we may take interim steps such as issuing the ACO a warning notice or placing the ACO on a corrective action plan (CAP) (§ 425.216). However, we reserve the PO 00000 Frm 00089 Fmt 4701 Sfmt 4702 72847 right to immediately terminate a participation agreement if necessary (§ 425.218(c)). We notify the ACO in writing if the decision is made to terminate the participation agreement. Under § 425.220, an ACO may voluntarily terminate its participation agreement. Such an ACO is required to provide CMS and all of its ACO participants with a 60-day advance written notice of its decision to terminate its participation in the Shared Savings Program. An ACO is not required to notify beneficiaries of the ACO’s decision to terminate from the Shared Savings Program. Under current regulations, an ACO that terminates its participation agreement before completion of the participation agreement does not share in any savings for the performance year during which it notifies CMS of its decision to terminate the participation agreement (§ 425.220(b)). This is because an ACO that terminates its participation agreement during a performance year will have failed to complete the entire performance year and will therefore have failed to meet the requirements for shared savings. b. Proposed Revisions We propose several modifications to the regulations related to termination of a participation agreement. First, we propose to permit termination for failure to timely comply with requests for documents and other information and for submitting false or fraudulent data. In addition, we propose to add a new regulation at § 425.221 requiring ACOs to implement certain close-out procedures upon termination and nonrenewal. Finally, we propose to address in new § 425.221 the payment consequences upon termination of a participation agreement. (1) Grounds for Termination First, at § 425.218(b) we propose to modify the grounds for termination to specifically include the failure to comply with CMS requests for submission of documents and other information by the CMS specified deadline. At times, we may request certain information from the ACO in accordance with program rules. The submission of those documents by the specified due date is important for program operations. For example, we require each ACO to submit to us, on an annual basis, its list of ACO participants and their TINs (existing § 425.304 and proposed § 425.118). When ACOs do not submit these lists by the due date specified, it prevents us from applying the assignment methodology (which is dependent on having accurate lists of E:\FR\FM\08DEP2.SGM 08DEP2 72848 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 ACO participants for all ACOs) and impacts the timelines for the program, such as the calculation of the benchmarks for all ACOs. Missing such deadlines is very disruptive to the program and other ACOs. Therefore, we propose to modify § 425.218(b) to permit termination of an ACO agreement for failure to comply with requests for information and documentation by the due date specified by CMS. Additionally, under § 425.302, an individual with the authority to legally bind the individual or entity submitting data or information to CMS must certify the accuracy, completeness, and truthfulness of the data and information to the best of his or her knowledge and belief. However, circumstances could arise in which the data and information submitted was falsified or erroneous. Submission of false or fraudulent data, (for example, data submitted through the CMS web interface used to determine an ACO’s quality performance) could impact the amount of shared savings calculated for the ACO and cause CMS to overpay the ACO. Because of the severity of the consequences of submitting false or fraudulent data, we propose to modify § 425.218(b) to permit termination of an ACO agreement for submission of false or fraudulent data. We note that ACOs are obligated to repay shared savings payments to which they are not entitled, including, by way of example only, any overpayment to the ACO based on the submission of false or fraudulent data. (2) Close-Out Procedures and Payment Consequences of Early Termination We propose to add new § 425.221 to address close-out procedures and payment consequences of early termination. First, we believe it is important to establish an orderly closeout process when an ACO’s participation agreement is terminated. Therefore, we are proposing in § 425.221(a) that an ACO whose participation agreement is terminated prior to its expiration either voluntarily or by CMS must implement close-out procedures in a form, manner, and deadline specified by CMS. These closeout procedures shall address data sharing issues such as data destruction, beneficiary notification issues (for example removal of marketing materials and ensuring beneficiary care is not interrupted), compliance with quality reporting, record retention issues, and other issues established through guidance. We note that the close-out procedures would also apply to those ACOs that have elected not to renew their agreements upon expiration of the VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 participation agreement. We further propose in § 425.221(a)(2) that any ACO that fails to complete the close-out procedures in the form and manner and by the deadline specified by CMS would not be eligible for shared savings. We solicit comments on other strategies that would ensure compliance with closeout procedures. Second, we propose in § 425.221(b) to address certain payment consequences of early termination. Currently under § 425.220(b), an ACO that voluntarily terminates its agreement at any time during a performance year will not share in any savings for the performance year during which it notifies CMS of its decision to terminate the participation agreement. However, stakeholders have suggested that completion of the performance year, as part of an orderly close-out process, could be mutually beneficial to the ACO, its ACO participants and ACO providers/ suppliers, and to CMS. Specifically, stakeholders have suggested that an ACO should be entitled to receive shared savings if the ACO completes a performance year through December 31 and satisfies all requirements for sharing in savings for that performance year (for example, the quality reporting for the performance year). Additionally, by completing quality reporting as part of the close-out process, the ACO participants would not be penalized by the ACO’s decision to terminate its participation agreement. For example, eligible professionals that bill through the TIN of an ACO participant could satisfy the reporting requirement to avoid the downward payment adjustment under the PQRS in a subsequent year. Therefore, we propose in § 425.221(b) to permit an ACO whose participation agreement is voluntarily terminated by the ACO under § 425.220 to qualify for shared savings, if— • The effective date of termination is December 31; and • By a date specified by CMS, it completes its close-out process for the performance year in which the termination becomes effective. In order to effectively manage this option in the case of voluntary termination, the ACO must specify in its termination notice, and CMS must approve, a termination effective date of December 31 for the current performance year. Because the proposed new provision at § 425.221 will address the consequences of termination, including the payment consequences, we also propose to make a conforming change to § 425.220 to remove paragraph (b) addressing the payment consequences of early termination. PO 00000 Frm 00090 Fmt 4701 Sfmt 4702 We note that the opportunity to share in savings for a performance year would not extend to ACOs that terminate their participation agreement with effective dates prior to December 31 or to ACOs that CMS terminates under § 425.218. Those ACOs that terminate prior to December 31 will not have completed the performance year and thus would not qualify for shared savings. ACOs terminated by CMS under § 425.218 would not qualify for shared savings irrespective of the termination date because maintaining eligibility to participate in the Shared Saving Program is a pre-requisite for sharing in savings (see §§ 425.604(c) and 425.606(c)). In such cases, we strongly encourage ACOs to fulfill their obligations to their ACO participants and ACO providers/suppliers by reporting quality for the performance year in which it terminates so that their ACO participants and ACO providers/ suppliers are not unduly penalized by the ACO’s decision. However, even if the ACO completes quality reporting on behalf of its ACO participants and ACO provider/suppliers, if the ACO terminates its participation midyear or is terminated by CMS under § 425.218 (prior to December 31), it would not be eligible to share in savings for the performance year. The ACO would not be eligible to share in savings because the ACO would not have satisfied all requirements for sharing in savings for that performance year. (3) Reconsideration Review Process (A) Overview Under § 425.802(a), an ACO may appeal an initial determination that is not subject to the statutory preclusion on administrative or judicial review (see section 1899(g) of the Act). Specifically, the following determinations are not subject to administrative or judicial review: • The specification of quality and performance standards under §§ 425.500 and 425.502. • The assessment of the quality of care furnished by an ACO under the performance standards. • The assignment of beneficiaries. • The determination of whether the ACO is eligible for shared savings and the amount of such shared savings (including the determination of the estimated average per capita Medicare expenditures under the ACO for beneficiaries assigned to the ACO and the average benchmark for the ACO). • The percent of shared savings specified by the Secretary and the limit on the total amount of shared savings established under §§ 425.604 and 425.606. E:\FR\FM\08DEP2.SGM 08DEP2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules • The termination of an ACO for failure to meet the quality performance standards. Initial determinations that are not precluded from administrative or judicial review would include the denial of an ACO application or the involuntary termination of an ACO’s participation agreement by CMS. Under § 425.802(a), an ACO may appeal an initial determination that is not prohibited from administrative or judicial review by requesting reconsideration review by a CMS official. The request for review must be submitted for receipt by CMS within 15 days of the notice of the initial determination. Section 425.802(a)(2) provides that reconsiderations may be heard orally (that is, in person, by telephone or other electronic means) or on the record (review of submitted documentation) at the discretion of the reconsideration official. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 (B) Proposed Changes To date, CMS reconsideration official(s) have reviewed all reconsideration requests received as onthe-record reviews. We believe that onthe-record reviews are fair to both parties. Experience to date has demonstrated that a robust oral review is not necessary in light of the narrow scope of review. The issues eligible for review can be easily communicated in a detailed writing by both parties and do not require in-person witness testimony. Finally, we believe that on-the-record reviews do not require as many agency resources and can therefore ensure that decisions are made in a timely manner. Accordingly, we propose to modify § 425.802 to permit only on-the-record reviews of reconsideration requests. Additionally, we propose to similarly modify § 425.804 and also clarify that the reconsideration process allows both ACOs and CMS to submit one brief each in support of its position by the deadline established by the CMS reconsideration official. 4. Monitoring ACO Compliance With Quality Performance Standards We propose a technical revision to § 425.316(c) to clarify our administrative enforcement authority when ACOs fail to meet the quality reporting requirements. Specifically, we propose to remove § 425.316(c)(3), which sets forth various required actions the ACO must perform if it fails to report one or more quality measures or fails to report completely and accurately on all measures in a domain. We also propose to remove § 425.316(c)(4), which sets forth the administrative action we may take against an ACO if it exhibits a VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 pattern of inaccurate or incomplete reporting of quality measures or fails to make timely corrections following notice to resubmit. The actions identified in § 425.316(c)(3) and (4) include request for missing or corrected information, request for a written explanation for the noncompliance, and termination. All of these actions are already authorized under § 425.216 and § 425.218. Therefore, to reduce redundancy, prevent confusion, and to streamline our regulations, we propose to modify § 425.316(c) to remove § 425.316(c)(3) and (c)(4). In addition, we propose a technical change to § 425.316(c)(5), which currently provides that an ACO ‘‘will not qualify to share in savings in any year it fails to report fully and completely on the quality performance measures.’’ We propose to redesignate this paragraph as § 425.316(c)(3) and replace ‘‘fully and completely’’ with ‘‘accurately, completely, and timely’’ to align with § 425.500(f) and to emphasize the importance of timely submission of measures. 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. Response to Comments Because of the large number of public comments we normally receive on Federal Register documents, we are not able to acknowledge or respond to them individually. We will consider all comments we receive by the date and time specified in the DATES section of this proposed rule, and, when we proceed with a subsequent document, we will respond to the comments in the preamble to that document. V. Regulatory Impact Analysis A. Statement of Need This proposed rule is necessary to propose 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, coordinates items and services under parts A and B, and encourages investment in infrastructure and redesigned care processes for high quality and efficient service delivery. PO 00000 Frm 00091 Fmt 4701 Sfmt 4702 72849 B. Overall Impact We have 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), 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. 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 Regulatory Impact Analysis, which to the best of our ability presents the costs and benefits of the rulemaking. C. Anticipated Effects 1. Effects on the Medicare Program The Shared Savings Program is a voluntary program involving an innovative mix of financial incentives E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 72850 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules for quality of care and efficiency gains within FFS Medicare. As a result, the changes being proposed to the Shared Savings Program could result in a range of possible outcomes. In previous rulemaking (76 FR 67904), we indicated that participation in Track 1 might enable ACOs to gain the experience necessary to take on risk in a subsequent agreement period under a two-sided arrangement, possibly enhancing the opportunity for greater program savings in years beyond the first agreement period. Conversely, if in that first agreement period, ACOs come to reliably predict a bias that ensures an outcome—whether favorable or unfavorable—the program would be at risk for increasingly selective participation from favored ACOs and any real program savings could be overwhelmed by outsized sharedsavings payments (76 FR 67964). Further, even ACOs that opt for a twosided arrangement could eventually terminate their agreements if they anticipate that efforts to improve efficiency are overshadowed by their particular market circumstances. This scenario could also contribute to selective program participation by ACOs favored by the national flat-dollar growth target, or favored by other unforeseen biases affecting performance. However, as we indicated in the previous rulemaking, even with the optional liability for a portion of excess expenditures, which offers less incentive to reduce costs than a model involving full capitation, the opportunity to share in FFS Medicare savings still represents an incentive for efficiency. The actual effects of shared savings (and potential liabilities in the form of shared losses) will have varying degrees of influence on hospitals, primary care physicians, specialty physicians, and other providers and suppliers. Moreover, while certain care improvements might be achieved relatively quickly (for example, prevention of hospital readmissions and emergency-room visits for certain populations with chronic conditions), some ACOs might need more than 3 years to achieve comprehensive efficiency gains. As of the spring of 2014, over 330 organizations have chosen to participate in the Shared Savings Program. These organizations care for nearly 5 million assigned FFS beneficiaries living in 47 states, plus Puerto Rico and the District of Columbia. Half of all ACOs characterize themselves as networks of individual practices and the other half include hospitals. In the fall of 2014, CMS announced the final financial reconciliation and quality performance VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 results for performance year 1 for ACOs with 2012 and 2013 agreement start dates. Of the 220 ACOs with 2012 and 2013 start dates, 58 ACOs generated shared savings during their first performance year. They held spending $705 million below their targets and earned shared savings payments of more than $315 million as their share of program savings. One ACO in Track 2 overspent its target by $10 million and owed shared losses of $4 million. Total net savings to Medicare is close to $383 million, including repayment of shared losses by one Track 2 ACO. An additional 60 ACOs reduced health costs compared to their benchmark, but did not qualify for shared savings, as they did not meet the minimum savings threshold. While evaluation of the program’s overall impact is ongoing, the performance year 1 final financial reconciliation and quality results are within the range originally projected for the program’s first year. Also, at this point, we have seen no evidence of systematic bias in ACO participation or performance that would raise questions about the savings that have been achieved. Earlier in this proposed rule, we proposed additions to or changes in policy that are intended to better encourage ACO participation in riskbased models by— • Easing the transition from Track 1 to Track 2; • Reducing risk under Track 2; and • Adopting an alternative risk-based model—Track 3. First, as is currently the case, an ACO would be able to apply to participate in Track 1 for its initial agreement period during which the ACO could be eligible for shared savings payments in all 3 performance years of the agreement period without the risk of being responsible for repayment of any losses if actual expenditures exceed the benchmark. However, rather than requiring all Track 1 ACOs to transition to a risk-based model in their second agreement period, as is currently required, we are proposing to improve the transition from the shared-savings only model to a risk-based model for Track 1 ACOs that might require additional experience with the program before taking on performance-based risk. Specifically, in this proposed rule, we are proposing that Track 1 ACOs may elect to continue participation under Track 1 for a subsequent agreement period, albeit with a lower sharing rate, provided that they meet the eligibility requirements to continue in the program under Track 1. Second, we are proposing to reduce the current level of risk for ACOs that PO 00000 Frm 00092 Fmt 4701 Sfmt 4702 participate in Track 2, which provides an opportunity for an ACO to receive a higher percentage of shared savings for all years of the agreement period, but with potential liability for shared losses in each of the agreement years if annual expenditures exceed the benchmark. Specifically, in this proposed rule, we are proposing to replace the current flat 2 percent MSR and MLR under Track 2 with a variable MSR and MLR using the same methodology as is currently used to establish the MSRs for ACOs under Track 1. Under this methodology an ACO’s MSR varies based on the number of assigned beneficiaries using a sliding scale. Similarly, we are proposing to vary a Track 2 ACO’s MSR and MLR based on the number of assigned beneficiaries. This proposal would reduce risk for many Track 2 ACOs by increasing the threshold before they would have to share in additional costs that they had incurred for the program. Third, in this proposed rule, we are proposing to establish an additional risk-based option (Track 3) that offers a higher maximum shared savings percentage (75 percent) and performance payment limit (20 percent) than is available under Track 2 (60 percent and 15 percent respectively), a fixed MSR and MLR of 2 percent, and a cap on the amount of losses for which an ACO is liable that is fixed at 15 percent of its updated benchmark in each year. Also, under this model, beneficiaries would be assigned prospectively so an ACO would know in advance those beneficiaries for which it would be responsible. As detailed in Table 8, we estimate at baseline (that is, without the proposed changes detailed in this proposed rule) a total aggregate median impact of $730 million in net federal savings for calendar years (CY) 2016 through 2018 from the continued operation of the Shared Savings Program for ACOs electing a second agreement period starting in January 2016. The 10th and 90th percentiles of the estimate distribution, for this same time period, yield a net savings of $380 million and $1,160 million, respectively. These estimated impacts represent the effect on federal transfers of payments to Medicare providers and suppliers. The median estimated federal savings are higher than the estimate for the program effects over the preceding calendar years (CY) 2012 through 2015 published in the previous final rule (estimated median net savings of $470 million for such 4 year period). This increase in savings is due to multiple factors related to maturation of the program, including continued phase-in of assumed savings potentials, lowered effective sharing E:\FR\FM\08DEP2.SGM 08DEP2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 rates due in part to rebased benchmarks, and increased collection of shared losses due to mandatory enrollment in Track 2 in a second agreement period. However, absent changes to improve the viability of participation for ACOs considering a second agreement period, we estimate fewer than one in four ACOs will opt for continued participation under downside risk in Track 2 as required under the current regulations. Further, we estimate approximately one in three of such reenrolling ACOs would ultimately drop out of the program by 2018 to avoid future shared loss liability. Alternatively, as detailed in Table 9, by including the proposed changes detailed in this rule, the total aggregate median impact would increase to $1,010 million in net federal savings for calendar years (CY) 2016 through 2018. The 10th and 90th percentiles of the estimate distribution, for the same time period, would also be higher, yielding net savings of $430 million and $1,650 million, respectively. Such median estimated federal savings are $280 million greater than the $730 million median net savings estimated at baseline absent proposed changes. A key driver of an anticipated increase in net savings is through improved ACO participation levels in a second agreement period. We estimate that at least 90 percent of eligible ACOs will renew their participation in the Shared Savings Program if presented with the new options, primarily under Track 1 and, to a lesser extent, under Track 3. This expansion in the number of ACOs willing to continue their participation in the program is estimated to result in additional improvements in care efficiency of a magnitude significantly greater than the reduced shared loss receipts estimated from baseline (median shared loss dollars reduced by $140 million relative to baseline) and the added shared savings payments flowing from a higher sharing rate in Track 3 and continued one-sided sharing available in Track 1 (median shared savings payments increased by $320 million relative to baseline). With respect to costs incurred by ACOs, as discussed later in this section, for purposes of this analysis, we are retaining our assumption included in our November 2011 final rule (76 FR 67969) of an average of $0.58 million for start-up investment costs but are revising our assumption for average ongoing annual operating costs for an ACO participating in the Shared Savings Program to $0.86 million, down from the $1.27 million assumed in our November 2011 final rule (76 FR 67969). This revision is related to the lower average number of beneficiaries currently observed to be assigned to existing Shared Savings Program ACOs compared to the larger organizations participating in the Physician Group Practice Demonstration upon which the original assumption was based. We also believe that our proposals to streamline the administrative requirements for the program could further assist in lowering administrative costs. For our analysis, we are comparing the effects of the proposed changes in this proposed rule for a cohort of ACOs that either continued their participation, beginning in 2016 or newly began participation in that same year. For purposes of our analysis, we assume that roughly one quarter of ACOs will incur aggregate start-up investment costs in 2016, ranging from $7 million under the baseline scenario to $30 million under the alternative (all proposed changes) scenario in aggregate. Aggregate-ongoing operating costs are estimated to range from $43 million under the baseline scenario to $181 million under the alternative scenario. Both start-up investment and ongoing operating cost ranges assume an anticipated average participation level of 50 (baseline scenario) to 210 (alternative scenario) new or currently participating ACOs that establish or renew participation agreements in 2016. For purposes of this analysis, we assume that some portion of ACOs currently participating in the program will not renew their participation agreement for a subsequent agreement period. As a result, under our baseline scenario, we assume 50 ACOs will either renew or begin an agreement period in 2016—far fewer than the 100 72851 new ACOs that have entered the program in each of the last 2 years. The 3-year aggregate ongoing operating cost estimate also reflects our assumption that, under the baseline scenario, there would be a greater propensity for ACOs that have completed the full term of their initial agreement period, and that would be required to participate under Track 2 in their second agreement period, to drop out of the program after receiving poor results from their final settlement for the first performance year under Track 2 in the new agreement period. Therefore, as illustrated in Table 8 for the baseline scenario, for CYs 2016 through 2018, total median ACO shared savings payments of $310 million offset by $170 million in shared losses coupled with the aggregate average startup investment and ongoing operating cost of $121 million result in an estimated net private benefit of $19 million. Alternatively, as illustrated in Table 9 for the all changes scenario, for CYs 2016 through 2018 the total median ACO shared savings payments of $630 million, offset by $30 million in shared losses, coupled with the aggregate average start-up investment and ongoing operating costs of $562 million, result in an estimated net private benefit of $38 million. By proposing to no longer require ACOs to accept risk in their second agreement period, our proposed changes also provide the benefit of reducing the per-ACO average shared loss liability by over 95 percent compared to the baseline. Therefore, the proposed changes would likely prevent a significant number of ACOs that would renew their participation agreements in 2016 from leaving the program prior to 2018. By encouraging greater Shared Savings Program participation, the changes proposed in this rule will also benefit beneficiaries through broader improvements in accountability and care coordination than would occur under current regulations. Accordingly, we have prepared a regulatory impact analysis (RIA) that to the best of our ability presents the costs and benefits of this proposed rule. TABLE 8—BASELINE (ABSENT ALL PROPOSED CHANGES) ESTIMATED NET FEDERAL SAVINGS, COSTS AND BENEFITS, CYS 2016 THROUGH 2018 CY 2016 Net Federal Savings: 10th Percentile ........... Median ........................ 90th Percentile ........... ACO Shared Savings: 10th Percentile ........... Median ........................ VerDate Sep<11>2014 CY 2017 CY 2018 $200 million ....................... $340 million ....................... $510 million ....................... $150 million ....................... $270 million ....................... $430 million ....................... $20 million ......................... $110 million ....................... $240 million ....................... $380 million. $730 million. $1160 million. $40 million ......................... $80 million ......................... $60 million ......................... $110 million ....................... $70 million ......................... $120 million ....................... $180 million. $310 million. 20:28 Dec 05, 2014 Jkt 235001 PO 00000 Frm 00093 Fmt 4701 Sfmt 4702 E:\FR\FM\08DEP2.SGM 08DEP2 CYs (2016–2018) 72852 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules TABLE 8—BASELINE (ABSENT ALL PROPOSED CHANGES) ESTIMATED NET FEDERAL SAVINGS, COSTS AND BENEFITS, CYS 2016 THROUGH 2018—Continued CY 2016 CY 2017 CY 2018 CYs (2016–2018) 90th Percentile ........... ACO Shared Losses: 10th Percentile ........... Median ........................ 90th Percentile ........... $130 million ....................... $170 million ....................... $190 million ....................... $480 million. $20 million ......................... $60 million ......................... $100 million ....................... $40 million ......................... $80 million ......................... $150 million ....................... $10 million ......................... $30 million ......................... $60 million ......................... $80 million. $170 million. $290 million. Costs ................................. The estimated aggregate average start-up investment and 3-year operating costs is $121 million. The total estimated start-up investment costs average $7 million, with ongoing costs averaging $43 million, for the anticipated mean baseline participation of 50 ACOs. Benefits .............................. Improved healthcare delivery and quality of care and better communication to beneficiaries through patient-centered care. * Note that the percentiles for each individual year do not necessarily sum to equal the corresponding percentiles estimated for the total 3-year impact, in the column labeled CYs 2016 through 2018, due to the annual and overall distributions being constructed independently. TABLE 9—ALTERNATIVE SCENARIO ASSUMING ALL PROPOSED CHANGES ESTIMATED NET FEDERAL SAVINGS, COSTS AND BENEFITS, CYS 2016 THROUGH 2018 CY 2016 Net Federal Savings: 10th Percentile ........... Median ........................ 90th Percentile ........... ACO Shared Savings: 10th Percentile ........... Median ........................ 90th Percentile ........... ACO Shared Losses: 10th Percentile ........... Median ........................ 90th Percentile ........... CY 2017 CY 2018 CYs (2016–2018) $190 million ....................... $380 million ....................... $590 million ....................... $150 million ....................... $350 million ....................... $570 million ....................... $80 million ......................... $280 million ....................... $510 million ....................... $430 million. $1,010 million. $1650 million. $90 million ......................... $140 million ....................... $200 million ....................... $150 million ....................... $210 million ....................... $280 million ....................... $220 million ....................... $280 million ....................... $350 million ....................... $470 million. $630 million. $820 million. $0 million ........................... $10 million ......................... $30 million ......................... $0 million ........................... $20 million ......................... $40 million ......................... $0 million ........................... $0 million ........................... $20 million ......................... $10 million. $30 million. $70 million. Costs ................................. The estimated aggregate average start-up investment and 3-year operating costs is $562 million. The total estimated start-up investment costs average $30 million, with ongoing costs averaging $181 million, for the anticipated mean baseline participation of 210 ACOs. Benefits .............................. Improved healthcare delivery and quality of care and better communication to beneficiaries through patient-centered care. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Note that the percentiles for each individual year do not necessarily sum to equal the corresponding percentiles estimated for the total 3-year impact in the column labeled CYs 2016 through 2018, due to the annual and overall distributions being constructed independently. Also, the cost estimates for this table reflect our assumptions for increased ACO participation as well as changes in the mix of new and continuing ACOs. There remains uncertainty as to the number of ACOs that will continue to participate in the program, provider and supplier response to the financial incentives offered by the program in the medium and long run, and the ultimate effectiveness of the changes in care delivery that may result as ACOs work to improve the quality and efficiency of patient care. These uncertainties continue to complicate efforts to assess the financial impacts of the Shared Savings Program and result in a wide range of potential outcomes regarding the net impact of the proposed changes in this proposed rule on Medicare expenditures. To best reflect these uncertainties, we continue to utilize a stochastic model that incorporates assumed probability distributions for each of the key variables that will affect the overall VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 financial impact of the Shared Savings Program. Using a Monte Carlo simulation approach, the model randomly draws a set of specific values for each variable, reflecting the expected covariance among variables, and calculates the program’s financial impact based on the specific set of assumptions. We repeated the process for a total of 2,500 random trials, tabulating the resulting individual cost or savings estimates to produce a distribution of potential outcomes that reflects the assumed probability distributions of the incorporated variables, as shown in Table 9. In this way, we can evaluate the full range of potential outcomes based on all combinations of the many factors that will affect the financial impact, and with an indication of the likelihood of these outcomes. It is important to note PO 00000 Frm 00094 Fmt 4701 Sfmt 4702 that these indications do not represent formal statistical probabilities in the usual sense, since the underlying assumptions for each of the factors in the model are based on reasonable judgments, using independent expert opinion when available. The median result from the distribution of simulated outcomes represents the ‘‘best estimate’’ of the financial effect of the proposed changes to the Shared Savings Program. The full distribution illustrates the uncertainty surrounding the mean or median financial impact from the simulation. The median estimate involves a combination of— • Reduced actual Medicare expenditures due to more efficient care; • Shared savings payments to ACOs; and • Payments to CMS for shared losses when actual expenditures exceed the E:\FR\FM\08DEP2.SGM 08DEP2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules benchmark, resulting in a projected total of $1,010 million in net savings over CYs 2016 through 2018, or $280 million greater than the median projected total at baseline without the changes proposed in this rule. This net Federal savings estimate, detailed at the top of Table 9, can be summed with the projected ACO shared savings less projected ACO shared losses—both also detailed in Table 9— to show the median expected effect on Medicare claim expenditures before accounting for shared savings payments (that is, the reduction in actual Medicare expenditures due to more efficient care). A net savings (cost) occurs when payments of earned and unearned shared savings (less shared losses collected) resulting from: (1) Reductions in spending; (2) care redesign; and (3) random group claim fluctuation, in total are less than (greater than) assumed savings from reductions in expenditures. As continued emerging data become available on the differences between actual expenditures and the target expenditures reflected in ACO benchmarks, it may be possible to evaluate the financial effects with greater certainty. The estimate distribution shown in Table 10 provides an objective and reasonable indication of the likely range of financial outcomes, given the chosen variables and their assumed distributions at this time in the program’s operation. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 a. Assumptions and Uncertainties We continue to rely on input gathered as part of the analysis for the existing regulation from a wide range of external experts, including credentialed actuaries, consultants, and academic researchers, to identify the pertinent variables that could determine the efficacy of the program, and to identify the reasonable ranges for each variable. We also continue to monitor emerging evidence from current participation in this program, the Pioneer ACO Model, and related published evidence where available. The factors that we are continuing to consider for modeling include all of the following: • Number of participating ACOs, including the sensitivity to burdens of participation and the generosity of the sharing arrangement. • Size mix of participating ACOs. • Type of ACO that would consider accepting risk. • Participating ACOs’ current level of integration and preparedness for improving the quality and efficiency of care delivery. VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 • Baseline per-capita costs for ACOs, relative to the national average. • Number and profile of providers and suppliers available to participate in the Shared Savings Program as a result of Innovation Center model initiatives. • Range of gross savings achieved by ACOs, and the time required for full phase-in. • Local variation in expected claims cost growth relative to the national average. • Quality reporting scores and resulting attained sharing (or loss) percentages. • Potential ’spillover’ effects between the Shared Savings Program and other value-based incentive programs implemented by CMS and/or other payers. We assumed that overall between 0.8 million Medicare beneficiaries (under baseline) and 3.3 million Medicare beneficiaries (with all proposed changes) would annually be assigned to between 50 and 210 ACOs beginning a new agreement period in 2016. Given data on current participation, we anticipate the program will continue to garner comparable levels of participation from markets exhibiting baseline per-capita FFS expenditures above, at, or below the national average. In addition, we assumed the level of savings generated by an ACO to positively correlate to the achieved quality performance score and resulting sharing percentage. For estimating the impact of the proposed changes, we assume that most ACOs (approximately 9 out of 10, on average) will choose Track 1 despite a proposed decrease in the savings sharing percentage. This is because the ACOs will seek to simultaneously: (1) Avoid the potential for financial loss if expenditures experience a significant upward fluctuation or efficiency improvements are less effective than planned; and (2) continue to build organizational experience to achieve a per-capita cost target as determined under the program’s benchmark methodology. In contrast, we assume that a minority of ACOs—disproportionately represented from a more capable subset of the total program participation—will opt for Track 3 in the second agreement period. These ACOs will be enabled by experience accepting risk and/or achieving success in their first agreement period in this program, and motivated by the provision for prospective assignment of beneficiaries and the greater sharing percentage as proposed for this new option. A particularly important cause for uncertainty in our estimate is the high PO 00000 Frm 00095 Fmt 4701 Sfmt 4702 72853 degree of variability observed for local per-capita cost growth rates relative to the national average ‘‘flat dollar’’ growth (used to update ACO benchmarks). The benchmark or expenditure target effectively serves as the chief measure of efficiency for participating ACOs. Factors such as lower-than-average baseline per-capita expenditure and variation in local growth rates relative to the national average can trigger shared savings payments even in the absence of any efficiency gains. Similarly, some ACOs could find that factors, such as prevailing per-capita expenditure growth in their service area that is higher than the national average, limit efficiency gains and reduce or prevent shared savings. b. Detailed Stochastic Modeling Results Table 10 shows the distribution of the estimated net financial impact for the 2,500 stochastically generated trials under the scenario where all proposed changes are implemented. (The amounts shown are in millions, with negative net impacts representing Medicare savings). The net impact is defined as the total cost of shared savings less—(1) any amount of savings generated by reductions in actual expenditures; and (2) any shared losses collected from ACOs that accepted risk and have actual expenditures exceeding their benchmark. The median estimate of the Shared Savings Program financial impact for ACOs potentially entering a second agreement period as proposed in this rule and covering calendar years 2016 through 2018 is a net federal savings of $1,010 million, which is $280 million higher than our estimate for the same period assuming a baseline scenario, which excludes the changes proposed in this rule. This amount represents the ‘‘best estimate’’ of the financial impact of the Shared Savings Program during the applicable period. However, it is important to note the relatively wide range of possible outcomes. While over 99 percent of the stochastic trials resulted in net program savings, the 10th and 90th percentiles of the estimated distribution show net savings of $430 million to net savings of $1,650 million, respectively. In the extreme scenarios, the results were as large as $2.9 billion in savings or $200 million in costs. The stochastic model and resulting financial estimates were prepared by the CMS Office of the Actuary (OACT). The median result of $1,010 million in savings is a reasonable ‘‘point estimate’’ of the impact of the Shared Savings Program during the period between 2016 and 2018 if the changes proposed E:\FR\FM\08DEP2.SGM 08DEP2 72854 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules improve the precision of future financial impact estimates. To the extent that the Shared Savings Program will result in net savings or costs to Part B of Medicare, revenues from Part B beneficiary premiums would also be correspondingly lower or higher. In addition, because MA payment rates depend on the level of spending within traditional FFS Medicare, savings or costs arising from the Shared Savings Program would result in corresponding adjustments to MA payment rates. Neither of these secondary impacts has been included in the analysis shown. Table 11 shows the median estimated financial effects for the Shared Savings Program of ACOs entering in a new agreement period starting in 2016 and the associated 10th and 90th percentile ranges, assuming all changes in this proposed rule are implemented. Net savings (characterized by a negative net impact on federal outlays) are expected to moderately contract over the 3-year period, from a median of $380 million in 2016 to $270 million in 2018. This progression is related to the maturation of efficiencies achieved by renewing ACOs contrasted by progressive increases in shared savings payments due to increasing variability in expenditures in later performance years relative to a static benchmark expenditure baseline. To similar effect, the potential that Track 3 ACOs experiencing losses may elect to voluntarily terminate their participation in the program could work to decrease net savings in the last year of the period relative to prior years. We note that the percentiles are tabulated for each year separately. Therefore, the overall net impact distribution (Table 9) will not necessarily exactly match the sum of distributions for each distinct year. VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 PO 00000 Frm 00096 Fmt 4701 Sfmt 4702 E:\FR\FM\08DEP2.SGM 08DEP2 EP08DE14.000</GPH> mstockstill on DSK4VPTVN1PROD with PROPOSALS2 in this proposed rule are finalized and implemented. However, we emphasize the possibility of outcomes differing substantially from the median estimate, as illustrated by the estimate distribution. As we analyze additional data on ACO performance in the first agreement period, we may likely c. Further Consideration The impact analysis shown is only for the 3 years 2016 through 2018 corresponding to the second agreement period potentially available for the up to nearly 220 ACOs that will complete their first agreement period in 2015. As of January 1, 2014, 123 additional ACOs have joined the program and would potentially be eligible for a second agreement period beginning in 2017. For both groups of ACOs, uncertainties exist regarding providers’ continued engagement with program goals and incentives, especially for providers who fail to generate shared savings revenue comparable to the cost of effective participation in the program. It is possible that, notwithstanding the enhancements proposed in this rule, a significant drop-off in participation could materialize from ACOs failing to achieve significant revenue from shared savings in the short run. On the other hand, value-based payment models are showing significant growth in VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 arrangements from state Medicaid programs, private insurers, and employer-sponsored plans. Moreover, we would also note that the number of providers and suppliers participating in these models and in the existing ACOs continues to grow. Therefore, providers may view continued participation in this program as part of a wider strategy for care redesign rather than be driven only by the potential for receiving incentives in the form of shared savings payments from the Medicare Shared Savings Program. Therefore, there remains a potential for broad gains in efficiency and quality of care delivery across all populations served by ACOs participating in the Shared Savings Program with possible additional ‘‘spillover’’ effects on federal savings potentially traceable to momentum originally created by this program. The stochastic model for estimating future program impacts starting in 2016 does not incorporate either of these divergent longer-run scenarios, but both remain PO 00000 Frm 00097 Fmt 4701 Sfmt 4702 72855 possibilities. An impact estimate expanded to include performance beyond the 2016 through 2018 agreement period would likely entail a significantly wider range of possible outcomes. However, emerging results of the first performance cycle will help inform estimates of the ongoing financial effects of the Shared Savings Program. 2. Effects on Beneficiaries This program is still in the early stages of implementation. However, we continue to believe that the Shared Savings Program will benefit beneficiaries because the intent of the program is to— • Encourage providers and suppliers to join together to form ACOs that will be accountable for the care provided to an assigned population of Medicare beneficiaries; • Improve the coordination of FFS items and services; and E:\FR\FM\08DEP2.SGM 08DEP2 EP08DE14.001</GPH> mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 72856 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules • Encourage investment in infrastructure and redesigned care processes for high quality and efficient service delivery that demonstrates a dedication to, and focus on, patientcentered care that results in higher quality care. The benefits of a payment model that encourages providers and suppliers to become accountable for the overall care furnished to Medicare beneficiaries were evidenced by the PGP demonstration, upon which many features of the Shared Savings Program are based. Under the PGP demonstration, all of the PGP participants achieved improvements in their scores for most of the quality measures over time. While only 2 PGP participants met all 10 quality measure targets active in their first performance year, by the fifth performance year, seven sites met all 32, or 100 percent of their targets, and the remaining 3 PGP participants met over 90 percent of the targets. More specifically, as we previously discussed in our November 2011 final rule (76 FR 67968), over the first 4 years of the PGP Demonstration, physician groups increased their quality scores an average of 10 percentage points on the ten diabetes measures, 13 percentage points on the ten congestive heart failure measures, 6 percentage points on the seven coronary artery disease measures, 9 percentage points on the 2 cancer screening measures, and 3 percentage points on the 3 hypertension measures. Further analysis is provided in the Physician Group Practice Demonstration Evaluation Report (Report to Congress, 2009; https://www.cms.gov/ DemoProjectsEvalRpts/downloads/PGP_ RTC_Sept.pdf). As we have also previously discussed (76 FR 67968), in addition to the overall increases in quality scores, we can examine the impact of the PGP Demonstration on quality by comparing the values of the seven claims-based quality measures for each PGP site and its comparison group. Our analysis found that, on the claims-based measures, PGP performance exceeded that of the comparison groups (CGs) on all measures between the base year (BY) and performance year 2 (PY2). It also found that the PGP sites exhibited more improvement than their CGs on all but one measure between the BY and PY2. Even after adjusting for predemonstration trends in the claimsbased quality indicators, the PGP sites improved their claims-based quality process indicators more than their comparison groups. Further, for the first year of the Pioneer ACO Model, all 32 Pioneer VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 ACOs successfully reported quality measures and achieved the maximum quality score for complete and accurate reporting, earning incentive payments for their reporting accomplishments. Overall, Pioneer ACOs performed better than published rates in FFS Medicare for all 15 clinical quality measures for which comparable data are available. For example, • Twenty-five of 32 Pioneer ACOs generated lower risk-adjusted readmission rates for their aligned beneficiaries than the benchmark rate for all Medicare FFS beneficiaries. • Pioneer ACOs performed better on clinical quality measures that assess hypertension control for patients. The median rate among Pioneer ACOs on blood pressure control among beneficiaries with diabetes was 68 percent compared to 55 percent as measured in adult diabetic population in 10 managed care plans across 7 states from 2000 to 2001. • Pioneer ACOs performed better on clinical quality measures that assess low density lipoprotein (LDL) control for patients with diabetes. The median rate among Pioneer ACOs for LDL control among beneficiaries with diabetes was 57 percent compared to 48 percent in an adult diabetic population in 10 managed care plans across 7 states from 2000 to 2001. Additionally, under the Shared Savings Program, all but 6 organizations fully and completely reported quality measures for the 2013 reporting period, providing important information on current performance that can be used to improve patient engagement and make meaningful positive impacts on patient care. Above and beyond the early quality data generated by participating organizations, we have anecdotal evidence that illustrates the importance of encouraging participation in the Shared Savings Program. For example, ACO providers/suppliers report very meaningful changes in patient engagement through beneficiary participation on the governing body of the ACO and on patient advisory committees. In response to beneficiary input, clinical practices are offering extended office hours, including weekend hours, and ensuring timely appointments and access to clinical staff. Using the data shared by CMS, ACOs are able to identify high risk beneficiaries that require additional clinical attention, assign case managers, and actively work to improve care for these beneficiaries. One ACO reported that it has implemented a process for performing in-home medication reconciliation and review of care plans PO 00000 Frm 00098 Fmt 4701 Sfmt 4702 as a follow up to hospital discharge and for one third of those patients, discovered an intervention that avoided an unnecessary hospital readmission. Active identification and management of these patients has uncovered previously unaddressed issues that factored into patient inability to adhere to treatment plans. For example, one ACO reported that it has uncovered several psycho-social issues that were resulting in avoidable readmissions such as— • The inability to self-medicate (the ACO arranged for home health services); • Lack of transportation to clinical practices (the ACO’s affiliated hospitals had a taxi service voucher program that the ACO was able to expand to the beneficiary population assigned to the ACO): • Inadequate access to healthy food resources (the ACO worked with community stakeholders to have meals delivered to the patient’s home). Additionally, ACOs are using claims data to identify diagnoses prevalent in the assigned population and develop best practice guidelines for those conditions, and educating and alerting ACO participants and ACO providers/ suppliers to standardize care. We expect that the changes proposed in this proposed rule, specifically those easing administrative requirements, smoothing the transition to a risk-based model, and expanding opportunities to share in a higher level of savings will encourage greater program participation by ACOs, which will in turn increase the number of beneficiaries that can potentially benefit from high quality and more coordinated care. Nonetheless, this program does not affect beneficiaries’ freedom of choice regarding which providers and suppliers they see for care since beneficiaries assigned to an ACO continue to be in the traditional Medicare program. Thus, beneficiaries may continue to choose providers and suppliers that do not participate in ACOs under the Shared Savings Program. 3. Effect on Providers and Suppliers Based on discussions with ACOs that generated interim shared savings and demonstrated high quality care during their first performance year in the Shared Savings Program, we know that ACOs are busy implementing a variety of strategies designed to improve care coordination for beneficiaries and lower the rate of growth in expenditures. Most of these ACOs consider themselves to be ‘‘physician-based’’ organizations, rather than ‘‘hospital-based’’, although many state that a strong collaboration between E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules inpatient and outpatient facilities is critical to better care coordination across sites of care. ACOs mentioned several strategies they believed were important such as careful preparticipation planning, transparency between the ACO leadership and its ACO participants and ACO providers/ suppliers, education of ACO providers/ suppliers regarding the ACO’s care processes, strong physician leadership, and working to streamline and transform practices for highly efficient coordinated care across sites of care. Several clinicians in ACOs have reported to us that the ACO is providing them with the support and structure needed to practice ‘‘how [they] always hoped [they] could’’. All of the ACOs recognize that they are early in the process of implementing their strategies to improve care coordination and reduce the rate of growth in expenditures and have plans to refine and improve based upon their early lessons learned. We realize that ACOs bear costs in building the organizational, financial and legal infrastructure that is necessary to participate in the Shared Savings Program and implementing the strategies previously articulated, as well as performing the tasks required of an ACO, such as: Quality reporting, conducting patient surveys, and investing in infrastructure for effective care coordination. While provider and supplier participation in the Shared Savings Program is voluntary, we have examined the potential costs of continued program participation. In this proposed rule, we are proposing to revise several program policies in order to reduce the burden associated with the infrastructure, startup and ongoing annual operating costs for participating ACOs in the Shared Savings Program. These proposals include simplifying the application process for certain ACOs with experience under either Pioneer ACO Model or the Shared Savings Program streamlining sharing of beneficiary data. These significant proposed policy modifications are discussed in detail in sections II.B., C., and D. of this proposed rule. The Shared Savings Program is still relatively new, and the initial group of organizations that applied to participate has only recently completed the first performance year. Because of this limited experience with the program and flexibility regarding the composition of providers and suppliers within an ACO and the strategies that the provider community will pursue in order to improve quality and reduce cost of care, precise estimates of VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 expected provider costs or changes to their costs due to this proposed rule are difficult to create. In our November 2011 final rule (76 FR 67968), we discussed a Government Accountability Office analysis of the PGP demonstration. The GAO study showed that both start-up and annual operating costs varied greatly across the participating practices. Thus, as we indicated in the November 2011 final rule (76 FR 67968), we use GAO’s analysis not to predict cost investment and operating expenditures, but to demonstrate that we expect the range of investment to vary greatly across ACOs and to provide the potential scope for aspiring participants. For purposes of our current impact analysis, we are retaining the assumption included in our November 2011 final rule (76 FR 67969) of $0.58 million in average start-up investment cost but are revising our assumption for average ongoing annual operating costs for an ACO from $1.27 million to $0.86 million to reflect the lower average number of beneficiaries assigned to existing Shared Savings Program ACOs (approximately 14,700 beneficiaries) compared to the ten PGP sites examined by GAO (average size approximately 22,400 beneficiaries). Therefore, our cost estimates for purposes of this proposed rule reflect an average estimate of $0.58 million for the start-up investment costs and $0.86 million in ongoing annual operating costs for an ACO participating in the Shared Savings Program. Assuming an expected range of ACOs participating in the Shared Savings Program of 50 to 210 ACOs (baseline scenario and all changes scenario, respectively) yields an estimated aggregate start-up investment cost ranging from $7 million to $30 million (assuming 1 in 4 ACOs will incur start-up costs), with aggregate ongoing operating costs ranging from $43 million to $181 million for the agreement period coinciding with CYs 2016 through 2018. We are also assuming that ACOs participating in a track that includes two-sided performance-based risk will in certain cases drop out of the program after receiving poor results for the first performance period beginning in 2016. Such drop out activity is assumed to affect a greater proportion of ACOs at baseline than under the all changes scenario because of the requirement that all renewing ACOs participate in Track 2 under the baseline scenario. When utilizing the anticipated mean participation rate of ACOs in the Shared Savings Program for such agreement period coupled with the average start-up investment and ongoing annual PO 00000 Frm 00099 Fmt 4701 Sfmt 4702 72857 operating costs for the up to 3 years that ACOs may participate for such agreement period, this yields estimated aggregate average start-up investment and ongoing operating costs of $121 million for 50 ACOs (assuming no regulatory changes) to $562 million for 210 ACOs (assuming the proposed regulatory changes) for the agreement period covering CYs 2016 through 2018. While there will be a financial cost placed on ACOs that participate, there will be benefits to the respective organizations in the form of increased operational and healthcare delivery efficiency. Furthermore, as discussed previously, and explained in more detail in the preamble of this proposed rule, there will be an opportunity for financial reward for success in the program in the form of shared savings. As shown in Table 12, the estimate of the shared savings that will be paid to participating ACOs is a median of $630 million during CYs 2016 through 2018, with $470 million and $820 million reflecting the 10th and 90th percentiles, respectively. (Similar to the previously presented stochastic distributions, the distribution represents uncertainty given the range of expert opinion, rather than a true statistical probability distribution.) Compared to shared savings payments, under our proposed changes to the program, we anticipate collection from participating ACOs of a relatively moderate $30 million in shared losses during the same period, with our 10th and 90th percentiles projecting $10 million and $70 million in shared losses collected, respectively. Shared losses decrease relative to the baseline (median of $170 million over the same 3 years) because, in contrast to the baseline requirement, not all renewing ACOs would be required to enter Track 2 and take on downside risk. Modeling indicates that not all ACOs choosing downside risk in a second agreement period, whether required, as under the current regulation or as an alternative option under the proposed changes, will achieve shared savings and some may incur a financial loss, due to the requirement to repay a share of actual expenditures in excess of their benchmark as shared losses. The significantly reduced level of shared losses anticipated under the all proposed changes scenario is largely attributable to the proposed option for eligible ACOs to be able to renew under a modified Track 1, and illustrates a key reason why the program would be anticipated to see significantly stronger continued participation under the proposed changes than at baseline. E:\FR\FM\08DEP2.SGM 08DEP2 72858 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Assuming the proposed changes in this proposed rule, total median ACO shared savings payments ($630 million) net of median shared losses ($30 million) to ACOs with agreement periods covering CYs 2016 through 2018 are $600 million in net payments. Such median total net payment amount, coupled with the aggregate average startup investment and ongoing operating cost of $562 million, incurred by the mean participation rate of ACOs in the Shared Savings Program during the same time period, yields a net private benefit of $38 million. At baseline, absent the proposed changes, the median net payments to ACOs over the same time period would be only $140 million ($310 million in shared savings payments less $170 million in shared losses). Such lower net sharing at baseline, combined with baseline average start-up investment and ongoing operating costs of $121 million, yields a net private benefit of $19 million. We expect that a significant portion of Track 1 ACOs that are assumed to be unwilling to renew under the program without the protection from downside risk will welcome the opportunity to continue under Track 1 for a second agreement period, albeit with a lower maximum sharing rate of 40 percent. VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 Moreover, the proposed changes reduce the estimated per-ACO average shared loss liability by over 95 percent compared to the baseline, and increase the chance an ACO renewing in 2016 will continue to participate for all 3 years of the new agreement period. We would note that our estimates of net private benefits under the baseline and all proposed changes scenarios are influenced by assumptions that could vary in practice and thus result in a very different actual result than what was estimated. First, we assume that savings realized by existing ACOs during their first agreement period are built into their benchmarks and our baseline for their successive agreement period. This means that these ACOs may have to achieve greater efficiencies and quality improvements during their successive agreement period compared to their prior one in order to share in savings. Moreover, the extent to which these ACOs actually exceed or fall short of our assumed baseline savings will result in higher or lower actual net private benefits relative to our estimate. Second, our estimates assume a large proportion of existing Track 1 ACOs will continue participating under Track 1 for 2016 to 2018, albeit at the lower 40 percent sharing rate. This assumption has the PO 00000 Frm 00100 Fmt 4701 Sfmt 4702 effect of diminishing estimated benefits under our model. Thus, all else being equal, the extent to which a smaller or larger percentage of these ACOs remain under Track 1 for their second agreement period will also respectively increase or decrease the actual net private benefits relative to what we estimated. Finally, to the extent that actual ACO quality performance exceeds or falls short of our estimates, the net private benefits could be respectively higher or lower than what we estimated. We also note that the net private benefits actually experienced by a given ACO may increase as a result of other benefits associated with participation in the Shared Savings Program. For example, an ACO that is participating in the Shared Savings Program and simultaneously receives value-based contracts from other payers may receive additional benefits. Such potential benefits are not considered in our analysis because they are not readily quantifiable. Therefore, we limit our benefit-cost estimate to shared savings and shared loss dollars received under the Shared Savings Program relative to estimated operational costs associated with participating in the program as previously described. E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 4. Effect on Small Entities The RFA requires agencies to analyze options for regulatory relief of small entities, if a rule has a significant impact on a substantial number of small entities. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small governmental jurisdictions. Most physician practices, hospitals and other providers are small entities, either by virtue of their nonprofit status or by qualifying as small businesses under the Small Business Administration’s size standards (revenues of less than $7.5 to $38.5 million in any 1 year; NAIC Sector-62 series). States and individuals are not included in the definition of a small entity. For details, see the Small Business Administration’s Web site at https://www.sba.gov/content/small- VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 business-size-standards. For purposes of the RFA, approximately 95 percent of physicians are considered to be small entities. There are over 1 million physicians, other practitioners, and medical suppliers that receive Medicare payment under the Physician Fee Schedule (PFS). Although the Shared Savings Program is a voluntary program and payments for individual items and services will continue to be made on a FFS basis, we acknowledge that the program can affect many small entities and have drafted the proposed changes to our rules and regulations accordingly in order to minimize costs and administrative burden on such entities as well as to maximize their opportunity to participate. Small entities are both allowed and encouraged to participate in the Shared Savings Program, PO 00000 Frm 00101 Fmt 4701 Sfmt 4702 72859 provided they have a minimum of 5,000 assigned beneficiaries, thereby potentially realizing the economic benefits of receiving shared savings resulting from the utilization of enhanced and efficient systems of care and care coordination. Therefore, a solo, small physician practice or other small entity may realize economic benefits as a function of participating in this program and the utilization of enhanced clinical systems integration, which otherwise may not have been possible. We have determined that this proposed rule will have a significant impact on a substantial number of small entities and we present more detailed analysis of these impacts, including costs and benefits to small entities and alternative policy considerations throughout this RIA. However, as detailed in this RIA, total median shared E:\FR\FM\08DEP2.SGM 08DEP2 EP08DE14.002</GPH> Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules 72860 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules savings payments net of shared losses will offset about 107 percent of the average costs borne by entities participating in the Shared Savings Program, with an offset significantly greater than the cost of participation for the subset of ACOs that achieve shared savings in a given year, and no downside risk of significant shared losses for ACOs choosing to remain under Track 1 for a second agreement period. As a result, this regulatory impact section, together with the remainder of the preamble, constitutes our preliminary Regulatory Flexibility Analysis. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 5. Effect on Small Rural Hospitals Section 1102(b) of the Act requires us to prepare a regulatory impact analysis if a rule may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 603 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of a metropolitan statistical area and has fewer than 100 beds. Although the Shared Savings Program is a voluntary program, this proposed rule will have a significant impact on the operations of a substantial number of small rural hospitals. We have proposed changes to our regulations such that rural hospitals will have stronger incentives to participate in the program through offering a smoother transition to risk-based models, additional opportunities to potentially share in savings under proposed new Track 3, and streamlined administrative requirements. As detailed in this RIA, the estimated aggregate median impact of shared savings payments to participating ACOs is approximately 107 percent of the average costs borne by entities that voluntarily participate in the Shared Savings Program, with an offset significantly greater than the cost of participation for the subset of ACOs that achieve shared savings in a given year, and no downside risk of significant shared loss penalties for ACOs choosing to remain under Track 1 for a second agreement period. 6. Unfunded Mandates Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2014, that is approximately $141 million. This proposed rule does not include any VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 mandate that would result in spending by state, local or tribal governments, in the aggregate, or by the private sector in the amount of $141 million in any 1 year. Further, participation in this program is voluntary and is not mandated. D. Alternatives Considered In the November 2011 final rule (76 FR 67971), we noted in the regulatory impact analysis that many tenets of the program are statutorily mandated and thus allow for little, if any, flexibility in the rulemaking process. Where there was flexibility, we made our policy decisions regarding alternatives based on a balance between creating the least possible negative impact on the stakeholders affected by the program and satisfactorily fitting the vision of the program within given operational constraints. This proposed rule contains a range of modifications to program policies that take this balance into consideration. The preceding preamble provides descriptions of the various statutory provisions that are addressed in this proposed rule, identifies those policies where discretion has been allowed and exercised, presents the rationales for our proposals and, where relevant, alternatives that were considered. In addition to estimating the difference between impacts at baseline and assuming all proposed changes are adopted, the stochastic model was also adapted to isolate marginal impacts for several alternative scenarios related to individual proposals within the overall set of proposed changes to the program. In one scenario, all proposed changes were assumed except the addition of Track 3. Relative to the all-changes scenario, this modification was not anticipated to materially reduce overall participation. However, we estimated that excluding Track 3 as a proposal would reduce median gross savings by $70 million over 3 years as fewer ACOs would be willing to accept the stronger incentive of downside risk without the opportunity to earn enhanced shared savings up to the 75 percent maximum sharing percentage under Track 3. Lastly, median shared losses under this scenario would decline by $10 million. Thus, the overall impact on net federal savings of offering Track 3 in the context of all other proposed changes to the program is minimal. However for individual ACOs, the higher sharing rate available under Track 3 may boost efforts to build capacity for accepting downside risk while potentially accelerating activities related to improving the efficiency of care. Also, the opportunity under Track 3 to share PO 00000 Frm 00102 Fmt 4701 Sfmt 4702 in a greater percentage of the savings that are achieved could assist in addressing the concerns of ACOs that were successful in achieving savings in their first agreement period but are concerned that their new expenditure baseline for the agreement period starting in 2016 will be lower as a result of their prior success in reducing the cost of care for their assigned beneficiaries, thus making it more difficult to achieve savings. Another alternative scenario we considered included all proposed changes except for lowering the Track 1 sharing rate from 50 percent to 40 percent for Track 1 ACOs that elect to renew for a second agreement period under this model starting in 2016. Similar to the previous scenario, this change would not be expected to materially change overall assumed participation. However, relative to the all changes model, the net effect of this alternative would be to increase median shared savings payments by $110 million over 3 years. Furthermore, because a portion of ACOs that would have otherwise chosen Track 3 under the all changes scenario would now be expected to choose Track 1 given the higher sharing rate, overall median gross savings would decline by $30 million under this alternative, resulting in an overall reduction of $140 million in median net federal savings compared to the all changes scenario. Lastly, an alternative scenario was considered where no changes were proposed other than to allow current Track 1 ACOs a 2-year extension to their current agreement period, after which they would then be limited to participating under Track 2 as required under the current regulations. This alternative was assumed to boost ACO participation in 2016 and 2017 comparable to the participation level expected for such years in the allchanges scenario. However, we would anticipate a significant contraction in participation in 2018 similar to the rate of participation assumed at baseline for that year. The net impact of this alternative would be $220 million in reduced net federal savings compared to all changes as proposed in this rule, driven mainly by reduced program participation in the third year and by increased shared savings payments in 2016 and 2017 because ACO benchmarks would not be rebased until 2018. E. Accounting Statement and Table As required by OMB Circular A–4 under Executive Order 12866, in Table 13, we have prepared an accounting statement showing the change in (A) net E:\FR\FM\08DEP2.SGM 08DEP2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules federal monetary transfers, (B) shared savings payments to ACOs net of shared loss payments from ACOs and (C) the aggregate cost of ACO operations for ACO participants and ACO providers/ suppliers from 2016 to 2018 that are 72861 associated with the provisions of this proposed rule as compared to baseline. TABLE 13—ACCOUNTING STATEMENT ESTIMATED IMPACTS [CYs 2016–2018] Primary estimate (in millions) Category BENEFITS: Annualized monetized transfers ......................... Discount rate: 7% Maximum estimate (in millions) Source citation (RIA, preamble, etc.) Change from baseline (Table 8) to proposed changes (Table 9) ¥$76.3 ¥$12.0 ¥$129.7 ¥$83.8 Annualized monetized transfers ......................... Discount rate: 3% From whom to whom? ........................................ Minimum estimate (in millions) ¥$13.7 ¥$142.0 Negative values reflect reduction in federal net cost resulting from care management by ACOs BENEFITS: Annualized monetized transfers ......................... Discount rate: 7% $124.1 $96.5 $152.0 Annualized monetized transfers ......................... Discount rate: 3% $134.8 $105.1 $164.7 From whom to whom? ........................................ Positive values reflect increase in aggregate shared savings net of shared losses OPERATIONAL COST: Annualized monetized transfers ......................... Discount rate: 7% $121.3 Annualized monetized transfers ......................... Discount rate: 3% $130.7 From whom to whom? ........................................ F. Conclusion mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Change from baseline (Table 8) to proposed changes (Table 9) The analysis in this section, together with the remainder of this preamble, provides a Regulatory Impact Analysis. As a result of this proposed rule, the median estimate of the financial impact of the Shared Savings Program for CYs 2016 through 2018 would be net federal savings (after shared savings payments) of $1,010 million. Under this proposed rule, median savings would be about $280 million higher than we estimate assuming none of the proposed changes for this period. Although this is the ‘‘best estimate’’ of the financial impact of the Shared Savings Program during CYs 2016 through 2018, a relatively wide range of possible outcomes exists. While over 99 percent of the stochastic trials resulted in net program savings, the 10th and 90th percentiles of the estimated distribution show net savings of $430 million to net savings of $1,650 million, respectively. In the extreme scenarios, the results were as large as VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 Change from baseline (Table 8) to proposed changes (Table 9) Positive values reflect increase in aggregate ACO operating costs largely attributable to assumed increased participation as a result of the proposals included in this proposed rule compared to baseline $2.9 billion in savings or $200 million in costs. In addition, at the anticipated mean participation rate of ACOs in the Shared Savings Program, participating ACOs may experience an estimated aggregate average start-up investment and ongoing operating cost of $815 million for CYs 2016 through 2018. Lastly, we estimate an aggregate median impact of $630 million in shared savings payments to participating ACOs in the Shared Savings Program for CYs 2016 through 2018. The 10th and 90th percentiles of the estimate distribution, for the same time period, yield shared savings payments to ACOs of $470 million and $820 million, respectively. Therefore, the total median ACO shared savings payments of $630 million during CYs 2016 through 2018, net of a median $30 million shared losses, coupled with the aggregate average start-up investment and ongoing operating cost of $562 PO 00000 Frm 00103 Fmt 4701 Sfmt 4702 million yields a net private benefit of $38 million. Overall, we assumed greater participation by ACOs under the policies contained in this proposed rule due to our proposals to ease the transition from Track 1 to Track 2, reduce risk under Track 2, and adopt an alternative risk-based model—Track 3. This resulted in total shared savings increasing significantly, while shared losses decreased due to these changes. Moreover, as participation in the Shared Savings Program continues to expand, we anticipate there will be a broader focus on care coordination and quality improvement among providers and suppliers within the Medicare program that will lead to both increased efficiency in the provision of care and improved quality of the care that is provided to beneficiaries. In accordance with the provisions of Executive Order 12866, this rule was E:\FR\FM\08DEP2.SGM 08DEP2 72862 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules reviewed by the Office of Management and Budget. List of Subjects in 42 CFR Part 425 Administrative practice and procedure, Health facilities, Health professions, Medicare, Reporting and recordkeeping requirements. For the reasons set forth in the preamble, the Centers for Medicare & Medicaid Services proposes to amend 42 CFR part 425 as follows: PART 425—MEDICARE SHARED SAVINGS PROGRAM 1. The authority citation for part 425 continues to read as follows: ■ Authority: Secs. 1102, 1106, 1871, and 1899 of the Social Security Act (42 U.S.C. 1302 and 1395hh). § 425.10 [Amended] 2. Amend § 425.10 (b)(6) by removing the phrase ‘‘two-sided model’’ and adding in its place the phrase ‘‘twosided models’’. ■ 3. Amend § 425.20 as follows: ■ A. By revising the definition of ‘‘ACO participant’’. ■ B. By adding the definition of ‘‘ACO participant agreement’’ in alphabetical order. ■ C. By revising the definitions of ‘‘ACO professional’’, ‘‘ACO provider/ supplier’’, ‘‘Agreement period’’, and ‘‘Assignment’’. ■ D. By adding the definition of ‘‘Assignment window’’ in alphabetical order. ■ E. By revising the definitions of ‘‘Continuously assigned beneficiary’’, ‘‘Hospital’’, and ‘‘Newly assigned beneficiary’’. ■ F. By adding the definition of ‘‘Participation agreement’’ in alphabetical order. ■ G. In the definition of ‘‘Performance year’’ by removing the phrase ‘‘in the ACO’s agreement’’ and adding in its place the phrase ‘‘in the participation agreement’’. ■ H. In paragraph (2) of the definition of ‘‘Primary care services’’, by removing the ‘‘;’’ and adding in its place ‘‘.’’. ■ I. By adding paragraphs (4) and (5) to the definition of ‘‘Primary care services’’. The revisions and additions read as follows: mstockstill on DSK4VPTVN1PROD with PROPOSALS2 ■ § 425.20 Definitions. * * * * * ACO participant means an entity identified by a Medicare-enrolled billing TIN through which one or more ACO providers/suppliers bill Medicare, that alone or together with one or more other ACO participants compose an ACO, and VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 that is included on the list of ACO participants that is required under § 425.118. ACO participant agreement means the written agreement (as required at § 425.116) between the ACO and ACO participant in which the ACO participant agrees to participate in, and comply with, the requirements of the Shared Savings Program. ACO professional means an individual who is Medicare-enrolled and bills for items and services furnished to Medicare fee-for-service beneficiaries under a Medicare billing number assigned to the TIN of an ACO participant in accordance with applicable Medicare regulations and who is either of the following: (1) A physician legally authorized to practice medicine and surgery by the State in which he or she performs such function or action. (2) A practitioner who is one of the following: (i) A physician assistant (as defined at § 410.74(a)(2) of this chapter). (ii) A nurse practitioner (as defined at § 410.75(b) of this chapter). (iii) A clinical nurse specialist (as defined at § 410.76(b) of this chapter) ACO provider/supplier means an individual or entity that meets all of the following: (1) Is a— (i) Provider (as defined at § 400.202 of this chapter); or (ii) Supplier (as defined at § 400.202 of this chapter). (2) Is enrolled in Medicare. (3) Bills for items and services furnished to Medicare fee-for-service beneficiaries during the agreement period under a Medicare billing number assigned to the TIN of an ACO participant in accordance with applicable Medicare regulations. (4) Is included on the list of ACO providers/suppliers that is required under § 425.118. Agreement period means the term of the participation agreement, which is 3 performance years unless otherwise specified in the participation agreement. * * * * * Assignment means the operational process by which CMS determines whether a beneficiary has chosen to receive a sufficient level of the requisite primary care services from ACO professionals so that the ACO may be appropriately designated as exercising basic responsibility for that beneficiary’s care during a given benchmark or performance year. Assignment window means the 12month period used to assign beneficiaries to an ACO. * * * * * PO 00000 Frm 00104 Fmt 4701 Sfmt 4702 Continuously assigned beneficiary means a beneficiary assigned to the ACO in the current performance year who was either assigned to or received a primary care service from any of the ACO participants during the assignment window for the most recent prior benchmark or performance year. * * * * * Hospital means a hospital as defined in section 1886(d)(1)(B) of the Act. * * * * * Newly assigned beneficiary means a beneficiary that is assigned to the ACO in the current performance year who was neither assigned to nor received a primary care service from any of the ACO participants during the assignment window for the most recent prior benchmark or performance year. * * * * * Participation agreement means the written agreement required under § 425.208(a) between the ACO and CMS that, along with the regulations in this part, govern the ACO’s participation in the Shared Savings Program. * * * * * Primary care services * * * (4) CPT codes 99495 and 99496 and HCPCS code GXXX1. (5) Additional codes designated by CMS as primary care services for purposes of the Shared Savings Program, including new HCPCS/CPT and revenue center codes and any subsequently modified or replacement codes for the HCPCS/CPT and revenue center codes identified in paragraphs (1) through (4) of this definition. * * * * * § 425.100 [Amended] 4. Amend § 425.100 as follows: A. In paragraph (b) by removing the reference ‘‘under § 425.604 or § 425.606’’ and adding in its place the reference ‘‘under § 425.604, § 425.606 or § 425.610’’. ■ B. In paragraph (c) by removing the phrase ‘‘under the two-sided model’’ and adding in its place the phrase ‘‘under a two-sided model’’. ■ C. In paragraph (c) by removing the reference ‘‘under § 425.606’’ and adding in its place the reference ‘‘under § 425.604, § 425.606 or § 425.610’’. ■ 5. Amend § 425.102 as follows: ■ A. By adding paragraph (a)(8). ■ B. In paragraph (b) by removing the phrase ‘‘eligible participate’’ and adding in its place the phrase ‘‘eligible to participate’’. The addition reads as follows: ■ ■ § 425.102 Eligible providers and suppliers. (a) * * * (8) Teaching hospitals that have elected under § 415.160 of this chapter E:\FR\FM\08DEP2.SGM 08DEP2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules to receive payment on a reasonable cost basis for the direct medical and surgical services of their physicians. * * * * * § 425.104 [Amended] 6. Amend § 425.104(b), by removing the phrase ‘‘otherwise independent ACO participants must’’ and adding in its place the phrase ‘‘ACO participants, each of which is identified by a unique TIN, must’’. ■ 7. Amend § 425.106 by revising paragraphs (a), (b)(3), (c)(1), (c)(2), and (c)(5) to read as follows: ■ mstockstill on DSK4VPTVN1PROD with PROPOSALS2 § 425.106 Shared governance. (a) General rule. (1) An ACO must maintain of an identifiable governing body with ultimate authority to execute the functions of an ACO as defined under this part, including but not limited to the processes defined under § 425.112 to promote evidence-based medicine and patient engagement, to report on quality and cost measures, and to coordinate care. (2) The governing body of the ACO must satisfy all of the following criteria: (i) Be the same as the governing body of the legal entity that is the ACO. (ii) Be separate and unique to the ACO and must not be the same as the governing body of any ACO participant, in the case of an ACO that comprises two or more ACO participants. (iii) Satisfy all other requirements of this section. (b) * * * (3) The governing body members must have a fiduciary duty to the ACO, including the duty of loyalty, and must act consistent with that fiduciary duty. * * * * * (c) * * * (1) The ACO must—(i) Establish a mechanism for shared governance among the ACO participants or combinations of ACO participants (as identified in § 425.102(a)) that formed the ACO; and (ii) Provide for meaningful participation in the composition and control of the ACO’s governing body for ACO participants or their designated representatives. (2) The ACO governing body must include a Medicare beneficiary who— (i) Is served by the ACO; (ii) Is not an ACO provider/supplier; (iii) Does not have a conflict of interest with the ACO; and (iv) Does not have an immediate family member who has a conflict of interest with the ACO. * * * * * (5) In cases in which the composition of the ACO’s governing body does not VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 meet the requirements of paragraphs (c)(2) of this section, the ACO must describe— (i) Why it seeks to differ from this requirement; and (ii) How it will provide meaningful representation of Medicare beneficiaries in ACO governance. * * * * * ■ 8. Amend § 425.108 by removing paragraph (e) and revising paragraph (c) to read as follows: § 425.108 Leadership and management. * * * * * (c) Clinical management and oversight must be managed by a senior-level medical director. The medical director must be— (1) A board-certified physician; (2) Licensed in a State in which the ACO operates; and (3) Physically present on a regular basis at any clinic, office or other location of the ACO, ACO participant or ACO provider/supplier. * * * * * ■ 9. Amend § 425.110 by revising paragraphs (a)(2) and (b) to read as follows: § 425.110 Number of ACO professionals and beneficiaries. (a) * * * (2) CMS deems an ACO to have initially satisfied the requirement to have at least 5,000 assigned beneficiaries as specified in paragraph (a)(1) of this section if 5,000 or more beneficiaries are historically assigned to the ACO participants in each of the 3 benchmark years, as calculated using the assignment methodology set forth in subpart E of this part. In the case of the third benchmark year, CMS uses the most recent data available to estimate the number of assigned beneficiaries. (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 actions described in §§ 425.216 and 425.218. (1) While under a CAP, the ACO remains eligible for shared savings and losses and the MSR is set at a level consistent with the number of assigned beneficiaries. (2) 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 participation agreement and the ACO is not eligible to share in savings for that performance year. ■ 10. Amend § 425.112 by adding paragraphs (b)(4)(ii)(C), (D), and (E) to read as follows: PO 00000 Frm 00105 Fmt 4701 Sfmt 4702 72863 § 425.112 Required processes and patientcenteredness criteria. * * * * * (b) * * * (4) * * * (ii) * * * (C) Describe how the ACO will encourage and promote use of enabling technologies for improving care coordination for beneficiaries. Enabling technologies may include one or more of the following: (1) Electronic health records and other health IT tools. (2) Telehealth services, including remote patient monitoring. (3) Electronic exchange of health information. (4) Other electronic tools to engage beneficiaries in their care. (D) Describe how the ACO intends to partner with long-term and post-acute care providers, both inside and outside the ACO, to improve care coordination for their assigned beneficiaries. (E) Define and submit a set of major milestones or performance metrics the ACO will use in each performance year to assess the progress of its ACO participants in implementing the processes described in paragraph (b)(4) of this section. ■ 11. Add § 425.116 to subpart B to read as follows: § 425.116 Agreements with ACO participants and ACO providers/suppliers. (a) ACO participant agreements. The ACO must have an ACO participant agreement with each ACO participant that complies with the following criteria: (1) The only parties to the agreement are the ACO and the ACO participant. (2) The agreement must be signed on behalf of the ACO and the ACO participant by individuals who are authorized to bind the ACO and the ACO participant, respectively. (3) The agreement must expressly require the ACO participant to agree, and to ensure that each ACO provider/ supplier billing through the TIN of the ACO participant agrees, to participate in the Shared Savings Program and to comply with the requirements of the Shared Savings Program and all other applicable laws and regulations (including, but not limited to, those specified at § 425.208(b)). (4) The agreement must set forth the ACO participant’s rights and obligations in, and representation by, the ACO, including without limitation, the quality reporting requirements set forth in subpart F of this part, the beneficiary notification requirements set forth at § 425.312, and how participation in the Shared Savings Program affects the E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 72864 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules ability of the ACO participant and its ACO providers/suppliers to participate in other Medicare demonstration projects or programs that involve shared savings. (5) The agreement must describe how the opportunity to receive shared savings or other financial arrangements will encourage the ACO participant to adhere to the quality assurance and improvement program and evidencebased medicine guidelines established by the ACO. (6) The agreement must require the ACO participant to update its enrollment information, including the addition and deletion of ACO professionals and ACO providers/ suppliers billing through the TIN of the ACO participant, on a timely basis in accordance with Medicare program requirements and to notify the ACO of any such changes within 30 days after the change. (7) The agreement must permit the ACO to take remedial action against the ACO participant, and must require the ACO participant to take remedial action against its ACO providers/suppliers, including imposition of a corrective action plan, denial of incentive payments, and termination of the ACO participant agreement, to address noncompliance with the requirements of the Shared Savings Program and other program integrity issues, including those identified by CMS. (8) The agreement must be for a term of at least one performance year and must articulate potential consequences for early termination from the ACO. (9) The agreement must require completion of a close-out process upon termination or expiration of the agreement that requires the ACO participant to furnish all data necessary to complete the annual assessment of the ACO’s quality of care and addresses other relevant matters. (b) Agreements with ACO providers/ suppliers. ACOs have the option of contracting directly with its ACO providers/suppliers regarding items and services furnished to beneficiaries aligned to the ACO. An ACO’s agreement with an ACO provider/ supplier regarding such items and services must satisfy the following criteria: (1) The only parties to the agreement are the ACO and the ACO provider/ supplier. (2) The agreement must be signed by the ACO provider/supplier and by an individual who is authorized to bind the ACO. (3) The agreement must expressly require the ACO provider/supplier to agree to participate in the Shared VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 Savings Program and to comply with the requirements of the Shared Savings Program and all other applicable laws and regulations (including, but not limited to, those specified at § 425.208(b)). (4) The agreement must set forth the ACO provider’s/supplier’s rights and obligations in, and representation by, the ACO, including without limitation, the quality reporting requirements set forth in subpart F of this part, the beneficiary notification requirements set forth at § 425.312, and how participation in the Shared Savings Program affects the ability of the ACO provider/supplier to participate in other Medicare demonstration projects or programs that involve shared savings. (5) The agreement must describe how the opportunity to receive shared savings or other financial arrangements will encourage the ACO provider/ supplier to adhere to the quality assurance and improvement program and evidence-based medicine guidelines established by the ACO. (6) The agreement must require the ACO provider/supplier to— (i) Update its enrollment information on a timely basis in accordance with Medicare program requirements; and (ii) Notify the ACO of any such changes within 30 days after the change. (7) The agreement must permit the ACO to take remedial action including the following against the ACO provider/ supplier to address noncompliance with the requirements of the Shared Savings Program and other program integrity issues, including those identified by CMS: (i) Imposition of a corrective action plan. (ii) Denial of incentive payments. (iii) Termination of the ACO participant agreement. (c) Submission of agreements. The ACO must submit an executed ACO participant agreement in accordance with CMS guidance for each ACO participant at the time of its initial application, participation agreement renewal process, and when adding to its list of ACO participants in accordance with § 425.118. The agreements may be submitted in the form and manner set forth in § 425.204(c)(6). ■ 12. Add new § 425.118 to subpart B to read as follows: § 425.118 Required reporting of ACO participants and ACO providers/suppliers. (a) List requirements. (1) The ACO must maintain, update, and submit to CMS an accurate and complete list identifying each ACO participant (including its Medicare-enrolled TIN) and each ACO provider/supplier PO 00000 Frm 00106 Fmt 4701 Sfmt 4702 (including its NPI or other identifier) in accordance with this section. (2) Before the start of an agreement period, before each performance year thereafter, and at such other times as specified by CMS, the ACO must submit to CMS an ACO participant list and an ACO provider/supplier list. (3) The ACO must certify the submitted lists in accordance with § 425.302(a)(2). (4) All Medicare enrolled individuals and entities that have reassigned their right to receive Medicare payment to the TIN of the ACO participant must be included on the ACO provider/supplier list and must agree to participate in the ACO and comply with the requirements of the Shared Savings Program before the ACO submits the ACO participant list and the ACO provider/supplier list. (b) Changes to the ACO participant list. (1) Additions. (i) An ACO must submit to CMS a request to add an entity and its Medicare enrolled TIN to its ACO participant list. This request must be submitted at such time and in the form and manner specified by CMS. (ii) If CMS approves the request, the entity and its Medicare enrolled TIN is added to the ACO participant list effective January 1 of the following performance year. (iii) CMS may deny the request on the basis that the entity is not eligible to be an ACO participant or on the basis of the results of the screening performed under § 425.304(b). (2) Deletions. (i) An ACO must notify CMS no later than 30 days after the termination of an ACO participant agreement. Such notice must be submitted in the form and manner specified by CMS and must include the termination date of the ACO participant agreement. (ii) The entity is deleted from the ACO participant list as of the termination date of the ACO participant agreement. (3) Adjustments. (i) CMS annually adjusts an ACO’s assignment, historical benchmark, the quality reporting sample, and the obligation of the ACO to report on behalf of ACO providers/ suppliers for certain CMS quality initiatives to reflect the addition or deletion of entities from the list of ACO participants that is submitted to CMS before the start of a performance year in accordance with paragraph (a) of this section. (ii) Absent unusual circumstances, CMS does not make adjustments during the performance year to the ACO’s assignment, historical benchmark, performance year financial calculations, the quality reporting sample, or the obligation of the ACO to report on E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules behalf of ACO providers/suppliers for certain CMS quality initiatives to reflect the addition or deletion of entities from the ACO participant list that become effective during the performance year. CMS has sole discretion to determine whether unusual circumstances exist that would warrant such adjustments. (c) Changes to the ACO provider/ supplier list. (1) Additions. (i) An ACO must notify CMS within 30 days after an individual or entity becomes a Medicare-enrolled provider or supplier that bills for items and services it furnishes to Medicare fee-for-service beneficiaries under a billing number assigned to the TIN of an ACO participant. The notice must be submitted in the form and manner specified by CMS. (ii) If the ACO timely submits notice to CMS, the addition of an individual or entity to the ACO provider/supplier list is effective on the date specified in the notice furnished to CMS, but no earlier than 30 days before the date of the notice. If the ACO fails to submit timely notice to CMS, the addition of an individual or entity to the ACO provider/supplier list is effective on the date of the notice. (2) Deletions. (i) An ACO must notify CMS no later than 30 days after an individual or entity ceases to be a Medicare-enrolled provider or supplier that bills for items and services it furnishes to Medicare fee-for-service beneficiaries under a billing number assigned to the TIN of an ACO participant. The notice must be submitted in the form and manner specified by CMS. (ii) The deletion of an ACO provider/ supplier from the ACO provider/ supplier list is effective on the date the individual or entity ceased to be a Medicare-enrolled provider or supplier that bills for items and services it furnishes to Medicare fee-for-service beneficiaries under a billing number assigned to the TIN of an ACO participant. (d) Update of Medicare enrollment information. The ACO must ensure that all changes to enrollment information for ACO participants and ACO providers/suppliers, including changes to reassignment of the right to receive Medicare payment, are reported to CMS consistent with § 424.516. ■ 13. Amend § 425.200 as follows: ■ A. By revising the section heading. ■ B. In paragraph (a), by removing the term ‘‘three’’ and adding in its place the figure ‘‘3’’. ■ C. In the heading of paragraph (b), and paragraphs (b)(1) introductory text, (b)(1)(i), (b)(1)(ii), (b)(2)(ii), and (c)(1) by removing the term ‘‘agreement’’ each VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 72865 time it appears and adding in its place the terms ‘‘participation agreement’’. The revision reads as follows: The revisions and additions read as follows: § 425.200 CMS. * Participation agreement with * * * * * 14. Amend § 425.202 by revising paragraphs (b) and (c) to read as follows: ■ § 425.202 Application procedures. * * * * * (b) Condensed application form. (1) PGP demonstration sites applying to participate in the Shared Savings Program will have an opportunity to complete a condensed application form. (2) A Pioneer ACO may use a condensed application form to apply for participation in the Shared Savings Program if it satisfies all of the following criteria: (i) The applicant is the same legal entity as the Pioneer ACO. (ii) ACO participant list does not contain any ACO participant TINs that did not appear on the ‘‘Confirmed Annual TIN/NPI List’’ (as defined in the Pioneer ACO Model Innovation Agreement with CMS) for the applicant ACO’s last full performance year in the Pioneer ACO Model. (iii) The applicant is not applying to participate in the one-sided model. (c) Application review. CMS reviews applications in accordance with § 425.206. ■ 15. Amend § 425.204 as follows: ■ A. In paragraph (b)(2) by removing the terms ‘‘ACO agreement’’ and adding in its place the terms ‘‘participation agreement’’. ■ B. In paragraph (b)(3) by removing the term ‘‘agreement’’ and adding in its place the terms ‘‘participation agreement’’. ■ C. By revising paragraphs (c)(1) introductory text and (c)(1)(i), (iii), and (iv). ■ D. In paragraph (c)(1)(vi) by removing the terms ‘‘ACO’s agreement’’ and adding in its place the terms ‘‘participation agreement’’. ■ E. By revising paragraph (c)(3). ■ F. In paragraph (c)(4)(ii), by removing the phrase ’’ among multiple, independent ACO participants’’ and adding in its place the phrase ‘‘among two or more ACO participants’’. ■ G. By revising paragraph (c)(5)(i). ■ H. By adding paragraph (c)(6). ■ I. In paragraph (e)(1), removing the phrase ‘‘an ACO must specify whether it is applying to participate in Track 1 or Track 2’’ and adding in its place the phrase ‘‘an ACO must specify the Track for which it is applying’’ ■ J. By revising paragraph (f). ■ K. By adding paragraph (g). PO 00000 Frm 00107 Fmt 4701 Sfmt 4702 § 425.204 Content of the application. * * * * (c) * * * (1) As part of its application, and upon request thereafter, an ACO must submit to CMS the following supporting materials to demonstrate that the ACO satisfies the requirements set forth in this part: (i) Documents (for example, ACO participant agreements, agreements with ACO providers/suppliers, employment contracts, and operating policies) sufficient to describe the ACO participants’ and ACO providers’/ suppliers’ rights and obligations in and representation by the ACO, and how the opportunity to receive shared savings or other financial arrangements will encourage ACO participants and ACO providers/suppliers to adhere to the quality assurance and improvement program and evidence-based clinical guidelines. * * * * * (iii) Materials documenting the ACO’s organization and management structure, including an organizational chart, a list of committees (including names of committee members) and their structures, and job descriptions for senior administrative and clinical leaders specifically noted in § 425.108 and § 425.112(a)(2). (iv) Evidence that the governing body— (A) Is an identifiable body; (B) Represents a mechanism for shared governance for ACO participants; (C) Is composed of representatives of its ACO participants; and (D) Is at least 75 percent controlled by its ACO participants. * * * * * (3) If an ACO requests an exception to the governing body requirement in § 425.106(c)(2), the ACO must describe— (i) Why it seeks to differ from this requirement; and (ii) How the ACO will provide meaningful representation in ACO governance by Medicare beneficiaries. * * * * * (5) * * * (i) The ACO must submit a list of all ACO participants and ACO providers/ suppliers in accordance with § 425.118. * * * * * (6) As part of the application process and upon request by CMS, the ACO must submit documents demonstrating that its ACO participants, ACO providers/suppliers, and other individuals or entities performing E:\FR\FM\08DEP2.SGM 08DEP2 mstockstill on DSK4VPTVN1PROD with PROPOSALS2 72866 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules functions or services related to ACO activities are required to comply with the requirements of the Shared Savings Program. The evidence to be submitted must include, without limitation, sample or form agreements and, in the case of ACO participant agreements, the first and signature page(s) of each executed ACO participant agreement. CMS may request all pages of an executed ACO participant agreement to confirm that it conforms to the sample form agreement submitted by the ACO. The ACO must certify that all of its ACO participant agreements comply with the requirements of this part. * * * * * (f) Assurance of ability to repay. (1) An ACO must have the ability to repay all shared losses for which it may be liable under a two-sided model. (i) As part of the application or participation agreement renewal process, an ACO that is seeking to participate under a two-sided model of the Shared Savings Program must submit for CMS approval documentation that it is capable of repaying shared losses that it may incur during the agreement period. (ii) The documentation specified in paragraph (f)(1)(i) of this section must include details supporting the adequacy of the mechanism for repaying shared losses equal to at least 1 percent of the ACO’s total per capita Medicare parts A and B fee-for-service expenditures for its assigned beneficiaries based on expenditures used to calculate the benchmark for the applicable agreement period, as estimated by CMS at the time of application or participation agreement renewal. (2) An ACO may demonstrate its ability to repay shared losses by placing funds in escrow, obtaining a surety bond, establishing a line of credit (as evidenced by a letter of credit that the Medicare program can draw upon), or establishing a combination of such repayment mechanisms, that will ensure its ability to repay the Medicare program. (3) An ACO participating under a twosided model must demonstrate the adequacy of this repayment mechanism prior to the start of each agreement period in which it takes risk, and upon request thereafter. After the repayment mechanism has been used to repay any portion of shared losses owed to CMS, the ACO must replenish the amount of funds available through the repayment mechanism within 60 days. (4) The repayment mechanism must be in effect for a sufficient period of time after the conclusion of the agreement period to permit CMS to VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 calculate the amount of shared losses owed and to collect this amount from the ACO. (g) Consideration of claims billed under merged and acquired Medicareenrolled TINs. An ACO may request that CMS consider, for purposes of beneficiary assignment and establishing the ACO’s benchmark under § 425.602, claims billed by Medicare-enrolled entities’ TINs that have been acquired through sale or merger by an ACO participant. (1) The ACO may include an acquired Medicare-enrolled entity’s TIN on its ACO participant list under the following circumstances: (i) The ACO participant has subsumed the acquired entity’s TIN in its entirety, including all of the providers and suppliers that reassigned their right to receive Medicare payment to the acquired entity’s Medicare-enrolled TIN. (ii) Each provider or supplier that previously reassigned his or her right to receive Medicare payment to the acquired entity’s TIN has reassigned his or her right to receive Medicare payment to the TIN of the acquiring ACO participant and has been added to the ACO provider/supplier list under paragraph (c)(5) of the section. (iii) The acquired entity’s TIN is no longer used to bill Medicare. (2) The ACO must submit the following supporting documentation in the form and manner specified by CMS. (i) An attestation that— (A) Identifies by Medicare-enrolled TIN both the acquired entity and the ACO participant that acquired it; (B) Specifies that all the providers and suppliers that previously reassigned their right to receive Medicare payment to the acquired entity’s TIN have reassigned such right to the TIN of the identified ACO participant and have been added to the ACO provider/ supplier list under paragraph (c)(5) of this section; and (C) Specifies that the acquired entity’s TIN is no longer used to bill Medicare. (ii) Documentation sufficient to demonstrate that the acquired entity’s TIN was merged with or purchased by the ACO participant. ■ 16. Amend § 425.206 by revising paragraph (a) to read as follows: § 425.206 Evaluation procedures for applications. (a) Basis for evaluation and determination. (1) CMS evaluates an ACO’s application to determine whether an applicant satisfies the requirements of this part and is qualified to participate in the Shared Savings Program. Applications are approved or denied on the basis of the following: PO 00000 Frm 00108 Fmt 4701 Sfmt 4702 (i) Information contained in and submitted with the application by a deadline specified by CMS. (ii) Supplemental information that was submitted by a deadline specified by CMS in response to CMS’ request for information. (iii) Other information available to CMS. (2) CMS notifies an ACO applicant when supplemental information is required for CMS to make such determination and provides an opportunity for the ACO to submit the information. (3) CMS may deny an application if an ACO applicant fails to submit information by the deadlines established by CMS. * * * * * ■ 17. Amend § 425.212 by revising the section heading and paragraph (a) to read as follows: § 425.212 Changes to program requirements during the agreement period. (a) An ACO is subject to all regulatory changes that become effective during the agreement period, with the exception of the following program areas, unless otherwise required by statute: (1) Eligibility requirements concerning the structure and governance of ACOs. (2) Calculation of sharing rate. * * * * * ■ 18. Amend § 425.214 as follows: ■ A. By revising the section heading. ■ B. By removing paragraph (a). ■ C. By redesignating paragraphs (b) and (c) as paragraphs (a) and (b), respectively. ■ D. By revising newly redesignated paragraph (a). ■ E. In newly redesignated paragraph (b) introductory text, removing the phrase ‘‘Upon receiving’’ and adding in its place the phrase ‘‘Upon becoming aware of a significant change or receiving’’. ■ F. In newly redesignated paragraphs (b)(2) and (4) by removing the term ‘‘agreement’’ and adding in its place the terms ‘‘participation agreement’’. The revisions read as follows: § 425.214 Managing changes to the ACO during the agreement period. (a)(1) An ACO must notify CMS within 30 days of any significant change. (2) An ACO’s failure to notify CMS of a significant change shall not preclude CMS from determining that the ACO has experienced a significant change. (3) A ‘‘significant change’’ occurs when — (i) An ACO is no longer able to meet the eligibility or program requirements of this part; or E:\FR\FM\08DEP2.SGM 08DEP2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules (ii) The number or identity of the ACO participants on the ACO’s list of ACO participants has changed by 50 percent or more. * * * * * § 425.216 [Amended] 19. Amend § 425.216 in paragraph (b) by removing the term ‘‘ACO’s agreement’’ and adding in its place the terms ‘‘participation agreement’’. ■ 20. Amend § 425.218 by revising the section heading and adding paragraphs (b)(4) and (5) to read as follows: ■ § 425.218 Termination of the participation agreement by CMS. * * * * * (b) * * * (4) Failure to comply with CMS requests for documentation or other information by the deadline specified by CMS. (5) Submitting false or fraudulent data or information. * * * * * § 425.220 [Amended] 21. Amend § 425.220 by removing and reserving paragraph (b). ■ 22. Add § 425.221 to read as follows: ■ mstockstill on DSK4VPTVN1PROD with PROPOSALS2 § 425.221 Close-out procedures and payment consequences of early termination. (a) Close-out procedures. (1) An ACO whose participation agreement has expired or is terminated by CMS under § 425.218 or by the ACO under § 425.220 must implement close-out procedures regarding the following in a form and manner and by a deadline specified by CMS: (i) Notice to ACO participants of termination. (ii) Record retention. (iii) Data sharing. (iv) Quality reporting. (v) Beneficiary continuity of care (vi) Other relevant operational matters established through guidance. (2) ACOs that fail to complete closeout procedures in the form and manner and by the deadline specified by CMS will not be eligible to share in savings. (b) Payment consequences of early termination. (1) An ACO whose participation agreement is terminated by the ACO under § 425.220 is eligible to receive shared savings for the performance year during which the termination becomes effective only if— (i) CMS designates or approves an effective date of termination of December 31st of such performance year; (ii) The ACO has completed all closeout procedures by the deadline specified by CMS; and VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 (iii) The ACO has satisfied the criteria for sharing in savings for the performance year. (2) An ACO that terminates its participation agreement under § 425.220 before December 31 of a performance year or whose participation agreement is terminated by CMS under § 425.218 at any time is not eligible to receive shared savings for the performance year during which the termination becomes effective. ■ 23. Amend § 425.222 by revising paragraph (c) to read as follows: § 425.222 Reapplication after termination. * * * * * (c) An ACO whose participation agreement was previously terminated may reenter the program under a subsequent agreement period. (1) If the termination occurred less than half way through the agreement period, an ACO that was previously under a one-sided model may reenter the program under the one-sided model or a two-sided model. If the ACO reenters the program under the onesided model, the ACO will be considered to be in its first agreement period under the one-sided model. (2) If the termination occurred more than half way through the agreement period, an ACO that was previously under a one-sided model may reenter the program under the one-sided model or a two-sided model. If the ACO reenters the program under the onesided model, the ACO will be considered to be in its second agreement period under the one-sided model. (3) Regardless of the date of termination, an ACO that was previously under a two-sided model may only reapply for participation in a two-sided model. ■ 24. Add § 425.224 to subpart C to read as follows: § 425.224 Renewal of participation agreements. (a) General rules. An ACO may request renewal of its participation agreement for a second or subsequent agreement period. (1) In order to obtain a determination regarding whether it meets the requirements for renewal of its participation agreement, the ACO must submit a complete renewal request in the form and manner and by the deadline specified by CMS. (2) An ACO executive who has the authority to legally bind the ACO must certify to the best of his or her knowledge, information, and belief that the information contained in the renewal request is accurate, complete, and truthful. PO 00000 Frm 00109 Fmt 4701 Sfmt 4702 72867 (3) An ACO that seeks renewal of its participation agreement and was newly formed after March 23, 2010, as defined in the Antitrust Policy Statement, must agree that CMS can share a copy of its renewal request with the Antitrust Agencies. (b) Review of renewal request. (1) CMS determines whether to renew a participation agreement based on an evaluation of all of the following factors: (i) Whether the ACO satisfies the criteria for operating under the selected risk track. (ii) The ACO’s history of compliance with the requirements of the Shared Savings Program. (iii) 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 losses, if applicable. (iv) Whether the ACO met the quality performance standard during at least one of the first 2 years of the previous agreement period. (v) For ACOs under a two-sided model, whether the ACO has repaid losses owed to the program that it generated during the first 2 years of the previous agreement period. (vi) The results of a program integrity screening of the ACO, its ACO participants, and its ACO providers/ suppliers (conducted in accordance with § 425.304(b)). (2) Renewal requests are approved or denied on the basis of the following information: (i) Information contained in and submitted with the renewal request by a deadline specified by CMS. (ii) Supplemental information that was submitted by a deadline specified by CMS in response to CMS’ request for information. (iii) Other information available to CMS. (3) CMS notifies the ACO when supplemental information is required for CMS to make such a determination and provides an opportunity for the ACO to submit the information. (c) Notice of determination. (1) CMS notifies in writing each ACO of its determination to approve or deny the ACO’s renewal request. (2) If CMS denies the renewal request, the notice of determination— (i) Specifies the reasons for the denial; and (ii) Informs the ACO of its right to request reconsideration review in accordance with the procedures specified in subpart I of this part. § 425.304 [Amended] 25. Amend § 425.304 by removing paragraph (d). ■ E:\FR\FM\08DEP2.SGM 08DEP2 72868 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules 26. Revise § 425.306 to read as follows: ■ § 425.306 Participant agreement and exclusivity of ACO participants. (a) Each ACO participant must commit to the term of the participation agreement and sign an ACO participant agreement that complies with the requirements of this part. (b)(1) Except as specified in paragraph (b)(2) of this section, ACO participants are not required to be exclusive to one Shared Savings Program ACO. (2) Each ACO participant that submits claims for primary care services used to determine the ACO’s assigned population under subpart E of this part must be exclusive to one Shared Savings Program ACO. ■ 27. Revise § 425.308 to read as follows: mstockstill on DSK4VPTVN1PROD with PROPOSALS2 § 425.308 Public reporting and transparency. (a) ACO public reporting Web page. Each ACO must create and maintain a dedicated Web page on which it publicly reports the information set forth in paragraph (b) of this section. The ACO must report the address of such Web page to CMS in a form and manner specified by CMS and must notify CMS of changes to the Web address in the form and manner specified by CMS. (b) Information to be reported. The ACO must report the following information in a standardized format specified by CMS: (1) Name and location. (2) Primary contact. (3) Organizational information, including all of the following: (i) Identification of ACO participants. (ii) Identification of participants in joint ventures between ACO professionals and hospitals. (iii) Identification of the members of its governing body. (iv) Identification of key clinical and administrative leadership. (v) Identification of associated committees and committee leadership. (vi) Identification of the types of ACO participants or combinations of ACO participants (as listed in § 425.102(a)) that formed the ACO. (4) Shared savings and losses information, including the following: (i) Amount of any payment of shared savings received by the ACO or shared losses owed to CMS. (ii) Total proportion of shared savings invested in infrastructure, redesigned care processes and other resources required to support the three-part aim goals of better health for populations, better care for individuals and lower VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 growth in expenditures, including the proportion distributed among ACO participants. (5) The ACO’s performance on all quality measures. (c) Approval of public reporting information. Information reported on an ACO’s public reporting Web page in compliance with the requirements of the standardized format specified by CMS is not subject to marketing review and approval under § 425.310. (d) Public reporting by CMS. CMS may publicly report ACO-specific information, including but not limited to the ACO public reporting Web page address and the information required to be publicly reported under paragraph (b) of this section. ■ 28. Amend § 425.312 by removing and reserving paragraph (b) and revising paragraph (a) to read as follows: § 425.312 Notification to beneficiaries of participation in the shared savings program. (a) ACO participants must notify beneficiaries at the point of care that their ACO providers/suppliers are participating in the Shared Savings Program and of the opportunity to decline claims data sharing under § 425.708. (1) Notification is carried out when an ACO participant posts signs in its facilities and, in settings in which beneficiaries receive primary care services, by making standardized written notices available upon request. (2) The ACO must use template language developed by CMS for notifications described in paragraph (a)(1) of this section. * * * * * § 425.314 [Amended] 29. Amend § 425.314 in paragraph (c) by removing the word ‘‘agreement’’ and adding in its place the words ‘‘participation agreement’’. ■ § 425.316 [Amended] 30. Amend § 425.316 as follows: A. By removing paragraphs (c)(3) and (4). ■ B. By redesignating paragraph (c)(5) as (c)(3). ■ C. In newly redesignated paragraph (c)(3) by removing the phrase ‘‘fully and completely’’ and adding in its place the phrase ‘‘accurately, completely, and timely’’. ■ 31. Amend § 425.400 as follows: ■ A. By adding paragraph (a)(1) introductory text. ■ B. By revising paragraph (a)(1)(i). ■ C. In paragraph (a)(1)(ii), by removing the phrase ‘‘by a physician who is an ACO provider/supplier during the ■ ■ PO 00000 Frm 00110 Fmt 4701 Sfmt 4702 performance year’’ and adding in its place the phrase ‘‘by a physician who is an ACO professional during each benchmarking year and during each performance year’’. ■ D. By adding a subject heading to paragraph (a)(2). ■ E. By adding paragraph (a)(3). The additions read as follows: § 425.400 General. (a)(1) General. (i) A Medicare fee-forservice beneficiary is assigned to an ACO for a performance year if the— (A) Beneficiary meets the eligibility criteria under § 425.401(a); and (B) Beneficiary’s utilization of primary care services meets the criteria established under the assignment methodology described in § 425.402 and § 425.404. * * * * * (2) Assignment under Tracks 1 and 2. * * * * * (3) Prospective assignment under Track 3. (i) Medicare fee-for-service beneficiaries are prospectively assigned to an ACO under Track 3 at the beginning of each performance year based on the beneficiary’s use of primary care services in the most recent 12 months for which data are available, using the assignment methodology described in § 425.402 and § 425.404. (ii) Beneficiaries that are prospectively assigned to an ACO under paragraph (a)(3)(i) of this section will remain assigned to the ACO at the end of the performance year unless they meet any of the exclusion criteria under § 425.401(b). * * * * * ■ 32. Add § 425.401 to read as follows: § 425.401 Criteria for a beneficiary to be assigned to an ACO. (a) A beneficiary may be assigned to an ACO under the assignment methodology in §§ 425.402 and 425.404, for a performance or benchmark year, if the beneficiary meets all of the following criteria during the assignment window: (1)(i) Has at least 1 month of Part A and Part B enrollment; and (ii) Does not have any months of Part A only or Part B only enrollment. (2) Does not have any months of Medicare group (private) health plan enrollment. (3) Is not assigned to any other Medicare shared savings initiative. (4) Lives in the United States or U.S. territories and possessions, based on the most recent available data in our beneficiary records regarding the beneficiary’s residence at the end of the assignment window. (b) A beneficiary will be excluded from the prospective assignment list of E:\FR\FM\08DEP2.SGM 08DEP2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules an ACO participating under Track 3 at the end of a performance or benchmark year, if the beneficiary meets any of the following criteria during the performance or benchmark year: (1)(i) Does not have at least 1 month of Part A and Part B enrollment; and (ii) Has any months of Part A only or Part B only enrollment. (2) Has any months of Medicare group (private) health plan enrollment. (3) Did not live in the United States or U.S. territories and possessions, based on the most recent available data in our beneficiary records regarding the beneficiary’s residency at the end of the year. ■ 33. Revise § 425.402 to read as follows: mstockstill on DSK4VPTVN1PROD with PROPOSALS2 § 425.402 Basic assignment methodology. (a) For purposes of benchmarking, preliminary prospective assignment (including quarterly updates) and retrospective reconciliation, and prospective assignment, CMS employs the following step-wise methodology to assign Medicare fee-for-service beneficiaries to an ACO: (1) Identify all beneficiaries that had at least one primary care service with a physician who is an ACO professional in the ACO and who is a primary care physician as defined under § 425.20 or who has one of the primary specialty designations included in paragraph (b) of this section. (2) Identify all primary care services furnished to beneficiaries identified in paragraph (a)(1) by ACO professionals of that ACO who are primary care physicians as defined under § 425.20, non-physician ACO professionals, and physicians with specialty designations included in paragraph (b) of this section during the applicable assignment window. (3) Under the first step, a beneficiary identified in paragraph (a)(1) of this section is assigned to an ACO if the allowed charges for primary care services furnished to the beneficiary by primary care physicians who are ACO professionals and non-physician ACO professionals in the ACO are greater than the allowed charges for primary care services furnished by primary care physicians, nurse practitioners, physician assistants, and clinical nurse specialists who are— (i) ACO professionals in any other ACO; or (ii) Not affiliated with any ACO and identified by a Medicare-enrolled billing TIN. (4) The second step considers the remainder of the beneficiaries identified in paragraph (a)(1) of this section who have not had a primary care service VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 rendered by any primary care physician, nurse practitioner, physician assistant, or clinical nurse specialist, either inside the ACO or outside the ACO. The beneficiary will be assigned to an ACO if the allowed charges for primary care services furnished to the beneficiary by physicians who are ACO professionals with specialty designations as specified in paragraph (b) of this section are greater than the allowed charges for primary care services furnished by physicians with specialty designations as specified in paragraph (b) of this section— (i) Who are ACO professionals in any other ACO; or (ii) Who are unaffiliated with an ACO and are identified by a Medicareenrolled billing TIN. (b) ACO professionals considered in the second step of the assignment methodology in paragraph (a)(4) of this section include physicians who have one of the following primary specialty designations: (1) Allergy/immunology. (2) Cardiology. (3) Gastroenterology. (4) Neurology. (5) Obstetrics/gynecology. (6) Hospice and palliative care. (7) Sports medicine. (8) Physical medicine and rehabilitation. (9) Pulmonary disease. (10) Pediatric medicine. (11) Nephrology. (12) Infectious disease. (13) Endocrinology. (14) Rheumatology. (15) Multispecialty clinic or group practice. (16) Hematology. (17) Hematology/oncology. (18) Preventive medicine. (19) Medical oncology. (20) Gynecology/oncology. (c) When considering services furnished by ACO professionals in teaching hospitals that have elected under § 415.160 to receive payment on a reasonable cost basis for the direct medical and surgical services of their physicians in the assignment methodology under paragraph (a) of this section, CMS uses the amount payable under the physician fee schedule for the specified HCPCS code as a proxy for the amount of the allowed charges for the service. ■ 34. Amend § 425.404 by revising paragraph (b) to read as follows: § 425.404 Special assignment conditions for ACOs including FQHCs and RHCs. * * * * * (b) Under the assignment methodology in § 425.402, CMS treats a PO 00000 Frm 00111 Fmt 4701 Sfmt 4702 72869 service reported on an FQHC/RHC claim as— (1) A primary care service if the claim includes a HCPCS or revenue center code that meets the definition of primary care services under § 425.20; (2) A primary care service performed by a primary care physician if the NPI of a physician identified in the attestation provided under paragraph (a) of this section is reported on the claim for a primary care service (as described in paragraph (b)(1) of this section) as the attending provider; and (3) A primary care service performed by a non-physician ACO professional if the NPI reported on the claim for a primary care service (as described in paragraph (b)(1) of this section) as the attending provider is an ACO professional but is not identified in the attestation provided under paragraph (a) of this section. ■ 36. Amend § 425.600 as follows: ■ A. In paragraph (a)(2), by removing the phrase ‘‘under the two-sided model’’ and adding in its place the phrase ‘‘under a two-sided model’’. ■ B. By adding paragraph (a)(3). ■ C. By revising paragraph (b). The addition and revision read as follows: § 425.600 Selection of risk model. (a) * * * (3) Track 3. Under Track 3, the ACO operates under a two-sided model (as described under § 425.610), sharing both savings and losses with the Medicare program for the agreement period. (b) An ACO may not operate under the one-sided model for a second agreement period unless the— (1) Immediately preceding agreement period was under the one-sided model; (2) The ACO did not generate losses in excess of its negative MSR in both of the first 2 performance years of the previous agreement period; and (3) The ACO meets the criteria established for ACOs seeking to renew their agreements under § 425.224(b). * * * * * § 425.602 [Amended] 37. Amend § 425.602 (a)(8), by removing the phrase ‘‘The ACO’s benchmark may be adjusted’’ and adding in its place the phrase ‘‘The ACO’s benchmark will be adjusted in accordance with § 425.118(b)’’. ■ 38. Amend § 425.604 as follows: ■ A. By redesignating the text of paragraph (d) as paragraph (d)(1). ■ B. In newly redesignated paragraph (d)(1), removing the phrase ‘‘under the one-sided model’’ and adding in its place the phrase ‘‘during a performance year in its first agreement period under the one-sided model’’. ■ E:\FR\FM\08DEP2.SGM 08DEP2 72870 ■ Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules D. By adding a paragraph (d)(2). The addition reads as follows: § 425.604 Calculation of savings under the one-sided model. * * * * * (d) * * * (2) An ACO that meets all the requirements for receiving shared savings payments during a performance year in its second agreement period under the one-sided model will receive a shared savings payment of up to 40 percent of all savings under the updated benchmark, as determined on the basis of its quality performance under § 425.502 (up to the performance payment limit described in paragraph (e)(2) of this section). * * * * * ■ 39. Amend § 425.606 as follows: ■ A. By revising the section heading. ■ B. In paragraph (a) introductory text, by removing the phrase ‘‘under the twosided model,’’ and adding in its place the phrase ‘‘under Track 2,’’. ■ C. By revising paragraph (b). ■ D. In paragraph (d), by removing the phrase ‘‘under the two-sided model’’ and adding in its place the phrase ‘‘under Track 2’’. ■ E. In paragraph (e)(2), by removing the phrase ‘‘under the two-sided model’’ and adding in its place the phrase ‘‘under Track 2’’. ■ F. In paragraph (g)(1), by removing the phrase ‘‘in a two-sided model’’ and adding in its place the phrase ‘‘in Track 2’’. The revisions read as follows: § 425.606 Calculation of shared savings and losses under Track 2. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 * * * * * (b) Minimum savings or loss rate. CMS uses a sliding scale, based on the number of beneficiaries assigned to the ACO under subpart E of this part, to establish the MSR and MLR for an ACO participating under Track 2. The MSR under Track 2 is the same as the MSR that would apply in the one-sided model under § 425.604(b) and is based on the number of assigned beneficiaries. The MLR under Track 2 is equal to the negative MSR. (1) To qualify for shared savings under Track 2, an ACO’s average per capita Medicare expenditures for the performance year must be below its updated benchmark costs for the year by at least the MSR established for the ACO. (2) To be responsible for sharing losses with the Medicare program, an ACO’s average per capita Medicare expenditures for the performance year must be above its updated benchmark VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 costs for the year by at least the MLR established for the ACO. * * * * * ■ 40. Add § 425.610 to subpart G to read as follows: § 425.610 Calculation of shared savings and losses under Track 3. (a) General rule. For each performance year, CMS determines whether the estimated average per capita Medicare expenditures under the ACO for Medicare fee-for-service beneficiaries for Parts A and B services are above or below the updated benchmark determined under § 425.602. In order to qualify for a shared savings payment under Track 3, or to be responsible for sharing losses with CMS, an ACO’s average per capita Medicare expenditures under the ACO for Medicare fee-for-service beneficiaries for Parts A and B services for the performance year must be below or above the updated benchmark, respectively, by at least the minimum savings or loss rate under paragraph (b) of this section. (1) Newly assigned beneficiaries. CMS uses an ACO’s HCC prospective risk score to adjust for changes in severity and case mix in this population. (2) Continuously assigned beneficiaries. (i) CMS uses demographic factors to adjust for changes in the continuously assigned beneficiary population. (ii) If the prospective HCC risk score is lower in the performance year for this population, CMS adjusts for changes in severity and case mix for this population using this lower prospective HCC risk score. (3) Assigned beneficiary changes in demographics and health status are used to adjust benchmark expenditures as described in § 425.602(a). In adjusting for health status and demographic changes CMS makes separate adjustments for each of the following populations of beneficiaries: (i) ESRD. (ii) Disabled. (iii) Aged/dual eligible Medicare and Medicaid beneficiaries. (iv) Aged/non-dual eligible Medicare and Medicaid beneficiaries. (4) To minimize variation from catastrophically large claims, CMS truncates an assigned beneficiary’s total annual Parts A and B fee-for-service per capita expenditures at the 99th percentile of national Medicare fee-forservice expenditures as determined for each performance year. (5) CMS uses a 3-month claims run out with a completion factor to calculate an ACO’s per capita expenditures for each performance year. PO 00000 Frm 00112 Fmt 4701 Sfmt 4702 (6) Calculations of the ACO’s expenditures will include the payment amounts included in Part A and B feefor-service claims. (i) These calculations will exclude indirect medical education (IME) and disproportionate share hospital (DSH) payments. (ii) These calculations will take into consideration individually beneficiary identifiable payments made under a demonstration, pilot or time limited program. (7) In order to qualify for a shared savings payment, the ACO’s average per capita Medicare expenditures for the performance year must be below the applicable updated benchmark by at least the minimum savings rate established for the ACO under paragraph (b) of this section. (b) Minimum savings or loss rate. (1) To qualify for shared savings under Track 3 an ACO’s average per capita Medicare expenditures for the performance year must be below its updated benchmark costs for the year by at least 2 percent. (2) To be responsible for sharing losses with the Medicare program under Track 3, an ACO’s average per capita Medicare expenditures for the performance year must be at least 2 percent above its updated benchmark costs for the year. (c) Qualification for shared savings payment. To qualify for shared savings, an ACO must meet the minimum savings rate requirement established under paragraph (b) of this section, meet the minimum quality performance standards established under § 425.502, and otherwise maintain its eligibility to participate in the Shared Savings Program under this part. (d) Final sharing rate. An ACO that meets all the requirements for receiving shared savings payments under Track 3 will receive a shared savings payment of up to 75 percent of all the savings under the updated benchmark, as determined on the basis of its quality performance under § 425.502 (up to the performance payment limit described in paragraph (e)(2) of this section). (e) Performance payment. (1) If an ACO qualifies for savings by meeting or exceeding the MSR, the final sharing rate will apply to an ACO’s savings on a first dollar basis. (2) The amount of shared savings an eligible ACO receives under Track 3 may not exceed 20 percent of its updated benchmark. (f) Shared loss rate. The shared loss rate— (1) For an ACO that is required to share losses with the Medicare program for expenditures over the updated E:\FR\FM\08DEP2.SGM 08DEP2 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules benchmark, the amount of shared losses is determined based on the inverse of its final sharing rate described in § 425.610(d) (that is, 1 minus the final shared savings rate determined under § 425.610(d)); (2) May not exceed 75 percent; and (3) May not be less than 40 percent. (g) Loss recoupment limit. The amount of shared losses for which an eligible ACO is liable may not exceed 15 percent of its updated benchmark as determined under § 425.602. (h) Notification of savings and losses. (1) CMS notifies an ACO in writing regarding whether the ACO qualifies for a shared savings payment, and if so, the amount of the payment due. (2) CMS provides written notification to an ACO of the amount of shared losses, if any, that it must repay to the program. (3) If an ACO has shared losses, the ACO must make payment in full to CMS within 90 days of receipt of notification. ■ 41. Amend § 425.702 by revising paragraph (c)(1) to read as follows: § 425.702 Aggregate reports. mstockstill on DSK4VPTVN1PROD with PROPOSALS2 * * * * * (c) * * * (1) At the beginning of the agreement period, during each quarter (and in conjunction with the annual reconciliation), and at the beginning of each performance year, CMS, upon the ACO’s request for the data for purposes of population-based activities relating to improving health or reducing growth in health care costs, process development, care management, and care coordination, will provide the ACO with information about its fee-forservice population. (i) Under Tracks 1 and 2, the following information is made available regarding preliminarily prospectively assigned beneficiaries and beneficiaries that received a primary care service during the previous 12 months from one of the ACO participants that submits claims for primary care services used to determine the ACO’s assigned population under subpart E of this part: (A) Beneficiary name. (B) Date of birth. (C) Health Insurance Claim Number (HICN). (D) Sex. (ii) Under Tracks 1 and 2, information in the following categories, which represents the minimum data necessary for ACOs to conduct health care operations work is made available regarding preliminarily prospectively assigned beneficiaries: (A) Demographic data such as enrollment status. VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 (B) Health status information such as risk profile and chronic condition subgroup. (C) Utilization rates of Medicare services such as the use of evaluation and management, hospital, emergency, and post-acute services, including the dates and place of service. (D) Expenditure information related to utilization of services. (iii) The information under paragraphs (c)(1)(i) and (c)(1)(ii) of this section will be made available to ACOs in Track 3, but will be limited to the ACO’s prospectively assigned beneficiaries. * * * * * ■ 42. Amend § 425.704 as follows: ■ A. By revising the section heading. ■ B. In the introductory text, by removing the phrase ‘‘claims data for preliminary prospectively assigned beneficiaries’’ and adding in its place the phrase ‘‘claims data for preliminarily prospectively and prospectively assigned beneficiaries’’. ■ C. In the introductory text, by removing the phrase ‘‘upon whom assignment is based during the agreement period’’ and adding in its place the phrase ‘‘that submits claims for primary care services used to determine the ACO’s assigned population under subpart E of this part during the performance year’’. ■ D. In paragraph (a) by removing the phrase ‘‘ACOs may request data as often’’ and adding in its place ‘‘ACOs may access requested data as often’’. ■ E. By revising paragraph (d)(1). ■ F. In paragraph (d)(2) by removing the phrase ‘‘has been notified in writing how the ACO intends to use’’ and adding in its place the phrase ‘‘has been notified in compliance with § 425.708 that the ACO has requested access to’’. The revisions read as follows: § 425.704 data. Beneficiary-identifiable claims * * * * * (d) * * * (1) For an ACO participating— (i) In Track 1 or 2, the beneficiary’s name appears on the preliminary prospective assignment list provided to the ACO at the beginning of the performance year, during each quarter (and in conjunction with the annual reconciliation) or the beneficiary has received a primary care service from an ACO participant upon whom assignment is based (under subpart E of this part) during the most recent 12month period. (ii) In Track 3, the beneficiary’s name appears on the prospective assignment PO 00000 Frm 00113 Fmt 4701 Sfmt 4702 72871 list provided to the ACO at the beginning of the performance year. * * * * * ■ 43. Amend § 425.708 as follows: ■ A. Revising the section heading and paragraph (a). ■ B. Removing paragraphs (b) and (c). ■ C. Redesignating paragraphs (d) through (f) as paragraphs (b) through (d), respectively. ■ D. Revising newly redesignated paragraphs (b) and (c). The revisions read as follows: § 425.708 Beneficiaries may decline claims data sharing. (a) Beneficiaries must receive notification about the Shared Savings Program and the opportunity to decline claims data sharing and instructions on how to inform CMS directly of their preference. (1) FFS beneficiaries are notified about the opportunity to decline claims data sharing through CMS materials such as the Medicare & You Handbook and through the notifications required under § 425.312. (2) The notifications provided under § 425.312 must state that the ACO may have requested beneficiary identifiable claims data about the beneficiary for purposes of its care coordination and quality improvement work, and inform the beneficiary how to decline having his or her claims information shared with the ACO in the form and manner specified by CMS. (3) Beneficiary requests to decline claims data sharing will remain in effect unless and until a beneficiary subsequently contacts CMS to amend that request to permit claims data sharing with ACOs. (b) The opportunity to decline having claims data shared with an ACO under paragraph (a) of this section does not apply to the information that CMS provides to ACOs under § 425.702(c). (c) In accordance with 42 U.S.C. 290dd–2 and the implementing regulations at 42 CFR part 2, CMS does not share beneficiary identifiable claims data relating to the diagnosis and treatment of alcohol and substance abuse without the explicit written consent of the beneficiary. * * * * * ■ 44. Amend § 425.802 by revising paragraph (a)(2) to read as follows: § 425.802 Request for review. (a) * * * (2) The reconsideration review must be held on the record (review of submitted documentation). * * * * * ■ 45. Amend § 425.804 as follows: ■ A. By revising paragraph (a)(3). E:\FR\FM\08DEP2.SGM 08DEP2 72872 Federal Register / Vol. 79, No. 235 / Monday, December 8, 2014 / Proposed Rules B. By removing paragraph (d). ■ C. Redesignating paragraphs (e) and (f) as paragraphs (d) and (e), respectively. The revision reads as follows: ■ § 425.804 Reconsideration review process. (a) * * * (3) A briefing schedule that permits each party to submit only one written brief, including any evidence, for consideration by the reconsideration official in support of the party’s position. * * * * * Dated: November 20, 2014. Marilyn Tavenner, Administrator, Centers for Medicare & Medicaid Services. Dated: November 21, 2014. Sylvia M. Burwell, Secretary, Department of Health and Human Services. [FR Doc. 2014–28388 Filed 12–1–14; 4:15 pm] mstockstill on DSK4VPTVN1PROD with PROPOSALS2 BILLING CODE 4120–01–P VerDate Sep<11>2014 20:28 Dec 05, 2014 Jkt 235001 PO 00000 Frm 00114 Fmt 4701 Sfmt 9990 E:\FR\FM\08DEP2.SGM 08DEP2

Agencies

[Federal Register Volume 79, Number 235 (Monday, December 8, 2014)]
[Proposed Rules]
[Pages 72759-72872]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-28388]

[[Page 72759]]

Vol. 79

Monday,

No. 235

December 8, 2014

Part II

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Part 425

Medicare Program; Medicare Shared Savings Program: Accountable Care
Organizations; Proposed Rule

Federal Register / Vol. 79 , No. 235 / Monday, December 8, 2014 /
Proposed Rules

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 425

[CMS-1461-P]
RIN 0938-AS06

Medicare Program; Medicare Shared Savings Program: Accountable
Care Organizations

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule addresses changes to the Medicare Shared
Savings Program (Shared Savings Program), including provisions relating
to the payment of Accountable Care Organizations (ACOs) participating
in the Shared Savings Program. Under the Shared Savings Program,
providers of services and suppliers that participate in an 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.

DATES: To be assured consideration, comments must be received at one of
the addresses provided below, no later than 5 p.m. on February 6, 2015.

ADDRESSES: In commenting, please refer to file code CMS-1461-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four 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-1461-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-1461-P, Mail
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
4. By hand or courier. Alternatively, you may deliver (by hand or
courier) your written comments ONLY to the following addresses prior to
the close of the comment period:
a. For delivery in Washington, DC--Centers for Medicare & Medicaid
Services, Department of Health and Human Services, Room 445-G, Hubert
H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 20201

(Because access to the interior of the Hubert H. Humphrey Building is
not readily available to persons without Federal government
identification, commenters are encouraged to leave their comments in
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing
by stamping in and retaining an extra copy of the comments being
filed.)
b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid
Services, Department of Health and Human Services, 7500 Security
Boulevard, Baltimore, MD 21244-1850.

If you intend to deliver your comments to the Baltimore address,
call telephone number (410) 786-7195 in advance to schedule your
arrival with one of our staff members.
Comments erroneously mailed to the addresses indicated as
appropriate for hand or courier delivery may be delayed and received
after the comment period.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Dr. Terri Postma or Rick Ensor, 410-
786-8084, Email address: 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 Web
site as soon as possible after they have been received: https://www.regulations.gov. Follow the search instructions on that Web site 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.

Table of Contents

To assist readers in referencing sections contained in this
preamble, we are providing a table of contents.

I. Executive Summary and Background
A. Executive Summary
1. Purpose
2. Summary of the Major Provisions
3. Summary of Costs and Benefits
B. Background
II. Provisions of This Proposed Rule
A. Definitions
1. Proposed Definitions
2. Proposed Revisions to Existing Definitions
a. Definition of ACO Participant
b. Definition of ACO Professional
c. Definition of ACO Provider/Supplier
d. Definition of Assignment
e. Definition of Hospital
f. Definition of Primary Care Services
g. Definitions of Continuously Assigned Beneficiary and Newly
Assigned Beneficiary
h. Definition of Agreement Period
B. ACO Eligibility Requirements
1. Agreement Requirements
a. Overview
b. Proposed Revisions
2. Sufficient Number of Primary Care Providers and Beneficiaries
a. Overview
b. Proposed Revisions
3. Identification and Required Reporting of ACO Participants and
ACO Providers/Suppliers
a. Overview
b. Proposed Revisions
(1) Certified List of ACO Participants and ACO Providers/
Suppliers
(2) Managing Changes to ACO Participants
(3) Managing Changes to ACO Providers/Suppliers
(4) Update of Medicare Enrollment Information
4. Significant Changes to an ACO
a. Overview
b. Proposed Revisions
5. Consideration of Claims Billed by Merged/Acquired Medicare-
Enrolled Entities
a. Overview
b. Proposal
6. Legal Structure and Governance
a. Legal Entity and Governing Body
(1) Overview
(2) Proposed Revisions
b. Fiduciary Duties of Governing Body Members
(1) Overview
(2) Proposed Revisions
c. Composition of the Governing Body
(1) Overview
(2) Proposed Revisions
7. Leadership and Management Structure
a. Overview
b. Proposed Revisions
8. Required Process To Coordinate Care
a. Overview
b. Accelerating Health Information Technology

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c. Proposed Revisions
9. Transition of Pioneer ACOs Into the Shared Savings Program
a. Overview
b. Proposed Revisions
C. Establishing and Maintaining the Participation Agreement With
the Secretary
1. Background
2. Application Deadlines
a. Overview
b. Proposed Revisions
3. Renewal of Participation Agreements
a. Overview
b. Proposed Revisions
4. Changes to Program Requirements During the 3-Year Agreement
a. Overview
b. Proposed Revisions
D. Provision of Aggregate and Beneficiary Identifiable Data
1. Background
2. Aggregate Data Reports and Limited Identifiable Data
a. Overview
b. Proposed Revisions
3. Claims Data Sharing and Beneficiary Opt-Out
a. Overview
b. Proposed Revisions
E. Assignment of Medicare FFS Beneficiaries
1. Background
2. Basic Criteria for a Beneficiary To Be Assigned to an ACO
3. Definition of Primary Care Services
a. Overview
b. Proposed Revisions
4. Consideration of Physician Specialties and Non-Physician
Practitioners in the Assignment Process
a. Overview
b. Proposed Revisions
5. Assignment of Beneficiaries to ACOs That Include FQHCs, RHCs,
CAHs, or ETA Hospitals
a. Assignment of Beneficiaries to ACOs That Include FQHCs and
RHCs
(1) Overview
(2) Proposed Revisions
b. Assignment of Beneficiaries to ACOs That Include CAHs
c. Assignment of Beneficiaries to ACOs That Include ETA
Hospitals
6. Effective Date for Finalization of Proposals Affecting
Beneficiary Assignment
F. Shared Savings and Losses
1. Background
2. Modifications to the Existing Payment Tracks
a. Overview
b. Proposals Related to Transition From the One-Sided to Two-
Sided Model
c. Proposals for Modifications to the Track 2 Financial Model
3. Creating Options for ACOs That Participate in Risk-Based
Arrangements
a. Overview
b. Proposals for Assignment of Beneficiaries Under Track 3
(1) Background
(2) Proposal for Prospective Assignment Under Track 3
c. Proposed Exclusion Criteria for Prospectively Assigned
Beneficiaries
d. Proposed Timing of Prospective Assignment
e. Proposals for Addressing Interactions Between Prospective and
Retrospective Assignment Models
f. Proposals for Determining Benchmark and Performance Year
Expenditures Under Track 3
g. Proposals for Risk Adjusting the Updated Benchmark for Track
3 ACOs
h. Proposals for Final Sharing/Loss Rate and Performance
Payment/Loss Recoupment Limit Under Track 3
i. Proposals for Minimum Savings Rate and Minimum Loss Rate in
Track 3
4. Seeking Comment on Ways To Encourage ACOs Participation in
Performance-Based Risk Arrangements
a. Payment Requirements and Program Requirements That May Need
To Be Waived in Order To Carry Out the Shared Savings Program
(1) SNF 3-Day Rule
(2) Billing and Payment for Telehealth Services
(3) Homebound Requirement Under the Home Health Benefit
(4) Waivers for Referrals to Postacute Care Settings
(5) Waiver of Other Payment Rules
b. Other Options for Improving the Transition to Two-Sided
Performance-Based Risk Arrangements
(1) Beneficiary Attestation
(2) Seeking Comment on a Step-Wise Progression for ACOs To Take
on Performance-Based Risk
5. Modifications to Repayment Mechanism Requirements
a. Overview
b. Proposals for Amount and Duration of the Repayment Mechanism
c. Proposals Regarding Permissible Repayment Mechanisms
6. Seeking Comment on Methodology for Establishing, Updating,
and Resetting the Benchmark
a. Background on Establishing, Updating, and Resetting the
Benchmark
(1) Background on Use of National Growth Rate as a Benchmark
Trending Factor
(2) Background on Use of National FFS Growth Factors in Updating
the Benchmark During the Agreement Period
(3) Background on Managing Changes to ACOs During the Agreement
Period
(4) Background on Resetting the Benchmark
(5) Background on Stakeholders' Concerns About Benchmarking
Methodology
b. Factors To Use in Resetting ACO Benchmarks and Alternative
Benchmarking Methodologies
(1) Equally Weighting the Three Benchmark Years
(2) Accounting for Shared Savings Payments in Benchmarks
(3) Use of Regional Factors (as opposed to national factors) in
Establishing and Updating Benchmarks
(4) Alternative Benchmark Resetting Methodology: Hold the ACO's
Historical Costs Constant Relative to Its Region
(5) Alternative Benchmark Methodology: Transition ACOs to
Benchmarks Based Only on Regional FFS Costs Over the Course of
Multiple Agreement Periods
(6) Seeking Comment on the Benchmarking Alternatives Considered
and the Applicability of These Approaches
7. Seeking Comment on Technical Adjustments to the Benchmark and
Performance Year Expenditures
G. Additional Program Requirements and Beneficiary Protections
1. Background
2. Public Reporting and Transparency
a. Overview
b. Proposed Revisions
3. Terminating Program Participation
a. Overview
b. Proposed Revisions
(1) Grounds for Termination
(2) Close-Out Procedures and Payment Consequences of Early
Termination
(3) Reconsideration Review Process
(A) Overview
(B) Proposed Changes
(4) Monitoring ACO Compliance With Quality Performance Standards
III. Collection of Information Requirements
IV. Response to Comments
V. Regulatory Impact Analysis
A. Statement of Need
B. Overall Impact
C. Anticipated Effects
1. Effects on the Medicare Program
a. Assumptions and Uncertainties
b. Detailed Stochastic Modeling Results
c. Further Considerations
2. Effects on Beneficiaries
3. Effect on Providers and Suppliers
4. Effect on Small Entities
5. Effect on Small Rural Hospitals
6. Unfunded Mandates
D. Alternatives Considered
E. Accounting Statement and Table
F. Conclusion

Regulations Text

Acronyms

ACO Accountable Care Organization
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000 (Pub. L. 106-554)
CAHs Critical Access Hospitals
CCM Chronic Care Management
CEHRT Certified Electronic Health Record Technology
CG-CAHPS Clinician and Group Consumer Assessment of Health Providers
and Systems
CHIP Children's Health Insurance Program
CMP Civil Monetary Penalties
CMS Centers for Medicare & Medicaid Services
CNM Certified Nurse Midwife
CMS-HCC CMS Hierarchal Condition Category
CPT [Physicians] Current Procedural Terminology (CPT codes,
descriptions and other data only are copyright 2013 American Medical
Association. All rights reserved.)
CWF Common Working File
DHHS Department of Health and Human Services
DOJ Department of Justice
DRA Deficit Reduction Act of 2005 (Pub. L. 109-171)
DSH Disproportionate Share Hospital
DUA Data Use Agreement

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EHR Electronic Health Record
ESRD End Stage Renal Disease
ETA hospital Electing Teaching Amendment Hospital
FFS Fee-for-service
FQHCs Federally Qualified Health Centers
FTC Federal Trade Commission
GPCI Geographic Practice Cost Index
GPRO Group Practice Reporting Option
HCC Hierarchal Condition Category
HCPCS Healthcare Common Procedure Coding System
HICN Health Insurance Claim Number
HIPAA Health Insurance Portability and Accountability Act of 1996
(Pub. L. 104-191)
HVBP Hospital Value-based Purchasing
IPA Independent Practice Association
IPPS Inpatient Prospective Payment System
IRS Internal Revenue Service
MA Medicare Advantage
MedPAC Medicare Payment Advisory Commission
MLR Minimum Loss Rate
MSP Medicare Secondary Payer
MSR Minimum Savings Rate
MU Meaningful Use
NCQA National Committee for Quality Assurance
NP Nurse Practitioner
NPI National Provider Identifier
NQF National Quality Forum
OIG Office of Inspector General
PA Physician Assistant
PACE Program of All Inclusive Care for the Elderly
PECOS Provider Enrollment, Chain, and Ownership System
PFS Physician Fee Schedule
PGP Physician Group Practice
PHI Protected Health Information
PPS Prospective Payment System
PQRS Physician Quality Reporting System
PRA Paperwork Reduction Act
PSA Primary Service Areas
RHCs Rural Health Clinics
RIA Regulatory Impact Analysis
SNFs Skilled Nursing Facilities
SSA Social Security Act
SSN Social Security Number
TIN Taxpayer Identification Number
VM Value Modifier

CPT (Current Procedural Terminology) Copyright Notice

Throughout this proposed rule, we use CPT codes and descriptions to
refer to a variety of services. We note that CPT codes and descriptions
are copyright 2013 American Medical Association. All Rights Reserved.
CPT is a registered trademark of the American Medical Association
(AMA). Applicable Federal Acquisition Regulations (FARs) and Defense
Federal Acquisition Regulations (DFARs) apply.

I. Executive Summary and Background

A. Executive Summary

1. Purpose
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
parts A and B, and encourages investment in infrastructure and
redesigned care processes for high quality and efficient health care
service delivery. This proposed rule would make changes to the
regulations that were promulgated in November 2011 to implement the
Shared Savings Program in order to make refinements based on our
experience with the program and to respond to concerns raised by
stakeholders. Unless otherwise noted, these changes would be effective
60 days after publication of the final rule. Application or
implementation dates may vary, depending on the nature of the policy;
however, we anticipate all of the final policies and methodological
changes would be applied for the 2016 performance year for all
participating organizations unless otherwise noted.
2. Summary of the Major Provisions
This proposed rule is designed to codify existing guidance, reduce
administrative burden and improve program function and transparency in
the following areas: (1) Data-sharing requirements; (2) requirements
for ACO participant agreements, the ACO application process, and our
review of applications; (3) identification and reporting of ACO
participants and ACO providers/suppliers, including managing changes to
the list of ACO participants and ACO providers/suppliers; (4)
eligibility requirements related to the ACO's number of beneficiaries,
required processes, the ACO's legal structure and governing body, and
its leadership and management structure; (5) modification to assignment
methodology; (6) repayment mechanisms for ACOs in two-sided
performance-based risk tracks; (7) alternatives to encourage
participation in risk-based models; (8) ACO public reporting and
transparency; (9) the ACO termination process; and (10) the
reconsideration review process. To achieve these goals, we make the
following proposed modifications to our current program rules:
Clarify existing and establish new definitions of terms
including an ACO participant, ACO provider/supplier, and ACO
participation agreement.
Add a process for ACOs to renew the participation
agreement for an additional agreement period.
Add, clarify, and revise the beneficiary assignment
algorithm, including the following--
++ Update the CPT codes that would be considered to be primary care
services as well as changing the treatment of certain physician
specialties in the assignment process;
++ Include the claims for primary care services furnished by NP,
PAs, and CNSs in Step 1 of the assignment algorithm; and
++ Clarify how primary care services furnished in federally
qualified health centers (FQHCs), rural health clinics (RHCs), and
electing teaching amendment (ETA) hospitals will be considered in the
assignment process.
Expand the kinds of beneficiary-identifiable data that
would be provided to ACOs in various reports under the Shared Savings
Program as well as simplify the claims data sharing opt-out process to
improve the timeliness of access to claims data.
Add or change policies to encourage greater ACO
participation in risk-based models by--
++ Offering the opportunity for ACOs to continue participating
under a one-sided participation agreement after their first 3-year
agreement;
++ Reducing risk under Track 2; and
++ Adopting an alternative risk-based model referred to as Track 3
which includes proposals for a higher sharing rate and prospective
assignment of beneficiaries.
In addition, we seek comment on a number of options that we have
been considering in order to encourage ACOs to take on two-sided
performance-based risk under the Shared Savings Program. We also seek
comment on issues related to resetting the benchmark in a subsequent
performance year and the use of statutory waiver authority to improve
participation in two-sided risk models.
3. Summary of Costs and Benefits
We assume that our proposals to ease the transition to risk, reduce
risk under Track 2, and adopt an alternative risk-based model (Track 3)
would result in increased participation in the Shared Savings Program.
As shown in our impact analysis, we expect the proposed changes to
result in a significant increase in total shared savings, while shared
losses would decrease. Moreover, as participation in the Shared Savings
Program continues to expand, we anticipate there would be a broader
focus on care coordination and quality improvement among providers and
suppliers within the Medicare program that would lead to both increased
efficiency in the provision of care and improved quality of the care
provided to beneficiaries.
The proposed changes detailed in this rule would result in median
estimated federal savings of $280 million greater than the $730 million
median net

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savings estimated at baseline for calendar years (CYs) 2016 through
2018. We estimate that the provisions of this proposed rule would
result in a reduction in the median shared loss dollars by $140 million
and an increase in the median shared savings payments by $320 million
dollars relative to the baseline for CYs 2016 through 2018. The
estimated aggregate average start up investment and 3 year operating
costs if all proposals are finalized is approximately $441 million.

B. 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.
Collectively known as the Affordable Care Act, these public laws
include a number of provisions designed to improve the quality of
Medicare services, support innovation and the establishment of new
payment models, better align Medicare payments with provider costs,
strengthen Medicare program integrity, and put Medicare on a firmer
financial footing.
Section 3022 of the Affordable Care Act amended Title XVIII of the
Act (42 U.S.C. 1395 et seq.) by adding new section 1899 to the Act to
establish a Shared Savings Program. This program is a key component of
the Medicare delivery system reform initiatives included in the
Affordable Care Act and is a new approach to the delivery of health
care. The purpose of the Shared Savings Program is to promote
accountability for a population of Medicare beneficiaries, improve the
coordination of FFS items and services, encourage investment in
infrastructure and redesigned care processes for high quality and
efficient service delivery, and promote higher value care. ACOs that
successfully meet quality and savings requirements share a percentage
of the achieved savings with Medicare. Under the Shared Savings
Program, ACOs share in savings only if they meet both the quality
performance standards and generate shareable savings. Consistent with
the purpose of the Shared Savings Program, we focused on developing
policies aimed at achieving the three-part aim consisting of: (1)
Better care for individuals; (2) better health for populations; and (3)
lower growth in expenditures.
In the November 2, 2011 Federal Register (76 FR 67802), we
published the final rule entitled ``Medicare Program; Medicare Shared
Savings Program: Accountable Care Organizations'' (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. We anticipated that
subsequent rulemaking for the Shared Savings Program would be informed
by lessons learned from our experience with the program as well as from
testing through the Pioneer ACO Model and other initiatives conducted
by the Center for Medicare and Medicaid Innovation (Innovation Center)
under section 1115A of the Act.
Over 330 organizations are now participating in the Shared Savings
Program. We are gratified by stakeholder interest in this program. In
the November 2011 final rule (76 FR 67805), we stated that we intended
to assess the policies for the Shared Savings Program and models being
tested by the Innovation Center to determine how well they were working
and if there were any modifications that would enhance them. As
evidenced by the high degree of interest in participation in the Shared
Savings Program, we believe that the policies adopted in the November
2011 final rule are generally well-accepted. However, we have
identified several policy areas we would like to revisit in light of
the additional experience we have gained during the first 2 years of
program implementation.
We note that in developing the Shared Savings Program, and in
response to stakeholder suggestions, we worked very closely with
agencies across the federal government to develop policies to encourage
participation in the program and to ensure a coordinated inter- and
intra-agency program implementation. The result of this effort was the
release of several documents regarding the application of other
relevant laws and regulations to ACOs. These documents are described in
more detail in section II.C.5. of the November 2011 final rule (76 FR
67840) and include: (1) A joint CMS and DHHS OIG interim final rule
with comment period establishing waivers of the application of the
physician self-referral law, the Federal anti-kickback statute, and
certain civil monetary penalties (CMP) law provisions for specified
arrangements involving ACOs participating in the Shared Savings Program
(76 FR 67992); (2) an Internal Revenue Service (IRS) notice (Notice
2011-20) and fact sheet (FS-2011-11) issued in response to comments
regarding the need for additional tax guidance for tax-exempt
organizations, including tax-exempt hospitals, that may participate in
the Shared Savings Program (see Notice 2011-20 at www.irs.gov//pub/irs-drop/n-11-20.pdf and FS-2011-11 at www.irs.gov/pub/irs-news/fs-2011-11.pdf); and (3) a final Statement of Antitrust Enforcement Policy
Regarding Accountable Care Organizations Participating in the Shared
Savings Program issued jointly by the FTC and DOJ (collectively, the
Antitrust Agencies) and published in the October 28, 2011 Federal
Register (76 FR 67026). We have continued working with these agencies
as we have implemented this program and believe that these materials
continue to offer valuable information regarding a number of issues of
great importance both to our implementation of the Shared Savings
Program and to the entities that participate in the program. We
encourage ACOs and other stakeholders to review and comply with the
referenced documents. Documents can be accessed through the links on
our Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Statutes_Regulations_Guidance.html.

II. Provisions of This Proposed Rule

The purpose of this proposed rule is to propose revisions to some
key policies adopted in the November 2011 final rule (76 FR 67802), to
incorporate in our regulations certain guidance that we have issued
since the Shared Savings Program was established, and to propose
regulatory additions to support program compliance and growth. Our
intent is to encourage continued and enhanced stakeholder
participation, to reduce administrative burden for ACOs while
facilitating their efforts to improve care outcomes, and to maintain
excellence in program operations while bolstering program integrity.

A. Definitions

In the November 2011 final rule (76 FR 67802), we adopted
definitions of key terms for purposes of the Shared Savings Program at
Sec. 425.20. These terms are used throughout this proposed rule. We
encourage readers to review these definitions. Based on our experiences
thus far with the Shared Savings Program and inquiries we received
regarding the defined terms, we propose some additions to the
definitions and a few revisions to the existing definitions.
1. Proposed Definitions
We propose to add several new terms to the definitions in Sec.
425.20. First, we propose to add a definition of ``participation
agreement.'' Specifically,

[[Page 72764]]

we propose to define the term to mean the written agreement required
under Sec. 425.208(a) between the ACO and CMS that, along with the
regulations at part 425, governs the ACO's participation in the Shared
Savings Program. We further propose to make conforming changes
throughout part 425, replacing references to an ACO's agreement with
CMS with the defined term ``participation agreement.'' In addition, we
propose to make a conforming change in Sec. 425.204(c)(1)(i) to remove
the incorrect reference to ``participation agreements'' and replace it
with ``ACO participant agreements.''
Second, we propose to add the related definition of ``ACO
participant agreement.'' Specifically, we propose to define ``ACO
participant agreement'' to mean the written agreement between an ACO
and an ACO participant required at Sec. 425.116 in which the ACO
participant agrees to participate in, and comply with, the requirements
of the Shared Savings Program.
Third, as discussed in greater detail in section II.F. of this
proposed rule, we propose to add a definition for ``assignment
window,'' to mean the 12-month period used to assign beneficiaries to
an ACO.
2. Proposed Revisions to Existing Definitions
a. Definition of ACO Participant
The current definition of ``ACO participant'' states that an ``ACO
participant means an individual or group of ACO provider(s)/
supplier(s), that is identified by a Medicare-enrolled TIN, that alone
or together with one or more other ACO participants comprise(s) an ACO,
and that is included on the list of ACO participants that is required
under Sec. 425.204(c)(5).'' Based on inquiries we have received since
the publication of November 2011 final rule, we believe that there has
been some confusion as to the distinction between an ACO participant
and an ACO provider/supplier. The key point is that an ACO participant
is an entity, not a practitioner, identified by a Medicare-enrolled TIN
(that is, a TIN that is used to bill Medicare for services furnished to
Medicare fee-for-service beneficiaries). An ACO participant may be
composed of one or more ACO providers/suppliers whose services are
billed under a Medicare billing number assigned to the TIN of the ACO
participant. Additionally, we emphasize that the ACO is responsible for
ensuring that all individuals and entities that have reassigned the
right to receive Medicare payment to the TIN of the ACO participant
have also agreed to be ACO providers/suppliers.
We propose to revise the definition of ``ACO participant'' to
clarify that an ACO participant is an entity identified by a Medicare-
enrolled TIN. Additionally, we are correcting a grammatical error by
revising the definition to indicate that one or more ACO participants
``compose,'' rather than ``comprise'' an ACO. We note that a related
grammatical error is corrected at Sec. 425.204(c)(iv). These proposed
changes to the definition of ``ACO participant'' are not intended to
alter the way the Shared Savings Program currently operates.
b. Definition of ACO Professional
Under the current definition at Sec. 425.20, an ``ACO
professional'' means an ACO provider/supplier who is either of the
following:
A physician legally authorized to practice medicine and
surgery by the State in which he performs such function or action.
A practitioner who is one of the following:
++ A physician assistant (as defined at Sec. 410.74(a)(2)).
++ A nurse practitioner (as defined at Sec. 410.75(b)).
++ A clinical nurse specialist (as defined at Sec. 410.76(b)).
We propose to revise the definition of ACO professional to remove
the requirement that an ACO professional be an ACO provider/supplier.
We also propose to revise the definition of ACO professional to
indicate that an ACO professional is an individual who bills for items
or services he or she furnishes to Medicare fee-for-service
beneficiaries under a Medicare billing number assigned to the TIN of an
ACO participant in accordance with Medicare regulations. We are
proposing these modifications because there may be ACO professionals
who furnished services billed through an ACO participant's TIN in the
benchmarking years but are no longer affiliated with the ACO
participant and therefore are not furnishing services billed through
the TIN of the ACO participant during the performance years. These
proposed changes to the definition of ``ACO professional'' are not
intended to alter the way the Shared Savings Program currently
operates.
c. Definition of ACO Provider/Supplier
Under the current definition at Sec. 425.20, an ``ACO provider/
supplier'' means an individual or entity that--(1) is a provider (as
defined at Sec. 400.202) or a supplier (as defined at Sec. 400.202);
(2) is enrolled in Medicare; (3) bills for items and services it
furnishes to Medicare fee-for-service beneficiaries under a Medicare
billing number assigned to the TIN of an ACO participant in accordance
with applicable Medicare regulations; and (4) is included on the
certified list of ACO providers/suppliers that is submitted by the ACO.
We propose to modify the definition to clarify that an individual or
entity is an ACO provider/supplier only when it bills for items and
services furnished to Medicare FFS beneficiaries during the agreement
period under a Medicare billing number assigned to the TIN of an ACO
participant and is included on the list of ACO providers/suppliers that
is required under the proposed regulation at Sec. 425.118. We do not
believe that an individual or entity that may previously have
reassigned the right to receive Medicare payment to an ACO participant,
but that is not participating in the activities of the ACO by
furnishing care to Medicare FFS beneficiaries that is billed through
the TIN of an ACO participant during the ACO's agreement period, should
be considered to be an ACO provider/supplier. Thus, this modification
is intended to clarify that a provider or supplier must bill for items
or services furnished to Medicare FFS beneficiaries through the TIN of
an ACO participant during the ACO's agreement period in order to be an
ACO provider/supplier.
d. Definition of Assignment
Under the current definition at Sec. 425.20, ``assignment'' means
``the operational process by which CMS determines whether a beneficiary
has chosen to receive a sufficient level of the requisite primary care
services from a physician who is an ACO provider/supplier so that the
ACO may be appropriately designated as exercising basic responsibility
for that beneficiary's care.'' As discussed previously in this section,
we are proposing to modify the definition of ``ACO professional'' to
remove the requirement that an ACO professional be an ACO provider/
supplier. Similarly, we believe that for purposes of defining
assignment, it is more appropriate to use the term ``ACO
professional,'' as revised, than the term ``ACO provider/supplier''
because a physician or other practitioner can only be an ACO provider/
supplier if he or she bills for items and services through the TIN of
an ACO participant during the ACO's agreement period and is included on
the list of ACO providers/suppliers required under our regulations.
However, as we discussed previously, there may be an ACO professional
who furnished services billed through an ACO participant's TIN

[[Page 72765]]

in the benchmarking years but is no longer billing through the ACO
participant's TIN during the performance years and therefore cannot be
considered an ACO provider/supplier. For example, a practitioner that
retired before the ACO entered into a participation agreement with CMS
and is no longer billing through the TIN of an ACO participant, and
therefore was not included on the ACO provider/supplier list is not an
ACO provider/supplier. Nevertheless, the services furnished by this ACO
professional and billed through the TIN of an ACO participant would be
considered for purposes of determining beneficiary assignment to the
ACO during the benchmarking period.
In the interests of clarity, we therefore propose to modify the
definition of assignment to reflect that our assignment methodology
takes into account claims for primary care services furnished by ACO
professionals, not solely claims for primary care services furnished by
physicians in the ACO. This revision will ensure consistency with
program operations and alignment with the definition of ``ACO
professional'' since it is the aggregation of the ACO professionals'
claims that impacts assignment. Consistent with section 1899(c) of the
Act, a beneficiary must have at least one primary care service
furnished by a physician in the ACO in order to be eligible for
assignment to the ACO, and this is reflected in the assignment
methodology articulated under subpart E of the Shared Savings Program
regulations. Once a beneficiary is determined to be eligible for
assignment, the beneficiary is then assigned to the ACO if its ACO
professionals have rendered the plurality of primary care services for
the beneficiary as determined under the stepwise assignment methodology
in Sec. 425.402. Thus, we believe the proposed modification to the
definition of ``assignment'' would more accurately reflect the use of
claims for primary care services furnished by ACO professionals that
are submitted through an ACO participant's TIN in determining
beneficiary assignment in the ACO's benchmark and performance years.
Additionally, we propose to make conforming changes as necessary to
the regulations governing the assignment methodology in subpart E of
part 425, to revise the references to ``ACO provider/supplier'' to read
``ACO professional.''
e. Definition of Hospital
We are proposing a technical revision to the definition of
``hospital'' for purposes of the Shared Savings Program. Section
1899(h)(2) of the Act provides that, for purposes of the Shared Savings
Program, the term ``hospital'' means a subsection (d) hospital as
defined in section 1886(d)(1)(B) of the Act. In the November 2011 final
rule (76 FR 67812), we stated that this statutory definition of
hospital thus limits: ''. . . the definition to include only acute care
hospitals paid under the hospital inpatient prospective payment system
(IPPS).'' Consistent with this interpretation, we proposed and
finalized the following definition of ``hospital'' for purposes of the
Shared Savings Program at Sec. 425.20: ``Hospital means a hospital
subject to the prospective payment system specified in Sec.
412.1(a)(1) of this chapter.''
Under this regulatory definition, Maryland acute care hospitals
would not be considered to be hospitals for purposes of the Shared
Savings Program because hospitals in the state of Maryland are subject
to a waiver from the Medicare payment methodologies under which they
would otherwise be paid. However, we have taken the position in other
contexts, for example, for purposes of electronic health record (EHR)
incentive payments (75 FR 44448) and in the FY 2014 IPPS final rule (78
FR 50623), that Maryland acute care hospitals remain subsection (d)
hospitals. This is because these hospitals are ``located in one of the
fifty states or the District of Columbia'' (as provided in the
definition of subsection (d) hospitals at section 1886(d)(1)(B) of the
Act) and are not hospitals that are specifically excluded from that
category, such as cancer hospitals and psychiatric hospitals.
Therefore, we propose to revise the definition of ``hospital'' for
purposes of the Shared Savings Program to provide that a ``hospital''
means a hospital as defined in section 1886(d)(1)(B) of the Act. The
proposed regulation text is consistent with both the statutory
definition of ``hospital'' for purposes of the Shared Savings Program
in section 1899(h)(2) of the Act and the position we have taken in
other contexts in referring to subsection (d) hospitals. The effect of
this change is to clarify that a Maryland acute care hospital is a
``hospital'' for purposes of the Shared Savings Program.
f. Definition of Primary Care Services
We propose to modify the definition of ``primary care services.''
We refer the reader to section II.E.3. of this proposed rule for a more
detailed discussion of the proposed revision to this definition, which
is relevant to the assignment of a Medicare beneficiary to an ACO.
g. Definitions of ``Continuously Assigned Beneficiary'' and ``Newly
Assigned Beneficiary''
As discussed in greater detail in section II.F.3.b. of this
proposed rule, we propose revisions to the definitions of
``continuously assigned beneficiary'' and ``newly assigned
beneficiary.'' These definitions relate to risk adjustment for the
assigned population and require minor modification to accommodate the
newly proposed Track 3.
h. Definition of Agreement Period
In connection with our discussion of the applicability of certain
changes that are made to program requirements during the agreement
period, we propose revisions to the definition of ``agreement period.''
Readers should refer to section II.C.4. of this proposed rule for a
discussion of the proposed changes to the definition.

B. ACO Eligibility Requirements

1. Agreement Requirements
a. Overview
Section 1899(b)(2)(B) of the Act requires participating ACOs to
``enter into an agreement with the Secretary to participate in the
program for not less than a 3-year period.'' If the ACO is approved for
participation in the Shared Savings Program, an executive who has the
ability to legally bind the ACO must sign and submit a participation
agreement to CMS (Sec. 425.208(a)(1)). Under the participation
agreement with CMS, the ACO agrees to comply with the regulations
governing the Shared Savings Program (Sec. 425.208(a)(2)). In
addition, the ACO must require its ACO participants, ACO providers/
suppliers, and other individuals or entities performing functions or
services related to the ACO's activities to agree to comply with the
Shared Savings Program regulations and all other applicable laws and
regulations (Sec. 425.208(b) and Sec. 425.210(b)). 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 (Sec. 425.210(a)). As part of its
application, we currently require each ACO to submit a sample of the
agreement it executes with each of its ACO participants (the ``ACO
participant agreement''). Also, as part of its application and when
requesting the addition of new ACO participants, we require an ACO to
submit evidence that it has a signed written agreement with each of its
ACO participants. (See guidance on our Web site at https://

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www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/
sharedsavingsprogram/Downloads/
Memo_Additional_Guidance_on_ACO_Participants.pdf.) An ACO's application
to participate in the Shared Savings Program and any subsequent request
to add new ACO participants will not be approved if the ACO does not
have an agreement in place with each of its ACO participants in which
each ACO participant agrees to participate in the Shared Savings
Program and to comply with the requirements of the Shared Savings
Program.
In our review of applications to participate in the Shared Savings
Program, we received many ACO participant agreements that were not
properly executed, were not between the correct parties, lacked the
required provisions, contained incorrect information, or failed to
comply with Sec. 425.304(c) relating to the prohibition on certain
required referrals and cost shifting. When we identified such
agreements, ACOs experienced processing delays, and in some cases, we
were unable to approve the ACO applicant and/or its ACO participant to
participate in the Shared Savings Program. Consequently, we issued
guidance for ACO applicants in which we reiterated the required
elements for ACO participant agreements and strongly recommended that
ACOs employ good contracting practices to ensure that each of their ACO
participant agreements met our requirements (see https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Downloads/Tips-ACO-Developing-Participant-Agreements.pdf).
The ACO participant agreements are necessary for purposes of
program transparency and to ensure an ACO's compliance with program
requirements. Moreover, many important program operations (including
calculation of shared savings, assignment of beneficiaries, and
financial benchmarking), use claims and other information that are
submitted to CMS by the ACO participant. Our guidance clarified that
ACO participant agreements and any agreements with ACO providers/
suppliers must contain the following:
An explicit requirement that the ACO participant or the
ACO provider/supplier will comply with the requirements and conditions
of the Shared Savings Program (part 425), including, but not limited
to, those specified in the participation agreement with CMS.
A description of the ACO participants' and ACO providers'/
suppliers' rights and obligations in and representation by the ACO.
A description of how the opportunity to get shared savings
or other financial arrangements will encourage ACO participants and ACO
providers/suppliers to follow the quality assurance and improvement
program and evidence-based clinical guidelines.
Remedial measures that will apply to ACO participants and
ACO providers/suppliers who do not comply with the requirements of
their agreements with the ACO.
Our guidance also requires that the ACO participant agreements be
made directly between the ACO and the ACO participant. We believe it is
important that the parties entering into the agreement have a direct
legal relationship to ensure that the requirements of the agreement are
fully and directly enforceable by the ACO, including the ability of the
ACO to terminate an agreement with an ACO participant that is not
complying with the requirements of the Shared Savings Program.
Additionally, a direct legal relationship ensures that the ACO
participant may, if necessary, terminate the agreement with the ACO
according to the terms of the agreement without interrupting other
contracts or agreements with third parties. Therefore, the ACO and the
ACO participant must be the only parties to an ACO participant
agreement; the agreements may not include a third party to the
agreement. For example, the agreement may not be between the ACO and
another entity, such as an independent practice association (IPA) or
management company that in turn has an agreement with one or more ACO
participants. Similarly, existing contracts between ACOs and ACO
participants that include third parties should not be used.
We recognize that there are existing contractual agreements between
entities (for example, contracts that permit organizations like IPAs to
negotiate contracts with health care payers on behalf of individual
practitioners). However, because it is important to ensure that there
is a direct legal relationship between the ACO and the ACO participant
evidenced by a written agreement, and because ACO participants continue
to bill and receive payments as usual under the Medicare FFS rules
(that is, there is no negotiation for payment under the program) we
believe that typical IPA contracts are generally inappropriate and
unnecessary for purposes of participation in the Shared Savings
Program. An ACO and ACO participant may use a contract unrelated to the
Shared Savings Program as an ACO participant agreement only when it is
between the two parties and is amended to satisfy the requirements for
ACO participant agreements under the Shared Savings Program.
It is the ACO's responsibility to make sure that each ACO
participant agreement identifies the parties entering into the
agreement using their correct legal names, specifies the term of the
agreement, and is signed by both parties to the agreement. We validate
the legal names of the parties based on information the ACO submitted
in its application and the legal name of the entity associated with the
ACO participant's TIN in the Provider Enrollment Chain & Ownership
System (PECOS). We reject an ACO participant agreement if the party
names do not match our records. It may be necessary for the ACO to
execute a new or amended ACO participant agreement.
Although the ACO participant must ensure that each of its ACO
providers/suppliers (as identified by a National Provider Identifier
(NPI)) has agreed to participate in the ACO and will comply with
program rules, the ACO has the ultimate responsibility for ensuring
that all the ACO providers/suppliers that bill through the TIN of the
ACO participant (that is, reassign their right to receive Medicare
payment to the ACO participant) have also agreed to participate in the
Shared Savings Program and comply with our program regulations. The ACO
may ensure this by directly contracting with each ACO provider/supplier
(NPI) or by contractually requiring the ACO participant to ensure that
all ACO providers/suppliers that bill through its TIN have agreed to
participate in, and comply with the requirements of, the Shared Saving
Program. If the ACO chooses to contract directly with the ACO
providers/suppliers, the agreements must meet the same requirements as
the agreements with ACO participants. We emphasize that even if an ACO
chooses to contract directly with the ACO providers/suppliers (NPIs),
it must still have the required ACO participant agreement. In other
words, the ACO must be able to produce valid written agreements for
each ACO participant and each ACO provider/supplier. Furthermore, since
we use TINs (and not merely some of the NPIs that make up the entity
identified by a TIN) as the basis for identifying ACO participants, and
we use all claims submitted under an ACO participant's TIN for
financial calculations and beneficiary assignment, an ACO may not
include an entity as an ACO participant unless all Medicare

[[Page 72767]]

enrolled providers and suppliers billing under that entity's TIN have
agreed to participate in the ACO as ACO providers/suppliers.
To illustrate the requirement that all ACO providers/suppliers must
agree to participate in and comply with the terms of the Shared Savings
Program before the ACO can include the ACO participant's TIN on its
list of ACO participants, we offer the following scenarios that
describe when an ACO participant's TIN may and may not be included on
the applicant's ACO participant list:
Correct: A large group practice (Medicare-enrolled TIN) decides to
participate in an ACO as an ACO participant. Its owner signs an
agreement with the ACO on behalf of the practice to participate in the
program and follow program regulations. Also, all practitioners that
have reassigned their right to receive Medicare payments to the TIN of
the large group practice have also agreed to participate and follow
program regulations. Therefore, the ACO may include this group practice
TIN on its list of ACO participants.
Incorrect: A large group practice (Medicare-enrolled TIN) decides
to participate in an ACO as an ACO participant. Its owner signs an
agreement to participate in the program and follow program regulations.
However, not all practitioners that have reassigned their right to
receive Medicare payment to the group practice TIN have agreed to
participate in the ACO and follow Shared Savings Program regulations.
Therefore, the ACO may not include this group practice TIN on its list
of ACO participants.
Incorrect: Several practitioners in a large group practice
(Medicare-enrolled TIN) decide to participate in an ACO. However, the
group practice as a whole has not agreed to participate in the program.
Therefore, the ACO may not include this group practice TIN on its list
of ACO participants.
We propose to codify much of our guidance regarding the content of
the ACO participant and ACO provider/supplier agreements.
b. Proposed Revisions
First, we propose to add new Sec. 425.116 to set forth the
requirements for agreements between an ACO and an ACO participant or
ACO provider/supplier. We believe the new provision would promote a
better general understanding of the Shared Savings Program and
transparency for ACO participants and ACO providers/suppliers. It is
our intent to provide requirements that would facilitate and enhance
the relationships between ACOs and ACO participants, and reduce
uncertainties and misunderstandings leading to rejection of ACO
participant agreements during application review. Specifically, we
propose to require that ACO participant agreements satisfy the
following criteria:
The ACO and the ACO participant are the only parties to
the agreement.
The agreement must be signed on behalf of the ACO and the
ACO participant by individuals who are authorized to bind the ACO and
the ACO participant, respectively.
The agreement must expressly require the ACO participant
to agree, and to ensure that each ACO provider/supplier billing through
the TIN of the ACO participant agrees, to participate in the Shared
Savings Program and to comply with the requirements of the Shared
Savings Program and all other applicable laws and regulations
(including, but not limited to, those specified at Sec. 425.208(b)).
The agreement must set forth the ACO participant's rights
and obligations in, and representation by, the ACO, including without
limitation, the quality reporting requirements set forth in Subpart F,
the beneficiary notification requirements set forth at Sec. 425.312,
and how participation in the Shared Savings Program affects the ability
of the ACO participant and its ACO providers/suppliers to participate
in other Medicare demonstration projects or programs that involve
shared savings.
The agreement must describe how the opportunity to receive
shared savings or other financial arrangements will encourage the ACO
participant to adhere to the quality assurance and improvement program
and evidence-based medicine guidelines established by the ACO.
The agreement must require the ACO participant to update
enrollment information with its Medicare contractor using the PECOS,
including the addition and deletion of ACO professionals billing
through the TIN of the ACO participant, on a timely basis in accordance
with Medicare program requirements. The Agreement must also require ACO
participants to notify the ACO within 30 days after any addition or
deletion of an ACO provider/supplier.
The agreement must permit the ACO to take remedial action
against the ACO participant, and must require the ACO participant to
take remedial action against its ACO providers/suppliers, including
imposition of a corrective action plan, denial of shared savings
payments (that is, the ability of the ACO participant or ACO provider/
supplier to receive a distribution of the ACO's shared savings) and
termination of the ACO participant agreement, to address noncompliance
with the requirements of the Shared Savings Program and other program
integrity issues, including those identified by CMS.
The term of the agreement must be for at least 1
performance year and must articulate potential consequences for early
termination from the ACO.
The agreement must require completion of a close-out
process upon the termination or expiration of the ACO's participation
agreement that requires the ACO participant to furnish data necessary
to complete the annual assessment of the ACO's quality of care and
addresses other relevant matters.
Although we propose that the term of an ACO participant agreement
be for at least 1 performance year, we do not intend to prohibit early
termination of the agreement. We recognize that there may be legitimate
reasons to terminate an ACO participant agreement. However, because
care coordination and quality improvement requires commitment from ACO
participants, we believe this requirement would improve the likelihood
of success in the Shared Savings Program. We are also considering
whether and how ACO participant agreements should encourage
participation to continue for subsequent performance years. We seek
comment on this issue.
In the case of an ACO that chooses to contract directly with its
ACO providers/suppliers, we propose virtually identical requirements
for its agreements with ACO providers/suppliers. We note that
agreements with ACO providers/suppliers would not be required to be for
a term of 1 year, because we do not want to impede individual
practitioners from activities such as retirement, reassignment of
billing rights, or changing employers. In the case of ACO providers/
suppliers that do not have a contract directly with the ACO, we are
considering requiring each ACO to ensure that its ACO participants
contract with or otherwise arrange for the services of its ACO
providers/suppliers on the same or similar terms as those required for
contracts made directly between the ACO and ACO providers/suppliers.
In addition, we propose to add at Sec. 425.204(c)(6) a requirement
that, as part of the application process and upon request thereafter,
the ACO must submit documents demonstrating that its ACO participants,
ACO providers/suppliers, and other individuals or entities performing
functions or services related to ACO activities are required to comply

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with the requirements of the Shared Savings Program. In the case of ACO
participants, the evidence to be submitted must, consistent with our
past guidance, include executed agreements or sample form agreements
together with the first and last (signature) page of each form
agreement that has been fully executed by the parties to the agreement.
However, we reserve the right, to request all pages of an executed ACO
participant agreement to confirm that it conforms to the sample form
agreement submitted by the ACO. We further propose at Sec. 425.116(c)
that executed ACO participant agreements must also be submitted when an
ACO seeks approval to add new ACO participants. The agreements may be
submitted in the same form and manner as set forth in Sec.
425.204(c)(6). Finally, although we would not routinely request an ACO
to submit copies of executed agreements with its ACO providers/
suppliers or other individuals or entities performing functions or
services related to ACO activities as part of the ACO's application or
continued participation in each performance year, we reserve our right
to request this information during the application or renewal process
and at any other time for audit or monitoring purposes in accordance
with Sec. 425.314 and Sec. 425.316.
We believe that the proposed requirements regarding agreements
between ACOs and ACO participants, together with our earlier guidance
regarding good contracting practices, would enhance transparency
between the ACO, ACO participants, and ACO professionals, reduce
turnover among ACO participants, prevent misunderstandings related to
participation in the Shared Savings Program, and assist prospective
ACOs in submitting complete applications and requests for adding ACO
participants. We believe that codifying these requirements would assist
the ACO, ACO participants, and ACO providers/suppliers in better
understanding the program and their rights and responsibilities while
participating in the program. We solicit comment on the proposed new
requirements and on whether there are additional elements that should
be considered for inclusion in the agreements the ACO has with its ACO
participants and ACO providers/suppliers.
2. Sufficient Number of Primary Care Providers and Beneficiaries
a. Overview
Section 1899(b)(2)(D) of the Act requires participating ACOs to
``include primary care ACO professionals that are sufficient for the
number of Medicare fee-for-service beneficiaries assigned to the ACO .
. .'' and that at a minimum, ``the ACO must have at least 5,000 such
beneficiaries assigned to it. . . .'' Under Sec. 425.110(a)(2) of the
regulations, an ACO is deemed to have initially satisfied the
requirement to have at least 5,000 assigned beneficiaries if the number
of Medicare beneficiaries historically assigned to the ACO participants
in each of the 3 years before the start of the agreement period is
5,000 or more.
Under the beneficiary assignment methodology set forth in the
regulations at part 425, subpart E, the assignment of beneficiaries to
a particular ACO for a calendar year is dependent upon a number of
factors, including where the beneficiary elected to receive primary
care services and whether the beneficiary received primary care
services from ACO professionals participating in one or more Shared
Savings Program ACOs. We note that to ensure no duplication in shared
savings payments for care provided to the same beneficiaries,
assignment of a beneficiary may also be dependent on whether the
beneficiary has been assigned to another initiative involving shared
savings, such as the Pioneer ACO Model (Sec. 425.114(c)). While a
final assignment determination can be made for the first 2 benchmark
years (BY1 and BY2, respectively) for an ACO applying to participate in
the Shared Savings Program, it is not possible to determine the final
assignment for the third benchmark year (BY3) (that is, the calendar
year immediately prior to the start of the agreement period) because
application review and determination of whether the ACO has met the
required 5,000 assignment must take place during BY3 before all claims
are submitted for the calendar year. Further, there is a lag period
after the end of a calendar year during which additional claims for the
year are billed and processed. Therefore, the final historical
benchmark for the 3-year period and the preliminary prospective
assignment for PY1 must be determined after the ACO's agreement period
has already started. We note that we currently estimate the number of
historically assigned beneficiaries for the third benchmark year for
Tracks 1 and 2 by using claims with dates of service for the last 3
months of benchmark year 2 (October through December) and the first 9
months of benchmark year 3 (January through September, with up to 3
months claims run out, as available). We use this approach to calculate
the number of assigned beneficiaries for BY3 in order to be as
consistent as possible with the timeframes (that is, 12 month period)
and claims run out used for the BY1 and BY2 calculations.
Section 425.110(b) provides that an ACO that falls below 5,000
assigned beneficiaries at any time during the agreement period will be
allowed to continue in the program, but CMS must issue a warning letter
and place the ACO on a CAP. The purpose of this provision is to ensure
that the ACO is aware that its number of assigned beneficiaries is
below 5,000, is notified of the consequences of remaining under 5,000,
and that the ACO is taking appropriate steps to correct the deficiency.
Section 425.110(b)(1) provides that, while under the CAP, the ACO
will remain eligible to share in savings for the performance year in
which it fell below the 5,000, and the MSR will be adjusted according
to the number of assigned beneficiaries determined at the time of
reconciliation. For example, according to Table 6 in the November 2011
final rule (42 FR 67928), a Track 1 ACO with an assigned population of
5,000 would have an MSR of 3.9. If the ACO's number of assigned
beneficiaries falls below 5,000, we would work with the CMS Office of
the Actuary to determine the MSR for the number of beneficiaries below
5,000, set at the same 90 percent confidence interval that is used to
determine an ACO's MSR when the ACO has a smaller assigned beneficiary
population. If the number of beneficiaries assigned to the ACO remains
less than 5,000 by the end of the next performance year, the ACO is
terminated and is not be permitted to share in savings for that
performance year (Sec. 425.110(b)(2)).
b. Proposed Revisions
First, we propose to revise Sec. 425.110(a)(2) to clarify the data
used during the application review process to estimate the number of
beneficiaries historically assigned in each of the 3 years of the
benchmarking period. Specifically, we propose that the number of
assigned beneficiaries would be calculated for each benchmark year
using the assignment methodology set forth in Subpart E of part 425,
and in the case of BY3, we would use the most recent data available
with up to a 3-month claims run out to estimate the number of assigned
beneficiaries. This proposed revision would reflect current operational
processes under which we assign beneficiaries to ACOs using complete
claims data for BY1 and BY2 but must rely on incomplete claims data for
BY3. We would likely continue to

[[Page 72769]]

estimate the number of historically assigned beneficiaries for the
third benchmark year by using claims with dates of service for the last
3 months of BY2 and the first 9 months of BY3, with up to 3 months
claims run out. However, that could vary from year to year depending on
data availability during the application review process. As discussed
previously, we believe that using this approach to calculate the number
of assigned beneficiaries for BY3 is consistent with the timeframes and
claims run out used for BY1 and BY2 calculations because we would be
using a full 12 months of claims, rather than the only available claims
for the calendar year, which would be less than 12 months.
The estimates of the number of assigned beneficiaries would be used
during the ACO application review process to determine whether the ACO
exceeds the 5,000 assigned beneficiary threshold for each year of the
historical benchmark period. If based upon these estimates, we
determine that an ACO had at least 5,000 assigned beneficiaries in each
of the benchmark years, it would be deemed to have initially satisfied
the eligibility requirement that the ACO have at least 5,000 assigned
beneficiaries. The specific data to be used for computing these initial
estimates during the ACO application review process would be designated
through program instructions and guidance. Although unlikely, it is
possible that when final benchmark year assignment numbers are
generated after the ACO has been accepted into the program, the number
of assigned beneficiaries could be below 5,000. In this event, the ACO
will be allowed to continue in the program, but may be subject to the
actions set forth in Sec. 425.110(b).
Second, given our experience with the program and the timing of
performance year determinations regarding beneficiary assignment
provided during reconciliation, we wish to modify our rules to provide
greater flexibility to address situations in which an ACO's assigned
beneficiary population falls below 5,000 assigned beneficiaries.
Specifically, we have concerns that in some cases it may be very
difficult for an ACO to increase its number of assigned beneficiaries
by the end of the next performance year, as currently required by Sec.
425.110(b)(2). For example, assume an ACO with a start date of January
2013 were to get its third quarterly report for PY1 in November or
December 2013, and the report indicated that the ACO's preliminary
prospectively assigned beneficiary population had fallen below 5,000.
Under our current regulations, we would send the ACO a warning letter
and place the ACO on a CAP. If the ACO were to fail to increase its
assigned beneficiary population to at least 5,000 by the end of the
next performance year (PY2), it would be terminated. We note that
increasing the number of assigned beneficiaries generally involves
adding new ACO participants and/or ACO providers/suppliers. However, in
the previous example, by the time the ACO had been notified that its
assigned beneficiary population had fallen below 5,000 beneficiaries,
it would have been too late for the ACO to add new ACO participants for
PY2, leaving the ACO with more limited options for timely correction of
the deficit. We believe that Sec. 425.110(b) should be modified to
provide ACOs with adequate time to successfully complete a CAP.
Therefore, we propose to revise Sec. 425.110(b)(2) to state that CMS
will specify in its request for a CAP the performance year during which
the ACO's assigned population must meet or exceed 5,000 beneficiaries.
This modification would permit some flexibility for ACOs whose assigned
populations fall below 5,000 late in a performance year to take
appropriate actions to address the deficit.
Additionally, we do not believe it is necessary to request a CAP
from every ACO whose assigned beneficiary population falls below 5,000.
For example, we should have the discretion not to impose a CAP when the
ACO has already submitted a request to add ACO participants effective
at the beginning of the next performance year and CMS has a reasonable
expectation that the addition of these new ACO participants would
increase the assigned beneficiary population above the 5,000 minimum
beneficiary threshold. Therefore, we propose to revise Sec. 425.110(b)
to indicate that we have the discretion whether to impose any remedial
measures or to terminate an ACO for failure to satisfy the minimum
assigned beneficiary threshold. Specifically, we propose to revise
Sec. 425.110(b) to state that the ACO ``may'' be subject to any of the
actions described in Sec. 425.216 (actions prior to termination,
including a warning letter or request for CAP) and Sec. 425.218
(termination). However, we note that although we are proposing to
retain discretion as to whether to impose remedial measures or
terminate an ACO whose assigned beneficiary population falls below
5,000, we recognize that the requirement that an ACO have at least
5,000 assigned beneficiaries is a condition of eligibility to
participate in the Shared Savings Program under Sec. 1899(b)(2)(D),
and would exercise our discretion accordingly and consistently.
3. Identification and Required Reporting of ACO Participants and ACO
Providers/Suppliers
a. Overview
For purposes of the Shared Savings Program, an ACO is an entity
that is identified by a TIN and comprised of one or more Medicare-
enrolled TINs associated with ACO participants (see Sec. 425.20). The
Medicare-enrolled TINs of ACO participants, in turn, are associated
with Medicare enrolled individuals and entities that bill through the
TIN of the ACO participant. (For example, in the case of a physician,
the physician has reassigned to the TIN of the ACO participant his or
her right to receive Medicare payments, and their services to Medicare
beneficiaries are billed by the ACO participant under a billing number
assigned to the TIN of the ACO participant).
As part of the application process and annually thereafter, the ACO
must submit a certified list identifying all of its ACO participants
and their Medicare-enrolled TINs (the ``ACO participant list'') (Sec.
425.204(c)(5)(i)). Additionally, for each ACO participant, the ACO must
submit a list identifying all ACO providers/suppliers (including their
NPIs or other provider identifiers) that bill Medicare during the
agreement period under a billing number assigned to the TIN of an ACO
participant (the ``ACO provider/supplier list'') (Sec.
425.204(c)(5)(i)(A)). Our regulations require the ACO to indicate on
the ACO provider/supplier list whether an individual is a primary care
physician as defined at Sec. 425.20. All Medicare enrolled individuals
and entities that bill through an ACO participant's TIN during the
agreement period must be on the certified ACO provider/supplier list
and agree to participate in the ACO. ACOs are required to maintain,
update, and annually furnish the ACO participant and ACO provider/
supplier lists to CMS at the beginning of each performance year and at
such other times as may be specified by CMS (Sec. 425.304(d)).
We use TINs identified on the ACO participant list to identify
claims billed to Medicare in order to support the assignment of
Medicare fee-for-service beneficiaries to the ACO, the implementation
of quality and other reporting requirements, and the determination of
shared savings and losses (see section 1899(b)(2)(E) of the Act). We
also use the ACO's initial (and annually updated) ACO participant list
to: Identify parties subject to the

[[Page 72770]]

screenings under Sec. 425.304(b); determine whether the ACO satisfies
the requirement to have a minimum of 5,000 assigned beneficiaries;
establish the historical benchmark; perform financial calculations
associated with quarterly and annual reports; determine preliminary
prospective assignment for and during the performance year; determine a
sample of beneficiaries for quality reporting; and coordinate
participation in the Physician Quality Reporting System (PQRS) under
the Shared Savings Program. Both the ACO participant and ACO provider/
supplier lists are used to ensure compliance with program requirements.
We refer readers to our guidance at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Updating-ACO-Participant-List.html for more information.
In this section, we discuss current policy and procedures regarding
the identification and required reporting of ACO participants and ACO
providers/suppliers. In addition, we propose revisions to our
regulations to improve program transparency by ensuring that all ACO
participants and ACO providers/suppliers are accurately identified.
b. Proposed Revisions
In order to administer the Shared Savings Program, we need to
identify accurately the ACO participants and ACO providers/suppliers
associated with each ACO that participates in the program. An accurate
understanding of the ACO participants is critical for assignment of
beneficiaries to the ACO as well as assessing the quality of care
provided by the ACO to its assigned beneficiaries. An accurate
understanding of the ACO providers/suppliers is also critical for
ensuring compliance with program rules. We believe that this
information is equally critical to the ACO for its own operational and
compliance purposes. Thus, both CMS and the ACO need to have a common
understanding of the individuals and entities that comprise the ACO
participants and ACO providers/suppliers in the ACO. We obtain this
common understanding by requiring the ACO to certify the accuracy of
its ACO participant and ACO provider/supplier lists prior to the start
of each performance year and to update the lists as changes occur
during the performance year. Because we rely on these lists for both
operational and program integrity purposes, we must have a transparent
process that results in the accurate identification of all ACO
participants and ACO providers/suppliers that compose each ACO in the
Shared Savings Program.
We propose to add a new Sec. 425.118 to reflect with more
specificity the requirements for submitting ACO participant and ACO
provider/supplier lists and the reporting of changes to those lists. In
addition, we propose to revise Sec. 425.204(c)(5) and to remove Sec.
425.214(a) and Sec. 425.304(d) because these provisions are addressed
in new Sec. 425.118.
(1) Certified Lists of ACO Participants and ACO Providers/Suppliers
We intend to continue to require ACOs to maintain, update and
submit to CMS accurate and complete ACO participant and ACO provider/
supplier lists, but are proposing to establish new Sec. 425.118 to set
forth the requirements and processes for maintaining, updating, and
submitting the required ACO participant and ACO provider/supplier
lists. New Sec. 425.118 would consolidate and revise provisions at
Sec. 425.204(c)(5), Sec. 425.214(a) and Sec. 425.304(d) regarding
the ACO participant and ACO provider/supplier lists. Specifically, we
propose at Sec. 425.118(a) that prior to the start of the agreement
period and before each performance year thereafter, the ACO must
provide CMS with a complete and certified list of its ACO participants
and their Medicare-enrolled TINs. We would use this ACO participant
list to identify the Medicare-enrolled individuals and entities that
are affiliated with the ACO participant's TIN in PECOS, the CMS
enrollment system. Because these individuals and entities are currently
billing through the Medicare enrolled TIN identified by the ACO as an
ACO participant, they must be included on the ACO provider/supplier
list. We would provide the ACO with a list of all ACO providers/
suppliers (NPIs) that we have identified as billing through each ACO
participant's Medicare-enrolled TIN. In accordance with Sec.
425.118(a), the ACO would be required to review the list, make any
necessary corrections, and certify the lists of all of its ACO
participants and ACO providers/suppliers (including their TINs and
NPIs) as true, accurate, and complete. In addition, we propose that an
ACO must submit certified ACO participant and ACO provider/supplier
lists at any time upon CMS request. We note that all NPIs that reassign
their right to receive Medicare payment to an ACO participant must be
on the certified list of ACO providers/suppliers and must agree to be
ACO providers/suppliers. We propose to clarify this point in
regulations text at Sec. 425.118(a)(4).
Finally, in accordance with developing and certifying the ACO
participant and provider/supplier lists, we propose at Sec. 425.118(d)
to require the ACO to report changes in ACO participant and ACO
provider/supplier enrollment status in PECOS within 30 days after such
changes have occurred (for example, to report changes in an ACO
provider's/supplier's reassignment of the right to receive Medicare
payment or revocation of billing rights). This requirement corresponds
with our longstanding policy that requires enrolled providers and
suppliers to notify their Medicare contractors through PECOS within
specified timeframes for certain reportable events. We recognize that
PECOS is generally not accessible to ACOs to make these changes
directly because most ACOs are not enrolled in Medicare. Therefore, an
ACO may satisfy the requirement to update PECOS throughout the
performance year by requiring its ACO participants to submit the
required information directly in PECOS within 30 days after the change,
provided that the ACO participant actually submits the required
information within 30 days. We propose to require ACOs to include
language in their ACO participant agreements (discussed in section
II.B.1. of this proposed rule) to ensure compliance with this
requirement. We are not proposing to change the current 30-day
timeframe required for such reporting in PECOS. These changes are
consistent with the current requirements regarding ACO participant and
ACO provider/supplier list updates under Sec. 425.304(d) and we
believe that they would enhance transparency and accuracy within the
Shared Savings Program. We further propose to remove Sec. 425.304(d)
because the requirements, although not modified, would be incorporated
into new Sec. 425.118(d).
This revised process should afford the ACO the opportunity to work
with its ACO participants to identify its ACO providers/suppliers and
to ensure compliance with Shared Savings Program requirements.
Currently, we also require the ACO to indicate whether the ACO
provider/supplier is a primary care physician as defined in Sec.
425.20. Because this information is derived from the claims submitted
under the ACO participant's TINs (FQHCs and RHCs being the exception),
we have found this unnecessary to implement the program, so we are
proposing to remove this requirement, which currently appears in Sec.
425.204(c)(5)(i)(A).

[[Page 72771]]

(2) Managing Changes to ACO Participants
Except for rare instances, such as the cessation of ACO participant
operations or exclusion from the Medicare program, we expect ACO
participants to remain in the ACO for the entire 3 year agreement
period. This is due to our belief that care coordination and quality
improvement require the commitment of ACO participants. Moreover, as
noted previously, we utilize the ACO participant list, among other
things, for assigning beneficiaries to the ACO, determining the ACO's
benchmark and performance year expenditures, and drawing the sample for
ACO quality reporting. Nevertheless, we understand that there are
legitimate reasons why an ACO may need to update its list of ACO
participants during the 3-year agreement period. Thus, under current
Sec. 425.214(a), an ACO may add or remove ACO participants (identified
by TINs) throughout a performance year, provided that it notifies CMS
within 30 days of such addition or removal.
If such changes occur, we may, at our discretion, adjust the ACO's
benchmark, risk scores, and preliminary prospective assignment (Sec.
425.214(a)(3)). We articulated the timing of these changes in our
guidance (https://cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Updating-ACO-Participant-List.html), which states
that we adjust the ACO's historical benchmark at the start of a
performance year if the ACO participant list that the ACO certified at
the start of that performance year differs from the one it certified at
the start of the prior performance year. We use the updated certified
ACO participant list to assign beneficiaries to the ACO in the
benchmark period (the 3 years prior to the start of the ACO's agreement
period) in order to determine the ACO's adjusted historical benchmark.
Our guidance provides that, as a result of changes to the ACO's
certified ACO participant list, we may adjust the historical benchmark
upward or downward. We use the new annually certified list of ACO
participants and the adjusted benchmark for the following program
operations: The new performance year's assignment; quality measurement
and sampling; reports for the new performance year; and financial
reconciliation. We provide ACOs with the adjusted Historical Benchmark
Report reflecting these changes.
However, our guidance stated that absent unusual circumstances,
changes in ACO participants that occur in the middle of a performance
year will not result in midyear changes to assignment, sampling for
quality reporting, financial reconciliation, or other matters. As
indicated in our guidance, the midyear removal of an entity from the
ACO participant list due to program integrity issues is one unusual
circumstance that could result in midyear changes to assignment and
other matters. Finally, our guidance states that we do not make
adjustments upon Medicare payment changes such as wage-index
adjustments, or the addition or deletion of ACO participants during the
course of the performance year made by the ACO and ACO participants.
We propose to add new provisions at Sec. 425.118(b) to address the
procedures for adding and removing ACO participants during the
agreement period. These proposals revise the regulations to incorporate
some of the important policies that we have implemented through our
operational guidance as well as some additional proposals to ease the
administrative burden generated by the magnitude of changes made to ACO
participant lists to date.
First, we propose under Sec. 425.118(b)(1) that an ACO must submit
a request to add a new entity to its ACO participant list in the form
and manner specified by CMS and that CMS must approve additions to the
ACO participant list before they can become effective. We do not
believe ACO participants should be admitted into the program if, for
example, the screening conducted under Sec. 425.304(b) reveals that
the entity has a history of program integrity issues, or if the ACO
participant agreement with the entity does not comply with program
requirements, or if the entity is participating in another Medicare
shared savings initiative (Sec. 425.114). If CMS denies the request to
add an entity to the ACO participant list, then the entity is not
eligible to participate in the ACO for the upcoming performance year.
Second, we propose that, if CMS approves the request, the entity
will be added to the ACO participant list at the beginning of the
following performance year. That is, entities that are approved for
addition to the ACO participant list will not become ACO participants,
and their claims would not be considered for purposes of benchmarking,
assignment and other operational purposes, until the beginning of the
next performance year. For example, if an ACO notifies CMS of the
addition of an entity in June of the second performance year (PY2), the
entity would not become an ACO participant and its claims would not be
included in program operations until January 1 of PY3 if CMS approves
the entity's addition.
Third, we propose that an ACO must notify CMS no later than 30 days
after the date of termination of the entity's ACO participant
agreement. The ACO may notify CMS in advance of such termination. The
ACO must submit the notice of removal, which must include the date of
termination, in the form and manner specified by CMS. We propose that
the removal of the ACO participant from the ACO participant list would
be effective on the date of termination of the ACO participation
agreement.
We propose at Sec. 425.118(b)(3)(i) that changes made by an ACO to
its annually certified ACO participant list would result in adjustments
to its historical benchmark, assignment, quality reporting sample, and
the obligation of the ACO to report on behalf of eligible professionals
for certain CMS quality initiatives. We would annually adjust the ACO's
benchmark calculations to include (or exclude) the claims submitted
during the benchmark years by the newly added (or removed) ACO
participants. In other words, the annually certified ACO participant
list is used under Subparts E (assignment of beneficiaries), F (quality
performance assessment), and G (calculation of shared savings/losses)
for the performance year. For example, if an ACO began program
participation in 2013, the PY1 certified list generates an historical
benchmark calculated from claims submitted by the TINs on the PY1
certified list during CY 2010, 2011, and 2012. If the ACO adds ACO
participants during 2013 and certifies an updated list for PY2
reflecting those additions, we would adjust the historical benchmark to
accommodate those changes by recalculating the benchmark using the
claims submitted by the PY2 list of certified ACO participants during
the ACO's same benchmark years (CYs 2010, 2011, and 2012). In this way,
the ACO's benchmark continues to be based on the same 3 years prior to
the start of the ACO's agreement, but ensures that the changes in ACO
composition and performance year calculations retain a consistent
comparison between benchmark and performance during the agreement
period.
As noted previously, adjustment to the ACO's historical benchmark
as a result of changes to the ACO's certified ACO participant list may
move the benchmark upward or downward. We would use the annual
certified ACO participant list and the adjusted benchmark for the new
performance year's beneficiary assignment, quality measurement and
other operations that

[[Page 72772]]

are dependent on the ACO participant list as outlined in our guidance.
We would provide ACOs with an adjusted Historical Benchmark Report that
reflects the new certified ACO participant list. We propose to add this
requirement at Sec. 425.118(b)(3).
We propose at Sec. 425.118(b)(3)(ii) to codify the policy we
established in guidance that, absent unusual circumstances, the removal
of an ACO participant from the ACO participant list during the
performance year must not affect certain program calculations for the
remainder of the performance year in which the removal becomes
effective. Namely, the removal of an entity from the ACO participant
list during the performance year would not affect the ACO's beneficiary
assignment or, by extension, such program operations as the calculation
of the ACO's historical benchmark, financial calculations for quarterly
and annual reporting, the sample of beneficiaries for quality
reporting, or the obligation of the ACO to report on behalf of eligible
professionals for certain quality initiatives. In other words, absent
unusual circumstances, CMS uses only the ACO participant list that is
certified at the beginning of a performance year to assign
beneficiaries to the ACO under Subpart E and to determine the ACO's
quality and financial performance for that performance year under
Subparts F and G. Examples of unusual circumstances that might justify
midyear changes include the midyear removal of an ACO participant due
to avoidance of at-risk beneficiaries or another program integrity
issue.
For example, if an ACO participant is on the ACO's certified list
of ACO participants for the second performance year, and the ACO timely
notifies CMS of the termination of the entity's ACO participant
agreement effective June 30th of PY2, the ACO participant would be
removed from the ACO participant list effective June 30th of PY2.
However, the former ACO participant's TIN would still be used for
purposes of calculating the quality reporting requirements, financial
reports, benchmarking, assignment and reporting of PQRS, meaningful use
of EHR, and the value-based modifier. The ACO participant list that was
certified at the start of the performance year governs the assessment
of the ACO's financial and quality performance for that year,
regardless of changes to the list during the performance year. We
believe this is necessary to help create some stability in the
assessment of the ACO's quality and financial performance for each
performance year. If CMS had to modify underlying program operations
each time an ACO added or removed a TIN from its list of ACO
participants, the ACO would not be able to rely on information (such as
the calculation of the historical benchmark) that we provide before the
beginning of the performance year. We would not make adjustments upon
Medicare payment changes such as wage index adjustments.
We further believe it is important for ACOs to communicate
effectively with ACO participants that seek to join an ACO so that they
understand the potential impact to the ACO, the ACO participant, and
the ACO providers/suppliers affiliated with the ACO participant when an
ACO participant leaves during a performance year. For example, it is
likely that the ACO would be required to report quality data for
beneficiaries that were seen by the former ACO participant in the
previous 12 months. The ACO must work with the former ACO participant
to obtain the necessary quality reporting data. Additionally, the ACO
participant would not be able to qualify for PQRS incentive payment or
avoid the PQRS payment adjustment apart from the ACO for that
performance year. Therefore, it is in the best interest of both parties
to understand this in advance and to commit to working together to
fulfill the obligations for the performance year. To assist ACO and ACO
participants, we have proposed criteria for ACO participant agreements
addressing this issue (see section II.B.1. of this proposed rule).
(3) Managing Changes to ACO Providers/Suppliers
We recognize that ACO providers/suppliers may terminate their
affiliation with an ACO participant or affiliate with new or additional
Medicare-enrolled TINs (which may or may not be ACO participants) on a
frequent basis. Thus, the annual certified ACO provider/supplier list
may quickly become outdated. In order to ensure that CMS and the ACO
have a common understanding of which NPIs are part of the ACO at any
particular point in time, our regulations at Sec. 425.214 set forth
requirements for managing changes to the ACO during the term of the
participation agreement. Specifically, Sec. 425.214(a)(2) and Sec.
425.304(d)(2) require an ACO to notify CMS within 30 days of the
addition or removal of an ACO provider/supplier from the ACO provider/
supplier list.
We are proposing new Sec. 425.118(c) on how to report changes to
the ACO provider/supplier list that occur during the performance year.
Under proposed Sec. 425.118(c), ACOs will continue to be required to
report these changes within 30 days. As discussed later in this
section, we would require the ACO to ensure that changes in ACO
participant and ACO provider/supplier enrollment status are reported in
PECOS. However, because the lists of ACO providers/suppliers cannot be
maintained in PECOS, we propose to require ACOs to notify CMS' Shared
Savings Program separately, in the form and manner specified by CMS, of
the addition or removal of an ACO provider/supplier. At this time, we
anticipate that ACOs will be required to send such notifications via
electronic mail; however, specific guidance regarding this notification
process would be provided by the Secretary on the CMS Web site and/or
through the ACO intranet portal.
We propose that an ACO may add an individual or entity to the ACO
provider/supplier list if it notifies CMS within 30 days after the
individual or entity became a Medicare-enrolled provider or supplier
that bills for items and services it furnishes to Medicare fee-for-
service beneficiaries under a billing number assigned to the TIN of an
ACO participant. If the ACO provides such notice by the 30-day
deadline, the addition of an ACO provider/supplier would be effective
on the date specified in the notice furnished to CMS but no earlier
than 30 days before the date of notice. If the ACO fails to provide
timely notice to CMS regarding the addition of an individual or entity
to the ACO provider/supplier list, then the addition becomes effective
on the date CMS receives notice from the ACO. However, we note that
when an individual has begun billing through the TIN of an ACO
participant but is not on the ACO provider/supplier list, the
individual satisfies the definition of an ACO professional, in which
case his or her claims for services furnished to Medicare fee-for-
service beneficiaries are considered for assignment and other
operational purposes previously described.
Each potential ACO provider/supplier that reassigns his or her
billing rights under the TIN of an ACO participant is screened by CMS
through the enrollment process and PECOS system. Additionally, the
Shared Savings Program conducts additional screening on a biannual
basis for each ACO provider/supplier through the CMS Fraud Prevention
System. In spite of this, we are concerned that our proposed effective
date for the addition of an individual or entity to the ACO provider/
supplier list will prevent us from conducting a robust program
integrity screening of such individuals

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and entities. Therefore, we are considering whether to delay the
effective date of any additions to the ACO provider/supplier list until
after we have completed a program integrity screening of the
individuals or entities that the ACO wishes to add to the list. For
example, we are considering whether to delay the effective date of
additions to the ACO provider/supplier list until the start of the next
performance year, similar to the timing for adding TINs of ACO
participants to the list of ACO participants. In this way, a complete
yearly screening, including screening with the assistance of our law
enforcement partners, could occur at one time for both the ACO
participant list and the ACO provider/supplier list. As noted
previously, until the individual or entity has been officially
designated as an ACO provider/supplier, that individual or entity would
be an ACO professional because of its billing relationship with the ACO
participant. Thus, any claims billed by the ACO professional through
the TIN of the ACO participant would be used for assignment and related
activities during the performance year in which the change takes place,
regardless of whether the individual or entity subsequently becomes an
ACO provider/supplier. We seek comment on this proposal.
We propose that to remove an ACO provider/supplier from the ACO
provider/supplier list, an ACO must notify CMS no later than 30 days
after the individual or entity ceases to be a Medicare-enrolled
provider or supplier that bills for items and services it furnishes to
Medicare fee-for-service beneficiaries under a billing number assigned
to the TIN of an ACO participant. The individual or entity would be
removed from the ACO provider/supplier list effective as of the date
the individual or entity terminates its affiliation with the ACO
participant.
(4) Update of Medicare Enrollment Information
We propose at Sec. 425.118(d) to require the ACO to ensure that
changes in ACO participant and ACO provider/supplier enrollment status
are reported in PECOS consistent with Sec. 424.516 (for example,
changes in an ACO provider's/supplier's reassignment of the right to
receive Medicare payment or revocation of billing rights). As
previously discussed in detail, this requirement corresponds with our
longstanding policy that requires enrolled providers and suppliers to
notify their Medicare contractors through PECOS within specified
timeframes for certain reportable events.
4. Significant Changes to an ACO
a. Overview
Section 425.214(b) requires an ACO to notify CMS within 30 days of
any significant change. A significant change occurs when an ACO is no
longer able to meet the Shared Savings Program eligibility or program
requirements (Sec. 425.214(b)). Upon receiving an ACO's notice of a
significant change, CMS reviews the ACO's eligibility to continue
participating in the Shared Savings Program and, if necessary, may
terminate the ACO's participation agreement (Sec. 425.214 (c)). In
addition, Sec. 425.214(c)(2) provides that CMS may determine that a
significant change has caused the ACO's structure to be so different
from what was approved in the ACO's initial application that it is no
longer able to meet the eligibility or program requirements. Under such
circumstances, CMS would terminate the ACO's participation agreement,
and permit the ACO to submit a new application for program
participation. In the November 2011 final rule (76 FR 67840), we noted
that changes to an ACO participant list could constitute a significant
change to an ACO if, for example, the removal of a large primary care
practice from the list of ACO participants caused the number of
assigned beneficiaries to fall below 5,000.
b. Proposed Revisions
In light of changes proposed in the previous section of this
preamble, we propose to redesignate Sec. 425.214(b) and (c) as Sec.
425.214(a) and (b). Second, we propose to describe when certain changes
to the ACO constitute a significant change to the ACO. We believe that
a change in ownership of an ACO or the addition or deletion of ACO
participants could affect an ACO's compliance with the governance
requirements in Sec. 425.106 or other eligibility requirements. We
note that some changes to the ACO participant list may be of such a
magnitude that the ACO is no longer the entity that was originally
approved for program participation. In addition, depending on the
nature of the change in ownership, the ACO would need to execute a new
participation agreement with CMS if the existing participation
agreement is no longer with the correct legal entity. We believe that
such changes constitute significant changes and should be subject to
the actions outlined under Sec. 425.214(b).
Therefore, we are proposing to specify at Sec. 425.214(a) that a
significant change occurs when the ACO is no longer able to meet the
eligibility or other requirements of the Shared Savings Program, or
when the number or identity of ACO participants included on the ACO
participant list, as updated in accordance with Sec. 425.118, changes
by 50 percent or more during an agreement period. For example, in the
case of an ACO whose initial certified ACO participant list contained
ten ACO participants, five of which gradually left the ACO and either
were not replaced or were replaced with five different ACO
participants, the ACO would have undergone a significant change because
the number or identity of its ACO participants changed by 50 percent.
Similarly, if an ACO's initial certified ACO participant list contains
20 ACO participants, and the ACO incrementally adds 10 new ACO
participants for a total of 30 ACO participants, it would have
undergone a significant change with the addition of the 10th new ACO
participant.
Upon notice that an ACO has experienced a significant change, we
would evaluate the ACO's eligibility to continue participating in the
Shared Savings Program and make one of the determinations listed in the
provision we propose to redesignate as Sec. 425.214(b). We may request
additional information to determine whether and under what terms the
ACO may continue in the program. We note that a determination that a
significant change has occurred would not necessarily result in the
termination of the ACO's participation agreement. We further propose to
modify Sec. 425.214 to provide that an ACO's failure to notify CMS of
a significant change must not preclude CMS from determining that the
ACO has experienced a significant change.
In addition, we are seeking comment on whether we should consider
amending our regulations to clarify that the ACO's notice of a
significant change must be furnished prior to the occurrence of the
significant change. We believe some significant changes could benefit
from a longer notice period, particularly in the case of a change of
ownership that causes the ACO to be unable to comply with program
requirements. Therefore, we seek comment on whether ACOs should be
required to provide 45 or 60 days' advance notice of a significant
change. We also seek comment on what changes in the ACO participant
list should constitute a significant change.

[[Page 72774]]

5. Consideration of Claims Billed by Merged/Acquired Medicare-Enrolled
Entities
a. Overview
As discussed in the November 2011 final rule (76 FR 67843), we do
not believe that mergers and acquisitions by ACO providers and
suppliers are the only way for an entity to become an ACO. The statute
and our regulations permit ACO participants that form an ACO to use a
variety of collaborative organizational structures, including
collaborations other than merger. We reject the proposition that an
entity under single control, that is, an entity formed through a
merger, would be more likely to meet the goals of improved health at a
lower cost. However, we have received questions from industry
stakeholders regarding how previous mergers and acquisitions of
entities with Medicare enrolled billing TINs will be treated for
purposes of the Shared Savings Program. In particular, some applicants
have inquired whether the claims billed to Medicare in previous years
by an entity that has since been merged with, or acquired by, a
different entity could be used to determine whether an applicant meets
the requirement to have at least 5,000 beneficiaries assigned to it in
each of the benchmark years (Sec. 425.110) and to establish the ACO's
historical benchmark and preliminary prospective assignment. To
illustrate, suppose a large group practice that is a prospective ACO
participant recently purchased two small primary care practices, and
the primary care practitioners from those small practices have
reassigned the right to receive Medicare payment to the larger group
practice Medicare-enrolled TIN. In this instance, it is likely that the
primary care providers will continue to serve the same patient
population they served before the practices were purchased, and that
their patients may appear on the ACO's list of assigned beneficiaries
at the end of the performance year. Therefore, applicants and
established ACOs have inquired whether there is a way to take into
account the claims billed by the Medicare-enrolled TINs of practices
acquired by sale or merger for purposes of meeting the minimum assigned
beneficiary threshold and creating a more accurate benchmark and
preliminary prospective list of assigned beneficiaries for the upcoming
performance year. Similarly, an established ACO may request
consideration of the claims billed by the Medicare-enrolled TINs of
entities acquired during the course of a performance year for the same
purposes.
In response to questions from industry stakeholders, we provided
additional guidance on our Web site to all Shared Savings Program
applicants about the requirements related to mergers and acquisitions
(see https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Downloads/Merger-Acquisitions-FAQ.pdf). In this
guidance, we indicated that under the following circumstances, we may
take the claims billed under TINs of entities acquired through purchase
or merger into account for purposes of beneficiary assignment and the
ACO's historical benchmark:
The ACO participant must have subsumed the acquired
entity's TIN in its entirety, including all the providers and suppliers
that reassigned the right to receive Medicare payment to that acquired
entity's TIN.
All the providers and suppliers that previously reassigned
the right to receive Medicare payment to the acquired entity's TIN must
reassign that right to the TIN of the acquiring ACO participant.
The acquired entity's TIN must no longer be used to bill
Medicare.
In order to attribute the billings of merged or acquired TINs to
the ACO's benchmark, the ACO applicant must--
Submit the acquired entity's TIN on the ACO participant
list, along with an attestation stating that all providers and/
suppliers that previously billed under the acquired entity's TIN have
reassigned their right to receive Medicare payment to an ACO
participant's TIN;
Indicate the acquired entity's TIN and which ACO
participant acquired it; and
Submit supporting documentation demonstrating that the
entity's TIN was acquired by an ACO participant through a sale or
merger and submit a letter attesting that the acquired entity's TIN
will no longer be used to bill Medicare.
We note that we require an applicant's list of ACO providers/
suppliers to include all individuals who previously billed under the
acquired entity's TIN to have reassigned their right to receive
Medicare payment to an ACO participant's TIN.
We believe that these requirements are necessary to ensure that
these entities have actually been completely merged or acquired and
that it would be likely that the primary care providers will continue
to serve the same patient population. In this way, the beneficiary
assignments and the benchmarks would be more accurate for ACOs that
include merged or acquired Medicare-enrolled TINs under which their ACO
professionals billed during application or updates to the ACO
participant list.
b. Proposal
We believe the current criteria and processes have been working
well and have benefited both CMS (for example, by providing assurance
that an entity's Medicare-enrolled billing TIN have actually been
acquired through sale or merger) and the affected ACOs (for example, by
allowing for an increase in the ACO's number of appropriately assigned
beneficiaries and providing for a more accurate financial benchmark).
To avoid uncertainty and to establish a clear and consistent process
for the recognition of the claims previously billed by the TINs of
acquired entities, we propose to codify the current operational
guidance on this topic at Sec. 425.204(g) with some minor revisions to
more precisely and accurately describe our proposed policy. Proposed
Sec. 425.204(g) would add the option for ACOs to request consideration
of claims submitted by the Medicare-enrolled TINs of acquired entities
as part of their application, and would address the documentation
requirements for such requests. Although this provision is added in a
section regarding the content of the initial application, we propose to
permit ACOs to annually request consideration of claims submitted by
the TINs of entities acquired through sale or merger upon submission of
the ACO's updated list of ACO participants.
6. Legal Structure and Governance
Section 1899(b)(1) of the Act requires ACO participants to have
established a ``mechanism for shared governance'' in order to be
eligible to participate as ACOs in the Shared Savings Program. In
addition, section 1899(b)(2)(C) of the Act requires the ACO to have a
formal legal structure that allows the organization to receive and
distribute shared savings payments to ACO participants and ACO
providers/suppliers. We believe this requirement is important because a
formal legal structure can ensure the ACO is protected against improper
influence. In this section, we propose clarifications to our rules
related to the ACO's legal entity and governing body. The purpose of
these changes is to clarify our regulations and to ensure that ACO
decision making is governed by individuals who have a fiduciary duty,
including a duty of loyalty, to the ACO alone and not to any other
individuals or entities. We believe these clarifications are relatively
minor and would not significantly impact the program as currently
implemented.

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a. Legal Entity and Governing Body
(1) Overview
As specified in the November 2011 final rule (76 FR 67816) and at
Sec. 425.104(a), an ACO must be a legal entity, formed under
applicable state, federal, or tribal law, and authorized to conduct
business in each state in which it operates for purposes of the
following:
Receiving and distributing shared savings.
Repaying shared losses or other monies determined to be
owed to CMS.
Establishing, reporting, and ensuring provider compliance
with health care quality criteria, including quality performance
standards.
Fulfilling other ACO functions identified in this part.
Additionally, under Sec. 425.104(b), an ACO formed by two or more
``otherwise independent'' ACO participants must be a legal entity
separate from any of its ACO participants. Our regulations at Sec.
425.106(b)(4) further specify that when an ACO comprises ``multiple,
otherwise independent ACO participants,'' the governing body of the ACO
must be ``separate and unique to the ACO''. In contrast, if the ACO is
an ``existing legal entity,'' the ACO governing body may be the same as
the governing body of that existing legal entity, provided it satisfies
all other requirements of Sec. 425.106, including provisions regarding
the fiduciary duties of governing body members, the composition of the
governing body, and conflict of interest policies (Sec.
425.106(b)(5)).
Some applicants have questioned when an ACO needs to be formed as a
separate legal entity, particularly the meaning in Sec. 425.104(b) of
``otherwise independent'' ACO participants. Specifically, applicants
have questioned whether multiple prospective ACO participants are
``otherwise independent'' when they have a prior relationship through,
for example, an integrated health system. In addition, we received some
questions regarding compliance with the governing body requirements set
forth in Sec. 425.106(b)(4) and (5). For example, we received
questions from some IPAs, each of which wanted to apply to the Shared
Savings Program as an ACO using its existing legal structure and
governing body. In some cases, the IPA represented many group
practices, but not every group practice represented by an IPA had
agreed to be an ACO participant. We believe that such an IPA would need
to organize its ACO as a separate legal entity with its own governing
body to ensure that the governing body members would have a fiduciary
duty to the ACO alone, as required by Sec. 425.106(b)(3), and not to
an entity comprised in part by entities that are not ACO participants.
(2) Proposed Revisions
We propose to clarify our regulation text regarding when an ACO
must be formed as a separate legal entity. Specifically, we propose to
remove the reference to ``otherwise independent ACO participants'' in
Sec. 425.104(b). The revised regulation would provide that an ACO
formed by ``two or more ACO participants, each of which is identified
by a unique TIN,'' must be a legal entity separate from any of its ACO
participants. For example, if an ACO is composed of three ACO
participants, each of which belongs to the same health system or IPA,
the ACO must be a legal entity separate and distinct from any one of
the three ACO participants.
In addition, we propose to clarify Sec. 425.106(a), which sets
forth the general requirement that an ACO have an identifiable
governing body with the authority to execute the functions of an ACO.
Specifically, we propose that the governing body must satisfy three
criteria. First, the governing body of the ACO must be the same as the
governing body of the legal entity that is the ACO. Second, in the case
of an ACO that comprises multiple ACO participants the governing body
must be separate and unique to the ACO and must not be the same as the
governing body of any ACO participant. Third, the governing body must
satisfy all other requirements set forth in Sec. 425.106, including
the fiduciary duty requirement. We note that the second criterion
incorporates the requirement that currently appears at Sec.
425.106(b)(4), which provides that the governing body of the ACO must
be separate and unique to the ACO in cases where there are multiple ACO
participants. Accordingly, we propose to remove Sec. 425.106(b)(4). We
further propose to remove Sec. 425.106(b)(5), which provides that if
an ACO is an existing legal entity, its governing body may be the same
as the governing body of that existing entity, provided that it
satisfies the other requirements of Sec. 425.106. In light of our
proposed revision to Sec. 425.106(a), we believe this provision is
unnecessary and should be removed to avoid confusion.
In proposing that the governing body be the same as the governing
body of the legal entity that is the ACO, we intend to preclude
delegation of all ACO decision-making authority to a committee of the
governing body or retention of ACO decision-making authority by a
parent company; ultimate authority for the ACO must still reside with
the governing body. We recognize that the governing body of the legal
entity that is the ACO may wish to organize committees that address
certain matters pertaining to the ACO, but we do not believe that such
committees can constitute the governing body of the ACO. We also
recognize that a parent organization may wish to retain certain
authorities to protect the parent company and ensure the subsidiary's
success; however, the ACO's governing body must retain the ultimate
authority to execute the functions of an ACO. As stated in the
regulations, we believe such functions include such things as
developing and implementing the required processes under Sec. 425.112
and holding leadership and management accountable for the ACO's
activities. We also believe this authority extends to such activities
including the appointment and removal of members of the governing body,
leadership, and management, and determining how shared savings are used
and distributed among ACO participants and ACO providers/suppliers. We
seek comments on this proposal that the ultimate authority for the ACO
to carry out its activities must reside with the governing body of the
ACO.
The purpose of the new provision precluding the governing body of
the ACO from being the same as the governing body of an ACO participant
is to ensure that decisions made on behalf of the ACO are not
improperly influenced by the interests of individuals and entities
other than the ACO. In order to comply with the requirement that the
governing body be separate and unique to the ACO, it must not be
responsible for representing the interests of any entity participating
in the ACO or any entity that is not participating in the ACO. Thus, we
propose the requirement that an ACO's governing body must not be the
same as the governing body of any of the ACO participants.
b. Fiduciary Duties of Governing Body Members
(1) Overview
Our current regulations at Sec. 425.106(b)(3) require that the
governing body members have a fiduciary duty to the ACO and must act
consistent with that fiduciary duty. We have clarified in guidance that
the governing body members cannot meet the fiduciary duty requirement
if the governing body is also responsible for governing the activities
of individuals or entities that are not part of the ACO (See
``Additional Guidance for Medicare Shared Savings Program Accountable
Care Organization (ACO) Applicants''

[[Page 72776]]

located online at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Downloads/Memo_Additional_Guidance_on_ACO_Participants.pdf). For example, in the
case of an IPA that applies as an ACO to the Shared Savings Program, we
believe it would be difficult for the members of the IPA's governing
body to make decisions in the best interests of the ACO if only some of
the group practices that compose the IPA are ACO participants;
decisions affecting the ACO may be improperly influenced by the
interests of group practices that are part of the IPA but are not ACO
participants. For this reason, our regulations require the IPA to
establish the ACO as a separate legal entity. This new legal entity
must have a governing body whose members have a fiduciary
responsibility to the ACO alone and not to any other individual or
entity.
We wish to emphasize that the ACO's governing body decisions must
be free from the influence of interests that may conflict with the
ACO's interests.
(2) Proposed Revisions
We propose to clarify in Sec. 425.106(b)(3) that the fiduciary
duty owed to an ACO by its governing body members includes the duty of
loyalty. This proposal does not represent a change in policy and is
simply intended to emphasize that members of an ACO governing body must
not have divided loyalties; they must act only in the best interests of
the ACO and not another individual or entity, including the individual
interests of ACO participants, ACO professionals, ACO providers/
suppliers, or other individuals or entities.
c. Composition of the Governing Body
(1) Overview
Section 1899(b)(1) requires an ACO to have a ``mechanism for shared
governance'' among ACO participants. Section 425.106(c)(1) of the
regulations requires an ACO to provide for meaningful participation in
the composition and control of the ACO's governing body for ACO
participants or their designated representatives. As we explained in
the November 2011 final rule (76 FR 67819), we believe that an ACO
should be operated and directed by Medicare-enrolled entities that
directly provide health care services to beneficiaries. However, we
acknowledged, that small groups of providers often lack both the
capital and infrastructure necessary to form an ACO and to administer
the programmatic requirements of the Shared Savings Program and could
benefit from partnerships with non-Medicare enrolled entities. For this
reason, we proposed (76 FR 19541) that to be eligible for participation
in the Shared Savings Program, the ACO participants must have at least
75 percent control of the ACO's governing body. In the November 2011
final rule, we explained that this requirement would ensure that ACOs
remain provider-driven, but also leave room for nonproviders to
participate in the program.
In addition, to provide for patient involvement in the ACO
governing process, we specified at Sec. 425.106(c)(2) that an ACO's
governing body must include a Medicare beneficiary served by the ACO
who does not have a conflict of interest with the ACO. We acknowledged
that beneficiary representation on an ACO's governing body may not
always be feasible. For example, commenters raised concerns that
requiring a beneficiary on the governing body could conflict with State
corporate practice of medicine laws or other local laws regarding
governing body requirements for public health or higher education
institutions (76 FR 67821). As a result, we believed it was appropriate
to provide some flexibility for us to permit an ACO to adopt an
alternative structure for its governing body, while still ensuring that
ACO participants and Medicare FFS beneficiaries are involved in ACO
governance.
Accordingly, the November 2011 final rule, offers some flexibility
to permit an ACO to participate in the Shared Savings Program even if
its governing body fails to include a beneficiary or satisfy the
requirement that 75 percent of the governing body be controlled by ACO
participants. Specifically, Sec. 425.106(c)(5) provides that if an
ACO's governing body does not meet either the 75 percent threshold or
the requirement regarding beneficiary representation, it must describe
in its application how the proposed structure of its governing body
would involve ACO participants in innovative ways in ACO governance or
provide a meaningful opportunity for beneficiaries to participate in
the governance of the ACO. For example, under this provision, we
anticipated that exceptions might be needed for ACOs that operate in
states with Corporate Practice of Medicine restrictions to structure
beneficiary representation accordingly. We contemplated that this
provision could also be used by an existing entity to explain why it
should not be required to reconfigure its board if it had other means
of addressing the requirement to include a consumer perspective in
governance (see 76 FR 67821).
(2) Proposed Revisions
We propose to revise Sec. 425.106(c)(5) to remove the flexibility
for ACOs to deviate from the requirement that at least 75 percent
control of an ACO's governing body must be held by ACO participants.
Based on our experience to date with implementing the program, we have
learned that ACO applicants do not have difficulty meeting the
requirement under Sec. 425.106(c)(3) that ACO participants maintain 75
percent control of the governing body. We have not denied participation
to any ACO applicants on the basis of failure to comply with this
requirement, and it has not been necessary to grant any exceptions to
this rule under Sec. 425.106(c)(5). To the contrary, we have found the
75 percent control requirement to be necessary and protective of the
ACO participant's interests. Accordingly, we believe there is no reason
to continue to offer an exception to the rule.
We continue to believe it is important to maintain the flexibility
for ACOs to request innovative ways to provide meaningful
representation of Medicare beneficiaries on ACO governing bodies. Based
on our experience, some ACOs have been unable to include a beneficiary
on their governing body, and these entities have used the process under
Sec. 425.106(c)(5) to establish that they satisfy the requirement for
meaningful beneficiary representation through the use of patient
advisory bodies that report to the governing body of the ACO.
We also propose to revise Sec. 425.106(c)(2) to explicitly
prohibit an ACO provider/supplier from being the beneficiary
representative on the governing body. Some ACO applicants have proposed
that one of their ACO providers/suppliers would serve as the
beneficiary representative on the governing body. We believe it would
be very difficult for an ACO provider/supplier who is Medicare
beneficiary to represent only the interests of beneficiaries, rather
than his or her own interests as an ACO provider/supplier, the
interests of other ACO providers/suppliers, or the interests of the ACO
participant through which he or she bills Medicare. Finally, we are
proposing to revise Sec. 425.106(c)(1) to reiterate the statutory
standard in section 1899(b)(1) of the Act requiring an ACO to have a
``mechanism for shared governance'' among ACO participants. Although we
declined in the November 2011 final rule to promulgate a requirement
that each

[[Page 72777]]

ACO participant be a member of the ACO's governing body (76 FR 67818),
the governing body must nevertheless represent a mechanism for shared
governance among ACO participants. To that end, the governing body of
an ACO that is composed of more than one ACO participant should not,
for example, include representatives from only one ACO participant. For
ACOs that have extensive ACO participant lists, we would expect to see
representatives from many different ACO participants on the governing
body. Our proposal to reiterate the statutory standard for shared
governance in our regulations at Sec. 425.106(c)(1) does not
constitute a substantive change to the program.
7. Leadership and Management Structure
a. Overview
Section 1899(b)(2)(F) of the Act requires an eligible ACO to ``have
in place a leadership and management structure that includes clinical
and administrative systems.'' Under this authority, we incorporated
certain leadership and management requirements into the Shared Savings
Program, as part of the eligibility requirements for program
participation. In the November 2011 final rule (76 FR 67822), we stated
that we believed an ACO's leadership and management structure should
align with and support the goals of the Shared Savings Program and the
three-part aim of better care for individuals, better health for
populations, and lower growth in expenditures.
In the November 2011 final rule (76 FR 67825), we established the
requirement that the ACO's operations be managed by an executive,
officer, manager, general partner, or similar party whose appointment
and removal are under the control of the ACO's governing body and whose
leadership team has demonstrated the ability to influence or direct
clinical practice to improve efficiency, processes, and outcomes (see
Sec. 425.108(b)). In addition, under Sec. 425.108(c), clinical
management and oversight must be managed by a senior-level medical
director who is one of the ACO providers/suppliers, who is physically
present on a regular basis in an established ACO location (clinic,
office or other location participating in the ACO), and who is a board-
certified physician licensed in a State in which the ACO operates. In
Sec. 425.204(c)(1)(iii), we require ACO applicants to submit materials
documenting the ACO's organization and management structure, including
senior administrative and clinical leaders specified in Sec. 425.108.
In the November 2011 final rule (76 FR 67825), we provided
flexibility for ACOs to request an exception to the leadership and
management requirements set forth under Sec. 425.108(b) and (c). We
believed that affording this flexibility was appropriate in order to
encourage innovation in ACO leadership and management structures. In
accordance with Sec. 425.108(e), we reserve the right to give
consideration to an innovative ACO leadership and management structure
that does not comply with the requirements of Sec. 425.108(b) and (c).
We continue to believe that having these key leaders (operational
manager and clinical medical director) is necessary for a well-
functioning and clinically integrated ACO. We have learned from our
experience with the program, over four application cycles, that ACO
applicants generally do not have difficulty in meeting the operational
manager and clinical medical director requirements. Only one ACO has
requested an exception to the medical director requirements. In that
case, the ACO sought the exception in order to allow a physician, who
had retired after a long tenure with the organization to serve as the
medical director of the ACO. We approved this request because, although
the retired physician was not an ACO provider/supplier because he was
no longer billing for physician services furnished during the agreement
period, he was closely associated with the clinical operations of the
ACO, familiar with the ACO's organizational culture, and dedicated to
this one ACO.
In addition, we have received a number of questions from ACO
applicants regarding the other types of roles for which CMS requires
documentation under Sec. 425.204(c)(1)(iii) to evaluate whether an
applicant has a ``. . . leadership and management structure that
includes clinical and administrative systems'' that support the
purposes of the Shared Savings Program and the aims of better care for
individuals, better health for populations, and lower growth in
expenditures, as articulated at Sec. 425.108(a)). In response to such
inquiries regard, we have indicated that we consider an ACO's ``. . .
leadership and management structure that includes clinical and
administrative systems'' to be comprised of the operational manager and
clinical medical director (referenced under Sec. 425.108(b) and (c))
as well as the qualified healthcare professional that is required under
Sec. 425.112(a) to be responsible for the ACO's quality assurance and
improvement program.
b. Proposed Revisions
We propose to amend Sec. 425.108 to provide some additional
flexibility regarding the qualifications of the ACO medical director
and to eliminate the provision permitting some ACOs to enter the
program without satisfying the requirements at Sec. 425.108(b) and (c)
for operations and clinical management. In addition, we propose to
amend Sec. 425.204(c)(iii) to clarify that applicants must submit
materials regarding the qualified health care professional responsible
for the ACO's quality assurance and improvement program. We discuss
each proposal later in this section.
We believe that it is appropriate to amend the medical director
requirement at Sec. 425.108(c) to allow some additional flexibility.
Specifically, we propose to remove the requirement that the medical
director be an ACO provider/supplier. This change would permit an ACO
to have a medical director who was, for example, previously closely
associated with an ACO participant but who is not an ACO provider/
supplier because he or she does not bill through the TIN of an ACO
participant and is not on the list of ACO providers/suppliers.
Alternatively, we may retain the requirement that an ACO's medical
director be an ACO provider/supplier, but permit ACOs to request CMS
approval to designate as its medical director a physician who is not an
ACO provider/supplier but who is closely associated with the ACO and
satisfies all of the other medical director requirements. We seek
comment on whether an ACO medical director who is not an ACO provider/
supplier must have been closely associated with the ACO or an ACO
participant in the recent past. In addition, we propose to clarify that
the medical director must be physically present on a regular basis ``at
any clinic, office, or other location of the ACO, ACO participant or
ACO provider/supplier.'' Currently, the provision incorrectly refers
only to locations ``participating in the ACO.''
However, we continue to strongly believe that the medical director
of the ACO should be directly associated with the ACO's clinical
operations and familiar with the ACO's organizational culture. This is
one purpose of the provision requiring medical directors to be
physically present on a regular basis at any clinic, office, or other
ACO location. A close working relationship with the ACO and its
clinical operations is necessary in order for the medical director to
lead the ACO's efforts to achieve quality improvement and cost
efficiencies.

[[Page 72778]]

We propose to eliminate Sec. 425.108(e), which permits us to
approve applications from innovative ACOs that do not satisfy the
leadership and management requirements related to operations management
and clinical management and oversight set forth at Sec. 425.108(b) and
(c). Based on our experience with the program and the proposed change
to the medical director requirement, we believe it is unnecessary to
continue to allow ACOs the flexibility to request an exception to the
leadership and management requirements related to operations management
and clinical management and oversight (Sec. 425.108(b) and (c)). These
requirements are broad and flexible and have not posed a barrier to
participation in the Shared Savings Program; in fact, in only one
instance has an ACO requested an exception to the operations management
criterion (Sec. 425.108(b)). We are unaware of any alternative
operations management structure that might be considered acceptable,
and we have modified Sec. 425.108(c) to accommodate the one exception
we have granted to date. Accordingly, we propose to revise the
regulations by striking Sec. 425.108(e) to eliminate the flexibility
for ACOs to request an exception to the leadership and management
requirements at Sec. 425.108(b) and (c).
Finally, to clarify questions that have been raised by ACO
applicants and to reduce the need for application corrections, we
propose to modify Sec. 425.204(c)(1)(iii) to require a Shared Savings
Program applicant to submit documentation regarding the qualified
healthcare professional responsible for the ACO's quality assurance and
improvement program (as required by Sec. 425.112(a)).
We seek comment on these changes to the requirements for ACO
leadership and management.
8. Required Process To Coordinate Care
a. Overview
Section 1899(b)(2)(G) of the Act requires an ACO to ``define
processes to . . . coordinate care, such as through the use of
telehealth, remote patient monitoring, and other such enabling
technologies.'' In the November 2011 final rule (76 FR 67829 through
67830), we established requirements under Sec. 425.112(b)(4) that ACOs
define their care coordination processes across and among primary care
physicians, specialists, and acute and postacute providers. As part of
this requirement, an ACO must define its methods and processes to
coordinate care throughout an episode of care and during its
transitions. In its application to participate in the Shared Savings
Program, the ACO must submit a description of its individualized care
program, along with a sample care plan, and explain how this program is
used to promote improved outcomes for, at a minimum, its high-risk and
multiple chronic condition patients. In addition, an ACO's application
must describe target populations that would benefit from individualized
care plans.
In developing these policies for the November 2011 final rule (76
FR 67819), we received comments acknowledging that requiring ACOs to
define processes to promote coordination of care is vital to the
success of the Shared Savings Program. Commenters stressed the
importance of health information exchanges in coordination of care
activities and recommended that CMS allow ACOs the flexibility to use
any standards-based electronic care coordination tools that meet their
needs. Other commenters suggested that the proposed rule anticipated a
level of functional health information exchange and technology adoption
that may be too aggressive.
As stated in Sec. 425.204(c)(1)(ii), applicants to the Shared
Savings Program must provide a description, or documents sufficient to
describe, how the ACO will implement the required processes and
patient-centeredness criteria under Sec. 425.112, including
descriptions of the remedial processes and penalties (including the
potential for expulsion) that will apply if an ACO participant or an
ACO provider/supplier fails to comply with and implement these
processes. Under Sec. 425.112(b), an ACO must establish processes to
accomplish the following: promote evidence-based medicine; Promote
patient engagement; develop an infrastructure to internally report on
quality and cost metrics required for monitoring and feedback; and
coordinate care across and among primary care physicians, specialists
and acute and postacute providers and suppliers.
In addition to the processes described previously, we believe it is
important for applicants to explain how they will develop the health
information technology tools and infrastructure to accomplish care
coordination across and among physicians and providers Adoption of
health information technology is important for supporting care
coordination by ACO participants and other providers outside the ACO in
the following ways: Secure, private sharing of patient information;
reporting on quality data and aggregating data across providers and
sites to track quality measures; and deploying clinical decision
support tools that provide access to alerts and evidence based-
guidelines. As ACOs establish more mature processes for risk
management, information technology infrastructure allows ACOs and
providers to conduct robust financial management of beneficiary
populations, deliver cost and quality feedback reporting to individual
providers, and streamline the administration of risk based contracts
across multiple payers. We believe that requiring ACOs to address
health information technology infrastructure in their application to
the Shared Savings program would support more careful planning and
increased focus on this issue.
b. Accelerating Health Information Technology
HHS believes all patients, their families, and their healthcare
providers should have consistent and timely access to their health
information in a standardized format that can be securely exchanged
between the patient, providers, and others involved in the patient's
care. (HHS August 2013 Statement, ``Principles and Strategies for
Accelerating Health Information Exchange'') HHS is committed to
accelerating health information exchange (HIE) through the use of EHRs
and other types of health information technology (HIT) across the
broader care continuum through a number of initiatives including: (1)
Alignment of incentives and payment adjustments to encourage provider
adoption and optimization of HIT and HIE services through Medicare and
Medicaid payment policies; (2) adoption of common standards and
certification requirements for interoperable HIT; (3) support for
privacy and security of patient information across all HIE-focused
initiatives; and (4) governance of health information networks. These
initiatives are designed to encourage HIE among health care providers,
including professionals and hospitals eligible for the Medicare and
Medicaid EHR Incentive Programs and those who are not eligible for the
EHR Incentive programs as well as those providers that are
participating in the Medicare Shared Savings Program as an ACO and
those that are not, and are designed to improve care delivery and
coordination across the entire care continuum. For example, the
Transition of Care Measure #2 in Stage 2 of the Medicare and Medicaid
EHR Incentive Programs requires HIE to share summary records for at
least 10 percent of care transitions.
We believe that HIE and the use of certified EHRs can effectively
and

[[Page 72779]]

efficiently help ACOs and participating providers improve internal care
delivery practices, support management of patient care across the
continuum, and support the reporting of electronically specified
clinical quality measures (eCQMs).
c. Proposed Revisions
We continue to believe that ACOs should coordinate care between all
types of providers and across all services, and that the secure,
electronic exchange of health information across all providers in a
community is of the utmost importance for both effective care
coordination activities and the success of the Shared Savings Program.
We understand that ACOs will differ in their ability to adopt the
appropriate health information exchange technologies, but we continue
to underscore the importance of robust health information exchange
tools in effective care coordination.
ACOs have reported how important access to real time data is for
providers to improve care coordination across all sites of care,
including outpatient, acute, and postacute sites of care. We believe
that providers across the continuum of care are essential partners to
physicians in the management of patient care. ACOs participating in the
program indicate that they are actively developing the necessary
infrastructure and have been encouraging the use of technologies that
enable real time data sharing among and between sites of care. We
believe having a process and plan in place to coordinate a
beneficiary's care by electronically sharing health information
improves care, and that this helps all clinicians involved in the care
of a patient to securely access the necessary health information in a
timely manner. It also can also be used to engage beneficiaries in
their own care. We further believe that Shared Savings Program
applicants should provide, as part of the application, their plans for
improving care coordination by developing, encouraging, and using
enabling technologies and electronic health records to make health
information electronically available to all practitioners involved in a
beneficiary's care.
Therefore, we propose to add a new requirement to the eligibility
requirements under Sec. 425.112(b)(4)(ii)(C) which would require an
ACO to describe in its application how it will encourage and promote
the use of enabling technologies for improving care coordination for
beneficiaries. Such enabling technologies and services may include
electronic health records and other health IT tools (such as population
health management and data aggregation and analytic tools), telehealth
services (including remote patient monitoring), health information
exchange services, or other electronic tools to engage patients in
their care. We also propose to add a new provision at Sec.
425.112(b)(4)(ii)(D) to require the applicant to describe how the ACO
intends to partner with long-term and postacute care providers to
improve care coordination for the ACO's assigned beneficiaries.
Finally, we propose to add a provision under Sec. 425.112(b)(4)(ii)(E)
to require that an ACO define and submit major milestones or
performance targets it will use in each performance year to assess the
progress of its ACO participants in implementing the elements required
under Sec. 425.112(b)(4). For instance, providers would be required to
submit milestones and targets such as: Projected dates for
implementation of an electronic quality reporting infrastructure for
participants; the number of providers expected to be connected to
health information exchange services by year; or the projected dates
for implementing elements of their care coordination approach, such as
alert notifications on emergency department and hospital visits or e-
care plan tools for virtual care teams. We believe this information
would allow us to better understand and support ACOs' plans to put into
place the systems and processes needed to deliver high quality care to
beneficiaries.
We also note that ACOs have flexibility to use telehealth services
as they deem appropriate for their efforts to improve care and avoid
unnecessary costs. Some ACOs have already reported that they are
actively using telehealth services to improve care for their
beneficiaries. We welcome information from ACOs and other stakeholders
about the use of such technologies. We seek comment on the specific
services and functions of this technology that might be appropriately
adopted by ACOs. For example, does the use of telehealth services and
other technologies necessitate any additional protections for
beneficiaries? Are these technologies necessary for care coordination
or could other methods be used for care coordination? If a particular
technology is necessary, under what circumstances?
9. Transition of Pioneer ACOs Into the Shared Savings Program
a. Overview
The Center for Medicare and Medicaid Innovation (the Innovation
Center) at CMS was established by section 1115A of the Act (as added by
section 3021 of the Affordable Care Act) for the purpose of testing
``innovative payment and service delivery models to reduce program
expenditures . . . while preserving or enhancing the quality of care''
for those individuals who receive Medicare, Medicaid, or Children's
Health Insurance Program (CHIP) benefits. The Pioneer ACO Model is an
Innovation Center initiative designed for organizations with experience
operating as ACOs or in similar arrangements. The Pioneer ACO Model is
testing the impact of using different payment arrangements in helping
these experienced organizations achieve the goals of providing better
care to patients, and reducing Medicare costs. Under section 1899(b)(4)
of the Act, to be eligible to participate in the Shared Savings
Program, a provider of services or supplier may not also be
participating in a program or demonstration project that involves
shared savings, such as the Pioneer ACO Model. Thus, Pioneer ACOs are
not permitted to participate concurrently in the Shared Savings
Program. As Pioneer ACOs complete the model test (the agreement is for
a minimum of 3 years with an option to participate for an additional 2
years), they would have an opportunity to transition to the Shared
Savings Program. We believe it would be appropriate to establish an
efficient process to facilitate this transition in a way that minimizes
any unnecessary burdens on these ACOs and on CMS.
b. Proposed Revisions
In order to do this, we propose to use a transition process that is
similar to the transition process we established previously for
Physician Group Practice (PGP) demonstration participants applying to
participate in the Shared Savings Program. The PGP demonstration,
authorized under section 1866A of the Act, was our first experience
with a shared savings program in Medicare and served as a model for
many aspects of the Shared Savings Program.
In the November 2011 final rule (76 FR 67834), we finalized Sec.
425.202(b), which provides that PGP sites applying for participation in
the Shared Savings Program will be given the opportunity to complete a
condensed application form. This condensed application form requires a
PGP site to provide the information that was required for the standard
Shared Savings Program application but that was not already obtained
through its application for or via its participation in the PGP
demonstration. Also, a PGP participant

[[Page 72780]]

would be required to update any information contained in its
application for the PGP demonstration that was also required on the
standard Shared Savings Program application. Former PGP participants
qualified to use a condensed application form if their ACO legal entity
and TINs of ACO participant were the same as those that participated
under the PGP demonstration.
As we continue to implement the Shared Savings program, we will
likely have a similar situation with regard to Pioneer ACOs that have
completed their current agreement and wish to transition to the Shared
Savings Program. Given that we have been working with and have a level
of familiarity with these organizations similar to that with the PGP
participants, we believe it is also appropriate to consider offering
some latitude with regard to the process for applying to the Shared
Savings Program for these ACOs.
Thus, we propose to revise Sec. 425.202(b) to offer Pioneer ACOs
the opportunity to apply to the Shared Savings Program using a
condensed application if three criteria are satisfied. First, the
applicant ACO must be the same legal entity as the Pioneer ACO. Second,
all of the TINs on the applicant's ACO participant list must have
appeared on the ``Confirmed Annual TIN/NPI List'' (as defined in the
Pioneer ACO Model Innovation Agreement with CMS) for the applicant
ACO's last full performance year in the Pioneer ACO Model. Third, the
applicant must be applying to participate in a two-sided model. We note
that, consistent with the statute and our regulation at Sec. 425.114,
any Pioneer ACO transitioning to the Shared Savings Program must apply
to participate in the Shared Savings Program for an agreement period
that would start after its participation in the Pioneer ACO Model has
ceased. We further note that Pioneer ACOs transitioning to the Shared
Savings Program would be subject to the standard program integrity
screening and an evaluation of their history of compliance with the
requirements of the Pioneer ACO Model.
Regarding the second criterion, we recognize there are differences
between the Pioneer ACO Model and the Shared Savings Program, and that
only some of the NPIs within a TIN might have participated in the
Pioneer ACO. Therefore, for purposes of determining whether a condensed
application will be appropriate under the Shared Savings Program, we
will only compare the TINs and not NPIs. We also recognize that some
TINs may not be able to obtain the consent of all NPIs billing through
the TIN to participate in the Shared Savings Program, which
disqualifies the TIN from participating in the program. Therefore,
unlike with the PGP demonstration sites, we propose to allow the ACO
applicant to complete a condensed application form even if it drops
TINs that participated in its Pioneer ACO. However, if the applicant
ACO includes TINs that were not on the Pioneer ACO's Confirmed Annual
TIN/NPI List for its last full performance year in the Pioneer ACO
Model, the applicant must use the standard application for the Shared
Savings Program. A Pioneer ACO applying to the Shared Savings Program
using a condensed application form will be required to include a
narrative description of the modifications they need to make to fulfill
our requirements (for example, making changes to the governing body and
obtaining or revising agreements with ACO participants and ACO
providers/suppliers).
Because the Pioneer ACO Model is a risk-bearing model designed for
more experienced organizations, the third proposed criterion would
permit Pioneer ACOs to use the condensed application only if they apply
to participate in the Shared Savings Program under a two-sided model.
We established Track 1 of the Shared Savings Program as an on-ramp for
ACOs while they gain experience and become ready to accept risk. In
this case, the Pioneer ACOs are already experienced and will have
already accepted significant financial risk. Therefore, under this
proposal, former Pioneer ACOs would not be permitted to enter the
Shared Savings Program under Track 1. We further note that the rules
and methodologies used under the Pioneer ACO Model to assess
performance-based risk are different than under the Shared Savings
Program. Therefore, we encourage former Pioneer Model ACOs to carefully
consider the risk-based track to which they apply under the Shared
Savings Program, and to be cognizant of the differences in rules and
methodologies.
We seek comments on this proposal to establish a condensed
application process for Pioneer ACOs applying to participate in the
Shared Savings Program and to require such Pioneer ACOs to participate
under a track that includes performance-based risk. Pioneer ACOs that
do not meet criteria for the condensed application would have to apply
through the regular application process.

C. Establishing and Maintaining the Participation Agreement With the
Secretary

1. Background
The November 2011 final rule established procedures for applying to
participate in the Shared Savings Program, including the need to submit
a complete application, the content of the application, and CMS's
criteria for evaluating applications (see Sec. 425.202 through Sec.
425.206). In addition, Sec. 425.212 specifies which changes to program
requirements will apply during the term of an ACO's participation
agreement. In this section we discuss our proposals to clarify and to
supplement the rules related to these requirements.
In addition, while the current regulations address certain issues
with respect to ACOs that wish to reapply after termination or
experiencing a loss during their initial agreement period (Sec.
425.222 and Sec. 425.600(c), respectively). The regulations are
generally silent with respect to the procedures that apply to ACOs that
successfully complete a 3-year agreement and would like to reapply for
a subsequent agreement period in the Shared Savings Program. In this
section, we discuss our proposal to establish the procedure for an ACO
to renew its participation agreement for a subsequent agreement period.
2. Application Deadlines
a. Overview
To obtain a determination on whether a prospective ACO meets the
requirements to participate in the Shared Savings Program, our rules at
Sec. 425.202(a) require that an ACO submit a complete application in
the form and manner required by CMS by the deadline established by CMS.
Information on the required content of applications can be found in
Sec. 425.204, as well as in guidance published at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Application.html. Among other requirements, applications must include
certain information such as an ACO's prior participation in or
termination from the program (Sec. 425.204(b)); documents such as
participation agreements, employment contracts and operating policies
(Sec. 425.204(c)(1)(i)); and a list of all ACO participants and their
Medicare-enrolled TINs (Sec. 425.204(c)(5)(i)).
We determine and publish in advance on our Web site the relevant
due dates for the initial submission of applications

[[Page 72781]]

for each application cycle. While ACOs must submit a completed
application by the initial application due date specified on our Web
site, we recognize that there may be portions of the application where
additional information is necessary for CMS to make a determination.
Therefore, according to Sec. 425.206(a)(2), we notify an applicant
when its application is incomplete and provide an opportunity to submit
information to complete the application by the deadline specified by
CMS.
As stated in Sec. 425.206(a), CMS evaluates an ACO's application
on the basis of the information contained in and submitted with the
application. Applications that remain incomplete after the deadline
specified by CMS are denied. It is incumbent upon the ACO applicant to
submit the information that is required for CMS to decide whether the
applicant is eligible to participate in the program.
b. Proposed Revisions
In implementing the Shared Savings Program, we found that some
applicants misunderstood our application process and the need to submit
all required information by the specified deadline for submission of
applications and supporting information. Thus, we propose to revise our
application review process set forth at Sec. 425.206(a) to better
reflect our review procedures.
First, we propose to consolidate at Sec. 425.206 two similar
provisions regarding application review. Currently, Sec. 425.202(c)(1)
regarding application review provides that CMS determines whether an
applicant satisfies the requirements of Part 425 and is qualified to
participate in the Shared Savings Program, and Sec. 425.202(c)(2)
provides that CMS approves or denies applications accordingly. We
propose to amend Sec. 425.206(a)(1) to address the concept of
application review currently set forth at Sec. 425.202(c)(1), and we
propose to amend Sec. 425.202(c) by replacing the existing text with
language clarifying that CMS reviews applications in accordance with
Sec. 425.206.
Second, we propose to revise Sec. 425.206(a) to better reflect our
application review process and the meaning of the reference to
``application due date.'' Specifically, we propose to revise Sec.
425.206(a)(1) to clarify that CMS approves or denies an application on
the basis of the following: Information contained in and submitted with
the application by the deadline specified by CMS; any supplemental
information submitted by a deadline specified by CMS in response to
CMS' request for information; and other information available to CMS
(including information on the ACO's program integrity history). In
addition, we propose to amend Sec. 425.206(a)(2) to clarify our
process for requesting supplemental information and to add a new
paragraph (a)(3) to specify that CMS may deny an application if an ACO
applicant fails to submit information by the deadlines specified by
CMS. We believe that additional clarity may result in more timely
submission of the information necessary to evaluate applications.
Moreover, it is critical that ACOs submit information on a timely basis
so that we can perform other necessary operational processes before the
start of the approved ACO's first performance year (for example,
determining the number of beneficiaries assigned to the ACO, screening
prospective ACO participants and ACO providers or suppliers,
identifying the preliminary prospective list of assigned beneficiaries,
and calculating the ACO's historical benchmark).
These proposed changes are consistent with our current regulations
and practice. For example, as part of the application review process,
CMS provides feedback to the ACO applicant regarding its list of ACO
participants, and the number of assigned beneficiaries is determined
using this list of ACO participants. If the number of assigned
beneficiaries based on the list of ACO participants submitted with the
application is under 5,000, which is the threshold for eligibility
under Sec. 425.110(a), we give the ACO applicant an opportunity to add
ACO participant TINs. However, the ACO applicant must do so by the
deadline indicated by CMS or the application is denied. Similarly, CMS
denies an application if an ACO applicant fails to timely submit
additional information that is required for CMS to determine whether
the ACO applicant meets program requirements.
3. Renewal of Participation Agreements
a. Overview
For ACOs that would like to continue participating in the Shared
Savings Program after the expiration of their current agreement period,
we propose a process for renewing their existing participation
agreements, rather than requiring submission of a new or condensed
application for continued program participation. Therefore, we propose
to add new Sec. 425.224 to establish procedures for renewing the
participation agreements of ACOs. In addition, we propose to modify the
definition of ``agreement period'' at Sec. 425.20 to clarify its
meaning in the context of participation agreement renewals.
b. Proposed Revisions
Under proposed Sec. 425.224(a), an ACO would be permitted to
request renewal of its participation agreement prior to its expiration
in a form and manner and by the deadline specified by CMS in guidance.
An ACO executive who has the authority to legally bind the ACO must
certify that the information contained in the renewal request is
accurate, complete, and truthful. Further, an ACO that seeks renewal of
its participation agreement and was newly formed after March 23, 2010,
as defined in the Antitrust Policy Statement, must agree that CMS can
share a copy of its renewal request with the Antitrust Agencies. We
anticipate that our operational guidance will outline a process
permitting renewal requests during the last performance year of an
ACO's participation agreement. For example, an ACO with a participation
agreement ending on December 31, 2015 would be offered the opportunity
to renew its participation agreement sometime during the 2015 calendar
year in preparation to begin a new 3-year agreement period on January
1, 2016. To streamline program operations, we anticipate specifying a
timeframe for submission and supplementation of renewal requests that
would generally coincide with the deadlines applicable to submission
and supplementation of applications by new ACO applicants under Sec.
425.202.
Under proposed Sec. 425.224(b), we propose to determine whether to
renew a participation agreement based on an evaluation of all of the
following factors:
Whether the ACO satisfies the criteria for operating under
the selected risk model.
The ACO's history of compliance with the requirements of
the Shared Savings Program.
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 losses, if applicable.
Whether the ACO met the quality performance standards
during at least 1 of the first 2 years of the previous agreement
period.
Whether an ACO under a two-sided model has repaid losses
owed to the program that it generated during the first 2 years of the
previous agreement period.
The results of a program integrity screening of the ACO,
its ACO participants, and its ACO providers/suppliers (conducted in
accordance with Sec. 425.304(b)).

[[Page 72782]]

We solicit comments on these criteria and any additional criteria
that would help ensure the success of the program.
We further propose to approve or deny a renewal request based on
the information submitted in the request and other information
available to CMS. We propose to notify the ACO when the request is
incomplete or inadequate and to provide an opportunity for the ACO to
submit supplemental information to correct the deficiency. The ACO must
submit both the renewal request and any additional information needed
to evaluate the request in the form and manner and by the deadlines
specified by CMS.
Under Sec. 425.224(c), we propose to notify each ACO in writing of
our determination to approve or deny the ACO's renewal request. If we
deny the renewal request, the notice would specify the reasons for the
denial and inform the ACO of any rights to request reconsideration
review in accordance with the procedures specified in part 425 subpart
I.
We believe that a simple renewal process would reduce the burden
for ACOs that wish to continue in the program and minimize the
administrative burden on CMS, which would allow us to focus our
attention on new applicants that have not yet established their
eligibility to participate. We intend to establish the deadlines and
other operational details for this renewal process through guidance and
instructions. Finally, we note that under our proposal to modify the
definition of the participation ``agreement period'' (section II.C.4 of
this proposed rule), a new agreement period would begin upon the start
of the first performance year of the renewed participation agreement.
4. Changes to Program Requirements During the 3-Year Agreement
a. Overview
In the November 2011 final rule (76 FR 67838), we recognized that
we might promulgate changes to the Shared Savings Program regulations
that would become effective while participating ACOs are in the middle
of an agreement period. Therefore, we promulgated a rule to specify
under what conditions an ACO would be subject to regulatory changes
that become effective after the start of its agreement period.
Specifically, we finalized Sec. 425.212(a)(2), which provides that
ACOs are subject to all regulatory changes with the exception of
changes to the eligibility requirements concerning ACO structure and
governance, the calculation of the sharing rate, and the assignment of
beneficiaries (Sec. 425.212(a)(2)). We did not exempt ACOs from
becoming immediately subject to other regulatory changes. For example,
we did not exempt changes such as those related to quality measures
because we believed that requiring ACOs to adhere to changes related to
quality measures would ensure that they keep pace with changes in
clinical practices and developments in evidence-based medicine.
The November 2011 final rule did not require ACOs to be subject to
any regulatory changes regarding beneficiary assignment that become
effective during an agreement period because we recognized that changes
in the beneficiary assignment methodology could necessitate changes to
ACOs' financial benchmarks. At the time we published the November 2011
final rule (76 FR 67838), we had not developed a methodology for
adjusting an ACO's benchmark to reflect changes in the beneficiary
assignment methodology during an agreement period. We anticipated that
ACOs would complete their 3-year agreement period with a relatively
stable set of ACO participants, and therefore they would all have
stable benchmarks during the 3-year agreement period that would require
updates only to reflect annual national FFS trends and changes in
beneficiary characteristics, consistent with statutory requirements.
Without a methodology for adjusting benchmarks to reflect changes in
the beneficiary assignment methodology during the agreement period, we
were reluctant to subject ACOs to immediate regulatory changes that
could impact their benchmarks during the term of a participation
agreement. However, in light of the extensive changes that ACOs have
made to their lists of ACO participants during the first two
performance years, the significant effect that these changes have had
upon beneficiary assignment, and our subsequent development of
additional policies regarding benchmark adjustment at the start of each
performance year to reflect such changes (see https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Updating-ACO-Participant-List.html), we wish to revisit the types of
regulatory changes an ACO would become subject to during its agreement
period. We also propose to clarify Sec. 425.212(a) regarding the
applicability of certain regulatory changes and to clarify the
definition of ``agreement period'' under Sec. 425.20.
b. Proposed Revisions
First, we propose to modify Sec. 425.212(a) to provide that ACOs
are subject to all regulatory changes ``that become effective during
the agreement period,'' except for regulations regarding certain
specified program areas, ``unless otherwise required by statute.'' This
proposed revision corrects the omission of temporal language in the
requirement regarding regulatory changes. In addition, it clarifies
that ACOs would be subject to regulatory changes regarding ACO
structure and governance, and calculation of the sharing rate during an
agreement period if CMS is mandated by statute to implement such
changes by regulation in the middle of a performance year.
Second, we propose to modify the definition of ``agreement period''
at Sec. 425.20. The term ``agreement period'' is currently defined at
Sec. 425.20 to mean ``the term of the participation agreement which
begins at the start of the first performance year and concludes at the
end of the final performance year.'' However, the reference to ``final
performance year'' in the existing definition is ambiguous in light of
our proposal to renew participation agreements (see section II.C.4. of
this proposed rule). For example, if the ``final performance year'' of
the agreement period includes the last performance year of a renewed
participation agreement, an ACO would never be subject to regulatory
changes regarding ACO structure and governance or calculation of the
sharing rate. Therefore, we propose to amend the definition to provide
that the agreement period would be 3 performance years, unless
otherwise specified in the participation agreement. Thus, an ACO whose
participation agreement is renewed for a second or subsequent agreement
period would be subject, beginning at the start of that second or
subsequent agreement period, to any regulatory changes regarding ACO
structure and governance that became effective during the previous 3
years (that is, during the preceding agreement period).
Third, we propose to require ACOs to be subject to any regulatory
changes regarding beneficiary assignment that become effective during
an agreement period. Specifically, we propose to remove beneficiary
assignment as an exception under Sec. 425.212(a). Consistent with our
authority under section 1899(d)(1)(B)(ii) of the Act to adjust the
benchmark ``for beneficiary characteristics and other factors as the
Secretary determines appropriate,'' we have now developed operational

[[Page 72783]]

policies under which we are able to adjust the benchmark on a yearly
basis to account for changes in beneficiary assignment resulting from
changes in the ACO's list of ACO participants. For more detailed
information on these policies see https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Updating-ACO-Participant-List.html. Given that these operational policies enable annual
adjustments to ACO benchmarks to account for changes in beneficiary
assignment resulting from changes in ACO participants, we believe we
would also be able to adjust an ACO's benchmark to account for
regulatory changes regarding beneficiary assignment methodology that
become effective during an agreement period. Accordingly, we do not
believe our proposal to make regulatory changes regarding beneficiary
assignment applicable to ACOs during an agreement period would
inappropriately affect the calculation of an ACO's benchmark or shared
savings for a given performance year. Rather, our adjustment
methodology would ensure continued and appropriate comparison between
benchmark and performance year expenditures.
Under this proposal, regulatory changes regarding beneficiary
assignment would apply to all ACOs, including those ACOs that are in
the middle of an agreement period. However, as discussed in section
II.E.6. of this proposed rule, we also propose that any final policies
that affect beneficiary assignment would not be applicable until the
start of the next performance year. We believe that implementing any
revisions to the assignment methodology at the beginning of a
performance year is reasonable and appropriate because it would permit
time for us to make the necessary programming changes and would not
disrupt the assessment of ACOs for the current performance year.
Moreover, we would adjust all benchmarks at the start of the first
performance year in which the new assignment rules are applied so that
the benchmark for an ACO reflects the use of the same assignment rules
that would apply in the performance year.
We also note that we carefully consider the timing and effect on
both current and future ACOs of any new regulatory proposal, and when
promulgating new regulatory changes, we intend to solicit comment on
these matters. Additionally, when implementing a final rule that
changes our processes and methodologies, we intend to alert current and
prospective ACOs of such changes via CMS communications and updates to
guidance. We request comment on this proposed change to Sec.
425.212(a).

D. Provision of Aggregate and Beneficiary Identifiable Data

1. Background
Under section 1899(b)(2)(A) of the Act, an ACO must ``be willing to
become accountable for the quality, cost, and overall care of the
Medicare fee-for-service beneficiaries assigned to it.'' Further, in
order to be eligible to participate in the Shared Savings Program,
section 1899(b)(2)(G) of the Act states an ``ACO shall define processes
to . . . report on quality and cost measures, and coordinate care. . .
.'' However, section 1899 of the Act does not address what data, if
any, we should make available to ACOs on their assigned beneficiary
populations to support them in evaluating the performance of ACO
participants and ACO providers/suppliers, conducting quality assessment
and improvement activities, or conducting population-based activities
relating to improved health.
As we explained in the November 2011 final rule (76 FR 67844), in
agreeing to become accountable for a group of Medicare beneficiaries,
and as a condition of participation in the Shared Savings Program, we
expect that ACOs will have, or are working towards having, processes in
place to independently identify and produce the data they believe are
necessary to best evaluate the health needs of their patient
population, improve health outcomes, monitor provider/supplier quality
of care and patient experience of care, and produce efficiencies in
utilization of services. Therefore, it is our expectation that ACOs are
actively working on developing and refining these processes. Moreover,
we continue to believe this ability to independently identify and
produce data for evaluating, improving, and monitoring the health of
their patient population is a critical skill for each ACO to develop,
leading to an understanding of the patient population that it serves.
Once the ACO achieves an understanding of its patient population, it
can work toward redesigning appropriate care processes to address the
specific needs of its patient population.
However, as we noted previously (76 FR 67844), while an ACO
typically should have, or at least be moving towards having complete
information for the services its ACO providers/suppliers furnish to
Medicare FFS beneficiaries, we recognize that the ACO may not have
access to information about services provided to its assigned
beneficiaries by health care providers and suppliers outside the ACO--
information that may be key to the ACO's coordination of care efforts.
Therefore, during the original rulemaking process for the Shared
Savings Program, we proposed and made final a policy: (1) To distribute
aggregate-level data reports to ACOs; (2) upon request from the ACO, to
share limited identifying information about beneficiaries who are
preliminarily prospectively assigned to the ACO and whose information
serves as the basis for the aggregate reports; and (3) upon request
from the ACO, to share certain beneficiary identifiable claims data
with the ACO to enable it to conduct quality assessment and improvement
activities and/or conduct care coordination, on its own behalf as a
covered entity, or on behalf of its ACO participants and ACO providers/
suppliers that are covered entities, unless the beneficiary chooses to
decline to share his or her claims data.
As we stated in the November 2011 final rule (76 FR 67844), we
believe that access to beneficiary identifiable information would
provide ACOs with a more complete picture about the care their assigned
beneficiaries receive, both within and outside the ACO. Further, it is
our view that this information would help ACOs evaluate providers'/
suppliers' performance, conduct quality assessment and improvement
activities, perform care coordination activities, and conduct
population-based activities relating to improved health.
In the April 2011 proposed rule (76 FR 19558), we described the
circumstances under which we believed that the HIPAA Privacy Rule would
permit our disclosure of certain Medicare Part A and B data to ACOs
participating in the Shared Savings Program. Specifically, under the
Shared Savings Program statute and regulations, ACOs are tasked with
working with their ACO participants and ACO providers/suppliers to
evaluate their performance, conduct quality assessment and improvement
activities, perform care coordination activities, and conduct
population-based activities relating to improved health for their
assigned beneficiary population. When done by or on behalf of a covered
entity, these are functions and activities that would qualify as
``health care operations'' under the first and second paragraphs of the
definition of health care operations at 45 CFR 164.501. As such, these
activities can be done by an ACO either on its own behalf, if it is
itself a covered entity, or on behalf of its covered entity ACO
participants and

[[Page 72784]]

ACO providers/suppliers, in which case the ACO would be acting as the
business associate of its covered entity ACO participants and ACO
providers/suppliers. Accordingly we concluded that the disclosure of
Part A and B claims data would be permitted by the HIPAA Privacy Rule
provisions governing disclosures for ``health care operations,''
provided certain conditions are met.
As we also discussed, upon receipt of a request for protected
health information (PHI), a covered entity or its business associate is
permitted to disclose PHI to another covered entity or its business
associate for the requestor's health care operations if both entities
have or had a relationship with the subject of the records to be
disclosed (which is true in the Shared Savings Program), the records
pertain to that relationship (which is also true in the Shared Savings
Program), and the recipient asserts in its request for the data that it
plans to use the records for a ``health care operations'' function that
falls within the first two paragraphs of the definition of ``health
care operations'' in the HIPAA Privacy Rule and that the data requested
are the ``minimum necessary'' to carry out those health care
operations. (See, the HIPAA Privacy Rule at 45 CFR 164.502(b) and
164.506(c)(4)). The first two paragraphs of the definition of health
care operations under 45 CFR 164.501 include evaluating a provider's or
supplier's performance, conducting quality assessment and improvement
activities, care coordination activities, and conducting population-
based activities relating to improved health.
With respect to the relationship requirements in 45 CFR
164.506(c)(4), we have a relationship with the individuals who are the
subjects of the requested PHI because they are Medicare beneficiaries.
The ACO has a relationship with such individuals, either as a covered
entity itself or on behalf of its covered entity ACO participants and
ACO providers/suppliers as a business associate, because the
individuals are either preliminarily prospectively assigned to the ACO
or have received a primary care service during the past 12 month period
from an ACO participant upon whom assignment is based. In addition, the
requested PHI pertains to the individuals' relationship with both CMS
and the ACO, in that we provide health care coverage for Medicare FFS
beneficiaries and have an interest in ensuring that they receive high
quality and efficient care, and the ACO is responsible for managing and
coordinating the care of these individuals, who are part of the ACO's
assigned beneficiary population.
Beneficiary identifiable Medicare prescription drug information
could also be used by ACOs to improve the care coordination of their
patient populations. Accordingly, consistent with the regulations
governing the release of Part D data, in the April 2011 proposed rule
(76 FR 19559), we also proposed to make available the minimum Part D
data necessary to allow for the evaluation of the performance of ACO
participants and ACO providers/suppliers, to conduct quality assessment
and improvement, to perform care coordination, and to conduct
population-based activities relating to improved health.
In the November 2011 final rule (76 FR 67846 and 67851), we adopted
a policy that defined when we would share beneficiary identifiable
information (including Part A and B claims data and Part D prescription
drug event data) for preliminarily prospectively assigned beneficiaries
and those beneficiaries who have a primary care visit with an ACO
participant that is used to assign beneficiaries to the ACO. As a basic
requirement, in order to receive such data an ACO that chooses to
access beneficiary identifiable data is required under 42 CFR 425.704
to request the minimum data necessary for the ACO to conduct health
care operations work, either as a HIPAA-covered entity in its own
right, or as the business associate of one or more HIPAA-covered
entities (where such covered entities are the ACO participants and ACO
providers/suppliers), for ``health care operations'' activities that
fall within the first or second paragraph of the definition of health
care operations at 45 CFR 164.501. We note that as part of their
application to participate in the Shared Savings Program, ACOs certify
whether they intend to request beneficiary identifiable information,
and that the requested data reflects the minimum necessary for the ACO
to conduct health care operations either on its own behalf or on behalf
of its covered entity ACO participants and ACO provider/suppliers.
Thus, the ACO's formal request to receive data is accomplished at the
time of its application to the Shared Savings Program. The ACO must
also enter into a data use agreement (DUA) with CMS. If all of these
conditions are satisfied, CMS makes available certain limited PHI
regarding the preliminarily prospectively assigned beneficiaries whose
data were used to generate the aggregate data reports provided to the
ACO under Sec. 425.702(b) and other beneficiaries who have a primary
care visit during the performance year with an ACO participant upon
whom assignment is based. In order to enhance transparency and
beneficiary engagement, we also finalized a policy that before ACOs may
start receiving PHI in the form of beneficiary identifiable claims
data, they must give beneficiaries the opportunity to decline sharing
of their claims data as required under Sec. 425.708.
Since the publication of the November 2011 final rule, we have
gained further experience with sharing data with ACOs participating in
the Shared Savings Program. We continue to believe that distributing
aggregate reports, paired with making available certain beneficiary
identifiable information related to preliminarily prospectively
assigned beneficiaries, as well as making available the claims data for
preliminarily prospectively assigned FFS beneficiaries and other FFS
beneficiaries that have primary care service visits with ACO
participants that submit claims for primary care services that are used
to determine the ACO's assigned population, is worthwhile and
consistent with the goals of the Shared Savings Program. The aggregate
data reports and the beneficiary identifiable information related to
preliminarily prospectively assigned beneficiaries give ACOs valuable
information that can be used to better understand their patient
population, redesign care processes, and better coordinate the care of
their beneficiaries. ACOs participating in the Shared Savings Program
have reported that the beneficiary identifiable claims data that they
receive from us are being used effectively to better understand the FFS
beneficiaries that are served by their ACO participants and ACO
providers/suppliers. These data give ACOs valuable insight into
patterns of care for their beneficiary population; enable them to
improve care coordination among and across providers and suppliers and
sites of care, including providers and suppliers and sites of care not
affiliated with the ACO; and allow them to identify and address gaps in
patient care.
However, based upon our experiences administering the Shared
Savings Program and feedback from stakeholders, we believe that we can
improve our data sharing policies and processes to streamline access to
such data to better support program and ACO function and goals and
better serve Medicare beneficiaries. It is with this in mind that we
propose the following modifications to our data sharing policies and
procedures under the Shared Savings Program.

[[Page 72785]]

2. Aggregate Data Reports and Limited Identifiable Data
a. Overview
Under Sec. 425.702, we share aggregate reports with ACOs at the
beginning of the agreement period based on beneficiary claims used to
calculate the benchmark, at each quarter thereafter on a rolling 12-
month basis, and in conjunction with the annual reconciliation. The
aggregate reports provided under Sec. 425.702(a) and (b) contain
certain de-identified beneficiary information including all of the
following:
Aggregated metrics on the ACO's preliminarily
prospectively assigned beneficiary population, including
characteristics of the assigned beneficiary population, the number of
primary care services provided to the assigned beneficiary population
by the ACO, and the proportion of primary care services provided to the
assigned beneficiary population by ACO participants upon whom
assignment is based.
Expenditure data for the ACO's assigned beneficiary
population by Medicare enrollment type (ESRD, disabled, aged/dual
eligible, aged/non-dual eligible) and type of service (for example,
inpatient hospital, physician, etc.).
Utilization data on select metrics for the assigned
population, such as ambulatory care sensitive conditions discharge
rates per 1,000 beneficiaries for conditions such as congestive heart
failure (CHF) or uncontrolled diabetes, and utilization rates for
imaging, emergency department visits, hospitalizations, and primary
care services.
In addition, under Sec. 425.702(c), we also provide a report that
includes certain beneficiary identifiable information about the
beneficiaries who are preliminarily prospectively assigned to the ACO
and whose data were used to generate the de-identified aggregate data
reports. The information currently contained in this assignment report
includes the beneficiary name, date of birth, HICN, and sex. These
beneficiary identifiable data are made available to an ACO that has met
the conditions previously discussed in detail for purposes of carrying
out population-based activities related to improving health or reducing
growth in health care costs, process development (such as care
coordination processes), case management, and care coordination for the
beneficiary population assigned to the ACO. Under Sec. 425.708(d)
these data points are not subject to the requirement that an ACO give
beneficiaries an opportunity to decline claims data sharing.
Feedback we have received since the November 2011 final rule was
issued and during implementation of the Shared Savings Program,
confirms there is a strong desire among ACOs and their ACO participants
and ACO providers/suppliers to have as much information about their
patients as is possible, in as timely a manner as possible, to better
coordinate care and target care strategies toward individual
beneficiaries. Moreover, ACOs are actively using the reports provided
under Sec. 425.702 to conduct their health care operations work with
the expectation that it will result in higher quality and more
efficient care for their assigned beneficiary populations. However,
ACOs and their ACO participants and ACO providers/suppliers also report
that the four data elements currently made available on the assignment
reports under Sec. 425.702(c)--that is, beneficiary name, date of
birth, HICN, and sex--severely limit their care redesign efforts. They
assert that additional data elements are necessary in order to conduct
health care operations work under the first or second paragraph of the
definition of health care operations at 45 CFR 164.501. For example, an
ACO reported that having data not only on the frequency of
hospitalizations but also on which specific beneficiaries were
hospitalized and in which specific hospitals would better enable it to
identify the effectiveness and outcomes of its post-hospitalization
care coordination processes. Some stakeholders have made suggestions
for beneficiary identifiable data that should be included in the
quarterly reports in addition to the current four data elements, such
as risk profiles or information on whether the beneficiary had a
hospital visit in the past year. Some stakeholders suggested that the
report be expanded to include information not only for the
beneficiaries that received a plurality of their primary care services
from ACO professionals, but also for all FFS beneficiaries that
received a primary care service from an ACO participant in the past
year. These stakeholders argue that understanding the entire FFS
patient population served by the ACO and its ACO participants would
improve their ability to redesign care, and reduce the uncertainty
associated with a list of preliminarily prospectively assigned
beneficiaries that fluctuates from quarter to quarter, based on the
population's use of primary care services.
b. Proposed Revisions
We considered what additional beneficiary identifiable data might
be the minimum necessary to support the ACOs' health care operations
work. Based on our discussions with ACOs and ACO participants and ACO
providers/suppliers, we believe that making additional information
available to ACOs about the FFS beneficiaries they serve, including for
example, on whether a beneficiary visited an emergency room or was
hospitalized, would help support such efforts. Thus, we propose to
expand the information made available to ACOs under Sec. 425.702(c) to
include certain additional beneficiary identifiable data subject to the
existing requirements of Sec. 425.702(c)(2), which incorporates the
requirements under HIPAA governing the disclosure of PHI. Specifically,
in addition to the four data elements (name, date of birth, HICN, and
sex) which are currently made available for preliminarily prospectively
assigned beneficiaries, we propose to expand the beneficiary
identifiable information that is made available under Sec.
425.702(c)(1) to include these data elements (name, date of birth,
HICN, and sex) for each beneficiary that has a primary care service
visit with an ACO participant that bills for primary care services that
are considered in the assignment process in the most recent 12-month
period.
Additionally, we propose to expand the beneficiary identifiable
information made available for preliminarily prospectively assigned
beneficiaries to include additional data points. The information would
be derived from the same claims used to determine the preliminary
prospective assigned beneficiary list. Specifically, we propose that we
would make available the minimum data set necessary for purposes of the
ACO's population-based activities related to improving health or
reducing health care costs, required process development (under Sec.
425.112), care management, and care coordination for its preliminarily
prospectively assigned beneficiary population, at the following times:
(1) At the beginning of the agreement period; (2) at the beginning of
each performance year and quarterly thereafter; and (3) in conjunction
with the annual reconciliation. We would articulate the data elements
associated with the minimum data set in operational guidance, and
update as needed to reflect changes in the minimum data necessary for
ACOs to perform these activities. The information would fall under the
following categories:

[[Page 72786]]

Demographic data such as enrollment status.
Health status information such as risk profile, and
chronic condition subgroup.
Utilization rates of Medicare services such as the use of
evaluation and management, hospital, emergency, and post-acute
services, including dates and place of service.
Expenditure information related to utilization of
services.
We believe that under this approach the data made available in the
aggregate data reports under Sec. 425.702(c) would generally
constitute the minimum data necessary for covered entity ACOs or for
ACOs serving as the business associate of their covered entity ACO
participants and ACO providers/suppliers, to evaluate providers' and
suppliers' performance, conduct quality assessment and improvement
activities, and conduct population-based activities relating to
improved health.
Finally, we note that these proposals for expansion of the data
reports provided under Sec. 425.702(c) to include each FFS beneficiary
that has a primary care visit with an ACO participant that submits
claims for primary care services that are considered in the assignment
process, would apply only to ACOs participating in Tracks 1 and 2,
where beneficiaries are assigned in a preliminarily prospective manner
with retrospective reconciliation. This is because ACOs in Tracks 1 and
2 have an incentive to redesign care processes for all FFS
beneficiaries that receive care from their ACO participants, due to the
nature of the preliminarily prospective assignment methodology with
retrospective reconciliation. Under our proposed Track 3, which is
discussed in detail in section II.F.3.a. of this proposed rule, we
believe that the minimum data necessary for ACOs to perform health care
operations as defined under the first and second paragraphs of the
definition of health care operations at 45 CFR 164.501, would not
extend beyond data needed for health operations related to the
prospective list of assigned beneficiaries. We believe a prospective
assignment approach incentivizes targeting of the specific FFS
beneficiaries on the list for care improvement, rather than redesigning
care processes for all FFS beneficiaries seen by the ACO participants.
As such, the minimum data necessary required for Track 3 ACOs to
perform health care operations work would be limited to the data for
beneficiaries that are prospectively assigned for a performance year.
Thus, for Track 3, we propose to limit the beneficiary identifiable
data included in the reports made available under Sec. 425.702(c) to
only those beneficiaries that appear on the ACO's prospective list of
beneficiaries at the beginning of a performance year. Specifically,
Track 3 ACOs would have access to beneficiary identifiable data
elements associated with the list of categories under Sec. 425.702(c)
for beneficiaries prospectively assigned to the ACO but would not be
able to request any information related to other Medicare FFS
beneficiaries who receive primary care services that are considered in
the assignment process from ACO participants. We believe this
limitation is reasonable because, under Track 3, the prospectively
assigned beneficiary list would encompass all beneficiaries for whom
the ACO would be held accountable in a given performance year, in
contrast to ACOs in Tracks 1 and 2 that would be held accountable for
any FFS beneficiaries that choose to receive a plurality of their
primary care services from ACO professionals billing through the TINs
of ACO participants.
We seek comment on our proposal to expand the data set made
available to ACOs under Sec. 425.702(c). We seek comment on the
categories of information that we have proposed to include and on any
other beneficiary identifiable information that should be offered in
the aggregate reports provided under Sec. 425.702(c) in order to allow
ACOs as covered entities or as the business associate of their covered
entity ACO participants and ACO providers/suppliers to conduct health
care operations work under paragraphs one or two of the definition of
health care operations at 45 CFR 164.501. We also specifically seek
comment on our proposal to expand the list of beneficiaries for which
data are made available under Sec. 425.702(c) to ACOs participating in
Track 1 and Track 2 to include all beneficiaries that had a primary
care service visit with an ACO participant that submits claims for
primary care services that are considered in the assignment process.
3. Claims Data Sharing and Beneficiary Opt-Out
a. Overview
Because Medicare FFS beneficiaries have the freedom to choose their
health care providers and suppliers, and are not required to receive
services from providers and suppliers participating in the ACO, the
patients of ACO participants and ACO providers/suppliers often receive
care from other providers and suppliers that are not affiliated with
the ACO. As a result, ACOs and their ACO participants and ACO
providers/suppliers may not be aware of all of the services an assigned
beneficiary is receiving. Furthermore, under Tracks 1 and 2, we perform
a retrospective reconciliation at the end of each performance year to
determine an ACO's assigned beneficiary population based on
beneficiaries' use of primary care services using the assignment
algorithm described at Sec. 425.402 of the regulations. Therefore,
under Tracks 1 and 2, it is possible that an ACO's preliminary
prospective assigned beneficiary list would not be complete and would
not include all the beneficiaries that would ultimately be assigned to
the ACO at the end of the performance year--that is, all of the
beneficiaries for which the ACO ultimately would be held accountable.
As we discussed in the April 2011 proposed rule (76 FR 19558) and in
the November 2011 final rule (76 FR 67844), we were concerned about
ACOs' ability to do their work in the absence of information about
services delivered outside of the ACO. As we stated at that time, we
believed that it would be important to give ACOs appropriate access to
a beneficiary's identifiable claims data when the beneficiary has
received a primary care service billed through the TIN of an ACO
participant, and is thus a candidate for assignment at the time of
retrospective reconciliation for the performance year. We believed that
sharing beneficiary identifiable claims data would enable ACOs to
better coordinate and target care strategies towards the individual
beneficiaries seen by ACO participants and ACO providers/suppliers.
We ultimately concluded that the bases for disclosure under the
HIPAA Privacy Rule were broad enough to cover CMS's disclosure of
Medicare Parts A and B claims data to ACOs for health care operations
work when certain conditions are met. Similarly, we concluded that the
Part D regulations governing the release of Part D data on prescription
drug use would permit the release of Part D prescription drug event
data to ACOs for purposes of supporting care coordination, quality
improvement, and performance measurement activities. Thus, we concluded
that we are permitted to disclose the minimum Medicare Parts A, B, and
D data necessary to allow ACOs to conduct the health care operations
activities that fall into the first or second paragraph of the
definition of health care operations under the HIPAA Privacy Rule when
such data is requested by the ACO as a covered entity or as the
business

[[Page 72787]]

associate of its covered entity ACO participants and ACO providers/
suppliers. Accordingly, in the November 2011 final rule (76 FR 67851),
we adopted a policy under which an ACO may request Part A and Part B
claims data and Part D prescription drug event data for preliminarily
prospectively assigned beneficiaries and other beneficiaries who
receive primary care services from an ACO participant upon whom
assignment is based. In accordance with the terms of the DUA that the
ACO must enter into with CMS, data received from CMS under the data
sharing provisions of the Shared Savings Program may only be used for
the purposes of clinical treatment, care management and coordination,
quality improvement activities, and provider incentive design and
implementation. In providing the claims data subject to these
limitations, we believed that we would ensure compliance with the
requirements of the HIPAA Privacy Rule and the regulations governing
the release of Part D data.
While the disclosure of claims data in this manner is within the
bounds of the applicable laws, we also noted concerns about
beneficiaries' interests in controlling access to their individually
identifiable health information. Thus, even though we believed that we
had legal authority to make the contemplated disclosures without the
consent of beneficiaries, in the November 2011 final rule (76 FR 67849)
we implemented the additional requirement at Sec. 425.708 that ACOs
offer beneficiaries an opportunity to decline to have their claims data
shared with the ACO. As such, before requesting access to the
beneficiary's data and as part of its broader activities to notify
patients that their health care provider or supplier is participating
in an ACO, the ACO is required to inform beneficiaries that the ACO may
request access to their claims data, and give beneficiaries an
opportunity to decline such claims data sharing.
Under the current opt-out system, once the ACO formally requests
beneficiary identifiable claims data through the application process,
enters into a DUA with CMS, and begins its first performance year, the
ACO must supply beneficiaries with a written notification explaining
their opportunity to decline claims data sharing. Offering
beneficiaries the opportunity to decline claims data sharing may take
two forms under current Sec. 425.708. First, if the ACO has formally
requested beneficiary identifiable claims data as part of the
application process, the ACO must notify each FFS beneficiary of the
opportunity to decline data sharing when the beneficiary has his or her
first visit with an ACO participant upon whom assignment is based.
During this visit, the beneficiary must be provided with written
notification informing him or her of the ACO provider/supplier's
participation in the ACO and that the ACO may request claims
information from CMS in order to better coordinate the beneficiary's
care and for other health operations activities. This written
notification contains template language created by CMS with the
assistance of the Medicare Ombudsman's office and with input from
beneficiaries, and explains the beneficiary's option to decline claims
data sharing. Once the beneficiary has expressed a preference at the
point of care, the ACO may immediately inform CMS of the beneficiary's
data sharing preference. If the beneficiary has not declined data
sharing, CMS makes that beneficiary's data available to the ACO.
We recognized, however, that beneficiaries may not seek primary
care services until later in the performance year. Because of this, we
offered an alternative option to ACOs who met requirements for
receiving beneficiary identifiable claims data. Under the alternative
option, ACOs may contact beneficiaries via a mailed notification that
is sent to all preliminarily prospectively assigned beneficiaries to
notify them of their health care provider's participation in an ACO
under the Shared Savings Program, and the ACO's intent to request
beneficiary identifiable claims data. The mailed notification contains
template language that was developed in conjunction with the Medicare
Ombudsman's office with input from beneficiaries. If the beneficiary
wishes to decline claims data sharing, the beneficiary is instructed to
sign the mailed notification and return it to the ACO or call 1-800-
MEDICARE directly. If the ACO chooses to contact beneficiaries via a
mailed notification, rather than waiting to notify them at the point of
care, the ACO must wait 30 days before submitting the beneficiary's
preference and receiving access to the data for those beneficiaries
that have chosen not to decline claims data sharing. The 30-day waiting
period provides beneficiaries with an opportunity to mail back the
notification or to call 1-800-MEDICARE before the ACO receives access
to their claims data. In addition, in order to ensure transparency,
beneficiary engagement and meaningful choice, the notification and
opportunity to decline claims data sharing must be repeated at the
beneficiary's first primary care visit with an ACO participant upon
whom assignment is based (76 FR 67850 and 67851). Finally, in addition
to the point of care and mailed notifications provided by ACOs, all
Medicare FFS beneficiaries are notified through the Medicare & You
Handbook about ACOs and the opportunity to decline claims data sharing
by contacting CMS directly at 1-800-MEDICARE.
Once the ACO has notified the beneficiaries according to program
rules, and any applicable wait periods are over, the ACO submits the
beneficiaries' preferences to CMS. Beneficiary preferences submitted by
ACOs are combined with preferences received by CMS through 1-800-
MEDICARE. Based on these beneficiary preferences, we generate a claims
file containing the beneficiary identifiable claims data of
beneficiaries that have not declined data sharing. These claims files
are then made available for ACO access on a monthly basis.
Once a beneficiary has declined data sharing, the beneficiary may
choose to reverse the decision by signing another form and sending it
to the ACO (who in turn notifies CMS of the beneficiary's updated
preference) or by calling 1-800-MEDICARE directly. We then include the
beneficiary's claims data in the claims file provided to the ACO the
following month.
In the November 2011 final rule (76 FR 67849), we acknowledged that
it is possible that a beneficiary may decline to have his or her claims
data shared with an ACO but would choose to continue to receive care
from ACO participants and ACO providers/suppliers. In such a case, the
ACO would still be responsible for that beneficiary's care, and, as
such, although the beneficiary's claims data would not be shared with
the ACO, CMS would continue to use the beneficiary's claims data in its
assessment of the ACO's quality and financial performance.
In the November 2011 final rule (76 FR 67849 through 67850) we
expressed our view that beneficiaries should be notified of their
health care provider's participation in an ACO in order to have some
control over who has access to their health information for purposes of
the Shared Savings Program. Further, we indicated that the requirement
that an ACO provider/supplier engage patients in a discussion about the
inherent benefits, as well as the potential risks, of claims data
sharing provided an opportunity for true patient-centered care and
would create incentives for ACOs, ACO participants, and ACO providers/
suppliers to develop

[[Page 72788]]

positive relationships with each beneficiary under their care.
Additionally, we stated that this policy would provide ACO participants
and ACO providers/suppliers the opportunity to engage with
beneficiaries by explaining the Shared Savings Program and its
potential benefits for both the beneficiaries and the health care
system as a whole.
Since implementation of the Shared Savings Program, we have shared
claims data on over 5 million beneficiaries with over 300 Shared
Savings Program ACOs. We have received informal feedback from ACOs that
are putting the opt-out requirement into practice, and from
beneficiaries who have received notifications from an ACO that wanted
to request access to their claims data. We have learned the following
from this feedback:
The option for ACOs to mail notifications and then conduct
in-office follow-up adds to ACOs' financial costs and delays their
ability to access claims data in a timely manner. ACOs must wait until
January 1 of the first performance year to send out mailings. After
waiting the requisite 30 days, the earliest the ACO may submit
beneficiary preferences to CMS is in February. The first set of claims
data is then available in mid-March. In addition, some ACOs struggle
with obtaining current mailing information for preliminarily
prospectively assigned beneficiaries, which can delay the mailing of
notifications to later in the performance year. Thus, the earliest
opportunity for ACOs to receive claims data is mid-February, and that
is only the claims data for beneficiaries who visited primary care
providers in early January and were given the opportunity to decline
claims data sharing at the point of care.
Stakeholders, including ACOs, ACO participants, and ACO
providers/suppliers, continually confuse the notification regarding the
ACO's intent to request access to claims data with the separate
requirement that all FFS beneficiaries must be notified of ACO
participants' and ACO providers/suppliers' participation in the
program. Beneficiaries must be notified at the point of care of the ACO
participants' and ACO providers/suppliers' participation in an ACO,
regardless of whether the ACO has or intends to request access to
claims data.
ACOs have commented that beneficiaries are confused about
why their providers do not already have access to information regarding
other care they may receive, which potentially erodes rather than
strengthens the patient-provider relationship. Beneficiaries often
assume their providers have all the information they need to care for
them. However, as noted previously, the ACO, its ACO participants, and
ACO providers/suppliers would not have claims data for services
rendered outside the ACO, and would not necessarily have knowledge
about that care.
Beneficiaries can choose to receive care from providers
outside an ACO, so beneficiaries may receive notices regarding data
sharing from more than one ACO. This is most likely to occur in markets
with high ACO penetration where a beneficiary may receive primary care
services from several different ACO professionals, each participating
in different ACOs. Beneficiaries report confusion, concern, and
annoyance over receiving multiple mailings from ACOs, and question why
their health care providers do not already have the information they
need to appropriately coordinate their care.
Beneficiaries receiving the notifications giving them the
opportunity to decline claims data sharing may mistakenly believe they
are being asked to ``opt-out'' of ACO care and/or Medicare FFS, or that
they have been placed in a managed care plan without their consent.
Beneficiaries that receive the letters in the mail
notifying them of their provider's participation in an ACO and offering
them the opportunity to decline claims data sharing often mistakenly
believe that these letters are fraudulent and do not know what to do.
Many ACOs are entities that have been newly formed by providers and
suppliers for purposes of participating in the Shared Savings Program.
While the beneficiary may have a strong relationship with his or her
primary care provider, the beneficiary may not recognize the name of
the newly formed ACO and therefore may have concerns and question the
legitimacy of the notification.
Our data indicate that approximately 2 percent of
beneficiaries have declined claims data sharing. This is consistent
with other CMS initiatives that have included data sharing, such as the
Medicare Health Support demonstration, the Multi-Payer Advanced Primary
Care Practice demonstration, the Physician Group Practice
demonstration, and the Physician Group Practice Transition
demonstration.
As discussed previously, beneficiaries currently have the
opportunity to decline claims data sharing by responding to the letters
that ACOs send to their preliminarily prospectively assigned
beneficiaries, by informing an ACO provider/supplier during a face-to-
face primary care service visit, or by contacting 1-800-MEDICARE
directly. We continue to be committed to offering beneficiaries some
control over ACO access to their beneficiary identifiable information
for purposes of the Shared Savings Program. However, in light of the
feedback we have received, we were motivated to review our claims data
sharing policies and processes to determine what refinements could be
made to mitigate the concerns raised by stakeholders regarding the
burden imposed on both beneficiaries and those entities participating
in the Shared Savings Program. We considered several aspects of our
claims data sharing policies, including the use of various formats to
communicate with beneficiaries regarding claims data sharing under the
program such as: Mailed notifications to the list of preliminarily
prospectively assigned beneficiaries by the ACO; face-to-face
discussions with healthcare providers during primary care visits; and
CMS's use of 1-800-MEDICARE and the Medicare & You Handbook. As
discussed in the April 2011 proposed rule (76 FR 19558) and the
November 2011 final rule (76 FR 67846), we are convinced by
stakeholders that Medicare claims data provide an important supplement
to the data to which the ACO and its ACO participants and ACO
providers/suppliers already have access. Current law allows CMS to
share certain beneficiary identifiable claims data with ACOs when those
data are necessary for purposes of certain health care operations.
HIPAA does not require that beneficiaries be presented with an
opportunity to decline claims data sharing before their PHI can be
shared. Moreover, several other CMS initiatives, including the Medicare
Health Support demonstration, the Multi-Payer Advanced Primary Care
Practice demonstration, the Physician Group Practice demonstration, and
the Physician Group Practice Transition demonstration, have
successfully shared claims data with providers in the absence of an
opportunity for beneficiaries to decline claims data sharing.
Therefore, we considered how to retain meaningful beneficiary choice in
claims data sharing while reducing the confusion and burden caused by
our current claims data sharing policies. We believe meaningful
beneficiary choice in claims data sharing is maintained when the
purpose and rationale for such claims data sharing are transparent and
communicated to beneficiaries, and there is a mechanism in place for
beneficiaries to decline claims data

[[Page 72789]]

sharing. Thus, in revisiting our claims data sharing policies, we
sought to maintain claims data sharing transparency and a mechanism for
beneficiaries to decline claims data sharing.
b. Proposed Revisions
Based on our experiences with data sharing under the Shared Savings
Program to date, we are proposing to modify our processes and policy
for claims data sharing while remaining committed to retaining
meaningful beneficiary choice over claims data sharing with ACOs.
First, we propose to provide beneficiaries with the opportunity to
decline claims data sharing directly through 1-800-MEDICARE, rather
than through the ACO. We note that 1-800-MEDICARE has the capability
for beneficiaries to use accessible alternative or appropriate
assistive technology, if needed. We would continue to maintain a list
of beneficiaries that have declined data sharing and ensure that their
claims information is not included in the claims files shared with
ACOs. Second, we propose to provide advance notification to all FFS
beneficiaries about the opportunity to decline claims data sharing with
ACOs participating in the Shared Savings Program through CMS materials
such as the Medicare & You Handbook. The Handbook would include
information about the purpose of the program, describe the opportunity
for ACOs to request beneficiary identifiable claims data for health
care operations purposes, and provide instructions on how beneficiaries
may decline claims data sharing by contacting CMS directly through 1-
800-MEDICARE. The Handbook would also contain instructions on how a
beneficiary may reverse his or her preference to decline claims data
sharing by contacting 1-800-MEDICARE. Third, to reduce burden for both
beneficiaries and ACOs, we propose to remove the option for ACOs to
mail notifications to beneficiaries and for beneficiaries to sign and
return the forms to the ACO in order to decline claims data sharing.
This process would be replaced by a simpler, direct process through
notification at the point of care and through 1-800-MEDICARE as
described previously.
We also propose to continue to require that ACO participants notify
beneficiaries in writing at the point of care that their providers and
suppliers are participating in the Shared Savings Program as required
under Sec. 425.312(a). We propose that ACO participants would continue
to be required to post signs in their facilities using required
template language. Rather than requiring ACO participants furnishing
primary care services to provide a written form regarding claims data
sharing to all beneficiaries who have a primary care service office
visit, we propose to update the required notification template language
for these signs to include information regarding claims data sharing.
We would update the template language with the assistance of the
Medicare Ombudsman's Office and beneficiary input to inform
beneficiaries about both the Shared Savings Program and also that the
ACO may request access to beneficiary identifiable claims data from CMS
in order to perform health care operations as defined under the first
and second paragraphs of the definition of health care operations at 45
CFR 164.501. The signs would also provide beneficiaries with
information about their opportunity to decline this data sharing and
instructions to call 1-800-MEDICARE if they would prefer that we not
share their claims data with an ACO and its ACO participants and ACO
providers/suppliers. The signs would likewise include instructions for
how beneficiaries may reverse their opt-outs through 1-800-MEDICARE, if
they determine in the future they would prefer to have their claims
data made available to ACOs and their ACO participants and ACO
providers/suppliers. Because ACO participants are required to post
these signs in their facilities at all times, this written notification
through the signs would occur at each visit, including the first visit
the beneficiary has with an ACO participant during a performance year.
We also anticipate that some beneficiaries may continue to want to
have the ability to take the information home or into their visit with
their primary care provider for further discussion. Therefore, in
addition to the signs, we propose to retain our policy that ACO
participants that submit claims for primary care services used to
determine the ACO's assigned beneficiary population be required to make
a separate written notification form available to the beneficiary upon
request.
We propose to modify Sec. 425.312 and Sec. 425.708 for clarity
and to reflect these revised notification policies.
Finally, under Tracks 1 and 2, we propose to make beneficiary
identifiable claims data available in accordance with applicable law on
a monthly basis for beneficiaries that are either preliminarily
prospectively assigned to the ACO or who have received a primary care
service during the past 12-month period from an ACO participant upon
whom assignment is based. Because Tracks 1 and 2 use a preliminary
prospective assignment methodology with retrospective reconciliation,
we believe that ACOs, ACO participants, and ACO providers/suppliers in
Tracks 1 and 2 would benefit from access to beneficiary identifiable
claims information for all FFS beneficiaries that may be assigned to
the ACO at the end of the performance year. In contrast, under Track 3,
we propose to make beneficiary identifiable claims data available only
for beneficiaries that are prospectively assigned to an ACO, because
the beneficiaries on the prospective assignment list are the only
beneficiaries for whom the ACO would be held accountable at the end of
the performance year. Consistent with the existing requirements at
Sec. 425.704, in order to request beneficiary identifiable claims
data, and regardless of track, an ACO must: (1) Certify that it is a
covered entity or the business associate of a covered entity that has
provided a primary care service to the beneficiary in the previous 12
months (2) enter into a DUA with CMS prior to the receipt of these
beneficiary identifiable data; (3) submit a formal request to receive
beneficiary identifiable claims data for such beneficiaries at the time
of application to the Shared Savings Program; and (4) certify that the
request reflects the minimum data necessary for the ACO to conduct
either its own health care operations work that falls within the first
or second paragraph of the definition of health care operations at 45
CFR 164.501 or health care operations work on behalf of its ACO
participants and ACO providers/suppliers that are covered entities (as
the business associate of these covered entities) that falls within the
first or second paragraph of the definition of health care operations
at 45 CFR 164.501.
We believe these proposed modifications to our data sharing rules
would significantly improve the claims data sharing process. First, we
believe the modified process would reduce burden for beneficiaries who
would no longer have to mail back forms. In addition, it would minimize
beneficiary confusion in situations where an ACO may be newly formed
and may not yet have established a relationship with the beneficiary.
Instead, the beneficiary would be able decline claims data sharing, and
reverse a decision to decline claims sharing, by contacting CMS
directly using 1-800-MEDICARE. We believe beneficiaries would be more
comfortable expressing their claims data

[[Page 72790]]

sharing preferences directly through CMS, an agency with which
beneficiaries have an existing relationship. Moreover, we believe our
proposals would streamline ACO operations and would allow ACOs to
access beneficiary identifiable claims data earlier in the performance
year than is possible under our current policies. Beneficiary
identifiable claims data would still be available on a monthly basis,
but the new process would be operationally more efficient and less
expensive for ACOs. By removing the 30-day delay before ACOs may
request beneficiary identifiable claims data for their preliminarily
prospectively assigned beneficiaries under Tracks 1 and 2 and
prospectively assigned beneficiaries under Track 3, and reducing
operational complexities associated with providing these data, ACOs
would have access to beneficiary identifiable claims data in a more
timely fashion. This may allow ACOs to intervene in the care of
beneficiaries earlier during the performance year. In addition, as
discussed previously, while we initially believed that requiring ACOs
to notify beneficiaries of the opportunity to decline claims data
sharing would improve engagement between ACO providers/suppliers that
furnish primary care services and their patients, we now realize that
this policy unintentionally created burden and confusion for both ACOs
and beneficiaries, as many beneficiaries assume that their health care
providers already have the information needed to optimally coordinate
their care, even though this is not always the case. We believe that
the proposed revisions to our claims data sharing policy would reduce
beneficiary confusion about the Shared Savings Program and the role an
ACO plays in assisting the beneficiary's health care providers to
improve their health and health care experience, while still retaining
a beneficiary's meaningful opportunity to decline claims data sharing.
We note that, since implementation of the program, a small
percentage of FFS beneficiaries have requested that their identifiable
claims data not be shared and have done so either by notifying the ACO
or by contacting 1-800-MEDICARE to decline claims data sharing. None of
our proposed revisions would have any effect on any existing
beneficiary preferences. Previously recorded beneficiary preferences
would continue to be honored, unless and until a beneficiary changes
his or her preference by contacting 1-800-MEDICARE. Accordingly, our
proposal not only preserves the beneficiary's ability to decline claims
data sharing by directly contacting CMS, but also has no effect on
existing beneficiary claims data sharing preferences, unless the
beneficiary subsequently amends his or her preferences to allow claims
data sharing.
In summary, we propose to amend Sec. 425.704 to reflect our
proposal to begin sharing beneficiary identifiable claims data with
ACOs participating under Tracks 1 and 2 that request claims data on
beneficiaries that are included on their preliminary prospective
assigned beneficiary list or that have received a primary care service
from an ACO participant upon whom assignment is based during the most
recent 12-month period, at the start of the ACO's agreement period,
provided all other requirements for claims data sharing under the
Shared Savings Program and HIPAA regulations are met. We also propose
to share beneficiary identifiable claims data with ACOs participating
under Track 3 that request beneficiary identifiable claims data on
beneficiaries that are included on their prospectively assigned
beneficiary list. We also propose to revise Sec. 425.312(a) and Sec.
425.708 to reflect our policy that ACO participants use CMS approved
template language to notify beneficiaries regarding participation in an
ACO and the opportunity to decline claims data sharing. In addition, we
propose to modify Sec. 425.708 to reflect the streamlined process by
which beneficiaries may decline claims data sharing. We also propose to
add a new paragraph (c) to Sec. 425.708 to reflect our proposal to
honor any beneficiary request to decline claims data sharing that is
received under Sec. 425.708 until such time as the beneficiary may
reverse his or her claims data sharing preference to allow data
sharing.
We note that the beneficiary identifiable information that is made
available under Sec. 425.704 would include Parts A, B and D data, but
would exclude any information related to the diagnosis and treatment of
alcohol or substance abuse. As we discussed in the April 2011 proposed
rule (76 FR 19557), 42 U.S.C. 290dd-2 and the implementing regulations
at 42 CFR part 2 restrict the disclosure of patient records by
federally conducted or assisted substance abuse programs. Such data may
be disclosed only with the prior written consent of the patient, or as
otherwise provided in the statute and regulations. We note that we may
revisit this approach as technology in the area of consent management
advances.
We seek comment on these proposals. We also seek comment on other
specific modifications that could be made to our existing policies on
data sharing to improve the ability of ACOs to access beneficiary
identifiable claims data, and to reduce burden and confusion for ACOs,
ACO participants, ACO providers/suppliers, and beneficiaries.

E. Assignment of Medicare FFS Beneficiaries

1. Background
Section 1899(c) of the Act requires the Secretary to ``determine an
appropriate method to assign Medicare fee-for-service beneficiaries to
an ACO based on their utilization of primary care services provided
under this title by an ACO professional described in paragraph
(h)(1)(A).'' Section 1899(h)(1)(A) of the Act constitutes one element
of the definition of the term ``ACO professional.'' Specifically, this
provision establishes that ``a physician (as defined in section
1861(r)(1) of the Act)'' is an ``ACO professional'' for purposes of the
Shared Savings Program. Section 1861(r)(1) of the Act in turn defines
the term physician as ``. . . a doctor of medicine or osteopathy
legally authorized to practice medicine and surgery by the State in
which he performs such function or action . . .'' In addition, section
1899(h)(1)(B) of the Act defines ``ACO professional'' to include
practitioners described in section 1842(b)(18)(C)(i) of the Act, such
as physician assistants (PAs) and nurse practitioners (NPs).
As we explained in the November 2011 final rule (76 FR 67851) the
term ``assignment'' refers only to an operational process by which
Medicare determines whether a beneficiary has chosen to receive a
sufficient level of the requisite primary care services from physicians
associated with a specific ACO so that the ACO may be appropriately
designated as exercising basic responsibility for that beneficiary's
care. Consistent with section 1899(b)(2)(A) of the Act, an ACO is held
accountable ``for the quality, cost, and overall care of the Medicare
fee-for service beneficiaries assigned to it.'' The ACO may also
qualify to receive a share of any savings that are realized in the care
of these assigned beneficiaries due to appropriate efficiencies and
quality improvements that the ACO may be able to achieve. The term
``assignment'' for purposes of the Shared Savings Program in no way
implies any limits, restrictions, or diminishment of the rights of
Medicare FFS beneficiaries to exercise freedom of choice in the
physicians and other health care

[[Page 72791]]

providers and suppliers from whom they receive their services.
In developing the process for assigning Medicare beneficiaries to
ACOs, we considered several other elements in addition to the
definition of an ACO professional (76 FR 67851): (1) The operational
definition of an ACO (see the discussion of the formal and operational
definitions of an ACO in section II.B. of this proposed rule) so that
ACOs can be efficiently identified, distinguished, and associated with
the beneficiaries for whom they are providing services; (2) the
definition of primary care services for purposes of determining the
appropriate assignment of beneficiaries; (3) whether to assign
beneficiaries to ACOs prospectively, at the beginning of a performance
year on the basis of services rendered prior to the performance year,
or retrospectively, on the basis of services actually rendered by the
ACO during the performance year; and (4) the proportion of primary care
services that is necessary for a beneficiary to receive from an ACO in
order to be assigned to that ACO for purposes of this program.
In the November 2011 final rule (76 FR 67851 through 67870), we
finalized the methodology that we currently use to assign beneficiaries
to ACOs for purposes of the Shared Savings Program. Beneficiaries are
assigned to a participating ACO using the assignment methodology in
Part 425, subpart E of our regulations. In addition, since the final
rule was issued, we have provided additional guidance and more detailed
specifications regarding the beneficiary assignment process in
operational instructions which are available to the public on the CMS
Web site. (https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Financial-and-Assignment-Specifications.html)
In this section of this proposed rule, we summarize several key
policies and methodological issues to provide background for several
revisions to the assignment methodology that we are proposing based on
our initial experiences with the program and questions from
stakeholders.
2. Basic Criteria for a Beneficiary To Be Assigned to an ACO
In order to develop operational procedures needed to implement the
Shared Savings Program, and to respond to inquiries from ACOs and other
stakeholders, we developed specific criteria to govern beneficiary
eligibility for assignment to an ACO which we propose to codify in a
new provision at Sec. 425.401. We believe that revising the
regulations to include these eligibility criteria would help promote
understanding of the assignment methodology. The proposed criteria in
new Sec. 425.401 are consistent with the current assignment
methodology under Sec. 425.400 and Sec. 425.402 as well as the
discussion of the assignment methodology in the preamble to the
November 2011 final rule and operational instructions that we have
issued since the publication of the final rule (76 FR 67851).
First, to determine whether a beneficiary is eligible to be
assigned to an ACO, we must have information about the beneficiary's
Medicare enrollment status. As required by section 1899(h)(3) of the
Act, and consistent with the definition of Medicare FFS beneficiary in
Sec. 425.20, only beneficiaries enrolled in traditional Medicare FFS
under Parts A and B are eligible to be assigned to an ACO participating
in the Shared Savings Program. Because of this statutory definition and
because an important objective of this program is to help align
incentives between Part A and Part B, beneficiaries who have coverage
under only one of these parts are not eligible to be assigned to an
ACO. Beneficiaries enrolled in a group health plan--including
beneficiaries enrolled in Medicare Advantage (MA) plans under Part C,
eligible organizations under section 1876 of the Act, and Programs of
All Inclusive Care for the Elderly (PACE) under section 1894 of the
Act--are also not eligible to be assigned. However, we note that
Medicare Secondary Payer (MSP) status does not exclude a beneficiary
from assignment to an ACO.
The statute includes a provision that precludes duplication in
participation in initiatives involving shared savings. Section
1899(b)(4) of the Act states that providers of services or suppliers
that participate in certain programs that involve shared savings are
not eligible to participate in the Shared Savings Program. In the
November 2011 final rule (76 FR 67830 through 67833), we finalized a
proposal to implement this requirement and to adopt a process for
ensuring that providers and suppliers participating in the Shared
Savings Program do not concurrently participate in another Medicare
program or demonstration involving shared savings at Sec. 425.114.
Specifically, applications for participation in the Shared Savings
Program are reviewed to assess for overlapping ACO participant TINs.
ACO participants that are already participating in another Medicare
program, model or demonstration involving shared savings are prohibited
from participating in the Medicare Shared Savings Program. An ACO
application that contains ACO participants that are already
participating in another Medicare program or demonstration involving
shared savings is rejected.
The statutory prohibition against providers and suppliers
participating in multiple programs and initiatives that involve shared
savings limits but does not prevent the possibility for a beneficiary
to be assigned to more than one shared savings initiative. However, we
believe it is important that beneficiaries are not assigned to more
than one initiative involving shared savings because we do not believe
it is appropriate to make multiple shared savings payments for the same
beneficiaries. Therefore, at Sec. 425.114(c), we provide that if the
other program or demonstration involving shared savings does not assign
beneficiaries based upon the TINs of the health care providers from
whom they receive care, but uses an alternate beneficiary assignment
methodology, we will work with the developers of the respective
demonstrations and initiatives to devise an appropriate method to
ensure no duplication in shared savings payments. For example,
beneficiaries cannot be assigned to a Shared Savings Program ACO for a
performance year if they are associated with another Medicare shared
savings initiative at the start of the Shared Savings Program ACO's
performance year.
We have also implemented procedures to exclude beneficiaries whose
residence is outside the United States, U.S. territories or possessions
from assignment to an ACO. We make this determination based on the most
recent available data in our beneficiary records regarding the
beneficiary's residence at the end of the assignment window. We do not
believe it is appropriate to expect ACOs to be responsible for
coordinating the care provided to beneficiaries that reside outside the
United States, as required under the Shared Savings Program, or to hold
ACOs accountable for the care provided to beneficiaries that reside
outside the United States because ACOs may have limited ability to
interact with overseas providers and suppliers. In most situations,
Medicare does not pay for health care or supplies furnished outside the
United States. (Additional guidance about this policy is available at
https://www.medicare.gov/Pubs/pdf/11037.pdf.) As a result, claims
information regarding services received in other countries is not
available to ACOs. United States (U.S.) residence includes the 50
states, the District of Columbia, Puerto Rico, the U.S. Virgin

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Islands, Guam, American Samoa, and the Northern Marianas. (See guidance
at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Downloads/Shared-Savings-Losses-Assignment-Spec-v2.pdf.) We believe it is appropriate to amend the regulations
governing the assignment process to incorporate these limitations.
Thus, we propose to add a new provision at Sec. 425.401(a) of the
regulations to outline the criteria that a beneficiary must meet in
order to be eligible to be assigned to an ACO. Specifically, a
beneficiary would be eligible to be assigned to a participating ACO,
for a performance year or benchmark year, if the beneficiary meets all
of the following criteria during the assignment window (defined in
section II.F. of this proposed rule as the 12-month period used for
assignment):
Has at least 1 month of Part A and Part B enrollment and
does not have any months of Part A only or Part B only enrollment.
Does not have any months of Medicare group (private)
health plan enrollment.
Is not assigned to any other Medicare shared savings
initiative.
Lives in the U.S. or U.S. territories and possessions as
determined based on the most recent available data in our beneficiary
records regarding the beneficiary's residence at the end of the
assignment window.
If a beneficiary meets all of the criteria in Sec. 425.401(a),
then the beneficiary would be eligible to be assigned to an ACO in
accordance with the two-step beneficiary assignment methodology in
Sec. 425.402 and Sec. 425.404. We also propose to make a conforming
change to Sec. 425.400 to reflect the addition of this new provision.
We request comment on this proposal to amend the regulations to
address specifically the criteria that would be used to determine
whether a beneficiary is eligible to be assigned to an ACO.
3. Definition of Primary Care Services
a. Overview
Section 1899(c) of the Act requires the Secretary to assign
beneficiaries to an ACO ``based on their utilization of primary care
services'' provided by a physician. However, the statute does not
specify which kinds of services may be considered ``primary care
services'' for this purpose, nor the amount of those services that
would be an appropriate basis for making assignments. In this section
of this proposed rule, we summarize how we currently identify the
appropriate primary care services on which we base assignment. In
addition, we propose several revisions to our current policies for
defining primary care services for this purpose, consistent with our
statement in the November 2011 final rule (76 FR 67853), that we
intended to monitor this issue and would consider making changes to the
definition of primary care services to add or delete codes, if there is
sufficient evidence that revisions are warranted.
We currently define ``primary care services'' for purposes of the
Shared Savings Program in Sec. 425.20 as the set of services
identified by the following HCPCS/CPT codes: 99201 through 99215, 99304
through 99340, 99341 through 99350, the Welcome to Medicare visit
(G0402), and the annual wellness visits (G0438 and G0439). In addition,
as we will discuss later in this section, we have established a cross-
walk for these codes to certain revenue center codes used by FQHCs
(prior to January 1, 2011) and RHCs so that their services can be
included in the beneficiary assignment process.
In the November 2011 final rule (76 FR 67853), we established the
current list of codes that constitute primary care services for several
reasons. First, we believed the listed codes represented a reasonable
approximation of the kinds of services that are described by the
statutory language which refers to assignment of ``Medicare fee-for-
service beneficiaries to an ACO based on their utilization of primary
care services'' furnished by physicians. Because the statute requires
that assignment be based upon the utilization of primary care services
furnished by physicians, only primary care services can be considered
in the assignment process. In addition, we selected this list to be
largely consistent with the definition of ``primary care services'' in
section 5501 of the Affordable Care Act. That section establishes the
Primary Care Incentive Payment Program (PCIP) to expand access to
primary care services, and thus its definition of ``primary care
services'' provides a compelling precedent for adopting a similar list
of codes for purposes of the beneficiary assignment process under the
Shared Savings Program. We slightly expanded the list of codes found in
section 5501 of the Affordable Care Act to include the Welcome to
Medicare visit (HCPCS code G0402) and the annual wellness visits (HCPCS
codes G0438 and G0439) as primary care services for purposes of the
Shared Savings Program. These codes clearly represent primary care
services frequently received by Medicare beneficiaries, and in the
absence of the special G codes the services provided during these
visits would be described by one or more of the regular office visit
codes that are included in the list under section 5501 of the
Affordable Care Act.
Since the publication of the November 2011 final rule, we have
received several suggestions from ACOs and others regarding specific
codes that we would consider adding to the definition of primary care
services so that they could be considered when assigning beneficiaries
to ACOs. For example, commenters have noted that effective January 1,
2013, Medicare pays for two CPT codes (99495 and 99496) that are used
to report physician or qualifying non-physician practitioner
transitional care management (TCM) services for a patient following a
patient's discharge to a community setting from an inpatient hospital
or SNF or from outpatient observation status in a hospital or partial
hospitalization. These codes were established to pay a patient's
physician or practitioner to coordinate the patient's care in the 30
days following a hospital or skilled nursing facility (SNF) stay. We
believe that providing separate payment for the work of community
physicians and practitioners in treating a patient following discharge
from a hospital or nursing facility would ensure better continuity of
care for these patients and help reduce avoidable readmissions. We
discussed this policy in the CY 2013 Physician Fee Schedule (PFS) final
rule with comment period that appeared in the November 16, 2012 Federal
Register (77 FR 68978 through 68994).
Further, in the CY 2014 PFS final rule with comment period that
appeared in the December 10, 2013 Federal Register (78 FR 74414 through
74427), we indicated that for CY 2015, we planned to establish a
separate payment for HCPCS code GXXX1 under the PFS for chronic care
management (CCM) services furnished to patients with multiple (two or
more) chronic conditions. Subsequently, in the CY 2015 PFS final rule
with comment period that appeared in the November 13, 2014 Federal
Register, we provided more details relating to the implementation of
the new PFS policy, including coding, elements of service, and payment
rates (79 FR 67715 through 67728). Chronic care management services
generally include regular development and revision of a plan of care,
communication with other treating health professionals, and medication
management.
Accordingly, as part of our broader multiyear strategy to
appropriately recognize and value primary care and care management
services, effective January 1, 2015, we will make a separate

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payment for CCM services under the PFS. We believe that successful
efforts to improve chronic care management for these patients could
improve the quality of care while simultaneously decreasing costs, such
as through reductions in hospitalizations, use of post-acute care
services and emergency department visits.
We have also received a few suggestions from hospitalists and
others that certain evaluation and management codes used for services
furnished in SNFs and other nursing facility settings (CPT codes 99304
through 99318) should be excluded from the definition of primary care
services. In some cases, hospitalists that perform evaluation and
management services in SNFs requested this change so that their ACO
participant TIN need not be exclusive to only one ACO based on the
exclusivity policy established in the November 2011 final rule (76 FR
67810 through 67811). The requirement under Sec. 425.306(b) that an
ACO participant TIN be exclusive to a single ACO applies when the ACO
participant TIN submits claims for primary care services that are
considered in the assignment process. However, ACO participant TINs
upon which beneficiary assignment is not dependent (that is, ACO
participant TINs that do not submit claims for primary care services
that are considered in the assignment process) are not required to be
exclusive to a single ACO.
These requests from hospitalists and others were based on drawing a
distinction between evaluation and management services performed in
SNFs and those that are performed in other nursing facilities.
Specifically, these commenters believe that evaluation and management
services furnished in SNFs are more likely to be acute in nature and
should not be considered primary care services. In contrast, the
evaluation and management services performed in other nursing
facilities, where patients tend to stay for longer periods, are
arguably more likely to include primary care services. We have also
received comments, however, from others who support the inclusion of
these services in the definition of primary care for the Shared Savings
Program. They suggest that including the codes for evaluation and
management services furnished in SNFs in the assignment process could
help provide important incentives for ACOs to manage and coordinate the
care of these vulnerable patients because ACOs would be held
accountable for these patients if they receive the plurality of their
primary care services from ACO professionals during a performance year.
In the November 2011 final rule, we discussed comments both for and
against including the codes for SNF visits in the definition of primary
care services (76 FR 67852 through 67853). However, we ultimately
concluded that it was appropriate to include these codes. We continue
to believe that including the codes for SNF and other nursing facility
visits in the list of codes that constitute primary care services for
purposes of assignment to an ACO is appropriate for a number of
reasons. As we stated in the November 2011 final rule (76 FR 67853),
beneficiaries often stay for long periods of time in SNFs (Medicare
covers up to 100 days of SNF services in each benefit period) and it is
reasonable to conclude that these codes represent basic evaluation and
management services that would ordinarily be provided in physician
offices if the beneficiaries were not residing in nursing homes. If
these services are performed by ACO professionals, we continue to
believe that it is reasonable to hold the ACO accountable for the care
of these beneficiaries. In addition, as we noted previously, the PCIP
program established under section 5501 of the Affordable Care Act was
established to expand access to ``primary care services''. Under this
program, beginning January 1, 2011 and continuing through December 31,
2015, we pay an incentive payment of 10 percent of Medicare program
payments to qualifying primary care physicians and certain non-
physician practitioners who furnish specified primary care services. We
believe it is compelling that these SNF codes are included in the
definition of ``primary care services'' in section 5501 of the
Affordable Care Act, which established this incentive program. We would
also note that CPT codes 99304 through 99318 do not differentiate
between evaluation and management services performed in SNFs and other
nursing facilities. Thus, services furnished in SNFs and other nursing
facilities are included in the definition of ``primary care services''
for purposes of section 5501. Finally, in the CY 2015 PFS final rule
with comment period (79 FR 67910 through 67911), we added the Skilled
Nursing Facility 30-Day All-Cause Readmission Measure (SNFRM) to the
quality performance measure set used to evaluate the quality of the
care furnished by ACOs. We believe the addition of this measure helps
to fill a gap in the current Shared Savings Program measure set and
provides a focus on an area where ACOs are targeting redesign.
Therefore, we continue to believe that it is reasonable to conclude
that services provided in SNFs with CPT codes 99304 through 99318
represent basic evaluation and management services that would
ordinarily be provided in physician offices if the beneficiaries were
not residing in nursing homes and should continue to be included in the
definition of primary care services used for purposes of beneficiary
assignment to an ACO participating in the Shared Savings Program.
Although we are not making a proposal at this time regarding CPT codes
99304 through 99318, we welcome comment from stakeholders on the
implications of retaining these codes in the definition of primary care
services.
b. Proposed Revisions
We believe that the TCM services represented by CPT codes 99495 and
99496 represent primary care services that should be considered in the
beneficiary assignment methodology under the Shared Savings Program. In
order to receive payment for these codes, the physician or non-
physician practitioner is required to accept care of the beneficiary
post-discharge from an inpatient hospital or SNF without a gap and must
take responsibility for the beneficiary's overall care for a period of
30 days following the discharge. Likewise, we believe that the CCM
services represented by HCPCS code GXXX1 are primary care services that
should also be considered in the beneficiary assignment methodology
under the Shared Savings Program. The CCM service includes continuity
of care with a designated practitioner or member of the care team with
whom the patient is able to get successive routine appointments. The
CCM service also includes access to care management services 24-hours-
a-day, 7-days-a-week, which means providing beneficiaries with a means
to make timely contact with health care providers to address the
patient's urgent chronic care needs regardless of the time-of-day or
day of the week. Additional explanation of these and the other required
elements for billing CCM services can be found in the CY 2015 PFS final
rule with comment period (79 FR 67715 through 67728). Therefore, we
propose to update the definition of primary care services at Sec.
425.20 to include both TCM codes (CPT codes 99495 and 99496) and the
CCM code (HCPCS code GXXX1) and to include these codes in our
beneficiary assignment methodology under Sec. 425.402.
Further, in order to promote flexibility for the Shared Savings

[[Page 72794]]

Program and to allow the definition of primary care services used in
the Shared Savings Program to respond more quickly to HCPCS/CPT coding
changes made in the annual PFS rulemaking process, we propose to make
any future revisions to the definition of primary care service codes
through the annual PFS rulemaking process. If we intend to add any
proposed new HCPCS/CPT or revenue center codes to the definition of
primary care services for purposes of the Shared Savings Program, we
would include a discussion of the proposed addition in the preamble to
the PFS proposed rule to allow an opportunity for comment before we
announce our final decision in the PFS final rule. Such an approach
would enable the Shared Savings Program to be more flexible and
responsive to incorporate any changes to primary care oriented codes
that are made through the PFS rulemaking process. We believe this
process for making changes to the Shared Savings Program's definition
of primary care services under Sec. 425.20 would help to ensure that
the definition of primary care services used under the Shared Savings
Program properly reflects the full range of primary care services that
beneficiaries may receive under Medicare and that the assignment
methodology accurately aligns beneficiaries with the entities that are
responsible for managing their overall care. In addition, revising the
definition of primary care services for purposes of the Shared Savings
Program through the annual rulemaking for the PFS would enable us to
efficiently update and revise primary care service codes used for
purposes of beneficiary assignment under the Shared Savings Program to
reflect any administrative HCPCS/CPT coding changes, such as changes to
reflect successive coding changes. Accordingly, we also propose to
amend the definition of primary care services at Sec. 425.20 to
include additional codes designated by CMS as primary care services for
purposes of the Shared Savings Program, including new HCPCS/CPT codes
or revenue codes and any subsequently modified or replacement codes.
We seek comments on these proposals. In addition, we seek comments
as to whether there are any additional existing HCPCS/CPT codes that we
should consider adding to the definition of primary care services in
future rulemaking for purposes of assignment of beneficiaries to ACOs
under the Shared Savings Program. It would be most helpful if such
comments include a detailed discussion of the basis for such an
addition.

4. Consideration of Physician Specialties and Non-Physician
Practitioners in the Assignment Process

a. Overview
Primary care services can generally be defined based on the type of
service provided, the type of provider specialty that provides the
service, or both. In the November 2011 final rule establishing the
Shared Savings Program (76 FR 67853 through 67856), we adopted a
balanced assignment process that simultaneously maintains the
requirement to focus on primary care services in beneficiary
assignment, while recognizing the necessary and appropriate role of
specialists in providing primary care services, such as in areas with
primary care physician shortages.
Under Sec. 425.402, after identifying all patients that had a
primary care service with a physician who is an ACO professional (and
who are thus eligible for assignment to the ACO under the statutory
requirement to base assignment on ``utilization of primary care
services'' furnished by physicians), we employ a step-wise approach as
the basic assignment methodology. This step-wise assignment process
takes into account two particular decisions that we described in the
November 2011 final rule (76 FR 67853 through 67858): (1) Our decision
to base assignment on the primary care services of specialist
physicians in the second step of the assignment process; and (2) our
decision also to take into account the plurality of all primary care
services provided by ACO professionals, including both primary care and
specialist physicians and certain non-physician practitioners, in
determining which ACO is truly responsible for a beneficiary's primary
care in the second step of the assignment process. Our current step-
wise assignment process thus occurs in the following two steps:
Step 1: In this step, the beneficiary would be assigned to the ACO
if the allowed charges for primary care services furnished to the
beneficiary by primary care physicians who are ACO professionals are
greater than the allowed charges for primary care services furnished by
primary care physicians who are ACO professionals in any other ACOs,
and greater than the allowed charges for primary care services billed
to Medicare by any other solo practice/group containing primary care
physicians, identified by a Medicare-enrolled TIN, that is unaffiliated
with any ACO. In other words, first we add up the allowed charges for
primary care services billed by primary care physicians through the
TINs of ACO participants in the ACO. Next, we add up the allowed
charges for primary care services furnished by primary care physicians
that are billed through other Medicare-enrolled TINs (or through a
collection of ACO participant TINs in the case of another ACO). If the
allowed charges for the services furnished by ACO participants are
greater than the allowed charges for services furnished by the
participants in any other ACO or by any non-ACO participating Medicare-
enrolled TIN, then the beneficiary is assigned to the ACO in the first
step of the assignment process.
Step 2: This step applies only for beneficiaries who have not
received any primary care services from a primary care physician. We
assign a beneficiary to an ACO in this step if the beneficiary received
at least one primary care service from a physician participating in the
ACO, and more primary care services (measured by Medicare allowed
charges) from ACO professionals (physician regardless of specialty,
nurse practitioner, physician assistant or clinical nurse specialist)
at the ACO than from ACO professionals in any other ACO or solo
practice/group of practitioners identified by a Medicare-enrolled TIN
or other unique identifier, as appropriate, that is unaffiliated with
any ACO.
Since publication of the November 2011 final rule (76 FR 67853
through 67858), we have gained further experience with this assignment
methodology. We have learned from its application for the first 220
ACOs participating in the program that, on average, about 92 percent of
the beneficiaries assigned to ACOs are assigned in step 1, with only
about 8 percent of the beneficiaries being assigned in step 2.
We have adopted a similar beneficiary assignment approach for some
other programs, such as the PQRS Group Practice Reporting Option via
the GPRO web interface (77 FR 69195 through 69196). We would note that
in the CY 2015 PFS final rule with comment period that appeared in the
November 13, 2014 Federal Register, we revised the Value Modifier (VM)
beneficiary attribution methodology and the PQRS GPRO web interface
beneficiary assignment methodology to make them slightly different from
the Medicare Shared Savings Program assignment methodology, namely--(1)
eliminating the primary care service pre-step that is statutorily
required for the Shared Savings Program; and (2) including NPs, PAs,
and CNSs in step 1 rather than in step 2 of the attribution process
(see 79 FR 67790 and 79 FR 67962).

[[Page 72795]]

b. Proposed Revisions
We continue to believe that the current step-wise assignment
methodology generally provides a balance between maintaining a strong
emphasis on primary care while ultimately allowing for assignment of
beneficiaries on the basis of how they actually receive their primary
care services. However, we have received several suggestions for
possible improvements to the assignment methodology for consideration.
Some stakeholders have suggested that primary care services by non-
physician practitioners (NPs, PAs, and CNSs) should be included in step
1 of the assignment methodology rather than only in step 2 as they are
under the current process. These stakeholders have indicated that non-
physician practitioners very often serve as a beneficiary's sole
primary care provider, based on beneficiary preferences or other
factors, especially in rural areas and other areas where there is a
shortage of primary care physicians. We considered this recommendation
for a number of reasons.
As previously explained in the November 2011 final rule (76 FR
67853 through 67858), in establishing the Shared Savings Program, we
adopted certain key features of the Shared Savings Program (for
example, the decision not to include physician specialties in step 1 of
the assignment methodology and the definition of primary care physician
under Sec. 425.20) to align with other Affordable Care Act provisions
that place a strong emphasis on primary care. In particular, we
referred to section 5501 of the Affordable Care Act which established
the PCIP. For purposes of section 5501 of the Affordable Care Act, a
``primary care practitioner'' is defined as a physician who has a
primary specialty designation of family medicine, internal medicine,
geriatric medicine, or pediatric medicine or as a ``nurse practitioner,
clinical nurse specialist, or physician assistant.'' Therefore, we
believe it would be appropriate to better align the assignment
methodology under the Shared Savings Program with the primary care
emphasis in other provisions of the Affordable Care Act by including
these non-physician practitioners in step 1 of the assignment process.
Further, we believe that including these non-physician practitioners in
step 1 would be supported by the statute as long as we continue under
Sec. 425.402 to first identify all patients that have received a
primary care service from a physician who is an ACO professional and
who are thus eligible for assignment to the ACO under the statutory
requirement to base assignment on ``utilization of primary care
services'' furnished by physicians. Finally, we believe that it would
be appropriate to include primary services furnished by NPs, PAs, and
CNSs in step 1 of the beneficiary assignment methodology (after
satisfying the statutory criterion that assignment be based on primary
care services by physicians). Under section 1899(b)(2)(D), the ACO is
required to have sufficient primary care ACO professionals to care for
the number of FFS beneficiaries assigned to the ACO. The statute
includes NPs, PAs, and CNSs in its definition of ACO professional; thus
recognizing the important role played by these non-physician
practitioners in managing and coordinating the care of Medicare FFS
beneficiaries.
We believe including these practitioners in step one of the
assignment process could also further strengthen our current assignment
process, which we designed to simultaneously maintain a primary care
centric approach to beneficiary assignment, by including services
furnished by physicians from all of the primary care specialties in
step 1, while also recognizing the necessary and appropriate role of
specialists in providing primary care services by including services
furnished by specialist physicians in step 2. Including services
furnished by NPs, PAs, and CNSs in determining the plurality of primary
care services in step 1 of the assignment process may help ensure that
beneficiaries are assigned to the ACO (or non-ACO entity) that is
actually providing the plurality of primary care for that beneficiary
and thus, should be responsible for managing the patient's overall
care. In this way, all primary care services furnished by ACO
professionals, including the entire primary care physician and
practitioner team (including NPs, PAs, and CNSs working in clinical
teams in collaboration with or under the supervision of physicians),
would be considered for purposes of determining where a beneficiary
received the plurality of primary care services under step 1 of the
assignment methodology. Accordingly, we are proposing to amend the
assignment methodology to include primary care services furnished by
NPs, PAs, and CNSs in step 1 of the assignment process.
However, we would note that there could also be some concerns about
adding NPs, PAs, and CNSs to step 1 of the assignment methodology.
Unlike for physicians, the CMS self-reported specialty codes reported
on claims for NPs, PAs, and CNSs are not further broken down by
specific specialty areas and therefore do not allow practitioners to
indicate whether they are typically functioning as primary care
providers or as specialists. Therefore, we are concerned that by
considering services furnished by NPs, PAs, and CNSs in step 1, we may
ultimately assign some beneficiaries to an ACO inappropriately based on
specialty care over true primary care. Thus, while we invite comments
on our proposal to include primary care services furnished by NPs, PAs,
and CNSs in step 1 of the assignment methodology, we also seek comment
on the extent to which these non-physician practitioners provide non-
primary care services and whether there are ways to distinguish between
primary care services and non-primary care services billed by these
non-physician practitioners.
Some other stakeholders have suggested that certain physician
specialties are inappropriately included in the assignment process and
therefore request that we exclude certain physician specialties from
step 2 of the assignment process. These stakeholders are concerned that
by being included in step 2 of the assignment process, the ACO
participants that submit claims for services furnished by these
specialists are inappropriately limited to participating in only one
ACO because of the exclusivity requirement under Sec. 425.306(b) of
the regulations. This requirement is discussed in the November 2011
final rule (76 FR 67810 through 67811). Further, some stakeholders have
indicated that they are confused by the current exclusivity requirement
and inappropriately believe that an ACO participant can participate in
more than one ACO as long as none of the beneficiaries for whom the ACO
participant has submitted claims for primary care services have been
assigned to the ACO.
We would like to emphasize that under Sec. 425.306(b), the
requirement that an ACO participant must be exclusive to a single ACO
applies whenever primary care service claims submitted by the ACO
participant are considered in the beneficiary assignment process. The
application of the current exclusivity requirement to an ACO
participant is not affected by whether or not a FFS beneficiary for
whom an ACO participant has submitted claims for primary care services
is ultimately assigned to the ACO. Rather, an ACO participant that
submits claims to Medicare for primary care services must be exclusive
to a single ACO because

[[Page 72796]]

the claims for primary care services submitted by the ACO participant
are used to determine beneficiary assignment to the ACO. Additionally,
the current exclusivity requirement is not affected by whether or not
the primary care services for which the ACO participant submits claims
are services furnished by primary care physicians, specialist
physicians, or NPs, PAs, and CNSs. Furthermore, this exclusivity
requirement applies only to the ACO participant and not to individual
practitioners. Individual practitioners are free to participate in
multiple ACOs, provided they are billing under a different Medicare-
enrolled TIN for each ACO in which they participate. (See 76 FR 67810
through 67811). For example, there may be practitioners who work in
multiple settings and bill Medicare for primary care services through
several different TINs, depending on the setting. If each of these TINs
represents an ACO participant in a different ACO, then the practitioner
would be an ACO professional in more than one ACO.
Some stakeholders have argued that certain specialties that bill
for some of the evaluation and management services designated as
primary care services under Sec. 425.20 do not actually perform
primary care services. This is because most of the CPT and other HCPCS
codes that are included in the definition of primary care services
under Sec. 425.20 are actually more general purpose codes used for a
wide variety of clinical practices that are not specific to primary
care, such as CPT office visit codes. For example, cataract surgeons
bill for some of the office visit codes included in the definition of
``primary care'' but in actual practice these surgeons do not perform
primary care when they report these codes. These commenters believe
that the wide spread use of these codes is the reason that for purposes
of PCIP, the CPT code-based definition of ``primary care services'' is
paired with the definition of ``primary care practitioners'' under that
statute. In other words, to identify true primary care services, the
CPT codes for primary care services must be billed by practitioners
that render primary care services.
We agree that although some specialties such as surgeons and
certain others bill Medicare for some of the Shared Savings Program
``primary care'' codes, in actual practice the services such
specialists perform when reporting these codes do not typically
represent primary care services because the definitions of HCPCS/CPT
codes for office visits and most other evaluation and management
services are not based on whether primary care is provided as part of
the service. Accordingly, we agree that to identify primary care
services more accurately, the CPT codes for primary care services
should be paired with the specialties of the practitioners that render
those services and that it would be appropriate to exclude services
provided by certain physician specialties from the beneficiary
assignment process.
Therefore, we are proposing to exclude services provided by certain
CMS physician specialties from the beneficiary assignment process. The
net effect of this proposal would be to exclude certain claims from
determining the ACO's assigned population. The proposed lists of
physician specialties that would be included in and excluded from the
assignment process (provided in Tables 1 through 4 of this proposed
rule) are based on recommendations by CMS medical officers
knowledgeable about the services typically performed by physicians and
non-physician practitioners. However, we note that given the many
requests and comments from specialists and specialty societies asking
to have their services included in the assignment methodology that we
received during the original rulemaking to establish the Shared Savings
Program, we attempted to limit the list of physician specialty types
that would be excluded from the assignment process to those physician
specialties that would very rarely, if ever, provide primary care to
beneficiaries. As a general rule, for example, we expect that
physicians with an internal medicine subspecialty such as nephrology,
oncology, rheumatology, endocrinology, pulmonology, and cardiology
would frequently be providing primary care to their patients.
Especially for beneficiaries with certain chronic conditions (for
example, certain heart conditions, cancer or diabetes) but who are
otherwise healthy, we expect that these specialist physicians often
take the role of primary care physicians in the overall treatment of
the beneficiaries if there is no family practitioner or other primary
care physician serving in that role. In contrast we expect that most
surgeons, radiologists, and some other types of specialists would not
typically provide a significant amount of primary care, if any, and
therefore we propose to exclude their services from the assignment
process.
More specifically, the following 4 tables display the specific CMS
physician specialty codes that we are proposing to include and exclude
for beneficiary assignment purposes under the Shared Savings Program.
Table 1 shows the CMS physician specialty codes that would
continue to be included in step 1.
Table 2 lists the physician specialties that we are
proposing would continue to be included in step 2.
Table 3 lists the physician specialties that we are
proposing to exclude from the beneficiary assignment methodology under
step 2. Under this proposal, services furnished by these physician
specialties would also be excluded for purposes of determining if a
beneficiary has received a primary care service from a physician who is
an ACO professional, which under Sec. 425.402(a) is a precondition for
assignment to an ACO.
Table 4 shows the CMS specialty codes for NPs, PAs, and
CNSs that under our proposal would be included in beneficiary
assignment step 1.

Table 1--CMS Physician Specialty Codes That Would Continue To Be
Included in Assignment Step 1
------------------------------------------------------------------------
Code Specialty name
------------------------------------------------------------------------
01................................ General Practice.
08................................ Family Practice.
11................................ Internal Medicine.
38................................ Geriatric Medicine.
------------------------------------------------------------------------

Table 2--CMS Physician Specialty Codes That Would Continue To Be
Included in Assignment Step 2
------------------------------------------------------------------------
Code Specialty name
------------------------------------------------------------------------
03................................ Allergy/immunology.
06................................ Cardiology.
10................................ Gastroenterology.
13................................ Neurology.
16................................ Obstetrics/gynecology.
17................................ Hospice and palliative care.
23................................ Sports medicine.
25................................ Physical medicine and
rehabilitation.
29................................ Pulmonary disease.
37................................ Pediatric medicine.
39................................ Nephrology.
44................................ Infectious disease.
46................................ Endocrinology.
66................................ Rheumatology.
70................................ Multispecialty clinic or group
practice.
82................................ Hematology.
83................................ Hematology/oncology.
84................................ Preventive medicine.
90................................ Medical oncology.
98................................ Gynecology/oncology.
------------------------------------------------------------------------

[[Page 72797]]

Table 3--CMS Physician Specialty Codes That We Propose To Exclude From
Assignment Step 2
------------------------------------------------------------------------
Code Specialty name
------------------------------------------------------------------------
02................................ General surgery.
04................................ Otolaryngology.
05................................ Anesthesiology.
07................................ Dermatology.
09................................ Interventional pain management.
12................................ Osteopathic manipulative therapy.
14................................ Neurosurgery.
18................................ Ophthalmology.
20................................ Orthopedic surgery.
21................................ Cardiac electrophysiology.
22................................ Pathology.
24................................ Plastic and reconstructive surgery.
26................................ Psychiatry.
27................................ Geriatric psychiatry.
28................................ Colorectal surgery.
30................................ Diagnostic radiology.
33................................ Thoracic surgery.
34................................ Urology.
36................................ Nuclear medicine.
40................................ Hand surgery.
72................................ Pain management.
76................................ Peripheral vascular disease.
77................................ Vascular surgery.
78................................ Cardiac surgery.
79................................ Addiction medicine.
81................................ Critical care (intensivists).
85................................ Maxillofacial surgery.
86................................ Neuro-psychiatry.
91................................ Surgical oncology.
92................................ Radiation oncology.
93................................ Emergency medicine.
94................................ Interventional radiology.
99................................ Unknown physician specialty.
C0................................ Sleep medicine.
------------------------------------------------------------------------

Table 4--CMS Non-Physician Specialty Codes That Would Be Included in
Assignment Step 1
------------------------------------------------------------------------
Code Specialty name
------------------------------------------------------------------------
50................................ Nurse practitioner.
89................................ Clinical nurse specialist.
97................................ Physician assistant.
------------------------------------------------------------------------

The primary benefit of this proposal is that it could help ensure
that beneficiaries are correctly assigned to the ACO or other entity
that is actually providing primary care and managing the patient's
overall care. Otherwise, for example, a beneficiary could inadvertently
be assigned to an ACO based on services furnished by a surgeon who had
not provided primary care but had provided a number of consultations
for a specific clinical condition. Another important benefit of this
proposal is that the ACO participants that submit claims solely for
services performed by the categories of specialists that we are
proposing to exclude from the assignment process would have greater
flexibility to participate in more than one ACO if the ACO participant
does not submit claims for any primary care services performed by other
physicians or non-physician practitioners that are included in the
assignment process. This could especially be the case for small
physician practices which only submit claims for specialty services.
Allowing such ACO participants that are composed solely of excluded
specialists to participate in more than one ACO would support our goal
of facilitating competition among ACOs by increasing the number of
specialists that can participate in more than one ACO. This proposal
would not be expected to have a significant impact on the overall
number of beneficiaries assigned to each ACO because we believe most of
the specialties that we propose to exclude from the assignment
methodology provide a relatively modest number of services under the
codes included in the definition of primary care services or are not
typically the only physician that a beneficiary sees. For example,
patients that are furnished consultations by a thoracic surgeon would
typically also concurrently receive care from a primary care physician,
cardiologist or other medical specialist.
We propose to amend Sec. 425.402 to reflect these proposed changes
to the assignment methodology. Specifically, we propose to revise Sec.
425.402(a) to include NPs, PAs, and CNSs as ACO professionals that
would be considered in step 1 of the assignment process. In addition,
we propose to amend Sec. 425.402 by adding a new paragraph (b) to
identify the physician specialty designations that would be considered
in step 2 of the assignment process. We also propose to modify the
exclusivity requirement at Sec. 425.306(b) to clarify how the
exclusivity rules would be affected by this proposal to exclude certain
specialists from step 2 of the assignment methodology. Specifically, we
propose to revise Sec. 425.306(b) to indicate that each ACO
participant that submits claims for primary care services used to
determine the ACO's assigned population (that is, services rendered by
the primary care physicians or ACO professionals listed in Tables 1, 2,
and 4) must be exclusive to one Medicare Shared Savings Program ACO.
In addition, we propose to make several conforming and technical
changes to Sec. 425.402(a). First, we propose a modification to
provide that for purposes of determining whether a beneficiary has
received a primary care service from a physician who is an ACO
professional, we would consider only services furnished by primary care
physicians or physicians with a specialty listed in new paragraph (b).
Second, we propose to make modifications to conform with changes in the
definitions of ``assignment'', ``ACO professional'', and ``ACO
provider/supplier'' in addition to our proposal to adopt a prospective
assignment approach under proposed Track 3 in section II.F. of this
proposed rule. We seek comment on these proposals.
Finally, as part of our process of reviewing both recommendations
discussed previously, we considered another alternative approach to
assignment. We considered whether it might be preferable, after
excluding the specialties listed in Table 3 from step 2 of the
assignment process, to further simplify beneficiary assignment by
establishing an assignment process that involves only a single step.
More specifically, we considered whether we should replace the current
two step assignment methodology with a new one step assignment process
in which the plurality of primary care services provided by the
physicians listed in Tables 1 and 2, and the non-physician
practitioners in Table 4, would all be considered in a single step.
Arguably, this approach could at least partially address the comments
we have received about the current assignment methodology and also help
further simplify the assignment process.
However, while it has some attractive features, we also have some
important concerns about this approach. For example, beneficiaries
receiving concurrent care from both primary care physicians and
specialists could inappropriately be assigned to an ACO or other entity
that is not responsible for managing their overall care. To illustrate,
under an assignment process with only one step, if a beneficiary has a
long term, continuing relationship with a family practitioner who is an
ACO professional but also requires specialty care for a chronic allergy
condition from an allergist who is not participating in an ACO, then in
any given performance year the beneficiary could be assigned to the ACO
or not depending merely on the allowed charges for primary care
services furnished by the family practitioner versus the allowed
charges for services furnished by the allergist. Under our current two
step assignment methodology, this beneficiary would be consistently and
appropriately assigned to the ACO in which the beneficiary's family
practitioner participates. We believe this result would be appropriate
because, in this example, the family practitioner is responsible for
managing the overall care of this patient whereas

[[Page 72798]]

the allergist is providing more specialized care. A similar problem
would exist for some other beneficiaries, such as those who temporarily
require specialty care for an acute condition during a performance
year. Therefore, we are concerned that by establishing an assignment
methodology based on a single step, we may reduce our focus on primary
care and ultimately assign some beneficiaries to an ACO inappropriately
based on specialty care over true primary care. A one-step assignment
methodology could also introduce additional instability into the
assignment process. Therefore, we are not proposing to combine the two
steps used under the current assignment methodology.
Although we are not proposing this change at this time, we seek
comments as to whether it would be preferable, after excluding the
physician specialties listed in Table 3 from the assignment process, to
further simplify the assignment methodology by establishing an
assignment process that involves only a single step. We will consider
comments on this issue during the development of the final rule.
We also welcome any comments about the possible impact these
potential changes to the assignment methodology might have on other CMS
programs that use an assignment methodology that is generally aligned
with the Shared Savings Program, such as PQRS GPRO reporting via the
GPRO web interface and VM. We note that as previously discussed, we
revised the assignment methodology for PQRS GPRO reporting via the GPRO
web interface and VM in the CY 2015 PFS final rule with comment period
that appeared in the November 13, 2014 Federal Register (79 FR 67790
and 79 FR 67962).
5. Assignment of Beneficiaries to ACOs That Include FQHCs, RHCs, CAHs,
or ETA Hospitals
In this section, we summarize the regulatory policies in Sec.
425.404 for assignment of beneficiaries to ACOs that include FQHCs and
RHCs as ACO participants and subsequent operational procedures and
instructions that we have established in order to allow FQHCs and RHCs
as well as CAHs billing under section 1834(g)(2) of the Act (referred
to as Method II), and ETA hospitals to fully participate in the Shared
Savings Program. These types of providers may submit claims for
physician and other professional services when certain requirements are
met, but they do not submit their claims through the standard Part B
claims payment system. Accordingly, we have established operational
processes so that we can consider claims for professional services
submitted by these providers in the process for assigning beneficiaries
to ACOs. However, each of these four provider types (that is, FQHCs,
RHCs, CAHs, ETA hospitals) generally have differing circumstances with
respect to their provider and medical service code reporting
requirements, claims forms used, and the payment methodology that
applies to professional services. Although there are important
differences between the payment policy and claims processing for FQHCs
and RHCs, they do share some key characteristics. Therefore, we will
discuss FQHCs and RHCs jointly, and then address CAHs and ETA hospitals
separately.
a. Assignment of Beneficiaries to ACOs That Include FQHCs and RHCs
(1) Overview
FQHCs and RHCs are facilities that furnish services that are
typically furnished in an outpatient clinic setting. They are currently
paid an all-inclusive rate (AIR) per visit for qualified primary and
preventive health services furnished to Medicare beneficiaries. On
October 1, 2014, FQHCs began to transition to a new FQHC prospective
payment system (PPS). FQHCs have been required to use HCPCS coding on
all their claims since January 1, 2011, to inform the development of
the PPS and for limited other purposes, and would be required to use
HCPCS coding for payment purposes under the FQHC PPS. Under the current
payment methodology, FQHCs and RHCs submit claims for each encounter
with a beneficiary and receive an interim payment based on their AIR
for qualifying visits. The claims contain revenue codes that
distinguish general classes of services (for example, clinic visit,
home visit or mental health service). Claims submitted by FQHCs and
RHCs also identify the beneficiary to whom the service was provided,
and include other information relevant to determining whether the AIR
can be paid for the service. The claims contain very limited
information regarding the individual practitioner, or the type of
health professional (for example, physician, PA or NP) who provided the
service.
Based on detailed comments from some FQHC and RHC representatives,
in the November 2011 final rule, we established a beneficiary
assignment process that allows primary care services furnished in FQHCs
and RHCs to be considered in the assignment process for any ACO that
includes an FQHC or RHC as an ACO participant. This process is codified
in the regulations at Sec. 425.404. (This assignment process also
enables FQHCs and RHCs to form ACOs independently, without the
participation of other types of eligible entities, provided they meet
all other eligibility requirements (76 FR 67814)). Operationally we
assign beneficiaries to ACOs that include FQHCs or RHCs in a manner
generally consistent with how we assign beneficiaries to other ACOs
based on primary care services performed by physicians as described
previously. However, to address the requirement under section 1899(c)
of the Act that beneficiaries be assigned to an ACO based on their use
of primary care services furnished by physicians, we require ACOs that
include FQHCs or RHCs to identify, through an attestation (see Sec.
425.404(a)), the physicians that provide direct patient primary care
services in their ACO participant FQHCs or RHCs. This additional step
is not necessary in the case of other types of ACO participants that
bill Medicare for primary care services because the claims clearly
identify the practitioner furnishing the service. The attestation must
be submitted to CMS as part of the application process for all ACOs
that include FQHCs or RHCs as ACO participants and must include the
NPIs and other identifying information for the physicians that directly
provide primary care services in the ACO participant FQHCs or RHCs (see
Sec. 425.204(c)(5)(iii)(A)). Subsequently, we use the combination of
the FQHC or RHC ACO participant TIN (and other unique identifier such
as CCN, where appropriate) and the NPIs of the FQHC or RHC physicians
provided to us through the attestation process to identify those
beneficiaries that received a primary care service from a physician in
the FQHC or RHC and who are therefore eligible to be assigned to the
ACO as provided under Sec. 425.402(a)(1). Then, we assign those
beneficiaries to the ACO, using the step-wise assignment methodology
under Sec. 425.402(a)(3) and (4), if they received the plurality of
their primary care services, as determined based on allowed charges for
the HCPCS codes and revenue center codes included in the definition of
primary care services at Sec. 425.20, from ACO professionals.
We are able to crosswalk the revenue center codes reported by RHCs
(and FQHCs for services performed prior to January 1, 2011) to
comparable ``primary care'' HCPCS codes based on their code
definitions. For example, CPT codes 99201 through 99215 (office/

[[Page 72799]]

outpatient visits) are cross-walked to revenue center code 0521.
Because the focus of FQHCs and RHCs is on primary care, we continue to
believe these revenue center codes, when reported by FQHCs/RHCs,
represent primary care services and not more specialized care. This
crosswalk allows us to use the available revenue center codes as part
of the beneficiary assignment process for RHC services (and for FQHC
services furnished prior to January 1, 2011, when FQHCs were required
to start submitting HCPCS codes) in place of the HCPCS codes which are
used more generally. We established and have updated this crosswalk
through contractor instructions. For claims submitted by FQHCs on or
after January 1, 2011, we use the HCPCS codes which are included on the
claims to identify the service provided.
To summarize, the special procedures that we have established in
the November 2011 final rule and through operational program
instructions (see program specifications on our Web site at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Downloads/Shared-Savings-Losses-Assignment-Spec-v2.pdf) for processing FQHC and RHC claims in order to allow these
services to be considered in the beneficiary assignment process for the
Shared Savings Program are as follows:
FQHC and RHC services are billed on an institutional claim
form and require special handling to incorporate them into the
beneficiary assignment process. In general, ACO participants are
identified through their TIN(s). However, the TINs for FQHCs and RHCs
are not included in the CMS claims files. Therefore, we require that
the CCNs also be reported for FQHCs and RHCs that are ACO participants.
We use the CCN as the unique identifier for an individual FQHC or RHC.
We require ACOs to include the CCN, the TIN, and the organizational NPI
for FQHCs and RHCs that are participating in the ACO on their ACO
participant lists. For example, the instructions for entities applying
to the Shared Savings Program for 2015 were provided on our Web site at
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Downloads/HowTo-Participant-List-Template.pdf.
For FQHCs/RHCs that are ACO participants, we treat a FQHC
or RHC service reported on an institutional claim as a primary care
service performed by a primary care physician if the claim includes a
HCPCS or revenue center code that is included in the definition of a
primary care service at Sec. 425.20 and the service was furnished by a
physician that was identified as providing direct primary care services
in the attestation submitted as part of the ACO's application. All such
physicians are considered primary care physicians for purposes of the
assignment methodology and no specialty code is required for these
claims.
A primary care physician is any physician NPI included in
the attestation provided as part of the application submitted by an ACO
that includes an FQHC or RHC as an ACO participant.
For FQHCs/RHCs that are ACO participants, if the claim is
for a primary care service furnished by someone other than a physician
listed on the attestation, we treat the service as a primary care
service furnished by a non-physician ACO professional. We established
this operational policy in order to be able to include these FQHC/RHC
primary care services in step 2 of the current beneficiary assignment
methodology, as long as all other assignment requirements are met. We
believe this is a reasonable assumption because FQHC/RHC covered
services represented by the primary care HCPCS or revenue center codes
would primarily represent services furnished by a non-physician ACO
professional, if not by a primary care physician. We would note that
covered services in RHCs or FQHCs include services furnished by certain
other professionals who are not ACO professionals (that is, a certified
nurse midwife, clinical psychologist, clinical social worker or, in
very limited situations, a visiting nurse). However, such services are
not reported under the HCPCS codes and revenue center codes that we
have defined as being primary care services at Sec. 425.20 for
purposes of the Shared Savings Program. (See RHC/FQHC general billing
requirements in the Medicare Claims Processing Manual, Chapter 9--Rural
Health Clinics/Federally Qualified Health Centers, section 100 at
https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c09.pdf).
For FQHCs/RHCs that are not ACO participants, we treat a
FQHC or RHC service reported on an institutional claim as a primary
care service performed by a primary care physician if the claim
includes a HCPCS or revenue center code that meets the definition of a
primary care service at Sec. 425.20. That is, for non-ACO participant
FQHCs and RHCs, we assume a primary care physician performed all
primary care services. As we explained previously in the November 2011
final rule (76 FR 67860), FQHC/RHC claims contain limited information
as to the type of practitioner providing a service because such
information is not necessary to determine payment rates for services in
FQHCs/RHCs. Further, the attestation requirement at Sec. 425.404(a)
does not, of course, apply to FQHCs/RHCs that are not participating in
an ACO. As a result, for non-ACO participant FQHCs/RHCs we are not able
to determine whether a primary care service was furnished by a primary
care physician, and thus should be considered in step 1, or was
furnished by a specialist physician or NP/PA/CNS, and thus should be
considered under step 2 of the assignment methodology. We chose to
assume such primary care services were furnished by primary care
physicians so that these services would be considered in step 1 of the
assignment methodology. We established this operational procedure to
help make sure we do not disrupt established relationships between
beneficiaries and their care providers in non-ACO participant FQHCs and
RHCs, by inappropriately assigning beneficiaries to ACOs that are not
primarily responsible for coordinating their overall care.
To illustrate, we offer the following example: Assume Medicare is
billed for five primary care services (all with equal allowable
charges) for a particular beneficiary during a given performance year.
One of those primary care services was provided by a primary care
physician who is an ACO provider/supplier not affiliated with an FQHC.
Four of the services were provided by an FQHC that is not an ACO
participant. In this case, if we had assumed that the FQHC services
were performed by NPs/PAs/CNSs, then the beneficiary would have been
assigned to the ACO under step 1 of the assignment methodology and not
the FQHC. Instead, by assuming the non-ACO participant FQHC services
were performed by primary care physicians, this beneficiary would be
assigned to the FQHC under step 1 and not to the ACO. In this scenario
we believe it would be more appropriate for the beneficiary to be
assigned to the FQHC since the FQHC is the entity that is primarily
responsible for overseeing the care for this beneficiary. Also, we do
not believe it would be appropriate to hold the ACO accountable for the
beneficiary in this example given that the ACO is not providing the
plurality of primary care.
(2) Proposed Revisions
As currently drafted, Sec. 425.404(b) conflates the question of
whether a service billed by an FQHC or RHC is

[[Page 72800]]

provided by a physician with the question of whether the service is a
primary care service. As a consequence, the provision arguably does not
address situations where the FQHC/RHC claim is for a primary care
service as defined under Sec. 425.20, but the NPI reported on the
claim is not the NPI of a physician included in the attestation
submitted under Sec. 425.404(a). As with other types of ACO
participants, under the step-wise assignment methodology we believe it
is appropriate to separately address the questions of whether the
service is a primary care service, whether the service is a primary
care service provided by an ACO professional who is a primary care
physician, and whether the service is a primary care service provided
by another ACO professional. Therefore, we propose to revise Sec.
425.404(b) to better reflect the program rules and operational
practices as previously outlined. In addition, we propose to revise
Sec. 425.404(b) to reflect the proposal discussed earlier to revise
Sec. 425.402(a)(1) to include services furnished by NPs, PAs, and CNSs
as services that will be considered in step 1 of the assignment
process. Under these proposals, we would assign beneficiaries to ACOs
that include FQHCs and RHCs in the following manner.
To address the requirement under section 1899(c) of the Act that
beneficiaries be assigned to an ACO based on their use of primary care
services furnished by physicians, we would continue to require ACOs
that include FQHCs and RHCs to identify, through an attestation (see
Sec. 425.404(a)), the physicians that provide direct patient primary
care services in their ACO participant FQHCs or RHCs. Previously, we
used this attestation information both for purposes of determining
whether a beneficiary was ``assignable'' to an ACO and also for
purposes of assigning beneficiaries to the ACO under step 1. However,
we now propose to use this attestation information only for purposes of
determining whether a beneficiary is assignable to an ACO. We refer to
this determination under Sec. 425.402(a)(1) as being the assignment
``pre-step''. If a beneficiary is identified as an ``assignable''
beneficiary in the assignment pre-step, then we would use claims for
primary care services furnished by all ACO professionals submitted by
the FQHC or RHC to determine whether the beneficiary received a
plurality of his or her primary care services from the ACO under Step
1. We propose to make revisions to Sec. 425.404(b) to reflect these
policies. To illustrate the assignment methodology for an ACO that
includes FQHCs/RHCs we offer the following example. Assume Medicare is
billed for five primary care services (all with equal allowable
charges) for a particular beneficiary during a given performance year.
One of those primary care services was provided by a specialist
physician who is an ACO professional not affiliated with the FQHC. Two
of the services were provided in an FQHC that is an ACO participant in
the same ACO. Under the presumption discussed previously, these
services are assumed to have been provided by NPs, PAs, or CNSs in the
FQHC. The remaining two services were provided by specialist physicians
billing under a common TIN but unaffiliated with the ACO. In this case,
the beneficiary would be assignable to the ACO because the beneficiary
had at least one primary care service with a physician who is an ACO
professional. The beneficiary would be assigned to the ACO in Step 1
because two of the beneficiary's five primary care services during the
performance year were provided by NPs, PAs, or CNSs who are ACO
professionals in the ACO. These two services would be considered in
step 1, consistent with the proposal to include NP, PA, and CNS primary
care services in step 1 of the assignment methodology. In this
hypothetical example, if we did not consider the FQHC claims for the
services performed by NPs, PAs, or CNSs, the beneficiary would appear
to have had only three valid claims to be used for assignment and would
be assigned outside the ACO under Step 2 because there is only one
claim for primary care services furnished by the specialist physician
who is an ACO professional in the ACO but two of the claims were for
services furnished by specialist physicians outside the ACO. However,
by considering the FQHC claims, the beneficiary would have five claims
for primary care services and would be assigned to the ACO under step 1
because two of the services were rendered by NPs, PAs, or CNSs who are
ACO professionals, in contrast to the two claims for primary care
services furnished by specialist physicians outside the ACO.
We have also encountered instances where an assignable beneficiary
has received primary care services from FQHCs or RHCs that are not
participants in an ACO. For non-ACO participant FQHCs and RHCs, we have
previously assumed that all of their primary care services are
performed by primary care physicians. We believe that this assumption,
which we established in operational guidance as noted previously, has
helped to assure that while beneficiaries are appropriately assigned to
ACOs, we do not disrupt established relationships between beneficiaries
and their care providers in FQHCs and RHCs that are not ACO
participants. However, we note that this special assumption for non-ACO
FQHCs/RHCs would no longer be necessary under the proposed revision to
the assignment methodology at Sec. 425.402 to consider primary care
services furnished by NPs, PAs, and CNSs in step 1 of the assignment
methodology rather than step 2 because: (1) As indicated earlier we
believe that when a physician provides a service in an FQHC or RHC, the
physician is functioning as a primary care physician, regardless of his
or her specialty designation in the CMS enrollment records, and (2)
there is no need to differentiate between primary care services
performed by physicians and primary care services furnished by NPs,
PAs, and CNSs for non-ACO FQHCs/RHCs because the requirement under
section 1899(c) of the Act that beneficiaries be assigned to an ACO
based on their use of primary care services furnished by physicians
does not apply to entities that are not participating in an ACO.
Instead, for all FQHCs/RHCs regardless of whether or not they are ACO
participants, we would we treat all such claims for primary care
services that are furnished by someone other than a physician listed on
the attestation submitted by the ACO under Sec. 425.404(a) as a
service furnished by an NP, PA or CNS. Therefore, all primary care
services furnished by non-ACO FQHCs/RHCs would be considered in step 1
of the assignment methodology, and there would no longer be a need to
assume such primary care services were provided by primary care
physicians in order to achieve this result.
We recognize the unique needs and challenges of rural communities
and the importance of rural providers in assuring access to health
care. FQHCs, RHCs and other rural providers play an important role in
the nation's health care delivery system by serving as safety net
providers of primary care and other health care services in rural and
other underserved areas and for low-income beneficiaries. We have
attempted to develop and implement regulatory and operational policies
to facilitate full participation of rural providers in the Shared
Savings Program, within the statutory requirements for the program. We
welcome comments on our

[[Page 72801]]

proposed revisions to Sec. 425.404(b) and our current procedures for
using claims submitted by FQHCs and RHCs in the assignment methodology
and suggestions on how we might further support participation of FQHCs
and RHCs in the Shared Savings Program in a manner that is consistent
with the statutory requirements.
b. Assignment of Beneficiaries to ACOs That Include CAHs
We briefly addressed certain issues regarding ACOs that include
CAHs in both the proposed rule (76 FR 19538 through 19539) and final
rule (76 FR 67812 through 67814) establishing the Shared Savings
Program. We indicated that we determined that current Medicare payment
and billing policies could generally support the participation of CAHs
in ACOs. However, we explained that the situation is somewhat
complicated with regard to CAHs because section 1834(g) of the Act
provides for two different payment methods for outpatient CAH services.
CAHs billing under section 1834(g)(1) of the Act (referred to as
method I) can participate in the Shared Savings Program by establishing
partnerships or joint venture arrangements with ACO professionals, just
like other hospitals. CAHs billing under section 1834(g)(2) of the Act
(referred to as method II) may form independent ACOs if they meet the
eligibility requirements specified in the regulations. Professional
services billed by method II CAHs are reported using HCPCS/CPT codes
and are paid using a methodology based on the PFS. As a result, it is
possible to use claims submitted by method II CAHs in the assignment
methodology under Sec. 425.402. However, method II CAH claims that
include professional services require special processing because they
are submitted as part of institutional claims. Therefore, we have
developed operational procedures that allow these claims to be
considered in the assignment process under Sec. 425.402. Although we
are not making any proposals at this time regarding the use of services
billed by method II CAHs in the assignment process, we note that our
procedures for incorporating claims billed by method II CAHs into the
assignment methodology are available on our Web site at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Downloads/Shared-Savings-Losses-Assignment-Spec-v2.pdf (see section 3.3.) These technical specifications allow
interested parties to understand how these claims are considered in the
assignment methodology under Sec. 425.402 and to compare the manner in
which claims submitted by method II CAHs are processed with the
processing of claims submitted by other providers that also require
special processing before they can be considered in the assignment
process. We believe this additional information in the technical
specifications allows for a better understanding of the differences in
our procedures, and the reasons for these differences.
One question we frequently receive from ACO applicants is about the
identification numbers we use for different provider types. In general,
ACO participants are identified by Medicare-enrolled TINs. However, the
TINs for method II CAHs are not included in the CMS claims files.
Therefore, in accordance with Sec. 425.204(c)(5)(ii), we require that
as part of their application, ACO applicants also include the CCNs for
any CAHs that are included as ACO participants. In the assignment
methodology under Sec. 425.402, we use the CCN as the unique
identifier for an individual method II CAH.
c. Assignment of Beneficiaries to ACOs That Include ETA Hospitals
After finalizing the beneficiary assignment rules established at
Sec. 425.400 through Sec. 425.404 in the November 2011 final rule (76
FR 67851 through 76 FR 67870), we received inquiries regarding whether
primary care services performed by physicians at ETA hospitals would be
included in the assignment of beneficiaries to ACOs. ETA hospitals are
hospitals that, under section 1861(b)(7) of the Act and Sec. 415.160
of our regulations, have voluntarily elected to receive payment on a
reasonable cost basis for the direct medical and surgical services of
their physicians in lieu of Medicare PFS payments that might otherwise
be made for these services. As a result of this election, we do not
receive separate claims for such physician services furnished in ETA
hospitals. However, ETA hospitals do bill separately for their
outpatient hospital facility services, and these bills include the
information needed to assign beneficiaries to an ACO. Therefore, we
have developed operational instructions and processes (available at
Section 3.5 of the specification document available on our Web site at
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Downloads/Shared-Savings-Losses-Assignment-Spec-v2.pdf) that enable us to include primary care services performed by
physicians at ETA hospitals in the assignment of beneficiaries to ACOs
under Sec. 425.402.
We include TINs and other identifiers (including the
hospital CCN) for ETA hospitals in the assignment algorithm in both
steps 1 and 2 of the assignment process using claims from the
outpatient (institutional) file.
It is necessary for us to use institutional claims
submitted by ETA hospitals in the assignment process because ETA
hospitals are paid for physician professional services on a reasonable
cost basis through their cost reports and no other claim is submitted
for such services. However, ETA hospitals bill us for their separate
facility services when physicians and other practitioners provide
services in the ETA hospital and the institutional claims submitted by
ETA hospitals include the HCPCS code for the services provided. We use
the HCPCS code included on this institutional claim to identify whether
a primary care service was rendered to a beneficiary in the same way as
for any other claim.
To determine the rendering physician for ETA institutional
claims, we use the NPI listed in the ``other provider'' NPI field.
Then we use PECOS to obtain the CMS specialty for the NPI
listed on the ETA institutional claim.
These institutional claims do not include allowed charges,
which are necessary to determine where a beneficiary received the
plurality of primary care services as part of the assignment process.
Accordingly, we use the amount that would otherwise be payable under
the PFS for the applicable HCPCS code, in the applicable geographic
area as a proxy for the allowed charges for the service.
We believe it is appropriate to use ETA institutional claims for
purposes of identifying primary care services furnished by physicians
in ETA hospitals in order to allow these services to be included in the
stepwise methodology for assigning beneficiaries to ACOs. We believe
including these claims increases the accuracy of the assignment process
by helping ensure that beneficiaries are assigned to the ACO or other
entity that is actually managing the beneficiary's care. ETA hospitals
are often located in underserved areas and serve as providers of
primary care for the beneficiaries they serve. We believe it is
appropriate that their patients benefit from the opportunity for ETA
hospitals to fully participate in the Shared Savings Program.
Therefore, we propose to revise Sec. 425.402 by adding a new paragraph
(c) to provide that when considering services furnished by

[[Page 72802]]

physicians in ETA hospitals in the assignment methodology, we would use
the amount payable under the PFS for the specified HCPCS code as a
proxy for the amount of the allowed charges for the service. In
addition, because we are able to consider claims submitted by ETA
hospitals as part of the assignment process, we also propose to amend
Sec. 425.102(a) to add ETA hospitals to the list of ACO participants
that are eligible to form an ACO that may apply to participate in the
Shared Savings Program.
We invite comments on the use of institutional claims submitted by
ETA hospitals for purposes of identifying primary care services
furnished by physicians in order to allow these services to be
considered in the assignment of beneficiaries to ACOs. We also invite
comments on whether there are any other types of potential ACO
participants that submit claims representing primary care services that
CMS should also consider including in (or excluding from) its
methodology for assigning beneficiaries to ACOs participating in the
Shared Savings Program.
6. Effective Date for Finalization of Proposals Affecting Beneficiary
Assignment
As indicated in section II.A. of this proposed rule, the effective
date for the final rule would be 60 days after the final rule is
published. However, we propose that any final policies that affect
beneficiary assignment would be applicable starting at the beginning of
the next performance year. We believe that implementing any revisions
to the assignment methodology at the beginning of a performance year is
reasonable and appropriate because it would permit time for us to make
the necessary programming changes and would not disrupt the assessment
of ACOs for the current performance year. Moreover, we propose to
adjust all benchmarks at the start of the first performance year in
which the new assignment rules are applied so that the benchmark for
the ACO reflects the use of the same assignment rules as would apply in
the performance year. For example, any new beneficiary assignment
policies that might be included in a final rule issued in early 2015
would apply to beneficiary assignment starting at the beginning of the
following performance year, which in this example would be January 1,
2016. In this hypothetical example, we would also adjust performance
benchmarks that apply for the 2016 and subsequent performance years, as
applicable, to reflect changes in our assignment methodology.
In addition, we would not retroactively apply any new beneficiary
assignment policies to a previous performance year. For example, if the
assignment methodology is applied beginning in 2016, we would not use
it in mid-2016 to reconcile the 2015 performance year. In other words,
the assignment methodology used at the start of a performance year
would also be used to conduct the final reconciliation for that
performance year.

F. Shared Savings and Losses

1. Background
Section 1899(d) of the Act establishes the general requirements for
payments to participating ACOs. Specifically, section 1899(d)(1)(A) of
the Act provides that ACO participants will continue to receive payment
``under the original Medicare fee-for-service program under parts A and
B in the same manner as they would otherwise be made,'' and that an ACO
is eligible to receive payment for shared Medicare savings provided
that the ACO meets both the quality performance standards established
by the Secretary, and demonstrates that it has achieved savings against
a benchmark of expected average per capita Medicare FFS expenditures.
Additionally, section 1899(i)(3) of the Act authorizes the Secretary to
use other payment models in place of the one-sided model outlined in
section 1899(d) of the Act as long as the Secretary determines these
other payment models will improve the quality and efficiency of items
and services furnished to Medicare beneficiaries without additional
program expenditures.
In our November 2011 final rule (76 FR 67904 through 67909)
establishing the Shared Savings Program, we considered a number of
options for using this authority. For example, commenters suggested we
consider such options as blended FFS payments, prospective payments,
episode/case rate payments, bundled payments, patient centered medical
homes or surgical homes payment models, payments based on global
budgets, full or partial capitation, and enhanced FFS payments for care
management. However, in the November 2011 final rule (76 FR 67905), we
opted not to use our authority under section 1899(i) of the Act to
integrate these kinds of alternative payment models at that time,
noting that many of the suggested payment models were untested. We
expressed concern that immediately adopting untested and/or unproven
models with which we had little experience on a national scale could
lead to unintended consequences for the FFS beneficiaries we serve or
for the health care system more broadly. We also noted that the
Affordable Care Act had established a new Center for Medicare and
Medicaid Innovation (Innovation Center) at CMS. The Innovation Center
is charged with developing, testing, and evaluating innovative payment
and service delivery models in accordance with the requirements of
section 1115A of the Act. Many of the approaches suggested by
stakeholders and commenters on the Shared Savings Program rule are the
subject of ongoing testing and evaluation by the Innovation Center. In
the November 2011 final rule (76 FR 67905), we noted that while we did
not yet have enough experience with novel payment models to be
comfortable integrating them into the Shared Savings Program at the
time, we anticipated that what we learned from these models might be
incorporated into the program in the future.
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: A one-sided risk model (Track 1) that
incorporates 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
qualify to share in savings but are not responsible for losses. Under
the two-sided model, ACOs qualify to share in savings with an increased
sharing rate, but also must take on risk for sharing in losses.
In the November 2011 final rule (76 FR 67904), we discussed our
belief that offering these two 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 in losses. We expressed 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. Another reason we included the option for
a one-sided track with no downside risk was our belief that this model
would be accessible to and attract smaller group participation. Indeed,
commenters persuaded us that ACOs new to the

[[Page 72803]]

accountable care model--particularly small, rural, safety net, and
physician-only ACOs--would benefit from spending time under a one-sided
model before being required to accept performance-based risk (76 FR
67907).
We also noted, however, that while 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). Therefore, we used our
authority under section 1899(i)(3) of the Act to create a performance-
based risk option, Track 2, where ACOs would not only be eligible to
share in savings, but also must share in losses. We believed a
performance-based risk option would have the advantage of providing
more experienced ACOs an opportunity to enter a sharing arrangement
that provides greater reward for greater responsibility. Commenters
supported our belief that models where ACOs bear a degree of financial
risk hold the potential to induce more meaningful systematic change.
This input from commenters underscored our own views regarding the
importance of offering a pathway for ACOs to transition from the one-
sided model to risk-based arrangements. These comments persuaded us
that having Track 1 as a shared savings only option, while offering
Track 2 as a shared savings/losses model, would be the most appropriate
means to achieve our objectives. Thus, we made final these two tracks
which offered the two-sided model under Track 2 to ACOs willing and
able to take on performance-based risk in exchange for a greater share
of any savings, and also a shared savings only model under Track 1 for
the duration of an ACO's first 3-year agreement period for entities
needing more experience before taking on risk. In the final rule, we
required that ACOs that participate in Track 1 during their first
agreement period must transition to Track 2 for all subsequent
agreement periods. We noted our belief that offering the two tracks,
but requiring a transition to Track 2 in subsequent agreement periods,
would increase interest in the Shared Savings Program by providing a
gentler ``on ramp'' while maintaining the flexibility for more advanced
ACOs to take on greater performance-based risk in return for a greater
share of savings immediately upon entering the program (76 FR 67907).
Therefore, as specified in the November 2011 final rule (76 FR 67909),
ACOs may enter the program in one of two tracks:
Track 1: Under Track 1, the ACO operates under the one-sided shared
savings only model for its initial 3-year agreement period.
Track 2: Under Track 2, the ACO operates under the two-sided shared
savings/losses model for the 3-year agreement period.
Although most of the program requirements that apply to ACOs in
Track 1 and Track 2 are the same, the financial reconciliation
methodology was designed so that ACOs that accept performance-based
risk under Track 2 would have the opportunity to earn a greater share
of savings. Thus, the same eligibility criteria, beneficiary assignment
methodology, benchmark and update methodology, quality performance
standards, data reporting requirements, data sharing provisions,
monitoring for avoidance of at-risk beneficiaries, provider screening,
and transparency requirements apply to ACOs under both models. However,
the financial reconciliation methodology was modified for Track 2 in
order to allow an opportunity for ACOs to earn a greater share of
savings, in exchange for their willingness to accept performance-based
risk. Specific differences between the two tracks include the minimum
savings rate (MSR), the sharing rate based on quality performance, and
the performance payment limit. Table 7 summarizes the differences
between the existing one-sided and two-sided models.
In this section, we discuss various proposals for modifications to
the program tracks and the financial model based on our experience to
date, and propose to offer organizations an additional two-sided model
(Track 3) as a further option for participation.
2. Modifications to the Existing Payment Tracks
a. Overview
Because we believe that payment models where ACOs bear a degree of
financial risk have the potential to induce more meaningful systematic
change in the behavior of providers and suppliers, it was our intent in
the November 2011 final rule to establish the Shared Savings Program to
encourage ACOs not only to enter the program, but also to progress to
increased risk. Therefore, as discussed previously, we established a
requirement that an ACO entering the program under Track 1 may only
operate under the one-sided model for its first agreement period. For
subsequent agreement periods, an ACO would not be permitted to operate
under the one-sided model (Sec. 425.600(b)). If the ACO wishes to
participate in the program for a second agreement period, it must do so
under Track 2 (shared savings/losses). Additionally, an ACO
experiencing a net loss during its initial agreement period may reapply
to participate in the program, but the ACO must 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 (Sec. 425.600(c)). In our view, this allowance
for a full first agreement period under the one-sided model and
required transition to performance-based risk in the subsequent
agreement period struck a balance between our intent to encourage
program participation by small, rural, or physician-only ACOs with the
need to ensure that ACOs quickly transition to taking downside risk.
We are encouraged by the popularity of the Shared Savings Program,
particularly the popularity of the one-sided model. Over 98 percent of
ACOs participating in the Shared Savings Program (over 330 ACOs) have
chosen Track 1, with only 5 ACOs participating under Track 2 as a
starting option. About half of the ACOs participating in the program
are small, provider-based, or rural ACOs, each having less than 10,000
assigned beneficiaries. We continue to believe that one 3-year
agreement period under Track 1 is sufficient for many organizations to
progress along the on-ramp to performance-based risk. We also continue
to believe, as discussed in the November 2011 final rule (76 FR 67907),
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, so it remains our intent to continue to encourage
forward movement up the ramp. However, based on our experience with the
program, we recognize that many of the organizations that are currently
participating in the program are risk averse and lack the
infrastructure and readiness to manage increased performance-based
risk. Given the short time period between finalization of the November
2011 final rule and the first application cycles, is it our impression
that many ACOs, particularly smaller ACOs, focused initially on
developing their operational capacities rather than on the
implementation of care redesign processes. Therefore, we have some
concerns about the slope of the on-ramp to performance-based risk
created by the two existing tracks and the policy that requires ACOs in
Track 1 (shared

[[Page 72804]]

savings only) to transition to Track 2 (shared savings/losses) for
their second agreement period. We are particularly concerned that the
current transition from one- to two-sided risk may be too steep for
some organizations, putting them into a situation where they must
choose between taking on more risk than they can manage or dropping out
of program participation altogether. For instance, we believe that some
smaller and less experienced ACOs are likely to drop out of the program
when faced with this choice, because the smaller an ACO's assigned
beneficiary population, the greater the chances that shared losses
could result from normal variation. Also, we are aware of the concern
among some stakeholders that one agreement period under the one-sided
model may be not be a sufficient amount of time for some ACOs to gain
the level of experience with population management or program
participation needed for them to be comfortable taking on performance-
based risk. For some organizations, having additional experience in the
Shared Savings Program under Track 1 could help them be in a better
position to take on performance-based risk over time. We are also
concerned that the existing features of Track 2 may not be sufficiently
attractive to ACOs contemplating entering a risk-based arrangement.
Finally, some ACOs have reported that establishing the repayment
mechanism required to participate under the two-sided model is
difficult and ties up capital that otherwise could be used to implement
the care processes necessary to succeed in the program. We continue to
believe the requirement that ACOs entering the two-sided model
demonstrate an adequate repayment mechanism is important for protecting
the Medicare program. However, as discussed in more detail later in
this section, we are proposing certain modifications to the repayment
mechanism requirements applicable to ACOs under the program's two-sided
model(s) (Track 2 and proposed Track 3). These proposed modifications
are based on our experience with the repayment mechanism requirements
and are intended to reduce the burden of these requirements on ACOs.
Hence, we are revisiting our policies related to Tracks 1 and 2 in
order to smooth the on ramp for organizations participating in the
Shared Savings Program. First, we propose to remove the requirement at
Sec. 425.600(b) for Track 1 ACOs to transition to Track 2 after their
first agreement period. Second, we propose to modify the financial
thresholds under Track 2 to reduce the level of risk that ACOs must be
willing to accept. Taken together, we believe there are a number of
advantages to smoothing the on ramp by implementing these proposed
policies. We believe that removing the requirement that ACOs transition
to a two-sided model in their second agreement period will provide
organizations, especially newly formed, less experienced, and smaller
organizations, more time to gain experience in the program before
accepting performance-based risk. In particular, we believe the
proposed changes would encourage continued participation in the program
by potentially successful ACOs that would otherwise drop out because of
the requirement to transition to the two-sided model in their second
agreement period. We further believe the proposal to allow
organizations to gain more experience under a one-sided model before
moving forward to a two-sided model would encourage earlier adoption of
the shared savings model by organizations concerned about being
required to transition to performance-based risk before realizing
savings under a one-sided model. We believe incorporating the
opportunity for ACOs to remain in Track 1 beyond their first agreement
period could have a beneficial effect with respect to the care that
beneficiaries receive. Specifically, to the extent that more ACOs are
able to remain in the program, a potentially broader group of
beneficiaries will have access to better coordinated care through an
ACO. In addition, allowing ACOs additional time to make the transition
to performance-based risk would reduce the chances that a high-
performing ACO, which believes that it is not yet ready to assume
greater financial risk, will either cease to participate in the program
to avoid risk or find it necessary to engage in behaviors primarily
intended to minimize that risk rather than improve patient care.
Further, we believe that ACOs that accept financial responsibility
for the care of beneficiaries have the greatest beneficial effects for
the Medicare program and its beneficiaries. Therefore, we expect that
ACOs participating in the Shared Savings Program move in the direction
of accepting performance-based risk. Thus, while we believe it is
appropriate to offer additional time for ACOs under a one-sided model,
we also believe there should be incentives for participants to
voluntarily take on additional financial risk. There should also be
disincentives to discourage organizations from persisting in a shared
savings only risk track indefinitely. Therefore, we believe that
distinguishing the financial attractiveness of the one-sided model from
the two-sided model by dropping the sharing rate in Track 1 for ACOs
participating in Track 1 for a subsequent agreement period and
modifying the risk inherent in Track 2 would signal to ACOs the
importance of moving toward performance-based risk and encourage ACOs
to voluntarily enter the two-sided model as soon as they are able.
Finally, we believe that adopting restrictions to prevent organizations
that have not achieved certain minimum performance requirements with
respect to cost and quality of care, based on their experience to date,
from obtaining additional agreement periods under Track 1 can serve as
an appropriate program safeguard against entities remaining in the
program that are not fully committed to improving the quality and
efficiency of health care service delivery.
b. Proposals Related to Transition From the One-Sided to Two-Sided
Model
We considered several options to better balance both our intent to
encourage continued participation by ACOs that entered the program
under the one-sided model but that are not ready to accept performance-
based risk after 3 years of program participation with our concern that
allowing a shared savings only option will discourage ACOs capable of
taking risk from moving to a two-sided model. We considered the
following options: (1) Revising the regulations to allow ACOs that
enter the program under the one-sided model to continue participation
in Track 1 for more than one agreement period; (2) extending the
initial 3-year agreement period for an additional 2 years for ACOs that
enter the program under Track 1, but that do not believe that they are
ready to advance to a risk-based track; and (3) allowing ACOs to
continue participation in Track 1 for more than one agreement period,
but revising the one-sided model to decrease the financial
attractiveness of the model, so as to encourage ACOs ready to accept
performance-based risk to transition to a two-sided model.
Among these options, we believe the third option offers a good
balance of encouraging continued participation in addition to
encouraging progression along the on-ramp to performance-based risk.
Therefore, we propose to remove the requirement at Sec. 425.600(b)
that ACOs that enter the program under Track 1 (one-sided model) must
transition to Track 2 (two-sided model) after one agreement period, if
they wish

[[Page 72805]]

to continue participating in the Shared Savings Program. Instead, we
propose to revise the regulation to permit ACOs that have completed a
3-year agreement under Track 1 to enter into one additional 3-year
agreement under Track 1. We believe that continued participation in the
Shared Savings Program, generally, should be made available to ACOs
that demonstrate they have been compliant with the program
requirements, or are working through corrective action plans to CMS'
satisfaction, with safeguards in place to ensure they will meet program
requirements in the future. In section II.C.3. of this proposed rule,
we proposed criteria for determining whether to allow ACOs that are
currently participating in the program to renew their participation
agreements for subsequent agreement periods. We seek to encourage the
continued participation of ACOs that are successful and have the
potential to move toward accepting greater responsibility for the care
of their beneficiaries, but also encourage their progression along the
risk continuum. Thus, we propose to make the option of participating in
Track 1 for a second agreement period available to only those Track 1
ACOs that--(1) meet the criteria established for ACOs seeking to renew
their agreements (as proposed in section II.C.3 of this proposed rule,
including demonstrating to CMS that they satisfied the quality
performance requirements under Subpart F such that they were eligible
to share in savings in at least one of the first two performance years
of the previous agreement period) and (2) in at least one of the first
two performance years of the previous agreement period, they did not
generate losses in excess of the negative MSR. For example, assume a
Track 1 ACO has 15,000 assigned beneficiaries with an MSR of 2.7
percent. If we calculate that this ACO's expenditures exceeded the
ACO's benchmark by 2.7 percent or more in both of the first two
performance years, then CMS would not accept this ACO's request to
renew its agreement under the one-sided model. If the ACO's financial
performance results in expenditures in excess of the negative MSR in
only one of the first two performance years, then we would accept this
ACO's request to renew its participation agreement under the one-sided
model, provided all other requirements for renewal were satisfied.
We believe that requiring ACOs to meet these requirements in order
to remain in Track 1 will prevent consistently poor performers from
being able to seamlessly continue in program participation under the
one-sided model while permitting some leeway for ACOs that are new to
the program and may have had some difficulty in cost or quality
performance in one of the two first performance years. We also believe
that these additional eligibility criteria serve as an important
safeguard to reduce the potential for ACOs to participate in the
program for reasons other than a commitment to improving the value of
health care services. We recognize that because our assessment would be
based on only 2 years of data, we would not have a complete picture of
the ACO's performance during the agreement period. That is, an ACO may
financially perform very poorly, exceeding the negative MSR in its
first and second performance years, but demonstrate a trend in a
direction that could ultimately lead to better performance in the third
year. Under our proposal this ACO would not be permitted to renew its
agreement under Track 1 for a second agreement period. However, an
argument could be made that this ACO simply needed the additional time
under a one-sided model to gain experience and start improving. We
therefore seek comment on whether we should also consider the direction
the ACO's performance is trending when determining whether to permit
renewal of an ACO's participation agreement under Track 1. We also seek
comment on whether other options for such ACOs, short of refusing their
participation in a second agreement period under Track 1, would better
serve program goals. We note that such ACOs would not be precluded from
renewing their participation agreement in order to participate under a
two-sided risk track, consistent with Sec. 425.600(c). We also
emphasize that in addition to meeting the specific criteria to be
eligible to continue in Track 1, the ACO must also demonstrate that it
meets the requirements to renew its agreement under proposed Sec.
425.224, which would include the requirement that the ACO establish
that it is in compliance with the eligibility and other requirements of
the Shared Savings Program.
In addition, as part of our proposal to allow ACOs to participate
in a second agreement period under the one-sided model, we propose 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. As a
result, the maximum sharing rate for an ACO in a second agreement
period under Track 1 would be 40 percent.
Accordingly, in addition to our proposed change to Sec. 425.600(b)
to allow ACOs to participate under Track 1 for a second agreement
period, we propose to modify Sec. 425.604(d) to provide that the
maximum sharing rate during a second agreement period under Track 1
will be 40 percent. As a result, ACOs that continue to participate
under the one-sided model and are eligible for shared savings will
receive a smaller share of those savings compared to ACOs participating
under the one-sided model in their first agreement period and ACOs
participating under a two-sided model. We believe permitting one
additional agreement period under Track 1, but at a reduced sharing
rate, will encourage the continued participation of ACOs that are
successful and have the potential to move toward accepting greater
responsibility for the care of their beneficiaries, but also encourage
their progression along the risk continuum. However, as discussed later
in this section, we also recognize that limiting ACOs to only two
agreement periods under Track 1 may encourage ACOs to progress along
the on-ramp to risk earlier than they otherwise might if they were
permitted to remain under the one-sided model for several agreement
periods.
We further note that this option to participate under the one-sided
model agreement in a subsequent agreement period is only available to
ACOs that have completed or are in the process of completing an
agreement under the one-sided model. That is, we will not permit an ACO
under a two-sided model to subsequently participate under a one-sided
model.
We seek comment on this proposal. In particular, we request input
on whether a 40 percent sharing rate in a second agreement period under
the one-sided model is sufficient to incentivize an ACO that may need
more time to prepare to take on two-sided performance-based risk while
also encouraging ACOs that are ready to take on performance-based risk
to choose to continue participation in the Shared Savings Program under
a two-sided model.
We also considered other variations and options for allowing ACOs
additional time in the one-sided model. For example, we considered
allowing ACOs to continue under Track 1 for a second agreement period
without any changes to the sharing rate (that is, retaining the 50
percent sharing rate in the second agreement period); however, we do
not believe this approach would provide sufficient incentive for ACOs
to be moving in the direction of adopting

[[Page 72806]]

performance-based risk. We continue to believe that participating in a
model with two-sided risk offers stronger incentives for ACOs to
improve the quality of care and reduce costs. Currently, ACOs in their
first agreement period under Track 1 may share in up to 50 percent of
the savings generated for the Medicare program. We are concerned that
if ACOs are able to continue to receive up to 50 percent of savings in
a second agreement period there may be insufficient incentive for many
ACOs that may be ready to take on two-sided risk to move to a track
with two-sided risk after their first agreement period. As a result,
under our proposal we would reduce the sharing rate for ACOs
participating in Track 1 for a second agreement period in order to
discourage prolonged participation under Track 1 and encourage
progression along the on ramp to risk where an ACO may qualify for a
higher sharing rate.
We also considered permitting ACOs to participate in multiple
agreement periods under Track 1 and reducing the maximum sharing rate
by 10 percentage points for each subsequent agreement. Such a policy
may encourage more ACOs to continue to participate in the program, but
also may reduce the urgency for ACOs to progress quickly along the on-
ramp to risk if they are permitted to remain under the one-sided model
for several agreement periods.
We also considered offering the opportunity to ACOs participating
under Track 1 to extend their initial 3-year participation agreement
under Track 1 by an additional 2 years. However, we note that under
this option, we would not be able to rebase the benchmark, making it
more likely that organizations would achieve savings without further
improvements in care redesign; yet at the same time, it would be more
difficult for ACOs with losses to turn around their performance.
Moreover, we are concerned that limiting ACOs to only 2 additional
years under Track 1 may not be sufficient for all ACOs to take the
steps necessary to prepare to move to performance-based risk.
We seek comment on our proposal to permit ACOs to participate under
Track 1 for a second agreement period and to reduce the maximum sharing
rate to 40 percent for ACOs participating under Track 1 for a second
agreement period. We also specifically seek comments on the other
options we considered, including extending an ACO's Track 1 agreement
period for an additional 2-years rather than permitting two 3-year
agreement periods under Track 1, permitting ACOs to participate in a
second agreement period under Track 1 with no change to the sharing
rate, and offering multiple agreement periods under Track 1 while
reducing the sharing rate by 10 percentage points for each subsequent
agreement.
In the November 2011 final rule, we also addressed the possibility
that an ACO may terminate or be terminated from participation in the
Shared Savings Program, and the consequences for the ACO's choice of
tracks in the event it reapplies to the program. We finalized a policy
that would permit such ACOs to reapply to participate in the program
again only after the date on which the term of their original
participation agreement would have expired if the ACO had not been
terminated (Sec. 425.222(a)). Under Sec. 425.222(b), to be eligible
to participate in the Shared Savings Program after a previous
termination, the ACO must demonstrate in its application that it has
corrected the deficiencies that caused it to be terminated and that it
has processes in place to ensure it will remain in compliance with the
terms of the new participation agreement. We note that, all applicants
undergo screening with regard to their program integrity history that
may result in denial of the application (Sec. 425.304(b)). We also
provided that an ACO under the one-sided model whose participation
agreement was previously terminated may reenter the program only under
the two-sided model, unless it was terminated less than half-way
through its agreement period under the one-sided model, in which case
the ACO would be allowed to reenter the one-sided model (Sec.
425.222(c)). An ACO under Track 2 whose agreement was terminated may
only re-apply to participate in Track 2 (Sec. 425.222(c)).
In light of our proposed revisions to Sec. 425.600 to permit an
ACO to participate under Track 1 for a second agreement period, we are
proposing to make conforming changes to Sec. 425.222(c) to permit
previously terminated Track 1 ACOs to reapply under the one-sided
model. We propose that, consistent with our existing policy under Sec.
425.222(c), an ACO whose agreement was terminated less than half way
through the term of its participation agreement under Track 1 would be
permitted to reapply to the one-sided model as if it were applying for
its first agreement period. If the ACO is accepted to reenter the
program, the maximum sharing rate would be 50 percent. However, in the
case of an ACO that was terminated more than half way through its
initial agreement under the one-sided model, we propose to revise Sec.
425.222(c) to permit this ACO to reapply for participation under the
one-sided model, but to provide that the ACO would be treated as if it
were applying for a second agreement period under Track 1. Thus, if the
ACO is approved to participate in the program again, the reduced
sharing rate of 40 percent would apply. An ACO whose prior agreement
under Track 2 was terminated would still be precluded from applying to
participate under Track 1.
We seek comment on this proposal.
c. Proposals for Modifications to the Track 2 Financial Model
To complement the proposals to smooth the on ramp to risk, we are
also proposing to modify the financial model under Track 2 for ACOs
choosing this two-sided option to further encourage ACOs to accept
increased performance-based risk. Specifically, we are proposing to
modify the threshold that Track 2 ACOs must meet or exceed in order to
share in savings (minimum savings rate (MSR)) or losses (minimum loss
rate (MLR)). We believe this modification would improve the track's
attractiveness for ACOs, particularly for ACOs that may be cautious
about entering a performance-based payment arrangement such as some
ACOs with smaller assigned beneficiary populations or those with less
experience with managing the health of populations across sites of
care.
Track 2 was designed to allow more advanced ACOs the opportunity to
take on greater performance-based risk in exchange for greater reward
immediately, as early as their first agreement period. In the November
2011 final rule (76 FR 67904 through 67905), we discussed concerns that
had been raised about allowing ACOs to participate immediately in a
risk-based arrangement. Specifically, ACOs might try to avoid at-risk
beneficiaries in order to minimize the possibility of realizing losses
against their benchmarks or might be unable to repay the Medicare
program if they have losses. We explained our belief that the use of
retrospective beneficiary assignment for financial reconciliation and
the program's beneficiary notification requirements would be sufficient
safeguards against the prospect that ACOs participating in the two-
sided model might try to avoid at-risk beneficiaries (76 FR 67904).
Further, the requirement that ACOs participating in Track 2 establish
an adequate repayment mechanism provides further assurance about their
ability to repay shared losses to the Medicare program.
Currently, ACOs participating in Track 2 are eligible to share in a
greater

[[Page 72807]]

percentage of savings than ACOs participating in Track 1, but are also
accountable for a share of losses compared to their benchmark. ACOs may
elect to enter Track 2 in their first 3-year agreement period, or after
completing one agreement period under Track 1. Under the Track 2
financial model, an ACO must have savings that meet or exceed a 2
percent threshold to be eligible to share in savings or additional
expenditures that meet or exceed a 2 percent threshold to be held
accountable for sharing in losses (Sec. 425.606(b)). As compared to
the MSR used for Track 1, this fixed percentage generally offers a
lower savings threshold for Track 2 ACOs to meet in order to share in
savings, and was established in recognition of the Track 2 ACOs'
willingness to assume the risk of incurring shared losses (76 FR
67929). In contrast, although organizations participating under the
Track 1 financial model must also meet or exceed a MSR in order to be
eligible to share in savings (Sec. 425.604(b)), the MSR under the one-
sided model is established for each ACO using increasing nominal
confidence intervals (CI) based on the size of the beneficiary
population assigned to the ACO. Thus, an ACO with the minimum 5,000
assigned beneficiaries would have a MSR based on a 90 percent CI; an
ACO with 20,000 assigned beneficiaries would have a MSR based on a 95
percent CI and an ACO with 50,000 assigned beneficiaries would have an
MSR based on a 99 percent CI. In addition, the MSR under the one-sided
model is not allowed to fall under 2 percent for larger ACOs. Table 5
displays the MSR an ACO participating under Track 1 would have to
achieve before savings could be shared based on its number of assigned
beneficiaries.

Table 5--Minimum Savings Rate for Track 1
------------------------------------------------------------------------
MSR (low end of MSR (high end of
assigned assigned
Number of beneficiaries beneficiaries) beneficiaries)
(percent) (percent)
------------------------------------------------------------------------
5,000-5,999..................... 3.9 3.6
6,000-6,999..................... 3.6 3.4
7,000-7,999..................... 3.4 3.2
8,000-8,999..................... 3.2 3.1
9,000-9,999..................... 3.1 3.0
10,000-14,999................... 3.0 2.7
15,000-19,999................... 2.7 2.5
20,000-49,999................... 2.5 2.2
50,000-59,999................... 2.2 2.0
---------------------------------------
60,000 +........................ 2.0
------------------------------------------------------------------------

As we described in the rulemaking establishing the Shared Savings
Program (76 FR 67927), the MSR thresholds that apply under Track 1 were
established on the basis of standard inferential statistics and provide
confidence that, once the savings achieved by the ACO meet or exceed
the MSR, the change in expenditures represents actual performance
improvements by the ACO as opposed to normal variations.
Our experience with the program suggests that some ACOs,
particularly ACOs with small assigned populations or those with less
experience, are hesitant to elect Track 2 given the risk of losses and
their inexperience with population management. Therefore, we have
explored ways to reduce financial risk for ACOs participating under
Track 2. One way to reduce financial risk under Track 2 would be to
modify the current MSR and MLR under this track. By increasing the MSR
and MLR thresholds beyond the current 2 percent, financial risk would
be reduced for Track 2 ACOs because they would have to incur higher
losses in order to be held accountable for shared losses. However, an
ACO would also have to achieve a greater level of savings under a
higher MSR in order to share in savings. In exploring potential
modifications to the MSR and MLR under Track 2, we also considered
increasing them using a fixed percent. For example, we considered using
an MSR and MLR threshold of 3 or 4 percent that would apply to all ACOs
participating in Track 2.
After considering these options, we concluded that using the same
methodology currently used to establish the MSR under the one-sided
model, which is based upon the size of the beneficiary population
assigned to the ACO, to establish both the MSR and MLR under Track 2,
would serve two purposes. Specifically, in comparison with the existing
fixed 2 percent MSR and MLR that currently apply to ACOs in Track 2, it
would further protect ACOs against the risk of losses likely due to
normal variation while offering further protection to the Medicare
program from paying for shared savings likely due to normal variation.
The methodology that we used to establish the MSRs for Track 1 based
upon the size of the assigned beneficiary population was intended to
provide confidence that shared savings would not be earned by random
chance alone (76 FR 67928). Similarly, basing the MLR under Track 2 on
the size of an ACO's assigned beneficiary population would serve to
statistically protect ACOs with smaller assigned populations from
losses that result from normal variation, and we believe this change
would make it more likely that such ACOs will be willing to take on
performance-based risk under Track 2.
Therefore, we are proposing to retain the existing features of
Track 2 with the exception of revising Sec. 425.606(b) to allow the
MSR and MLR to vary based on the ACO's number of assigned beneficiaries
according to the methodology outlined for setting the MSR under the
one-sided model in Sec. 425.604(b) as shown in Table 6. We believe
that by building in greater downside protection, this proposal may help
smooth the on-ramp to performance-based risk for ACOs, particularly
ACOs with smaller assigned populations, making the transition to a two-
sided model more attractive.

[[Page 72808]]

Table 6--Proposed Minimum Savings Rate and Minimum Loss Rate for Track 2
------------------------------------------------------------------------
MSR/MLR (low end MSR/MLR (high end
of assigned of assigned
Number of beneficiaries beneficiaries) beneficiaries)
(percent) (percent)
------------------------------------------------------------------------
5,000-5,999..................... 3.9 3.6
6,000-6,999..................... 3.6 3.4
7,000-7,999..................... 3.4 3.2
8,000-8,999..................... 3.2 3.1
9,000-9,999..................... 3.1 3.0
10,000-14,999................... 3.0 2.7
15,000-19,999................... 2.7 2.5
20,000-49,999................... 2.5 2.2
50,000-59,999................... 2.2 2.0
---------------------------------------
60,000 +........................ 2.0
------------------------------------------------------------------------

With the proposed addition of Track 3 to the program, discussed
later in this section, Track 2 can be viewed as a first step for some
organizations to accepting performance-based risk. As such, providing
an MLR that is more protective of ACOs may attract greater
participation in performance-based risk under Track 2, particularly by
ACOs with smaller assigned populations or those with less experience
managing populations.
We seek comments on this proposal as well as other options that
could potentially make Track 2 more financially attractive to ACOs. We
request that commenters indicate why they believe an alternative option
would be more attractive to ACOs than the one proposed and the specific
reason why the option would be beneficial. We also request that
commenters consider whether additional safeguards should be implemented
to appropriately protect the Medicare Trust Fund, if an alternative
approach were to be adopted. We also seek comment on whether we should
consider implementing the prospective assignment approach proposed for
Track 3 under Track 2 and whether doing so would enhance or erode the
incentives for organizations to take on risk.
3. Creating Options for ACOs That Participate in Risk-Based
Arrangements
a. Overview
As noted previously, we are pleased with the overall interest in
the Shared Savings Program. However, we would also like to increase
interest in the program by expanding the range of opportunities and
models for organizations to improve the cost and quality of care
delivered to Medicare FFS beneficiaries by assuming greater financial
risk for their assigned beneficiaries.
In January 2012, the Innovation Center began testing the Pioneer
ACO Model. The Shared Savings Program and the Pioneer ACO Model
incorporate the same fundamental structure with a group of healthcare
providers and suppliers coming together to form an ACO that agrees to
be accountable for the care provided to a population of Medicare FFS
beneficiaries. The quality reporting requirements are the same for
Shared Savings Program ACOs and Pioneer ACOs. However, the Pioneer ACO
Model and Shared Savings Program differ on several key elements,
including the methodologies used for benchmarking, payment
reconciliation, and assignment. For instance, the Pioneer ACO Model
offers ACOs a greater sharing rate (up to 70 percent based on quality
performance in performance year 2 of the model) compared to the Shared
Savings Program, which currently offers a maximum sharing rate of 60
percent for ACOs choosing Track 2. Under the Pioneer ACO Model,
beneficiaries are aligned to a Pioneer ACO prospectively at the start
of each performance year and can only be removed from the list of
aligned beneficiaries retrospectively based on certain exclusion
criteria. In contrast, under the Shared Savings Program, beneficiaries
are assigned to an ACO under Track 1 or Track 2 based upon a
preliminary prospective assignment methodology with retrospective
reconciliation after the end of the performance year that ultimately
assigns a beneficiary to the ACO based on whether ACO professionals
provided the plurality of primary care services to that beneficiary
during the performance year. All Pioneer ACOs must agree to accept
performance-based risk, and the financial risk increases over the
course of their agreement period, whereas ACOs participating in the
Shared Savings Program have an option to participate in a shared
savings only model (Track 1) and for those ACOs that choose to accept
performance-based risk (Track 2), the shared loss rate for which the
ACO is at risk remains same throughout the agreement period. There are
also a number of other differences between the two initiatives. Key
features of the Pioneer ACO Model are explained in the Request for
Application available online at https://innovation.cms.gov/Files/x/Pioneer-ACO-Model-Request-For-Applications-document.pdf, and an updated
table on payment arrangements is available online at https://innovation.cms.gov/Files/x/Pioneer-ACO-Model-Alternative-Payment-Arrangements-document.pdf.
In the November 2011 final rule (76 FR 67907), we expressed our
intent to gain experience with alternative payment models through the
Innovation Center before potentially adopting them more widely in the
Shared Savings Program. Currently, testing of the Pioneer ACO Model is
still underway, and we do not yet have a completed evaluation of that
test. However, we have heard from stakeholders that there are certain
aspects of the Pioneer ACO Model that may be appealing to some
organizations and that we might consider incorporating into the Shared
Savings Program. Therefore, in light of our experience with the Shared
Savings Program, comments from stakeholders, and early responses to the
Pioneer ACO Model, we have considered certain modifications to the
financial models and arrangements available under the Shared Savings
Program that might encourage organizations to take on increasing
financial risk in order to motivate even greater improvements in care,
and also minimize the barriers faced by some ACOs that limit their
willingness to accept performance-based risk.
In evaluating what features might encourage ACOs to take on
increasing financial risk, we considered several

[[Page 72809]]

options, including modifying Track 1, modifying or eliminating Track 2,
adding a Track 3 to supplement the existing ones, or a combination of
these options. After reviewing these options, we are proposing to use
our authority under section 1899(i)(3) of the Act to create an
additional risk-based option for ACOs ready to take on increased
performance-based risk.
To exercise our authority under section 1899(i)(3) of the Act, we
must demonstrate that this policy; (1) `` . . . does not result in
spending more for such ACO for such beneficiaries than would otherwise
be expended . . . if the model were not implemented . . . .'' and (2)
``will improve the quality and efficiency of items and services
furnished under this title.'' We applied this authority when proposing
a two-sided risk-based model in our April 2011 proposed rule (76 FR
19603), which was modified and made final in in our November 2011 final
rule (76 FR 67909). As discussed in our final rule (76 FR 67904), we
believed that Track 2 would provide an opportunity for organizations
more experienced with care coordination and risk models that are ready
to accept performance-based risk to enter a sharing arrangement that
provides greater reward for greater responsibility. We believe that
proposed Track 3 would offer an additional opportunity for ACOs to
accept greater responsibility for beneficiary care in exchange for the
possibility of greater reward. Moreover, we do not believe that adding
a second two-sided risk model would result in an increase in spending
beyond what would otherwise occur. To the contrary, as discussed later
in our Regulatory Impact Analysis, our initial estimates suggest that
the inclusion of Track 3 along with the other proposals made in this
rule would improve savings for the Trust Funds resulting from this
program. Further, we believe that adding Track 3 would improve the
quality of care furnished to Medicare FFS beneficiaries because ACOs
participating under Track 3 would have an even greater incentive to
perform well on the quality measures in order to maximize the
percentage of savings they may receive, while limiting their liability
for any losses that might be incurred.
Hence, we are proposing to develop a new risk-based Track 3 under
Sec. 425.610, which would be based on the current payment methodology
under Track 2, but would also incorporate some different elements that
may make it more attractive for entities to accept increased
performance-based risk.
In general, unless otherwise stated, we are proposing to model
Track 3 off the current provisions governing Track 2, which in turn are
modeled on Track 1, to have the same general eligibility requirements,
quality performance standards, data sharing requirements, monitoring
rules, and transparency requirements. However, as we discuss later in
this section, we are proposing certain discrete features for Track 3
that will differentiate it from Track 2. Specifically, we propose to
make modifications to the beneficiary assignment methodology, sharing
rate, MSR and MLR, and performance payment and loss sharing limits.
These proposals are discussed in detail in the following sections.
b. Proposals for Assignment of Beneficiaries Under Track 3
(1) Background
Currently, beneficiaries are assigned to Shared Savings Program
ACOs participating under Track 1 and Track 2 based on the assignment
methodology that is described in detail in the November 2011 final rule
and in section II.E. of this proposed rule. Beneficiary assignment is
based on the certified ACO participant list and drives a variety of
program operations described in more detail in section II.B. of this
proposed rule. An assigned beneficiary population is determined for
each of the benchmark years as well as each performance year and used
to determine the average per capita costs of the ACO's assigned FFS
population in each of those years. Additionally, when an ACO enters the
program, and on a quarterly basis thereafter, we perform a preliminary
prospective assignment, based on the most recent 12 months of available
claims data, to provide the ACO with information about the FFS
population it has served in the past and that is likely to be assigned
to the ACO at the end of the performance year. After the end of each
performance year, we perform a final retrospective reconciliation to
generate the final list of beneficiaries that chose to receive the
plurality of their primary care services from ACO professionals
applying the assignment methodology established under Subpart E of the
regulations. Under this methodology, in developing the final list of
assigned beneficiaries for the performance year, beneficiaries are both
added to and removed from the preliminary prospectively assigned
beneficiary lists provided to ACOs. This final list of assigned
beneficiaries becomes the basis for calculating the average per capita
expenditures for the performance year, and is used for financial
reconciliation.
In this section, we discuss our proposals to apply a methodology to
assign beneficiaries prospectively to Track 3 ACOs. However, since the
program's operations currently center on retrospective assignment, we
also considered a number of issues important to implementing
prospective assignment for Track 3 ACOs. Specifically, we discuss our
proposals for: (1) A prospective assignment methodology; (2) the timing
for performing prospective assignment; (3) exclusion criteria to be
applied to the prospective list at the end of the benchmark or
performance year; and (4) addressing overlap and interactions between
prospective assignment for Track 3 ACOs and the preliminary prospective
assignment and retrospective reconciliation for Track 1 and Track 2
ACOs.
(2) Proposal for prospective assignment under Track 3
In the November 2011 final rule that established the Shared Savings
Program, we adopted a preliminary prospective assignment model with
retrospective reconciliation because we believed it would provide ACOs
with adequate information to redesign their care processes while also
encouraging ACOs to standardize these care processes for all Medicare
FFS beneficiaries instead of focusing care management activities on a
small subset of their FFS population. Further, we expressed our view
that this approach would provide sufficient incentives for each ACO to
provide quality care to its entire beneficiary population (76 FR
67864).
We continue to believe that the current Shared Savings Program
assignment methodology offers strong incentives for health system
redesign to impact the care for all FFS beneficiaries that receive care
from ACO professionals. As a result, we believe the assignment
methodology currently used for the Shared Savings Program limits the
potential for gaming and reduces the motivation to target beneficiaries
for avoidance. This methodology may also improve care for beneficiaries
who are newly diagnosed with high cost health problems during a
performance year. For example, a FFS beneficiary diagnosed with cancer
during a performance year would benefit from interacting with ACO
providers/suppliers that have incentives to be vigilant for
beneficiaries who are likely to be assigned to their ACO
retrospectively. Intervening early in the care of such patients may
improve the quality and coordination of their care and reduce the cost
of that care compared to what it might have been

[[Page 72810]]

without the early intervention by the ACO and its ACO providers/
suppliers.
On the other hand, while many beneficiaries routinely see the same
providers and suppliers from year to year, FFS beneficiaries that are
assigned to an ACO have freedom to choose their healthcare providers
and, unlike patients enrolled in many managed care plans, are not
locked into seeing only ACO providers/suppliers. As a result, there is
no absolute certainty that preliminarily prospectively assigned
beneficiaries will continue to receive the plurality of their primary
care services from ACO professionals during the performance year. Thus,
there can potentially be differences between the preliminary assigned
beneficiary list that the ACO receives at the start of the performance
year, and every quarter thereafter, and the final assigned beneficiary
list that is generated at the time of retrospective reconciliation,
which is based on the actual utilization of primary care services by
beneficiaries during the performance year. Given our experience with
the Shared Savings Program and Physician Group Practice Demonstration
before it, this is not an unexpected or unanticipated result of the
methodology used to assign FFS beneficiaries who retain their freedom
to choose providers under traditional FFS Medicare. That being said,
the need to account for both the ebb and flow of assigned beneficiaries
under the preliminary prospective assignment methodology with
retrospective reconciliation used in the Shared Savings Program may
discourage participation in risk-based arrangements by ACOs that seek
greater certainty about the population on whom they will be assessed.
As an alternative, beneficiaries could be prospectively assigned to
an ACO prior to the start of the performance year. An example of
prospective alignment can be found in the Pioneer ACO Model, where
beneficiaries are aligned to Pioneer ACOs prior to the start of each
performance year. Under the Pioneer ACO Model, the list of
prospectively aligned beneficiaries is reconciled at the end of the
year to exclude certain beneficiaries from the list, for example,
beneficiaries who were not eligible for alignment during the
performance year; however, no new beneficiaries are added to the list.
This alternative assignment methodology arguably provides Pioneer ACOs
with a more targeted set of FFS beneficiaries on whom to focus their
care redesign efforts during the performance year. The beneficiary
alignment methodology used under the Pioneer Model can be reviewed in
more detail on the Innovation Center Web site: https://innovation.cms.gov/initiatives/Pioneer-ACO-Model/
A prospective assignment methodology may offer ACOs a more narrowly
defined target population and greater certainty about where to focus
their care redesign processes. This improved certainty may be an
important factor in an ACO's willingness to take on greater
performance-based risk because the ACO may be better positioned to make
decisions regarding where to make investments in infrastructure to
deliver enhanced services. Given the higher levels of performance-based
risk associated with the Pioneer ACO Model, the Innovation Center
elected to use a prospective assignment methodology specifically to
provide participating ACOs with greater certainty regarding their
assigned beneficiary populations in order to allow them to better
target their care coordination efforts to those patients.
Potential disadvantages of a prospective assignment methodology,
such as the one used under the Pioneer ACO Model, are that it may
encourage ACOs to narrowly focus on a subset of FFS beneficiaries in
the care of their ACO providers/suppliers while not doing as much to
incentivize organizations to broadly redesign care processes to improve
the care for all FFS beneficiaries under the care of providers and
suppliers participating in the ACO. These incentives arise because ACOs
know in advance the subset of their patients for which their
performance will be measured.
However, despite these concerns, we acknowledge that a prospective
assignment methodology may offer greater certainty and a more narrowly
defined target population for some ACOs, and these may be important
factors in an ACO's willingness to take on greater performance-based
risk where the ACO must make decisions regarding where to make
investments in infrastructure to deliver enhanced services. We further
believe that ACOs will have strong incentives to provide their
prospectively assigned beneficiaries high-quality, low-cost care in
order to discourage them from seeking care outside of the ACO and that
beneficiaries that are prospectively assigned to an ACO will continue
to be protected from concerns related to inappropriate limitations on
care under traditional FFS Medicare because of their ability to choose
their providers. Under the Shared Savings Program, there is no lock in
for beneficiaries, therefore, we believe a prospective assignment
methodology under the Shared Savings Program presents limited risks to
FFS beneficiaries. Thus, having considered the relative advantages and
disadvantages of prospective and retrospective assignment methodologies
for FFS beneficiaries, we are proposing to implement a prospective
assignment methodology for Track 3 ACOs. This prospective assignment
methodology would use the same stepwise assignment methodology under
Sec. 425.402 to assign beneficiaries to ACOs in Track 3 as is
currently used to assign beneficiaries to ACOs participating under
Track 1 and Track 2. The major difference would be that beneficiaries
would be assigned to Track 3 ACOs prospectively, at the start of the
performance year, and there would be no retrospective reconciliation
resulting in the addition of new beneficiaries at the end of the
performance year. The only adjustments that would be made at the end of
the performance year would be to exclude beneficiaries that appeared on
the prospective assignment list provided to the ACO at the start of the
performance year that no longer meet eligibility criteria. For the
reasons discussed in the November 2011 final rule (76 FR 67851), we
believe that this proposed prospective assignment methodology meets the
requirement under section 1899(c) of the Act that assignment be based
on the ``utilization of primary care services'' provided by physicians
that are ACO professionals. We propose to codify this methodology in
the regulations at Sec. 425.400(a)(3).
In summary, while we have concerns that prospective assignment may
inadvertently increase incentives for gaming and avoidance of at-risk
beneficiaries, we have taken steps to minimize these incentives by
retaining other Shared Savings Program policies and procedures such as
risk-adjusting expenditures and monitoring ACOs to ensure they are not
engaging in gaming or avoidance of at-risk beneficiaries. Moreover, our
proposal to exclude only those beneficiaries that no longer meet the
eligibility criteria for assignment to an ACO should reduce the
probability that attempts by the ACO to ``cherry pick'' or avoid at-
risk beneficiaries during the performance year would succeed.
Therefore, we believe the concerns associated with a prospective
assignment methodology are balanced by the potential that establishing
a new Track 3 has to encourage ACOs to accept greater responsibility
and financial risk for the care provided to their patients in return
for the possibility of achieving greater rewards. We seek comment on
these proposals. In particular, we seek comment on ways to

[[Page 72811]]

mitigate concerns regarding gaming and avoidance of at-risk
beneficiaries under a prospective assignment methodology, whether
implementing a prospective approach to assignment will dilute the
program goals of delivery system redesign, and whether there are
additional programmatic considerations that should be taken into
account as a result of our proposal to apply a prospective assignment
methodology in Track 3.
Because of the differences between the Shared Savings Program and
the Pioneer ACO Model, we emphasize that the proposed prospective
assignment methodology under Track 3 is not identical to the
methodology used under the Pioneer ACO Model, but is tailored to the
Shared Savings Program. Specifically, we propose to assign
beneficiaries to an ACO participating under Track 3 using the
assignment algorithm that is specified in Subpart E of the Shared
Savings Program regulations, and described in more detail in section
II.E. of this proposed rule.
c. Proposed Exclusion Criteria for Prospectively Assigned Beneficiaries
Next we considered how to reconcile the prospective beneficiary
assignment list at the conclusion of the performance year. We recognize
that changes in circumstances may cause prospectively assigned
beneficiaries to no longer be eligible for assignment to an ACO at the
end of a performance year. For instance, during the course of a
benchmark or performance year a beneficiary may fall under one of the
assignment exclusion criteria specified in proposed Sec. 425.401(b).
The proposed exclusion criteria, found at Sec. 425.401(b), mirror the
proposed eligibility criteria under Sec. 425.401(a) with the exception
of assignment to another Medicare initiative involving shared savings.
This is because we believe it is appropriate to exclude only those
prospectively assigned beneficiaries that are no longer eligible to be
assigned to an ACO. We do not believe, however, that it will be
necessary to exclude beneficiaries that are assigned to another shared
savings initiative because we intend to adopt procedures to ensure that
a beneficiary who is prospectively assigned to an ACO participating
under Track 3 would not be assigned to another Medicare initiative
involving shared savings. Therefore, we propose to perform a limited
reconciliation where beneficiaries would only be removed from the
prospective assignment list at the end of the year if they were not
eligible for assignment at that time under the criteria in proposed
Sec. 425.401(b). For example, if a prospectively assigned beneficiary
chose to enroll in Medicare Advantage (MA) at the beginning of the
performance year, that beneficiary would be removed from the
beneficiary assignment list at the end of the year and the
beneficiary's expenditures would not be used in determining the ACO's
financial performance for that year. We note that under this proposal,
beneficiaries would be removed from the prospective list, but would not
be added as they are in the retrospective reconciliation used under
Tracks 1 and 2. Additionally, unlike the preliminary prospective
assignment methodology with retrospective reconciliation used in Tracks
1 and 2, we note that under this proposal, similar to the methodology
used under the Pioneer ACO Model, beneficiaries would not be removed
from the prospective beneficiary assignment list because the
beneficiary chose to receive primary care services during the
performance year from practitioners other than those participating in
the ACO. In other words, the ACO will be held accountable for all
beneficiaries that appear on the prospective assignment list, with the
narrow exception of those beneficiaries who are not eligible for
assignment at the time of reconciliation based on the limited set of
proposed exclusion criteria under proposed Sec. 425.401(b). We believe
that this methodology will help to mitigate concerns that ACOs may
attempt to avoid caring for high risk beneficiaries that appear on
their prospective beneficiary assignment list because the ACO will
continue to be held accountable for the quality and cost of the care
furnished to these beneficiaries even if the ACO providers/suppliers
are not directly involved in their care. However, we note that this may
mean that ACOs will be held accountable for beneficiaries with whom
their ACO providers/suppliers have had little contact during the year,
and therefore may have limited opportunity to affect their care. We
seek comment on our proposal to assign FFS beneficiaries prospectively
to ACOs and to apply limited exclusion criteria to reconcile the
beneficiary assignment list at the end of the performance year.
d. Proposed Timing of Prospective Assignment
We believe it is important to provide Track 3 ACOs with their lists
of prospectively assigned beneficiaries close to the start of each
performance year so that these ACOs may begin to target their care
coordination processes and to support ACO operations. Ideally, the
prospective list of assigned beneficiaries would be generated based on
the 12 months immediately preceding the performance year. However, we
need a certain amount of time to generate and validate assignment lists
and provide the information to the ACOs. Therefore, we must find a
balance between allowing time to produce and deliver prospective
assignment lists to Track 3 ACOs as near as possible to the start of
each performance year with our desire to base prospective assignment on
the most recent available data. For Tracks 1 and 2, we assign
beneficiaries based on a 12 month period. We similarly propose to use a
12-month assignment period for Track 3. Under Tracks 1 and 2, we use
the most recent available 12 months of data to determine the list of
preliminarily prospectively assigned beneficiaries and data from the 12
months of the performance year to determine final assignment at the
time of reconciliation. Ideally, under Track 3, we would determine
prospective assignment for an ACO's performance year based on complete
data for the most recent prior calendar year, for example, the third
benchmark year or the previous performance year. For instance, in
prospectively assigning beneficiaries to a Track 3 ACO for the
performance year that begins in January 1, 2016, we would ideally have
complete claims data for 2015. However, if we were to wait to obtain
complete claims data for the prior calendar year, we would not be able
to produce and deliver lists of prospectively assigned beneficiaries to
Track 3 ACOs before the start of the performance year. In performing
beneficiary assignment, we determine whether ACO professionals
participating in an ACO have provided the plurality of a beneficiary's
primary care services as compared to ACO professionals in all other
ACOs and individual practitioners or groups of practitioners identified
by TINs that are not participating in an ACO. We treat ACOs as a
collection of TINs for the purpose of determining whether the ACO
provided the plurality of the beneficiary's primary care services.
Further, we accept new ACOs into the Shared Savings Program annually,
with a participation agreement start date of January 1 of the following
year. To most accurately and fairly prospectively assign beneficiaries,
it is important to perform assignment by taking into consideration
existing ACOs as well as new entrants to the program. Therefore, to
assure that we can accurately prospectively assign beneficiaries to

[[Page 72812]]

ACOs under Track 3, our timeline for producing the prospective
assignment lists for Track 3 ACOs must factor in the time frames
associated with the program's application cycle (which typically
concludes in late November/early December of each calendar year).
We considered several options for establishing the 12-month period
for prospective assignment under Track 3. One option would be to use
the most recent 12-month period prior to the relevant performance year
for which data are available. That is, we would use a 12-month
assignment window that is offset from the calendar year. For instance,
to establish the assignment list for the performance year beginning
January 1, 2016, we could use an assignment window from October 1, 2014
through September 30, 2015. We also considered the option of using
complete claims data for the calendar year prior to the performance
year (this would synchronize with the timing of the financial
calculations for setting the ACO's benchmark, as discussed in more
detail in II.F.3.f. of this section); however, under these parameters
Track 3 ACOs would receive their prospective assignment lists well into
the first quarter of each performance year. We believe Track 3 ACOs
would find such a delay in their receipt of their prospective
assignment list burdensome for carrying out the ACO's health care
operations, including care coordination processes and data analysis. We
believe the first option best balances the availability of claims data
with our belief that it is important to produce and deliver these
prospective beneficiary assignment lists near the start of each
performance year. Therefore, we are proposing to base prospective
assignment on a 12-month assignment window (off-set from the calendar
year) prior to the start of the performance year. We further propose to
define an ``assignment window'' at Sec. 425.20 as the 12-month period
used to assign beneficiaries to an ACO. The assignment window for
Tracks 1 and 2 would be based on a calendar year while the assignment
window for Track 3 would be based on the most recent 12 months for
which data are available, and which would be off-set from the calendar
year. We propose to make conforming changes to the regulations to refer
to the assignment window where appropriate.
e. Proposals for Addressing Interactions Between Prospective and
Retrospective Assignment Models
Because there are markets in which there are multiple ACOs, we
anticipate that there will be interactions between prospective
assignment for Track 3 ACOs and preliminary prospective assignment with
retrospective reconciliation for Track 1 and Track 2 ACOs. Under the
Shared Savings Program, a beneficiary may only be assigned to a single
ACO for purposes of determining the ACO's financial and quality
performance during a performance year. Accordingly, a beneficiary that
is prospectively assigned to a Track 3 ACO would remain assigned to the
Track 3 ACO for the performance year even if the beneficiary chose to
receive a plurality of his or her care outside the ACO. Furthermore, we
propose that the beneficiary would remain assigned to the Track 3 ACO
even if we determine as part of the retrospective reconciliation for
Track 1 and Track 2 ACOs that the beneficiary actually received the
plurality of his or her care from ACO professionals in another ACO.
Similarly, a beneficiary prospectively assigned to a Track 3 ACO would
remain assigned to that ACO even if we subsequently determine the
beneficiary actually received the plurality of his or her primary care
from ACO professionals participating in another Track 3 ACO. In other
words, we propose that once a beneficiary is prospectively assigned to
a Track 3 ACO, the beneficiary will not be eligible for assignment to a
different ACO, even if the beneficiary chose to receive a plurality of
his or her primary care services from ACO professionals in that ACO
during the relevant performance year. As an aside, we note that it is
unlikely that such a beneficiary would be assigned prospectively to
that same Track 3 ACO for the next performance year.
f. Proposals for Determining Benchmark and Performance Year
Expenditures Under Track 3
As specified in the November 2011 final rule, we establish the
historical benchmark for ACOs in Tracks 1 and 2 by determining the per
capita Parts A and B fee-for-service expenditures for beneficiaries
that would have been assigned to the ACO in any of the 3 most recent
years prior to the start of the agreement period using the ACO
participant TINs identified at the start of the agreement period (Sec.
425.602(a)). For each benchmark year that corresponds to a calendar
year, this includes calculating the payment amounts included in Parts A
and B fee-for-service claims using claims received within 3 months
following the end of the calendar year (referred to as a ``3 month
claims run out'') with a completion factor, excluding IME and DSH
payments and considering individually beneficiary-identifiable payments
made under a demonstration, pilot or time limited program (Sec.
425.602(a)(1)). Similarly in determining shared savings and losses for
Tracks 1 and 2 (under Sec. 425.604 and Sec. 425.606), we use a 3-
month claims run out with a completion factor to calculate an ACO's per
capita expenditures for each performance year. Calculations of the
ACO's performance year expenditures include the payment amounts of Part
A and B fee-for-service claims. These calculations similarly exclude
IME and DSH payments, and take into consideration individually
beneficiary identifiable payments made under a demonstration, pilot or
time limited program. We believe this approach is well accepted and
therefore propose to use the same general methodology for determining
benchmark and performance year expenditures under Track 3. We also
propose to add a new regulation at Sec. 425.610 to address the
calculation of shared savings and losses under Track 3.
In establishing the historical benchmark for Track 3 ACOs, we
propose to determine the beneficiaries that would have been
prospectively assigned to the ACO during each of the 3 most recent
years prior to the start of the agreement period; basing benchmark year
assignment on a 12-month assignment window offset from the calendar
year prior to the start of each benchmark year. However, we propose
that we would still determine the Parts A and B fee-for-service
expenditures for each calendar year, whether it is a benchmark year or
a performance year, using a 3-month claims run out with a completion
factor for these prospectively assigned beneficiaries. We would exclude
IME and DSH payments and account for individually beneficiary-
identifiable payments made under a demonstration, pilot or time limited
program during the calendar year that corresponds to the benchmark or
performance year. For example, for an ACO entering Track 3 beginning
January 1, 2016, we would determine the benchmark based on CYs 2013,
2014, and 2015. We would determine a prospective list of beneficiaries
using the assignment window for each year (based on an off-set 12 month
period such as October 1, 2011 through September 30, 2012 for BY1) as
discussed previously. However, the claims used to determine the per
capita expenditures for BY1 would be based on claims submitted during
the calendar year from January 1, 2013 through December 31, 2013. The
same pattern would be used to determine the

[[Page 72813]]

assignment and per capita expenditures for BY2 and BY3. We would apply
the same pattern going forward to calculate per capita expenditures for
the performance years.
We believe this methodology is advantageous for several reasons.
First, this methodology would remove actuarial bias between the
benchmarking and performance years for assignment and financial
calculations, since the same method would be used to determine the
assignment and financial calculations for each benchmark and
performance year. Second, basing the financial calculations on the
calendar year is necessary to align with actuarial analyses with
respect to risk score calculations and data inputs based on national
FFS expenditures used in program financial calculations that depend on
the calendar year (for example, national FFS trend factors for the
historical benchmark, national FFS growth factors used in creating the
updated benchmark, and truncation points).
We note that the timing of the generation of historical benchmark
reports for Track 3 ACOs would also be consistent with the current
schedule for generating these reports for ACOs in Tracks 1 and 2. That
is, for an ACO that begins Track 3 in 2016, the prospective beneficiary
assignment list would be available immediately at the beginning of the
performance year and the historical benchmark report would be available
following the 3 month claims run out, sometime after the first quarter
of 2016.
g. Proposals for Risk Adjusting the Updated Benchmark for Track 3 ACOs
Another aspect of the financial models used under the Shared
Savings Program that we considered when developing Track 3 is our
methodology for risk adjusting an ACO's updated benchmark expenditures
to account for changes in severity and case mix for beneficiaries
assigned in the current performance year. Currently, under Track 1 and
Track 2, the risk adjustment methodology differentiates between newly
and continuously assigned beneficiaries, as defined under Sec. 425.20.
A newly assigned beneficiary is a beneficiary assigned in the current
performance year who was neither assigned to nor received a primary
care service from any of the ACO participants during the most recent
prior calendar year. A continuously assigned beneficiary is a
beneficiary assigned to the ACO in the current performance year who was
either assigned to or received a primary care service from any of the
ACO participants during the most recent prior calendar year. As
specified under Sec. 425.604(a), and Sec. 425.606(a), we use updated
CMS-HCC prospective risk scores to account for changes in severity and
case mix for newly-assigned beneficiaries. We use demographic factors
to adjust for these changes in severity and case mix for continuously
assigned beneficiaries. However, if the CMS-HCC prospective risk scores
for the continuously assigned population show a decline, we use the
lower risk score to adjust for changes in severity and case mix for
this population. As we explained in the November 2011 final rule (76 FR
67918), we believe that this approach to risk adjustment strikes a fair
balance between accounting for changes in the health status of an ACO's
population while not encouraging changes in coding practices for care
provided to beneficiaries who remain continuously assigned to the ACO
or avoidance of high risk beneficiaries. We believe that the existing
risk adjustment methodology has been effective in achieving this
balance under Tracks 1 and 2, which use a retrospective assignment
methodology for purposes of financial reconciliation, and that it would
be appropriate to apply a similar approach to risk adjusting the
updated benchmark for Track 3 ACOs, even though we are proposing a
prospective beneficiary assignment methodology. We believe that this
risk adjustment methodology is relevant to updating ACO benchmarks
under both a retrospective assignment model and a prospective
assignment model. We believe that as in the existing Tracks, it is
important to ensure that ACOs participating under the proposed Track 3
are not encouraged to modify their coding practices in order to
increase the likelihood of earning shared savings; rather, shared
savings should result from actual reductions in Medicare expenditures
for assigned beneficiaries.
Therefore, we carefully considered the risk adjustment methodology
in the context of our proposal to use a prospective assignment
methodology under Track 3. We determined that while the same general
risk adjustment methodology could be used, there are certain minor
modifications that must be made to accommodate the prospective
assignment approach. Specifically, we determined that the existing
definitions of newly and continuously assigned beneficiaries must be
adjusted for Track 3 ACOs.
Both definitions refer to determining whether the beneficiary was
assigned to the ACO or received primary care services from an ACO
participant in the ``prior calendar year''. However, our proposal for
Track 3 assignment does not correspond to the 12 months in a calendar
year. Instead, as proposed in the section, we would use an off-set 12-
month period prior to the relevant performance or benchmark year to
prospectively assign beneficiaries. If we continue to use a calendar
year as the basis for determining continuously and newly assigned
beneficiaries, very few beneficiaries would be designated as newly
assigned for each performance year and we would expect that the
majority of assigned beneficiaries would be designated as continuously
assigned. As a consequence, the major risk adjustment applied under
Track 3 would be based on demographic factors only. We do not believe
this policy would strike the same balance achieved when applied under a
model with retrospective assignment (Track 1 and Track 2).
Therefore, we propose refining our definitions of newly and
continuously assigned beneficiaries at Sec. 425.20 to also be
consistent with our proposed prospective assignment approach for Track
3. Specifically, we propose to replace the reference to ``most recent
prior calendar year'' with a reference to ``the assignment window for
the most recent prior benchmark or performance year.'' Thus, for Track
3 the reference period for determining whether a beneficiary is newly
or continuously assigned will be most recent prior prospective
assignment window (the off-set 12 months) before the assignment window
for the current performance year and the reference period for
determining whether a Track 1 or 2 beneficiary is newly or continuously
assigned will continue to be the most recent prior assignment window
(the most recent calendar year). Our proposed risk adjustment
methodology for Track 3 is reflected in the proposed new regulation at
Sec. 425.610(a).
h. Proposals for Final Sharing/Loss Rate and Performance Payment/Loss
Recoupment Limit under Track 3
Currently, an ACO that meets all the requirements for receiving
shared savings payments under the one-sided (Track 1) model can qualify
to receive a shared savings payment of up to 50 percent of all savings
under its updated benchmark, not to exceed 10 percent of its updated
benchmark, as determined on the basis of its quality performance.
Likewise, 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. The higher sharing
rate and performance

[[Page 72814]]

payment limit under Track 2 were established as incentives for ACOs to
accept greater financial risk for their assigned beneficiaries in
exchange for potentially higher financial rewards. Additionally, a
Track 2 ACO is accountable for between 40 to 60 percent of all losses
under its updated benchmark, depending on the ACO's quality
performance. The amount of shared losses for which an ACO is liable,
however, may not exceed 5 percent of its updated benchmark in the first
performance year, 7.5 percent in the second performance year, and 10
percent in the third performance year and any subsequent performance
year (Sec. 425.606(g)). In the November 2011 final rule (76 FR 67937),
we stated that we believe these progressively higher caps on losses
``achieve an appropriate balance between providing ACOs with security
about the limit of their accountability for losses while encouraging
ACOs to take increasing responsibility for their costs and protecting
the Medicare Trust Funds.'' We note that under one of the payment
arrangements available under the Pioneer ACO Model, a Pioneer ACO can
qualify to receive up to 75 percent of shared savings, not to exceed 15
percent of its benchmark. Under this payment arrangement, Pioneer ACOs
may also be responsible for shared losses of up to 15 percent of their
benchmark.
Currently, only five of the ACOs participating in the Medicare
Shared Savings Program are participating under Track 2. Given this
level of ACO participation under this model, we considered options for
improving the attractiveness of the final sharing rate and performance
payment limit in a risk model. For example, we considered whether the
current sharing rate under Track 2 is insufficient to encourage ACO
participation under a risk-based model and whether increasing the
sharing rate would better attract organizations to take on performance-
based risk. We also observed that the higher sharing rates available
under the Pioneer ACO model have appeared to be helpful in encouraging
ACO participation. Further, we believe it is important to draw a
distinction between the sharing rates available under Track 2 and the
proposed Track 3. As discussed later in this section, we are proposing
that ACOs participating in Track 3 would be subject to a fixed 2
percent MLR (compared to the proposed revisions that would allow the
MSR and MLR under Track 2 to vary between 2.0 percent and 3.9 percent).
Thus, we believe it is important to reward Track 3 ACOs with a greater
level of savings for taking on this greater level of risk. Accordingly,
we are proposing to set the sharing rate under Track 3 at 75 percent.
Likewise, we considered whether the current 15 percent performance
payment limit for Track 2 ACOs may discourage participation under a
risk-based model. In our November 2011 final rule (76 FR 67935 through
67936), we noted a range of commenters had urged us either to eliminate
the limits on shared savings or to apply higher payment limits for both
models, with limits as high as 25 percent. We explained that retaining
the performance payment limits is necessary to comply with the statute
and important for ensuring against providing an overly large incentive
that may encourage ACOs to generate savings through inappropriate
limits on necessary care. As was the case when we issued that rule, we
continue to believe that retaining a performance payment limit is
necessary. However, we believe that a modest increase in the
performance payment limit for ACOs willing to take on the greater level
of risk under Track 3 may balance our concerns while increasing the
attractiveness of the model. Accordingly, for Track 3 ACOs, we are
proposing a performance payment limit not to exceed 20 percent of the
ACO's updated benchmark. We note that the shared loss rate would
similarly increase to a maximum of 75 percent to retain symmetry within
the model which is comparable to the approach we used to establish the
shared loss rate for Track 2 ACOs.
To establish even stronger incentives for encouraging ACOs to
assume greater responsibility for the quality and cost of the care
furnished to their assigned beneficiaries, we are also considering
variations on the previous proposals. Currently, under the two-sided
model, an ACO's quality score is taken into account when calculating
the ACO's final sharing rate. Under Track 2, an ACO with poor quality
performance may be responsible for repaying Medicare up to 60 percent
of losses while an ACO with very high quality performance may be
responsible for repaying Medicare only 40 percent of the losses
incurred (see Sec. 425.606(f)). If we retain symmetry between the
shared savings and shared losses methodologies under Track 3, an ACO
with very low quality performance could be responsible for repaying
Medicare up to 75 percent of losses while a Track 3 ACO with very high
quality performance would only be responsible for 25 percent of losses.
However, it may not be desirable under Track 3 to allow such a
broad range for shared losses, which could be viewed as increasing the
potential reward without similarly increasing risk. Therefore, we
considered other options for increasing potential shared savings while
also increasing risk, or holding risk constant compared to Track 2.
Under one option we considered, Track 3 ACOs would be responsible for
the maximum percentage of losses, that is, 75 percent, but quality
performance would only protect them to the same extent it protects
Track 2 ACOs, such that ACOs with very high quality scores would limit
their percentage of losses to 40 percent. Alternatively, we could
retain the minimum and maximum shared loss rates found under Track 2
(that is, the range of 40 percent to 60 percent, depending on quality
performance) but the maximum shared savings rate would be increased to
75 percent in order to encourage participation in a model with
increased risk.
After considering these options, in Sec. 425.610(d) and (f) we are
proposing to increase the sharing rate for Track 3 ACOs so that they
may qualify for up to 75 percent of all savings under their updated
benchmark in conjunction with accepting risk for up to 75 percent of
all losses, depending on the quality performance of the organization
for the reasons articulated previously. We are also proposing under new
Sec. 425.610(e)(2) to increase the performance payment limit to 20
percent of an ACO's updated benchmark. Additionally, rather than
gradually increasing the cap on shared losses for Track 3 ACOs (as is
done under Track 2), in Sec. 425.610(g), we are proposing that the
amount of shared losses for which an ACO may be liable may not exceed
15 percent of its updated benchmark in each year of the ACO's 3-year
agreement period. We believe that capping losses at 15 percent would
provide adequate protection to the Medicare Trust Funds while limiting
risk to ACOs, thereby encouraging them to progress along the risk
continuum. We also propose that ACOs with high quality performance
would not be permitted to reduce the percentage of shared losses for
which they would be responsible for each year of the agreement period
below 40 percent. We believe it is important for Track 3 ACOs to be
held responsible for at least the same amount of downside risk as Track
2 ACOs. We seek comment on whether this percentage is high enough to
protect the Trust Funds or whether it should be increased, for example,
to 50 percent or 60 percent. We also seek comment on whether our

[[Page 72815]]

proposal to establish a range of 40 percent to 75 percent for shared
losses should, in turn, impact the amount of shared savings available
to Track 3 ACOs. For example, should we permit Track 3 ACOs to earn a
parallel range of 40 percent to 75 percent of shared savings. In other
words, once the ACO has met criteria for sharing in savings, the
minimum guaranteed amount of shared savings would be 40 percent with a
maximum of 75 percent.
We seek comments on these proposals and the proposed new regulation
at Sec. 425.610. In particular, we request comment on the appropriate
minimum percentage of shared losses under Track 3. We also seek comment
on the appropriate percentage for the performance payment limit and
loss recoupment limit and whether there are reasons to set these at 15
percent and 10 percent respectively, rather than our proposal of 20
percent and 15 percent respectively.
Finally, we are also proposing to make certain technical,
conforming changes to Sec. 425.606, which governs the calculation of
shared savings and losses under Track 2, to reflect our proposal to
incorporate a second two-sided risk model into the Shared Savings
Program. We seek comments on these proposed changes and on any other
technical changes to our regulations that may be necessary in order to
reflect the proposal to add a new Track 3.
i. Proposals for Minimum Savings Rate and Minimum Loss Rate in Track 3
In this proposed rule, we are proposing to replace the current
fixed 2 percent minimum savings rate (MSR) and minimum loss rate (MLR)
under Track 2 with a MSR and MLR that will vary based on the number of
beneficiaries assigned to the ACO, mirroring the methodology currently
used to determine the MSR under Track 1. We proposed this change as a
way to reduce financial risk and thereby increase the attractiveness of
Track 2 to prospective ACOs and ACOs continuing in the program for a
second or subsequent agreement period. Specifically, we believe it is
important to offer a risk-based option attractive to smaller ACOs that
may be hesitant to take on performance-based risk. Under the proposed
modifications to Track 2, smaller ACOs would have an MLR greater than 2
percent, which would provide additional protection to these ACOs
against incurring losses as a result of normal variations in
expenditures. Moreover, while reducing financial risk for Track 2 ACOs,
the proposal would also offer greater protection to the Medicare
program by raising the savings threshold that must be achieved before
an ACO would be eligible to share in savings for all but the largest
ACOs.
As discussed previously in this section, we are proposing to
establish a new Track 3 as an additional option for participation in
the Shared Savings Program with stronger incentives to encourage ACOs
to accept greater responsibility and risk for their beneficiaries.
Hence, for Track 3 ACOs, we are proposing to apply the same fixed 2
percent MSR and MLR that currently apply to Track 2 ACOs. As we
discussed in the November 2011 final rule (76 FR 67929), establishing
the Shared Savings Program, the use of an MSR and MLR remains important
under a two-sided risk model to guard against normal variations in
costs, so that ACOs share savings or losses with the program only under
those circumstances in which we can be confident that those savings and
losses are the result of the ACOs' actions rather than normal
variation. As we noted in that final rule, it is more appropriate to
employ a fixed MSR under a two-sided model than under the one-sided
model. First, given the potential for shared loss, the greater
predictability of a fixed MSR is more likely to attract organizations
to participate under the model. Second, there is greater protection for
the Medicare Trust Fund from normal variation under a two-sided model
because ACOs accept the risk of repaying the Medicare program for
shared losses. Therefore, in the November 2011 final rule (76 FR
67929), we adopted a fixed 2 percent MSR and MLR for ACOs participating
under Track 2. We selected 2 percent because this is the lowest MSR
under the one-side model and was also the MSR that was used in the PGP
demonstration. As discussed previously in this section, we are now
proposing to modify the MSR and MLR under Track 2 to vary based upon
the size of the ACO. We believe this change would improve the
attractiveness of Track 2 by offering ACOs that may be less experienced
with performance-based risk greater protection against shared losses.
However, because Track 3 is intended for ACOs that are willing to
accept a greater degree of risk in exchange for the opportunity to
share in a greater percentage of shared savings, we believe it is
appropriate to use a fixed 2 percent MSR and MLR under this track. We
believe that setting the MSR and MLR at this level would offer greater
predictability, which may attract more ACOs to participate in Track 3.
In addition, as we discussed in the November 2011 final rule (76 FR
67929), the requirement that ACOs repay shared losses offers additional
protection to the Medicare Trust Funds, which allows for the
application of a lower, fixed MSR. Accordingly, we propose to apply the
same fixed 2 percent MSR and MLR that currently apply to Track 2 ACOs
to ACOs that elect to participate in Track 3. This proposal is
reflected in paragraph (b) of the proposed new regulation at Sec.
425.610. We seek comments on this proposal.
Although we are proposing to apply a fixed MSR and MLR of 2 percent
under Track 3, we also considered other options for establishing the
MSR and MLR for Track 3 ACOs, including an option that would remove the
MSR and MLR entirely. Under this option, ACOs would be subject to
normal variation around their benchmark so that they would be held
responsible for all losses when performance year expenditures were
above the benchmark in addition to sharing in any savings if
performance year expenditures fell below the benchmark. Another option
could be to set both the MSR and MLR to 1 percent instead of 2 percent.
This would serve to increase both risk of sharing losses and savings,
but not as much as doing away with the MSR and MLR entirely. We
specifically seek comment on whether it would be desirable to remove
the MSR and MLR entirely under Track 3 as well as alternative levels at
which to set the MSR and MLR for ACOs participating under Track 3. We
will consider comments that are received regarding these alternatives
in determining the final MSR and MLR that would apply under Track 3.
4. Seeking Comment on Ways To Encourage ACO Participation in
Performance-Based Risk Arrangements
We are encouraged by stakeholder interest in the Shared Savings
Program. Since implementation of the Shared Savings Program in 2012,
there are now more than 330 organizations participating. Based on the
initial experience we have gained with the Shared Savings Program,
however, we believe ACOs are very reluctant to accept two-sided
performance-based risk arrangements in which ACOs would share in both
Medicare savings and losses because only a small number of ACOs have
agreed to participate in the Shared Savings Program under Track 2,
which provides for two-sided performance-based risk. Ninety-eight
percent of the ACOs participating in the Shared Savings Program have
elected to participate under Track 1 (shared savings only). We believe
that under a two-sided performance-based risk model, ACOs have much
stronger

[[Page 72816]]

incentives to achieve high quality and to avoid unnecessary costs,
which is why we are proposing Track 3 as a possibly more attractive
alternative to Track 2. The incentive for ACOs to achieve high quality
and avoid unnecessary costs under a two-sided performance-based risk
model is supported by the impact analyses performed by the CMS actuary
provided in section V. of this proposed rule. Accordingly, in order for
the Shared Savings Program to be effective and sustainable over the
long term, we believe we may need to further strengthen our efforts to
transition the Shared Savings Program to a two-sided performance-based
risk program in which ACOs would share in both Medicare savings and
losses.
We received a wide range of suggestions from ACOs, the Brookings
Institution, MedPAC, and other stakeholders of ways to improve the
Shared Savings Program and to address ACO concerns that they believe
are essential to the longer term success of the program. The Brookings
Institution has identified a number of critical issues that warrant
further discussion and consideration for ensuring the continued success
of ACOs in the Medicare Program. See ``Issue Brief: How to Improve the
Medicare Accountable Care Organization (ACO) Program'' at: https://
www.brookings.edu/~/media/research/files/papers/2014/06/
16%20medicare%20aco%20challenges%20and%20alternatives/
2%20mcclellan%20et%20al%20%20medicare%20aco%20program%2062014.pdf.
In a June 16, 2014 letter to CMS (https://www.medpac.gov/documents/06162014_ACO_issue_letter_2014_COMMENT.pdf), MedPAC raises several
issues for consideration in connection with CMS ACO models in the short
and long term. MedPAC indicates that ACOs represent an opportunity to
transform the delivery system, but MedPAC believes that realizing that
opportunity would require providers to change their practices and take
a risk on this new payment system, and that we would need to be
flexible and responsive as the program evolves. MedPAC's
recommendations are based on discussions with representatives from many
ACOs, structured interviews and case studies with Pioneer ACOs,
analysis of early data on ACO performance, and reviewing progress with
CMS staff. MedPAC reports that many ACO providers/suppliers who they
have spoken with have patients in both MA plans and FFS Medicare. Under
MA, providers can furnish services and use techniques that are not
available under FFS Medicare or, by extension, under the current rules
governing the Shared Savings Program. For example, pursuant to section
1861(i) of the Act, FFS Medicare requires a 3-day inpatient hospital
stay before a SNF services will be covered under Medicare Part A, but
MA plans can offer a waiver of the 3 day prior inpatient
hospitalization requirement as a supplemental benefit. ACOs have
indicated that they like the flexibility that capitated payments would
give them to redesign care and benefits to meet the needs of their
patient populations.
Under the current Medicare FFS system, providers have a financial
incentive to increase their volume of services. As a result, many
current Medicare regulations are designed to prevent overuse of
services and the resulting increase in Medicare spending in this
context. In brief, MedPAC believes that moving to two-sided
performance-based risk under the Shared Savings Program would provide
strong incentives for organizations to control costs, which should, in
turn, open up the opportunity for regulatory relief across a broad
range of issues. Removing certain regulatory requirements may provide
ACOs with additional flexibility to innovate further, which could in
turn lead to even greater cost savings. These views are supported by
analyses performed by CMS actuaries that suggest two-sided performance-
based risk provides stronger incentives for ACOs to achieve savings.
Thus, ACOs and MedPAC have encouraged us to consider relaxing certain
specific FFS Medicare payment and other rules under two-sided
performance-based risk models in the Shared Savings Program.
In the sections that follow, we solicit comment on several options
that are currently under consideration for inclusion in the Shared
Savings Program. We first consider options that would implicate the
waiver authority under section 1899(f) of the Act and then consider
other options that could be implemented independent of waiver
authority. Although we are not specifically proposing these options at
this time, we will consider the comments that are 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.
a. Payment Requirements and Other Program Requirements That May Need To
Be Waived in Order To Carry Out the Shared Savings Program
As noted previously, few organizations have chosen to participate
in the Shared Savings Program under two-sided performance-based risk.
In addition to the elements designed to enhance participation in a two-
sided performance-based risk track under the proposed new Track 3, we
believe it may be necessary and appropriate to provide for additional
program flexibilities to increase ACOs' willingness to participate in
the Shared Savings Program under two-sided performance-based risk
arrangements to increase quality and decrease cost growth. These
possible additional flexibilities could include use of our waiver
authority to waive certain Medicare Program rules under section 1899(f)
of the Act, which provides authority for the Secretary to waive ``such
requirements of . . . title XVIII of this Act as may be necessary to
carry out the provisions of this section.'' This provision affords
broad authority for the Secretary to waive statutory program
requirements as necessary to carry out the provisions of section 1899
of the Act. In order to waive FFS payment or other program rules, the
waiver must be determined to be necessary for CMS to carry out the
provisions of section 1899 of the Act, which govern the Shared Savings
Program. (The authority at section 1899(f) of the Act has been used by
the Office of Inspector General and CMS to issue an interim final rule
with comment period setting forth waivers of certain fraud and abuse
authorities (76 FR 67992), which was published concurrently with the
November 2011 final rule establishing the Shared Savings Program. This
rulemaking does not address fraud and abuse waivers, and we are not
soliciting comment on such waivers.)
As noted previously, we are encouraged by the robust participation
of organizations under the one-sided model of the Shared Savings
Program. However, we continue to believe that the long term
effectiveness and sustainability of the program depend on encouraging
ACOs to progress along the performance-based risk continuum. Given the
very limited ACO interest thus far in two-sided performance-based risk,
and the comments and suggestions by stakeholders, we now believe that
the authority under section 1899(f) of the Act to waive certain payment
or other program requirements may be necessary to carry out the
provisions of the Shared Savings Program and to permit effective
implementation of two-sided performance-based risk tracks under the
program. As discussed previously, on the April 2011 proposed rule, both
we and many commenters believe that models where ACOs bear a degree of
financial risk hold the potential to

[[Page 72817]]

induce more meaningful systematic change than one-sided models. We
believe that ACOs that bear financial risk would 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. In these circumstances, waiver of certain payment and
other programmatic rules for ACOs with two-sided risk may be
appropriate to give providers more flexibility under FFS Medicare to
provide appropriate care for beneficiaries.
We would point out that while we are considering these waiver
issues under the Shared Savings Program, we are also actively moving
forward with testing certain payment rule and other waivers as part of
models tested by the Innovation Center under section 1115A of the Act,
including the Pioneer ACO Model. For example, as explained below, we
already have a few months of data from our initial test of the waiver
of the SNF 3-day rule under the Pioneer ACO Model, and we are in the
process of testing beneficiary attestation under the Pioneer ACO Model.
In addition, under the demonstration authority in section 402 of Public
Law 90-248, as amended (42 U.S.C. 1395b-1), we granted Massachusetts
General Hospital (MGH) the ability to admit certain patients enrolled
in its Care Management for High Cost Beneficiaries Demonstration
directly into a SNF without a 3-day prior inpatient hospitalization,
and we intend to release a report evaluating this waiver later this
year. Based on our experience with the waiver of the SNF 3-day rule in
the MA program, and an initial, limited assessment of the MGH waiver
performed by CMS actuaries, we expect that the waiver of the SNF 3-day
rule under the Pioneer ACO Model will result in savings for the
Medicare Trust Funds.
We are learning from these tests and would seek to refine our
policies as we move forward. Through such testing we frequently
identify issues that neither we nor stakeholders had previously
identified. Developing and implementing such policies in a test
environment provides an opportunity for us to better understand the
effects on providers, beneficiaries, and Medicare as well as to further
fine tune the operations.
We welcome comments on possible waivers under section 1899(f) of
the Act of certain Medicare payment or other program requirements
suggested by stakeholders that might be necessary to permit effective
implementation of two-sided performance-based risk in the Shared
Savings Program. As noted previously, we will consider the comments
that are received during the development of the final rule, and in the
final rule may consider waiving certain requirements if we conclude
that such a waiver is necessary in order to carry out the Shared
Savings Program. We are especially interested in comments explaining
how such waivers may be necessary to encourage ACOs to accept
performance-based risk arrangements under the Shared Savings Program,
and how such waivers could provide ACOs with additional ways to
increase quality of care and reduce unnecessary costs that are not
permitted under FFS Medicare, but that could be appropriately used in
the context of an ACO model that incorporates two-sided performance-
based risk. What program integrity and beneficiary protection risks
could be introduced by waivers of the payment and program rules
described later in this section of this proposed rule and how could we
mitigate those risks? Would a waiver of these requirements impact
notification to beneficiaries of participation in the Shared Savings
Program as required under Sec. 425.312? What operational issues do
ACOs and CMS need to consider and what processes would ACOs need to
have in place to implement these alternative payment and other program
policies? What implications would there be for ACO infrastructure
including IT and other systems and processes? What provider education
would be needed? What other issues should be considered when making use
of waiver authority with respect to payment and program rules? Should
any waivers apply to all two-sided performance-based risk tracks or
should they be limited to a specific two-sided risk track? Should
waivers be available only for those organizations willing to take on
the greatest performance-based risk under the Shared Savings Program?
For example, should waivers be limited to the use of organizations
participating in Track 3 because participants in Track 3 would agree to
be held accountable for up to 75 percent of shared losses compared to
participants in Track 2 who would agree to be held accountable for up
to 60 percent of shared losses? Should the waivers be made available to
all organizations participating in the applicable risk tracks or only
to those ACOs that have successfully participated in the Shared Savings
Program or another ACO model previously?
We also note that the ability to implement any waivers of payment
or program rules may vary for ACOs participating under Track 2 and
Track 3 because of the differences in how beneficiaries are assigned to
ACOs under those Tracks. We are considering whether a waiver that
applies only to beneficiaries assigned to the ACO would perhaps be more
appropriately implemented under a model in which there is prospective
assignment of beneficiaries, such as proposed Track 3. Under
prospective assignment, beneficiaries would be assigned to the ACO for
the entire performance year, and it would thus be clear as to which
beneficiaries the waiver applied. Having clarity as to the beneficiary
to which a waiver applies may be important for the ACO to comply with
the conditions of the waiver and could also improve CMS' ability to
monitor waivers for misuse. Another option would be to apply the
waivers to any FFS beneficiary cared for by an eligible ACO. Then the
waiver could be available to all ACOs participating in a two-sided risk
track, regardless of whether the assignment is prospective or
retrospective. Another option would be to apply such waivers to
beneficiaries that appear on the quarterly lists of preliminarily
prospectively assigned beneficiaries. Under this approach, the
population for whom the waiver is available would likely change from
quarter to quarter. We seek comment on whether any waivers of payment
or program rules would be more viable under proposed Track 3, which
includes prospective beneficiary assignment, versus Track 2 in which
beneficiaries are assigned using a preliminary prospective assignment
methodology with final retrospective reconciliation. Specifically,
would a waiver require a fully prospective list of assigned
beneficiaries for the performance year or would it be feasible to use a
preliminary prospective list of beneficiaries that is likely to change
at the end of the performance year? What are the other operational
issues we should consider?
Specific payment and program rules for which we believe waivers
could be necessary under the Shared Savings Program to support ACO
efforts to increase quality and decrease costs under two-sided
performance-based risk arrangements and for which we invite comments
are as follows:
(1) SNF 3-Day Rule
The Medicare SNF benefit is for beneficiaries who require a short-
term intensive stay in a SNF, requiring skilled nursing and/or skilled
rehabilitation care. Pursuant to section 1861(i) of the Act,
beneficiaries must have a prior inpatient hospital stay of no

[[Page 72818]]

fewer than 3 consecutive days in order to be eligible for Medicare
coverage of inpatient SNF care. We refer to this as the SNF 3-day rule.
As discussed previously, we believe that the long term effectiveness
and sustainability of the Shared Savings Program depend on encouraging
ACOs to progress along the performance-based risk continuum. Given the
very limited ACO interest thus far in two-sided performance-based risk,
and the comments and suggestions by stakeholders, we now believe that
the authority under section 1899(f) of the Act to waive certain payment
or other program requirements may be necessary to carry out the
provisions of the Shared Savings Program and to permit effective
implementation of two-sided performance-based risk tracks under the
program. Models where ACOs bear a degree of financial risk hold the
potential to induce more meaningful systematic change. We believe that
under a two-sided performance-based risk ACO model it could be
medically appropriate and more efficient for some patients to receive
skilled nursing care and or skilled rehabilitation services provided at
SNFs without a prior inpatient hospitalization or with an inpatient
hospital length of stay of less than 3 days. A waiver of this
requirement could allow ACOs to realize cost savings and improve care
coordination, such that they could be more willing to accept two-sided
risk, which we believe is required to promote the long term
effectiveness and sustainability of the Shared Savings Program.
We note that the SNF 3-day rule has been waived or is not a
requirement for Medicare SNF coverage under a few CMS models or
programs. For instance, the Pioneer ACO Model has recently started
testing whether a tailored waiver of the SNF 3-day rule will enable the
Pioneer ACOs to improve quality of care for a subset of beneficiaries
requiring skilled nursing and/or skilled rehabilitation care while also
reducing expenditures. ACOs under the Pioneer Model are accountable for
the total costs of care furnished to their assigned beneficiary
population, and must accept performance-based risk in the event that
costs exceed their benchmark. This type of performance-based risk
arrangement has the potential to mitigate the incentive to overuse SNF
benefits. MA plans already have the flexibility not to apply the SNF 3-
day rule, and we believe this flexibility is appropriate because of the
financial incentives for MA plans, which operate under a capitated
payment arrangement, to control total cost of patient care. As in the
case of the MA program, the Pioneer ACO Model's use of shared risk
arrangements is expected to deter unnecessary referral of patients to
SNFs, as Pioneer ACOs are accountable for the total cost of care
furnished to their assigned beneficiaries. While the financial
incentive to control total cost of care in a shared savings model is
not as great as in a capitated model, all Pioneer ACOs are at
significant performance-based risk for exceeding their expenditure
benchmarks and are clearly focused on reducing total cost of care.
The waiver of the SNF 3-day rule under the Pioneer ACO Model went
into effect on April 7, 2014, for Pioneer ACOs that demonstrate through
an application process that they have the capacity and infrastructure
to identify and manage clinically eligible beneficiaries prospectively
assigned to Pioneer ACOs who may be admitted to a SNF without the
required 3-day inpatient hospital stay. All other requirements for
coverage of the Medicare SNF benefit remain unchanged under the Pioneer
ACO Model. Only beneficiaries that require skilled nursing and/or
skilled rehabilitation care are eligible for SNF coverage without a
prior 3-day inpatient hospitalization under the Pioneer ACO Model
waiver. All Pioneer ACOs are eligible to apply for a waiver of the SNF
3-day rule for their prospectively assigned beneficiaries, but must
demonstrate that they have the capacity to identify and manage patients
who would be either directly admitted to a SNF or admitted to a SNF
after an inpatient hospitalization of fewer than 3 days, by describing
the staff and processes involved in the clinical management of these
beneficiaries.
Further, patients eligible for coverage of SNF admissions under the
terms of the waiver include only FFS Medicare beneficiaries
prospectively aligned to a Pioneer ACO who do not reside in nursing
homes for long-term custodial care at the time of the decision to admit
to a SNF. Patients must be medically stable, have certain and confirmed
diagnoses and thus not require additional diagnostic testing, not
require an inpatient evaluation or treatment, and have a skilled
nursing or rehabilitation need that could not be provided as an
outpatient. Eligible beneficiaries must be admitted to SNFs at the
direction of admitting Pioneer providers/suppliers and not at the
direction of SNFs or non-Pioneer providers/suppliers. Pioneer ACOs are
required to submit to CMS for approval a SNF or group of SNFs with
which they wish to partner for purposes of this waiver. The designated
SNFs must have the appropriate staff capacity and necessary
infrastructure to carry out the activities proposed in the Pioneer
ACO's application. The SNF may be, but is not required to be, a Pioneer
provider/supplier. The SNF must also have, at the time of application
submission, a quality rating of 3 or more stars under the CMS 5-Star
Quality Rating System as reported on the Nursing Home Compare Web site.
Commenters suggest that a similar waiver of the SNF 3-day rule would be
appropriate for certain ACOs under the Shared Savings Program. When
Congress enacted the original Medicare legislation in 1965, it created
SNF coverage as a less expensive alternative to what would otherwise be
the final, convalescent portion of a beneficiary's inpatient hospital
stay. Accordingly, the Medicare SNF benefit was narrowly focused on
``post-hospital extended care'' to serve as a relatively brief and
skilled ``extension'' of an acute care stay in a hospital. Thus, the
requirement for a prior 3-day qualifying stay in an inpatient hospital
was included to effectively target the limited population that the SNF
benefit was designed to cover: Beneficiaries who require a short-term,
intensive stay in a SNF, requiring skilled care.
Because of changes in medical care over the half century since
enactment of the original Medicare legislation, it may now be medically
appropriate for some patients to receive skilled nursing care and or
rehabilitation services provided by SNFs without a prior inpatient
hospitalization, or with an inpatient hospital length of stay of less
than 3 days. It may be medically appropriate for patients to go to SNFs
earlier, due to changes in medical care, given that hospital lengths of
stay are shorter than they were decades ago, and the types of patients
that were staying 3 days in an inpatient hospital in 1965 are no longer
staying 3 days in an inpatient hospital now. Because of this, over
time, we have repeatedly expressed interest in testing alternatives to
the SNF 3-day rule. We have found that financial incentives need to
properly align so that the appropriate patients receive SNF care. That
is, we believe care must be coordinated in a manner that allows for
control of total patient cost and mitigates the incentive to
overutilize the SNF benefit. If alternatives to the SNF 3-day rule were
to be implemented, we believe that most treatment would continue to be
appropriately furnished in a hospital, either on an inpatient or
outpatient basis, rather than furnished at a SNF. Therefore, we do not
believe

[[Page 72819]]

that application of such a waiver should result in overutilization of
SNF care at the expense of appropriate acute hospital care. We would
also note that under a model of accountability for total costs of care
for assigned beneficiaries such as the Pioneer ACO Model or a two-sided
risk track under the Shared Savings Program, the greatest savings would
most likely be achieved by permitting the elimination, where
appropriate, of the entire prior hospital stay (and therefore the
hospital DRG payment) and improving quality of care for patients who
can instead receive appropriate care through direct admission to a SNF.
Permitting a shortened (less than 3 days) inpatient hospital stay prior
to SNF admission would not necessarily produce significant savings to
the Medicare Trust Funds, as Medicare would still pay the applicable
MS-DRG amount to the hospital. Commenters, however, suggested that
allowing ACOs to carefully identify beneficiaries with a prior hospital
stay of less than 3 days, for whom SNF care would be clinically
appropriate, could still produce cost savings for hospitals that
improve their financial performance, and could contribute to ACOs'
success and continued participation in the Shared Savings Program.
We believe it could be necessary to waive the SNF 3-day rule for
ACOs participating under a two-sided risk track in the Shared Savings
Program because the financial incentives for such ACOs to control total
patient costs for their prospectively assigned beneficiaries are
arguably similar to certain incentives that currently exist for MA
plans and Pioneer ACOs. If we were to conclude that a waiver of the
requirement for a prior 3-day qualifying stay in an inpatient hospital
under waiver authority in section 1899(f) of the Act is necessary for
purposes of implementing two-sided performance-based risk models under
the Shared Savings Program, we would likely initially limit this waiver
to ACO participants and ACO providers/suppliers under proposed Track 3.
Under Track 3 beneficiaries would be prospectively assigned to the ACO
for the entire year and it would thus be clear as to which
beneficiaries the waiver applied. In addition, under Track 3 as
proposed, organizations would agree to be held accountable for up to 75
percent of any losses compared to organizations participating under
Track 2 who agree to be held accountable for up to 60 percent of any
losses. Since a few organizations have been willing to participant
under Track 2 without waivers, this may represent the limit of risk
organizations are willing to take on without waiving the SNF 3-day
rule. As mentioned previously, we believe a prospective assignment
approach creates a potential pathway for improving the appropriate use
of waivers by ACOs and a method for CMS to monitor its use, in addition
to offering a higher sharing rate. For these reasons, we believe Track
3 may make it a better candidate for these waivers than Track 2.
However, we seek comment on whether such a waiver should apply to all
performance-based risk tracks. Another option would be to allow the
waiver to apply to any FFS beneficiary cared for by the ACO and then
the waiver could be available to all ACOs participating in a two-sided
risk track, regardless of whether assignment is prospective or
retrospective. Another option would be to apply any waiver to
beneficiaries that appear on the quarterly lists of preliminarily
prospectively assigned beneficiaries. In this case, the beneficiaries
to whom the waiver applies would likely change from quarter to quarter.
We anticipate that we would offer the opportunity to apply for such a
waiver to ACOs using a framework similar to the one currently being
tested under the Pioneer ACO Model, with appropriate revisions as
necessary to accommodate the differences in beneficiary assignment
methodology, as needed.
Under such a waiver, ACOs would be required to submit to CMS for
approval of a SNF or group of SNFs with which they wish to partner. The
designated SNFs must have the appropriate staff capacity and necessary
infrastructure to carry out the activities described in the ACO's
application for the waiver. The SNF would likely be required to be an
ACO participant or ACO provider/supplier. We believe it would be
appropriate to limit such a waiver to SNFs that are ACO participants or
ACO providers/suppliers, because we believe these entities would have
incentives that are most directly aligned with those of the ACO. ACOs
also have stronger control and oversight over such entities because
such entities are subject to Shared Savings Program requirements.
Under such a waiver, we would anticipate establishing additional
requirements to ensure program transparency and help reduce the
possibility for abuse of the waiver. For example, we would anticipate
requiring ACOs to indicate their intent to use the waiver as part of
their applications or requests for renewal of their participation
agreement, and remain in compliance with program rules. To further
substantiate an ACO's intent to use the waiver, we anticipate requiring
that the ACO submits as part of its application documentation showing
that its governing body has made and duly authorized a bona fide
determination that the ACO will use the waiver (if approved by CMS) and
will comply with all requirements of the waiver. As part of its
application for the waiver, we would require the ACO to submit a
written plan describing how it would use the waiver to meet the
clinical needs of its assigned beneficiaries. We would reserve the
right to deny or revoke a waiver to an ACO if it is not in compliance
with requirements under the Shared Savings Program, if it does not use
the waiver as described in its application, or if it does not
successfully meet the quality reporting standard. ACOs with approved
waivers would be required to post their use of the waivers as part of
public reporting (see Sec. 425.308) on the dedicated ACO Web page. Use
of the waiver and its authorization by the governing body would be
required to be documented and the documentation retained, consistent
with Sec. 425.314. We would anticipate that any waiver would be
effective on the start date of the ACO's participation agreement and
would not extend beyond the end of the ACO's participation in the
Shared Savings Program. However, if CMS terminates the participation
agreement, then the waiver would end on the date of the termination
notice. We also reserve the authority to withdraw the waiver in the
event we determine that there has been an abuse of the waiver. The
proposed payment waivers would not protect financial arrangements
between ACOs, ACO participants, ACOs providers/suppliers, or other
individuals or entities providing services to ACO patients from
liability under the fraud and abuse laws or any other applicable laws.
We note that we would retain the right to monitor and audit the use
of such waivers. We would anticipate implementing heightened monitoring
of entities that bill under payment waivers to help reduce the
possibility for abuse of the waiver. We seek comment on what specific
activities should be monitored to ensure that items and services are
properly delivered to eligible patients, that patients are not being
discharged prematurely to SNFs, and that patients are able to exercise
freedom of choice and are not being steered inappropriately. We would
also likely consider monitoring ACOs' marketing of services subject to
payment waivers to prevent coercive or

[[Page 72820]]

misleading marketing and to assess the effect on the delivery of care.
We invite comments on whether it is necessary to provide for a
waiver of the SNF 3-day rule using our authority under Section 1899(f)
of the Act for ACOs that choose to participate in the Shared Savings
Program under two-sided performance-based risk financial arrangements.
If so, what criteria would be appropriate to determine waiver
eligibility under the Shared Savings Program? We note that any waiver
under the Shared Savings Program for this purpose would have to be
implemented consistently across all eligible ACOs. In other words,
application of the waiver would be uniformly applied, and there would
not be customization of the waiver or conditions for the waiver for
particular eligible ACOs. With this in mind, would it be appropriate to
apply the same criteria discussed earlier that are currently being used
under the Pioneer ACO Model? If not, how would the criteria have to be
modified? What assurances should ACOs have to make in order to be
eligible to use the waiver? Are there current Shared Savings Program
rules and requirements that would have to be modified to permit this
waiver? Should we require that a beneficiary be admitted to a SNF that
is an ACO participant or ACO provider/supplier in order for the waiver
to apply? We invite comment on whether or not the SNF should be
required to be an ACO provider/supplier. Would a waiver under certain
conditions create any unexpected concerns about access to SNF services
for the patients who need them most (that is, those beneficiaries
admitted following a 3-day or longer hospital stay). Would a waiver of
the SNF 3-day rule align with our policy of including primary care
services furnished in SNFs in the beneficiary assignment process? Would
the ACO quality measures such as the new Skilled Nursing Facility 30-
Day All-Cause Readmission Measure (79 FR 67910) and the other measures
used in establishing the quality performance standards that ACOs must
meet in order to be eligible for shared savings provide sufficient
beneficiary protections from inappropriate care or withheld care? Are
there other quality standards that should apply to ACOs or post-acute
care facilities that use this waiver? What other monitoring activities
should be considered to guard against unintended consequences of a
waiver of the SNF 3-day rule? What other criteria, operational issues
or other concerns should we consider? We invite comment on these
issues.
(2) Billing and Payment for Telehealth Services
Under section 1834(m) of the Act, Medicare pays for 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. The telehealth services must be furnished
to a beneficiary located in one of the eight types of originating sites
specified in section 1834(m)(4)(C)(ii) of the Act and the site must
satisfy at least one of the requirements of section 1834(m)(4)(C)(i)(I)
through (III) of the Act. Generally, for Medicare payment to be made
for telehealth services under the Physician Fee Schedule several
conditions must be met (Sec. 410.78(b)). Specifically, the service
must be on the Medicare list of telehealth services and meet all of the
following other requirements for payment:
The service must be furnished via an interactive
telecommunications system.
The service must be furnished to an eligible telehealth
individual.
The individual receiving the services must be in an
eligible originating site.
When all of 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. For the list
of Medicare telehealth services, see the CMS Web site at www.cms.gov/teleheath/. 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.
We also note that a number of CMS demonstrations include or have
included testing of interventions that use electronic health records,
remote monitoring, and mobile diagnostic technology as part of
strategies to increase quality of care and decrease costs. For example,
for the Medicare Health Support Programs (see https://www.cms.gov/Medicare/Medicare-General-Information/CCIP/), participants
utilized a variety of telephonic care management services and related
interventions. These services included nurse-based health advice for
the management and monitoring of symptoms, health education (via health
information, videos, online information), health coaching to encourage
self-care and self-management of chronic health conditions and
medications, and health promotion and disease prevention coaching.
Likewise, under the Independence at Home Demonstration, physician and
nurse practitioner directed home-based primary care teams use
electronic health records, remote monitoring, and mobile diagnostic
technology to help reduce expenditures and improve health outcomes for
Medicare beneficiaries with multiple chronic conditions (see CMS Web
site at https://www.cms.gov/Medicare/Demonstration-Projects/DemoProjectsEvalRpts/Medicare-Demonstrations-Items/CMS1240082.html).
As discussed previously in section II.B.8.a of this proposed rule,
section 1899(b)(2)(G) of the Act requires a Shared Savings Program ACO
to ``define processes to . . . coordinate care, such as through the use
of telehealth, remote patient monitoring, and other such enabling
technologies.'' Commenters suggest that technologies that enable health
care providers to deliver care to patients in locations remote from
providers are being increasingly used to complement face-to-face
patient-provider encounters in both urban and rural areas. In these
cases, the use of remote access technologies may improve the
accessibility and timeliness of needed care, increase communication
between providers and patients, enhance care coordination, and improve
the efficiency of care. ACOs and other commenters have suggested that a
waiver of certain Medicare telemedicine payment requirements would help
encourage a broader range of ACOs to more fully utilize telehealth,
remote patient monitoring, and other such enabling technologies.
We note that certain professional services that are commonly
furnished remotely using telecommunications technology are paid under
the same conditions as in-person physicians' services, and thus do not
require a waiver. Such services that do not require the patient to be
present in person with the practitioner when they are furnished are
covered and paid in the same way as services delivered without the use
of telecommunications technology when the practitioner is in-person at
the medical facility furnishing care to the patient. Such services
typically involve circumstances where a practitioner is able to
visualize some aspect of the patient's condition without

[[Page 72821]]

the patient being present and without the interposition of a third
person's judgment. Visualization by the practitioner can be possible by
means of x-rays, electrocardiogram or electroencephalogram tracings,
tissue samples, etc. For example, the interpretation by a physician of
an actual electrocardiogram or electroencephalogram tracing that has
been transmitted via telephone (that is, electronically, rather than by
means of a verbal description) is a covered physician's service. These
remote services are not Medicare telehealth services as defined under
section 1834(m)(4)(F)(i) of the Act. Rather, these remote services that
utilize telecommunications technology are considered physicians'
services in the same way as services that are furnished in person
without the use of telecommunications technology, and they are paid
under the same conditions as in-person physicians' services, with no
requirements regarding permissible originating sites.
A waiver of certain Medicare telehealth requirements could be
supported by section 1899(b)(2)(G) of the Act in that it gives the use
of enabling technologies, such as telehealth, as an example of a
process to coordinate care, and the statute does not limit ACOs to
being in rural or shortage areas where Medicare payment is available
for telehealth services. As we indicated in section II.B.8.a. of this
proposed rule, we welcome information from ACOs and other stakeholders
about the use of such technologies to coordinate care for assigned
beneficiaries. If we conclude that a waiver of certain telehealth
requirements under section 1899(f) of the Act is necessary in order to
carry out the Shared Savings Program, we would likely provide for a
waiver of the originating site requirements of section
1834(m)(4)(C)(i)(I) through (III) of the Act that limit telehealth
payment to services furnished within specific types of geographic areas
or in an entity participating in a Federal telemedicine demonstration
project approved as of December 31, 2000, and would also likely provide
for a waiver of the originating site requirements of section
1834(m)(4)(C)(ii)(I) through (VIII) of the Act that specify the
particular sites at which the eligible telehealth individual must be
located at the time the service is furnished via a telecommunications
system. Waiver of this requirement could allow ACOs to realize cost
savings and improve care coordination, such that they would more
willing to take on two-sided risk which we believe is required to
promote the long term effectiveness and sustainability of the Shared
Savings Program.
If we were to implement a waiver then we believe it would be
appropriate to limit the use of such waivers to beneficiaries that are
assigned to the ACO during the applicable performance year. We believe
this would be best accomplished by permitting ACOs to use these waivers
when they have a prospectively assigned population. In other words, the
waivers would be limited to ACOs participating in Track 3.
Prospectively assigned beneficiaries under Track 3 would be assigned to
the ACO for the entire year and it would thus be clear to ACOs and CMS
as to the beneficiaries for which a waiver applied. As mentioned
previously, we believe a prospective assignment approach creates a
potential pathway for improving the appropriate use of waivers by ACOs
and a method for CMS to monitor its use. In addition, under Track 3
there would be greater opportunity for risk. For these reasons, we
believe that Track 3 is potentially a better candidate for such a
waiver than Track 2. However, we seek comment on whether these waivers
should apply to all two-sided performance-based risk tracks. Another
option would be for the waivers would apply to any FFS beneficiary
cared for by an ACO and then the waiver could be available to ACOs
participating in any two-sided risk track, regardless of whether the
assignment is prospective or retrospective. Another option would be to
apply such waivers to beneficiaries that appear on the quarterly lists
of preliminarily prospectively assigned beneficiaries. Under this
approach, the population for whom the waiver is available would likely
change from quarter to quarter.
Under a waiver of the telehealth requirements, we would anticipate
establishing additional requirements to ensure program transparency and
help reduce the possibility for abuse of the waiver. For example, we
would anticipate requiring ACOs to indicate their intent to use the
waiver in a form and manner specified by CMS, as part of either their
applications or requests for renewal of their participation agreement,
and to remain in compliance with program rules. To further substantiate
an ACO's intent to use the waiver, we anticipate requiring that the ACO
submit as part of its application documentation showing that its
governing body has made and duly authorized a bona fide determination
that the ACO will use the waiver (if approved by CMS) and will comply
with all requirements of the waiver. As part of its application for the
waiver, we would require the ACO to submit a written plan describing
how it would use the waiver to meet the clinical needs of its assigned
beneficiaries. We would reserve the right to deny or revoke a waiver to
an ACO if it is not in compliance with requirements under the Shared
Savings Program, if it does not use the waiver as described in its
application, or if it does not successfully meet the quality reporting
standard. ACOs with approved waivers would be required to post their
use of the waivers as part of public reporting (see Sec. 425.308) on
the dedicated ACO Web page. Use of the waiver and its authorization by
the governing body would be required to be documented, and the
documentation retained, consistent with Sec. 425.314. We would
anticipate that any waiver would be effective on the start date of the
ACO's participation agreement and would not extend beyond the end of
the ACO's participation in the Shared Savings Program. However, if CMS
terminates the participation agreement, then the waiver would end on
the date of the termination notice. We also reserve the authority to
withdraw the waiver in the event we determine that there has been an
abuse of the waiver. The proposed payment waivers would not protect
financial arrangements between ACOs, ACO participants, ACOs providers/
suppliers, or other individuals or entities providing services to ACO
patients from liability under the fraud and abuse laws or any other
applicable laws.
We note that we would retain the right to monitor and audit the use
of such waivers. We would anticipate implementing heightened monitoring
of entities that bill under payment waivers to help reduce the
possibility for abuse of the waiver. We seek comment on what specific
activities should be monitored to ensure that items and services are
properly delivered to eligible patients. We would also likely consider
monitoring ACOs' marketing of services subject to payment waivers to
prevent coercive or misleading marketing and to assess the effect on
the delivery of care.
In addition to welcoming comments related to the questions we
raised in section II.B.8.a of this proposed rule, we also welcome
specific comments on whether it is necessary to use our authority under
Section 1899(f) of the Act to provide for a waiver for ACOs
participating in the Shared Savings Program of any Medicare telehealth
rules, especially for those ACOs that have elected to participate under
a two-sided performance-based risk

[[Page 72822]]

arrangement. We seek comment on the telehealth rules that would require
a waiver and the circumstances under which a waiver would be necessary.
Specifically, what aspects of current Medicare telehealth payment and
other rules would it be necessary to waive in order to effectively
incorporate two-sided performance-based risk into the Shared Savings
Program? What factors should CMS consider if it were to provide for
such a waiver to allow ACOs additional flexibility to provide a broader
range of telehealth services or services in a broader range of
geographic areas? Also, how should telehealth be defined? While
``telehealth'' is not consistently defined across payers,
``telehealth'' typically refers to a broader set of services, including
``store and forward'' services, which are not currently covered by
Medicare outside of demonstration projects. Under what circumstances
should payment for telehealth and related services be made? What types
of services should be included--remote monitoring, remote visits and/or
e-consults? What capabilities or additional criteria should ACOs meet
in order to qualify for payments for telehealth services under such a
waiver? In your comments, please consider quality and outcomes metrics,
other requirements to ensure protection of beneficiaries and the
Medicare Trust Funds, and any other design factors you think may be
important.
(3) Homebound Requirement Under the Home Health Benefit
In order for Medicare to pay for home health services, a
beneficiary must be determined to be ``home-bound.'' Specifically,
sections 1835(a) and 1814(a) of the Act require that a physician
certify (and recertify) that in the case of home health services under
the Medicare home health benefit, such services are or were required
because the individual is or was ``confined to the home'' and needs or
needed skilled nursing care on an intermittent basis, or physical or
speech therapy or has or had a continuing need for occupational
therapy. A beneficiary is considered to be confined to the home if the
beneficiary has a condition, due to an illness or injury, that
restricts his or her ability to leave home except with the assistance
of another individual or the aid of a supportive device (such as
crutches, a cane, a wheelchair, or a walker), or if the beneficiary has
a condition such that leaving his or her home is medically
contraindicated. While a beneficiary does not have to be bedridden to
be considered confined to the home, the condition of the beneficiary
must be such that there exists a normal inability to leave home and
leaving home requires a considerable and taxing effort by the
beneficiary. Absent this condition, it would be expected that the
beneficiary could typically get the same services in an outpatient or
other setting. Thus, the homebound requirement provides a way to help
differentiate between patients that require medical care at home versus
patients who could more appropriately receive care in a less costly
outpatient setting. Additional information regarding the homebound
requirement is available in the Medicare Benefit Manual (Pub 100-02);
Chapter 7, ``Home Health Services'', Section 30.1.1, ``Patient Confined
to the Home''.
Some ACOs and other commenters have suggested that a waiver of this
requirement would be appropriate under the Shared Savings Program,
especially for ACOs that have elected to participate under a two-sided
performance-based risk arrangement. They suggest that home health care
would be appropriate for additional beneficiaries and could result in
lower overall costs of care in some instances. For example, commenters
suggest, based on their experiences outside of the Medicare FFS
program, that if a beneficiary is allowed to have home health care
visits, even if the beneficiary is not considered home-bound, the
beneficiary may avoid a hospital admission.
If we conclude that a waiver of the homebound requirement under
section 1899(f) of the Act is necessary in order to carry out the
Shared Savings Program, we would expect to offer the opportunity to
provide home health services to additional beneficiaries to ACOs
participating under Track 3 using a process similar to the approach we
discussed above for a waiver of the SNF 3-day rule for ACOs in Track 3.
Specifically, ACOs participating under Track 3 have a significant
financial incentive to control total patient costs. In addition, under
Track 3 beneficiaries would be prospectively assigned to the ACO for
the entire year, and it would thus be clear as to which beneficiaries
the waiver applied. As mentioned previously, we believe a prospective
assignment approach creates a potential pathway for improving the
appropriate use of waivers by ACOs and a method for CMS to monitor its
use. In addition, under Track 3 there would be greater opportunity for
risk. For these reasons, we believe that Track 3 is potentially making
a better candidate for such a waiver than Track 2. All ACOs
participating under Track 3 would be eligible to apply for a waiver of
the home-bound requirement for their prospectively assigned
beneficiaries; however, we seek comment on whether these waivers should
apply to all performance-based risk tracks. Another option would be
that the waivers would apply to any FFS beneficiary cared for by the
ACO and then the waiver could be available to all ACOs participating in
a two-sided risk track, regardless of whether assignment is prospective
or retrospective. Another option would be to apply any waiver to
beneficiaries that appear on the quarterly lists of preliminarily
prospectively assigned beneficiaries. In this case, the beneficiaries
to whom the waiver applies would likely change from quarter to quarter.
We believe we could authorize waiver of the homebound requirement under
the home health benefit for those ACOs that demonstrate through the
application process or in a request for renewal of their participation
agreement that they have the capacity and infrastructure to identify
and manage clinically beneficiaries who are not homebound, but are
otherwise eligible for services under the home health benefit, and
would benefit from receiving these services. As part of the application
for the waiver, we would expect to require ACOs to describe the staff
and processes that would be involved in the clinical management of
beneficiaries receiving services pursuant to the waiver. All other
requirements for the Medicare home health benefit would remain
unchanged. Thus, under such a waiver, only beneficiaries that otherwise
meet all program requirements to receive home health services would be
eligible for coverage of home health services without being homebound.
In addition, we would require that home health services provide
pursuant to the waiver at the direction of an ACO provider/supplier
that is not a home health agency, to help ensure that the waiver is
used appropriately. The home health agency would also likely be
required to be an ACO provider/supplier. We believe it would be
appropriate to limit such a waiver to home health agencies that are ACO
participants or ACO providers/suppliers, because we believe these
entities would have incentives that are most directly aligned with
those of the ACO. ACOs also have stronger control and oversight over
such entities and such entities are subject to Shared Savings Program
requirements. We invite comment on whether or not the home health
agency should be required to be an ACO provider/supplier. In either
case, an ACO would be required to submit to CMS for approval the home

[[Page 72823]]

health agency or group of home health agencies with which it wishes to
partner in providing services pursuant to this waiver. The designated
home health agency or agencies would be required to have the
appropriate staff capacity and necessary infrastructure to carry out
the processes described in the ACO's application for the waiver. In
addition, a designated home health agency would be required to have, at
the time of application submission, a quality rating of 3 or more stars
under the CMS 5-Star Quality Rating System as reported on the Home
Health Compare Web site. (For detailed information, see https://blog.cms.gov/2014/06/18/star-quality-ratings-coming-soon-to-compare-sites-on-medicare-gov/.)
Under such a waiver, we would anticipate establishing additional
requirements to ensure program transparency and help reduce the
possibility for abuse of the waiver. For example, we would anticipate
requiring ACOs to indicate their intent to use the waiver in a form and
manner specified by CMS, as part of either their applications or
requests for renewal of their participation agreement, and to remain in
compliance with program rules. To further substantiate an ACO's intent
to use the waiver, we anticipate requiring that the ACO submit as part
of its application documentation showing that its governing body has
made and duly authorized a bona fide determination that the ACO will
use the waiver (if approved by CMS) and will comply with all
requirements of the waiver. As part of its application for the waiver,
we would require the ACO to submit a written plan describing how it
would use the waiver to meet the clinical needs of its assigned
beneficiaries. We would reserve the right to deny or revoke a waiver to
an ACO if it is not in compliance with requirements under the Shared
Savings Program or if it does not successfully meet the quality
reporting standard. ACOs with approved waivers would be required to
post their use of the waivers as part of public reporting (see Sec.
425.308) on the dedicated ACO Web page. Use of the waiver and its
authorization by the governing body would be required to be documented,
and documentation retained, consistent with Sec. 425.314. We would
anticipate that any waiver would be effective on the start date of the
ACO's participation agreement and would not extend beyond the end of
the ACO's participation in the Shared Savings Program. However, if CMS
terminates the participation agreement, then the waiver would end on
the date of the termination notice. We would also reserve the authority
to withdraw the waiver in the event we determine that there has been an
abuse of the waiver. The proposed payment waivers would not protect
financial arrangements between ACOs, ACO participants, ACOs providers/
suppliers, or other individuals or entities providing services to ACO
patients from liability under the fraud and abuse laws or any other
applicable laws.
We note that we would retain the right to monitor and audit the use
of such waivers. We would anticipate implementing heightened monitoring
of entities that bill under payment waivers to help reduce the
possibility for abuse of the waiver. We seek comment on what specific
activities should be monitored to ensure that items and services are
properly delivered to eligible patients, and that patients are able to
exercise freedom of choice and are not being steered inappropriately.
We would also likely consider monitoring ACOs' marketing of services
subject to payment waivers to prevent coercive or misleading marketing
and to assess the effect on the delivery of care.
We invite comments on whether it is necessary to waive the
homebound requirement under the home health benefit using our authority
under Section 1899(f) of the Act for ACOs that choose to participate in
the Shared Savings Program under two-sided performance risk financial
arrangements. We also welcome comments on the potential waiver
requirements discussed previously. For example, what criteria would be
appropriate to determine eligibility for such a waiver under the Shared
Savings Program? Are there specific categories of providers or
beneficiaries to whom the waiver should (or should not) apply? If
implemented under a two-sided performance-based risk model, are there
additional protections for the Medicare Trust Funds or for
beneficiaries that should be considered? How would a waiver complement
Medicare payment for physician home visits for medically complex
patients? What considerations, if any, should we take into account when
adapting current 60-day episode payment amounts that require patients
to be homebound in applying them to services furnished to a non-
homebound population? What quality metrics should be incorporated into
the quality measure framework for ACOs and our monitoring program to
measure the quality of care for non-homebound home health recipients?
When should the waiver be applied? Would there be specific
circumstances when home health services should be available at any
point without first being triggered by some health event? If so, what
criteria would be necessary to differentiate these circumstances from
non-covered custodial care? What other criteria or operational issues
or other concerns should we also consider? We are also concerned that
under a homebound waiver, beneficiaries may, in effect, be steered
toward those agencies that can provide enhanced home health services to
patients who are not homebound. Any such homebound waiver would not
override Medicare patients' freedom of choice and that beneficiaries
would remain free to select any eligible home health agency. We seek
comments on ways to ensure that beneficiaries retain their freedom of
choice in practice under a waiver.
We would also note that the Independence at Home (IAH)
Demonstration builds on existing Medicare benefits by providing
chronically ill patients with a complete range of primary care services
in the home setting. Medical practices led by physicians or nurse
practitioners provide primary care home visits tailored to the needs of
beneficiaries with multiple chronic conditions and functional
limitations. See the CMS Web site at https://innovation.cms.gov/initiatives/independence-at-home/. How could the findings from
Independence at Home demonstration apply to the population of
beneficiaries assigned to ACOs or receiving care furnished by ACO
providers/suppliers?
(4) Waivers for Referrals to Postacute Care Settings
As a condition of participation (CoP) in Medicare, a hospital must
have in effect a discharge planning process that applies to all
patients, as required under Sec. 482.43. The Interpretative Guidelines
for this requirement found in the State Operations Manual, Publication
100-07, Appendix A--Survey Protocol, Regulations and Interpretive
Guidelines for Hospitals, section A-0799, define hospital discharge
planning as a process that involves determining the appropriate post-
hospital discharge destination for a patient; identifying what the
patient requires for a smooth and safe transition from the hospital to
his or her discharge destination; and beginning the process of meeting
the patient's identified postdischarge needs. Alternative terminology,
such as ``transition planning'' or ``community care transitions'' is
preferred by some, since it moves away from a focus primarily on a
patient's hospital stay to consideration of transitions among the
multiple types of patient care settings

[[Page 72824]]

that may be involved at various points in the treatment of a given
patient. This approach recognizes the shared responsibility of health
care professionals and facilities as well as patients and their support
persons throughout the continuum of care, and the need to foster better
communication among the various groups. At the same time, the term
``discharge planning'' is used both in section 1861(ee) of the Act as
well as in Sec. 482.43.
The discharge planning CoP specifically addresses the role of the
patient, or the patient's representative, by requiring the hospital to
develop a discharge planning evaluation at the patient's request and to
discuss the evaluation and plan with the patient. This is consistent
with the hospital patient's rights CoP regulations at Sec.
482.13(b)(1) and (2), which provide that the patient has the right to
participate in the development and implementation of his or her plan of
care, and to make informed decisions regarding his or her care.
Accordingly, hospitals must actively involve patients or their
representatives throughout the discharge planning process. Further, the
specific discharge planning evaluation requirement to assess a
patient's capability for post-discharge self-care requires the
hospital, as needed, to actively solicit information not only from the
patient or the patient's representative, but also from family, friends,
or other support persons. The hospital must include in the discharge
plan, when applicable in terms of the types of post-discharge care
needs identified, a list of home health agencies (HHAs) or SNFs that
are available to the patient, that are participating in the Medicare
program and that serve the geographic area (as defined by the HHA) in
which the patient resides, or in the case of a SNF, in the geographic
area requested by the patient. HHAs must request to be listed by the
hospital as available (see Sec. 482.43(c)(6)) for further details).
Further, under the CoP regulations at Sec. 482.43(c)(7), a hospital,
as part of the discharge planning process, must inform the patient or
the patient's family of their freedom to choose among participating
Medicare providers of post-hospital care services and must, when
possible, respect patient and family preferences when they are
expressed. The hospital must not specify or otherwise limit the
qualified providers that are available to the patient. The discharge
plan must identify any HHA or SNF to which the patient is referred in
which the hospital has a disclosable financial interest, as specified
by the Secretary, and any HHA or SNF that has a disclosable financial
interest in a hospital under Medicare (See Sec. 482.43(c)(8)).
The State Operations Manual (SOM), Appendix A at Section A-0823,
provides additional guidance for these requirements. During the
discharge planning process the hospital must inform the patient of his
or her freedom to choose among Medicare-participating post-hospital
providers and must not direct the patient to specific provider(s) or
otherwise limit which qualified providers the patient may choose among.
Hospitals have the flexibility either to develop their own lists or to
print a list of skilled nursing facilities and home health agencies in
the applicable geographic areas from the CMS Web sites, Nursing Home
Compare (www.medicare.gov/NHcompare) and Home Health Compare
(www.medicare.gov/homehealthcompare). If hospitals develop their own
lists, they are expected to update them at least annually (69 FR
49226). Hospitals may also refer patients and their families to the
Nursing Home Compare and Home Health Compare Web sites for additional
information regarding Medicare-certified SNFs and HHAs, as well as
Medicaid-participating nursing facilities. The data on the Nursing Home
Compare Web site include an overall performance rating, nursing home
characteristics, performance on quality measures, inspection results,
and nursing staff information.
Home Health Compare provides details about every Medicare-certified
home health agency in the country. Included on the Web site are quality
indicators such as managing daily activities, managing pain and
treating symptoms, treating wounds and preventing pressure sores,
preventing harm, and preventing unplanned hospital admissions. The
hospital might also refer the patient and his or her representatives to
individual State agency Web sites, the Long-Term Care Ombudsman
Program, Protection and Advocacy Organizations, Citizen Advocacy
Groups, Area Agencies on Aging, Centers for Independent Living, and
Aging and Disability Resource Centers for additional information on
long term care facilities and other types of providers of post-hospital
care. Having access to the information found at these sources may
assist beneficiaries and their families and other caregivers in the
decision making process regarding post-hospital care options. When the
patient or the patient's family has expressed a preference, the
hospital must attempt to arrange post-hospital care with an HHA or SNF,
as applicable, consistent with that preference. If the hospital is
unable to make the preferred arrangement, (for example, if there is no
bed available in the preferred SNF), it must document the reason the
patient's preference could not be fulfilled and explain that reason to
the patient.
ACOs and MedPAC have indicated that as ACOs have started to analyze
claims data on their beneficiaries, they are recognizing that certain
providers may deliver higher-quality and lower-cost care than others.
For example, some SNFs may deliver higher-quality care and thus
appropriately lower rates of readmissions to hospitals. ACOs have
indicated that they would like to have the ability to recommend high-
quality SNF and HHA providers with whom they have established
relationships, rather than presenting all options equally. In
particular, ACOs and their ACO providers/suppliers would like to have
the ability to clearly state to beneficiaries which providers they
believe are best and why. However, it is not clear to them that they
have the authority to do so, especially for referrals to post-acute
care. ACOs suggest that the ability to make more specific
recommendations would enable them to build robust networks across the
continuum of care, and thus help them to give beneficiaries as much
continuity as possible as they move across sites of care. Therefore,
ACOs have asked that we provide clear direction on how preferred
providers can be presented to beneficiaries and what represents clear
notification of the beneficiary's freedom to choose among participating
Medicare providers.
Based on these comments from ACOs and MedPAC, we have reviewed the
relevant statutory provisions, regulations, and guidance. While we
believe these materials make clear the requirements regarding how
preferred providers can be represented to beneficiaries and what
represents clear notification of beneficiary freedom of choice of
providers, we believe we have identified one requirement that might be
need to be waived. Specifically, we are considering whether it might be
necessary to waive the requirement under section 1861(ee)(2)(H) of the
Act that a hospital ``not specify or otherwise limit the qualified
provider which may provide post-hospital home services'' and the
portions of the hospital discharge planning CoP at Sec. 482.43 that
implement this requirement, using our waiver authority under Section
1899(f) of the Act for ACOs participating in two-sided risk tracks
under the Shared Savings Program. If we were to implement such a
waiver, we would anticipate making it a very narrow

[[Page 72825]]

waiver. In addition, we are considering whether such a waiver would be
most appropriately implemented under Track 3 in which there is
prospective assignment of beneficiaries. Under Track 3 beneficiaries
would be prospectively assigned to the ACO for the entire year and it
would thus be clear as to which beneficiaries the waiver applied. As
mentioned previously, we believe a prospective assignment approach
creates a potential pathway for improving the appropriate use of
waivers by ACOs and a method for CMS to monitor its use. In addition,
under Track 3 there would be greater opportunity for risk. For these
reasons, we believe that Track 3 is potentially a better candidate for
such a waiver than Track 2. Another option is that the waiver would
apply to any FFS beneficiary cared for by the ACO and then the waiver
could be available to all ACOs participating in a two-sided risk track,
regardless of whether the assignment is prospective or retrospective.
Another option would be to apply any waiver to beneficiaries that
appear on the quarterly lists of preliminarily prospectively assigned
beneficiaries. In this case, the beneficiaries to whom the waiver
applies would likely change from quarter to quarter. We would also
anticipate imposing additional documentation requirements upon those
ACOs that seek to use the waiver. Specifically, because the Shared
Savings Program is built on FFS Medicare, and because we continue to
support and protect beneficiaries' right to choose their providers
under FFS Medicare, we are not considering a complete waiver of the
requirement that a hospital, as part of the discharge planning process,
not specify or otherwise limit the qualified providers that are
available to the patient. This requirement is reflected in the hospital
CoPs at Sec. 482.43(c)(7). In other words, under the terms of any
waiver, hospitals still would be required to inform the patient or the
patient's family of their freedom to choose among participating
Medicare providers of post-hospital care services and must, when
possible, respect patient and family preferences when they are
expressed. In addition, the hospital must also present a complete list
and may not limit the qualified providers that are available to the
patient. However, under a waiver of the prohibition on the
specification of qualified providers, discharge planners in hospitals
that are ACO participants or ACO providers/suppliers would have the
flexibility to recommend high quality post-acute providers with whom
they have relationships (either financial and/or clinical) for the
purpose of improving continuity of care across sites of care. Such a
waiver would not cover a situation in which a post-acute provider paid
the ACO participant or ACO provider/supplier to be included as a
recommended post-acute provider. We believe it would be appropriate to
limit such a waiver to hospitals that are ACO participants or ACO
providers/suppliers because we believe these entities would have
incentives that are most directly aligned with those of the ACO. ACOs
also have stronger control and oversight over such entities and such
entities are subject to Shared Savings Program requirements. We
anticipate that under a such waiver discharge planners would be
required to document that the patient or the patient's family was
informed of their freedom to choose a provider of post-hospital
services and presented with a complete list of participating Medicare
providers of post-hospital care services as well as information
regarding the Medicare provider of post-hospital care services
recommended by the discharge planner. We also anticipate that under
such a waiver discharge planners would be required to document the data
and the rationale they used as the basis for recommending any specific
provider of post-hospital services. If implemented across all risk
tracks, we anticipate it would apply to all FFS beneficiaries receiving
services from hospitals participating in the ACO. We would additionally
anticipate requiring the use of certain quality criteria for
recommended providers (such as requiring that SNFs meet a minimum Star
rating of 3 or more stars under the CMS 5-Star Quality Rating System as
reported on the Home Health Compare Web site. For detailed information,
see https://blog.cms.gov/2014/06/18/star-quality-ratings-coming-soon-to-compare-sites-on-medicare-gov/.) and documentation that the patient or
the patient's family was informed of the recommended provider's quality
of care, the clinical and/or financial relationship that the ACO has
with the recommended provider, and any other reasons why the provider
is being recommended. Furthermore, we would continue to require that
the ACO respect the patient or the patient's family's preference
regarding the choice of post-acute provider. Under such a waiver, we
would anticipate establishing additional requirements to ensure program
transparency and help reduce the possibility for abuse of the waiver.
For example, we would anticipate requiring ACOs to indicate their
intent to use the waiver in a form and manner specified by CMS, as part
of either their applications or requests for renewal of their
participation agreement, and to remain in compliance with program
rules. To further substantiate an ACO's intent to use the waiver, we
anticipate requiring that the ACO submit as part of its application
documentation showing that its governing body has made and duly
authorized a bona fide determination that the ACO will use the waiver
(if approved by CMS) and will comply with all requirements of the
waiver. As part of its application for the waiver, we would require the
ACO to submit a written plan describing how it would use the waiver to
meet the clinical needs of its assigned beneficiaries. We would reserve
the right to deny or revoke a waiver to an ACO if it is not in
compliance with other requirements under the Shared Savings Program, if
it does not use the waiver as described in its application, or if it
does not successfully meet the quality reporting standard. ACOs with
approved waivers would be required to post their use of the waivers as
part of public reporting (see Sec. 425.308) on the dedicated ACO Web
page. Use of the waiver and its authorization by the governing body
would be required to be documented, and the documentation retained,
consistent with Sec. 425.314. We would anticipate that any waiver
would be effective on the start date of the ACO's participation
agreement and would not extend beyond the end of the ACO's
participation in the Shared Savings Program. However, if CMS terminates
the participation agreement, then the waiver would end on the date of
the termination notice. We also reserve the authority to withdraw the
waiver in the event we determine that there has been an abuse of the
waiver. The proposed payment waivers would not protect financial
arrangements between ACOs, ACO participants, ACOs providers/suppliers,
or other individuals or entities providing services to ACO patients
from liability under the fraud and abuse laws or any other applicable
laws.
We would retain the right to monitor and audit the use of such
waivers. We would implement heightened monitoring of entities that bill
under payment waivers to help reduce the possibility for abuse of the
waiver. We seek comment on what specific activities should be monitored
to ensure that items and services are properly delivered to eligible
patients, and that patients are able to exercise freedom of choice and
are not being steered inappropriately. We would also likely

[[Page 72826]]

consider monitoring ACOs' marketing of services subject to payment
waivers to prevent coercive or misleading marketing and to assess the
effect on the delivery of care.
We seek comment on this potential approach to using our waiver
authority to permit ACOs flexibility in specifying certain Medicare
providers of post-hospital care services to patients and their
families. We further seek comment on the criteria discussed above. Are
there other cost and quality criteria that should be considered?
Specifically to what hospitals and post-hospital providers should the
waiver apply? For example, as discussed above, should the ability to
recommend a post-hospital provider be available only to those hospitals
that are ACO participants or ACO provider/suppliers, since these
entities would have incentives that are most directly aligned with
those of the ACO? Should a hospital be permitted to recommend any post-
hospital provider or only post-hospital providers that are ACO
participants or ACO provider/suppliers? We anticipate that if a waiver
is found to be necessary, we would establish a waiver that would apply
to all hospitals that are ACO participants or ACO providers/suppliers
and that these hospitals would have the ability to recommend any post-
hospital provider; however, we would be interested to receive comments
on alternative approaches.
Overall, we are supportive of hospitals recommending certain post-
hospital providers based on quality and a beneficiary's specific needs,
as long as the beneficiaries understand their other options and retain
their freedom of choice. In the event a waiver is found to be
necessary, are there other parameters that should be established around
how hospitals formulate their lists of post-acute providers and what
information would be shared with beneficiaries? Under such a waiver
would it be appropriate for hospitals to share only information on
quality that is publically reported, such as on Home Health Compare, or
would it be appropriate for hospitals to also share information that
they have generated internally? We would be concerned if hospitals
might steer beneficiaries to providers based on quality information
that has not been properly vetted. Also, we would be concerned if
hospitals recommended only their partnering providers, when there may
be other providers of equal or better quality. Since the CoP
requirements apply to all patients of a participating hospital
regardless of their insurer or insured status, we are also seeking
comment on whether it would be feasible to implement a system where the
CoP requirement to not make recommendations is waived for the ACO
participating hospitals only in the case of certain Medicare FFS
beneficiaries. We are further seeking comments on whether it might be
necessary for purposes of carrying out the Shared Savings Program and
what benefits and risks might arise for non-Medicare inpatients if we
were to waive this portion of the regulation for ACO participating
hospitals with respect to all of their patients. We welcome comments on
whether it would be appropriate to limit any such a waiver to ACOs
participating under two-sided risk financial arrangements, or whether
such a waiver should be available more broadly to all ACOs
participating in the Shared Savings Program. Alternatively, should the
waiver apply only to beneficiaries that are prospectively assigned to
ACOs participating in Track 3? What operational considerations/concerns
would implementation of such a waiver raise? What additional
beneficiary protections and safeguards should be considered and put in
place to prevent abuse of such a waiver?
(5) Waiver of Other Payment Rules
We welcome suggestions on whether there are any additional Medicare
FFS payment rules that it may be necessary to waive using our authority
under section 1899(f) of the Act in order to effectively implement two-
sided risk financial arrangements under the Shared Savings Program by
providing additional mechanisms for ACOs to increase quality and
decrease costs. We would establish any such waivers through the
rulemaking process. As a result, any suggestions submitted by
commenters would be helpful to CMS in developing future proposals
regarding the waiver of any Medicare FFS rules that might be necessary
to carry out the provisions of the Shared Savings Program, and in
particular to implement two-sided risk models under the program.
b. Other Options for Improving the Transition to Two-Sided Performance-
Based Risk Arrangements
(1) Beneficiary Attestation
Under 1899(c) of the Act, beneficiaries are required to be assigned
to an ACO participating in the Shared Savings Program based on the
beneficiary's utilization of primary care services rendered by
physicians. Thus, beneficiary choice, as indicated by their utilization
of primary care service furnished by physicians, must determine
beneficiary assignment to an ACO under the Shared Savings Program.
Therefore, we developed a methodology for assigning beneficiaries based
on whether the ACO provided the plurality of the beneficiary's primary
care during a particular performance year. In the November 2011 final
rule (76 FR 67851 through 67870), we outlined the major considerations
in beneficiary assignment to an ACO.
First, we emphasized that unlike managed care programs, Medicare
FFS beneficiaries do not enroll in the Shared Savings Program, and they
retain the right to seek treatment from any Medicare-enrolled provider
of their choosing. Thus, the ``assignment'' methodology in no way
implies a lock-in or enrollment process. To the contrary, the statutory
term ``assignment'' in this context refers only to an operational
process by which we determine whether a beneficiary has chosen to
receive a sufficient level of the requisite primary care services from
a specific ACO so that the ACO may be appropriately designated as being
accountable for that beneficiary's care, and we can measure its quality
and financial performance on patients for whom it is in the best
position to direct and influence their care. No exclusions or
restrictions based on health conditions or similar factors are applied
in the assignment of Medicare FFS beneficiaries.
Additionally, we noted that the statute requires that assignment be
based on beneficiary utilization of primary care services furnished by
physicians. We explored several options for assigning beneficiaries to
an ACO based on whether the beneficiary received the plurality of
primary care services from providers and suppliers participating in the
ACO. The primary options we considered were whether to assign
beneficiaries to an ACO prospectively, at the beginning of the
performance year, or whether to assign beneficiaries to an ACO
retrospectively, at the end of the performance year.
Under the retrospective approach, the ACO would be held accountable
for beneficiaries that chose to receive the plurality of their primary
care services from practitioners in the ACO during the course of the
performance year. These beneficiaries necessarily would be identified
at the end of the performance year. The advantage of this approach is
that the ACO is assessed based on beneficiaries with whom its providers
and suppliers had visits with during the performance year and had the
greatest opportunity to impact care. Another advantage is that this
methodology encourages organizations to improve care for all Medicare
FFS

[[Page 72827]]

patients seen by ACO professionals during a performance year. The
disadvantage that some ACOs have articulated is that retrospective
assignment can pose challenges when an organization has limited
resources. Such organizations may prefer to target specific FFS
beneficiaries for enhanced care improvement activities, and be
confident that those specific beneficiaries will be the population used
to determine the ACO's performance on cost and quality at the end of
the year.
Under a prospective assignment approach, a beneficiary's
utilization of primary care services during a timeframe prior to the
start of the performance year would be used to assign a list of
beneficiaries to the ACO at the beginning of a particular performance
year (as we have proposed under Track 3). The total cost and quality of
the care furnished to beneficiaries on the prospective assignment list
would be used at the end of the performance year to determine the ACO's
performance. As some ACOs have articulated, an advantage to this
approach is that the organization can target its resources and care
coordination activities to the specific FFS beneficiaries that appear
on the prospective assignment list, confident that these are the
beneficiaries that will determine the ACO's quality and efficiency
performance at the end of the year. However, in the November 2011 final
rule, we discussed several disadvantages to this approach. First, we
believed that such an approach would erode the incentive for ACOs to
improve their care processes to benefit the broader Medicare FFS
population served by the ACO and its ACO participants and ACO
providers/suppliers. We stated that since the goal of the Shared
Savings Program is to change the care experience for all FFS
beneficiaries, ACO participants and ACO provider/suppliers should have
incentives to treat all patients equally; using standardized evidence-
based care processes, to improve the quality and efficiency of the care
they provide to all FFS beneficiaries (76 FR 67861). Second, we noted
that since FFS beneficiaries retain the freedom to choose their
providers, it was likely that some prospectively assigned beneficiaries
would choose not to obtain the plurality of their primary care services
from ACO professionals during the performance year; however, the ACO
would still be held accountable for the total cost and quality of the
care furnished to those beneficiaries.
After considering stakeholder comments on these main approaches, we
finalized a hybrid policy that provided for a preliminary prospective
assignment methodology with final retrospective reconciliation (76 FR
67867). We finalized this hybrid approach in an effort to realize the
most positive aspects of both prospective and retrospective assignment
and avoid, to the extent possible, the major disadvantages of each.
Therefore, we finalized a policy in which we prospectively assign
beneficiaries to ACOs in a preliminary manner at the beginning of a
performance year based on most recent 12 months of data. We then update
this information quarterly, based on a rolling 12 months of data. Final
assignment is determined after the end of each performance year based
on the 12 months of data from the performance year. This policy
determines assignment to an ACO under the Shared Savings Program based
on a statistical determination of a beneficiary's utilization of
primary care services, rather than on a process of enrollment or
``voluntary selection'' by beneficiaries. Beneficiaries are assigned to
no more than one ACO, and the specific methodology (the ``step-wise''
approach) is described in Sec. 425.402. We finalized this policy
because we believed that the methodology would balance beneficiary
freedom to choose providers under FFS Medicare with the ACO's desire to
have information about the FFS beneficiaries that were likely to be
assigned at the end of the performance year. We also felt this approach
would provide adequate incentives for each ACO to redesign care
processes for and provide high quality care to its entire FFS
beneficiary population instead of just focusing on a subset of
patients. Finally, the ACO's performance would be assessed on the basis
of the care furnished to those beneficiaries that chose to receive the
plurality of primary care services from ACO professionals during the
performance year, and for whom the ACO had the greatest opportunity to
impact care.
A retrospective claims-based assignment methodology necessarily
creates more year-to-year variability or ``churn'' in the list of
assigned beneficiaries compared to managed care programs where patients
enroll in and are locked in at the beginning of the year. Based on our
experience and the data generated from the Physician Group Practice
Demonstration (which used a similar retrospective assignment
methodology), approximately 75 percent of beneficiaries assigned at the
end of one performance year remained assigned at the end of the next
performance year. The other 25 percent of beneficiaries were no longer
assigned to the PGP site because they either were no longer eligible to
be assigned or chose not to receive the plurality of their primary care
services from the PGP practitioners. This statistic was recently
confirmed when evaluating ``churn'' in the Shared Savings Program
context. On average, 76 percent (range = 58 percent to 88 percent) of
beneficiaries assigned to a Shared Savings Program ACO at the end of
one year are assigned to the same ACO at the end of the subsequent
performance year. In other words, ACOs experience a ``churn rate'' of
24 percent on average. However, when combined with the information
provided on quarterly updates to the assigned beneficiary list,
``churn'' from quarter to quarter decreases to an average of 10
percent. In other words, on average, 91 percent of the beneficiaries
assigned in one quarter appear on the next quarter's assignment list
(range = 77 percent to 95 percent). These data indicate that ``churn''
varies from ACO to ACO, and that our hybrid assignment methodology
performed according to expectations, that is, the quarterly assignment
reports provide the ACO with relevant information during the
performance year about its patient population for purposes of more
effectively planning and coordinating care.
As in the PGP demonstration, the 24 percent ``churn rate'' found in
the Shared Savings Program reflects beneficiaries that either became
ineligible to be assigned or chose not to receive the plurality of
their primary care services from ACO professionals. Beneficiaries who
were assigned in one performance year, but fall off the assignment list
at the end of the subsequent performance year may do so for a variety
of reasons including:
Beneficiary did not seek primary care services from any
Medicare-enrolled physicians during the subsequent performance year.
Beneficiary chose to receive all primary care services or
the plurality of his or her primary care services from providers
outside the ACO during the subsequent performance year. Reasons for
this could include:
++ The beneficiary received short term care (for example, referral
care, SNF care) from ACO professionals during the earlier performance
year but did not continue the relationships in the subsequent year.
++ Beneficiary moved his/her residence and now seeks care from
practitioners unaffiliated with the ACO.
Beneficiary chose to enroll in MA or is otherwise no
longer a FFS Medicare beneficiary in the subsequent

[[Page 72828]]

performance year (that is, the beneficiary is no longer eligible for
assignment).
A new ACO entered the market in the subsequent performance
year and its ACO professionals furnish the plurality of primary care
services to the beneficiary compared to the established ACO.
We estimate that on average, 76 percent of beneficiaries assigned
to a Shared Savings Program ACO remain assigned from one year to the
next. However, the retention rate varies from 58 percent to 88 percent
across ACOs, and correspondingly, the turnover varies from 12 percent
to 42 percent. On average, 7 percent of previously assigned
beneficiaries are no longer eligible for assignment to an ACO and 17
percent of previously assigned beneficiaries remain eligible to be
assigned, but do not receive the plurality of their primary care
services from ACO professionals the ACO during the subsequent
performance year. Of the 17 percent of previously assigned
beneficiaries who remain eligible for assignment--
Six percent had at least one primary care physician visit
with a physician who is an ACO professional, but the plurality of their
primary care services were rendered outside the ACO;
Three percent had no physician or non-physician primary
care visits during the subsequent year;
Seven percent had at least one physician or non-physician
primary care visit, but none with ACO professionals;
One percent had at least one non-physician primary care
visit with an ACO professional, but had no primary care visits with
physicians who are ACO professionals in the ACO; and
Seven percent had at least one primary care visit with a
physician in the ACO, but did not receive the plurality of their
primary care services from ACO professionals.
As suggested by these statistics, some percentage of beneficiaries
may believe a certain primary care practitioner affiliated with an ACO
has ultimate responsibility for coordinating their care, even when it
is necessary for them to receive primary care services from other
practitioners, including practitioners who are not participating in the
same ACO with which the practitioner is affiliated. Such a beneficiary
could become unassigned if his or her primary care service utilization
shifted away from practitioners in the ACO in a year. For example, a
beneficiary living in a small town may have had a primary care service
visit during a performance year with a primary care provider who is an
ACO professional with whom the beneficiary has a long-standing
relationship and the beneficiary believes this ACO professional is
responsible for coordinating his/her care. If this beneficiary chooses
to go to a large health system in the next town for primary care
services and receives primary care services from practitioners that are
unaffiliated with the ACO during the performance year, at the end of
the performance year it may be determined that ACO professionals did
not render the plurality of the primary care services for that
beneficiary and therefore the ACO would not be held accountable for the
total quality and cost of the beneficiary's care for that performance
year. However, commenters have suggested that beneficiaries should have
the ability to designate which providers (and by extension, the ACOs
with which they are affiliated) are responsible for overseeing their
overall care, regardless of where the beneficiary received the
plurality of his or her primary care services. These commenters argue
that creating a methodology that takes into account what provider a
beneficiary believes has ultimate responsibility for his or her care
could reduce ``churn'' from year to year, and increase the chances that
an ACO would see a return on the investments it makes in the care of
specific beneficiaries. Commenters argue this is particularly important
in two-sided models where ACOs face amplified levels of performance-
based risk.
Patient advocacy groups and ACOs have expressed interest in and
support for enhancing claims-based assignment of beneficiaries to ACOs
by taking into account beneficiary attestation regarding the provider
that they consider to be responsible for coordinating their overall
care. Stakeholders believe that incorporating this information and
giving beneficiaries the opportunity to voluntarily ``align'' with the
ACO in which their primary healthcare provider participates will
improve the patient-centeredness of the assignment methodology.
To begin to address these concerns, the Pioneer ACO Model is
currently conducting a test of beneficiary attestation for the 2015
performance year. Specifically, the Innovation Center has designed a
test in which participating ACOs mail cover letters to beneficiaries
aligned to the Pioneer ACO in either the 2013 or 2014 performance
years, explaining the process by which a beneficiary may indicate whom
they consider to be their ``main doctor'', each with a form that asks
the beneficiary to confirm their ``main doctor''. In the form the
beneficiary is asked to confirm whether or not the listed provider or
supplier is their ``main doctor.'' Beneficiaries who confirm a care
relationship with the provider/supplier listed on the form (who is an
ACO participating provider/supplier identified by the Pioneer ACO) and
meet all other eligibility criteria for alignment (or example, they did
not drop either Part A or B coverage or join a MA plan), would be
aligned to the Pioneer ACO for the following performance year,
regardless of whether or not the practitioners participating in the
Pioneer ACO rendered the plurality of the beneficiary's primary care
services during the performance year. The Innovation Center will
conduct claims-based attribution using the methodology established for
the Pioneer ACO Model, but will include in the Pioneer's aligned
beneficiary population not only those beneficiaries aligned through
claims, but also those beneficiaries who returned the form confirming
that a Pioneer ACO provider/supplier is their main doctor.
Beneficiaries who do not return the form or who return the form, but
indicate the provider listed is not their main doctor, will not be
included in the ACO's assigned beneficiary population unless they are
assigned through the existing claims-based attribution methodology.
This means that if the beneficiary does not return the form and the
beneficiary is not assigned to the Pioneer ACO through the claims-based
attribution methodology, then the beneficiary would not be assigned to
the Pioneer ACO.
Due to program integrity concerns and the additional administrative
burden for ACOs participating in the Pioneer Model, discussions of
beneficiary attestation or receipt of confirmation forms at the point
of care were precluded under this first test of beneficiary
attestation. Rather, in this initial test, the Innovation Center seeks
only to evaluate the effectiveness of different types of mailed forms
with respect to beneficiary willingness to attest that a particular
practitioner has the primary responsibility for their care. Additional
testing in the future is planned under the Pioneer ACO Model that will
build upon lessons learned from this initial test and in which we would
seek to enhance the meaningfulness of dialogue between beneficiaries
and their providers regarding the nature of the care relationship.
Although we are not making any specific proposals related to
beneficiary attestation, we welcome comments on

[[Page 72829]]

whether it would be appropriate to offer a beneficiary attestation
process to ACOs that choose to participate in the Shared Savings
Program under two-sided risk financial arrangements. We intend to
carefully consider any comments on this issue during the development of
the final rule, and will make an assessment at that time as to whether
any change to our assignment methodology to include beneficiary
attestation would be appropriate. We are interested in receiving
comments and suggestions on a wide variety of policy and operational
issues related to beneficiary attestation. For example, which
beneficiaries should be eligible to attest into an ACO? Should this
option be available to all beneficiaries or only to currently or
previously aligned beneficiaries? What implications would attestation
or voluntary alignment have for the assignment of beneficiaries to an
ACO under a prospective versus a preliminary prospective method? Which
types of care relationships should be considered--those with primary
care physicians, specialists or other types of providers? How should
beneficiaries receive communications about claims-based and voluntary
alignment and who would provide the information? What method or process
should be used to obtain beneficiary confirmation and when would this
occur? Under what circumstances and how could beneficiaries reverse
their decisions? Although we believe the option suggested would protect
beneficiary freedom to choose, we seek comment on whether there are
additional ways to protect beneficiaries from coercion and ensure
proper monitoring and safeguards under the Shared Savings Program. What
implications would there be for ACO information or other administrative
systems? What provider education would be needed? Should there be
additional application or eligibility requirements for ACOs in tracks
under which beneficiary attestation is offered? We would note that if
we were to offer a beneficiary attestation process for ACOs that choose
to participate in the Shared Savings Program under two-sided risk
financial arrangements, such beneficiaries would be eligible to be
included in the sample for GPRO quality reporting by ACOs participating
in the Shared Savings Program (76 FR 67900), even if the beneficiary
did not chose to receive care from the ACO professionals during the
performance year, as might be the case under Track 3 under the proposed
prospective assignment methodology. Also, we are concerned about
creating additional administrative burdens for ACOs that might
discourage them from accepting two-sided risk arrangements. Are there
ways that beneficiary attestation could be operationally implemented to
reduce administrative burdens on ACOs and CMS and limit beneficiary
confusion? We anticipate that if we were to offer a beneficiary
attestation process for ACOs that choose to participate in the Shared
Savings Program under two-sided risk financial arrangements, then at
least initially we would anticipate implementing this beneficiary
attestation in a manner consistent with the current beneficiary
attestation under the Pioneer ACO Model. We believe this would be an
appropriate starting point for beneficiary attestation under the Shared
Savings Program because it allows us to take advantage of the policies
and processes that have already been developed for the Pioneer ACO
Model. Additionally, we believe it is unlikely that such a policy would
impact ``churn'' for Track 3 ACOs during a performance year, given our
proposals for prospectively assigning beneficiaries. However,
beneficiary attestation may have a minor impact on ``churn'' during a
performance year related to the preliminary prospective with
retrospective reconciliation approach such as the methodology employed
under Track 2. This process may also have a minor impact in stabilizing
the beneficiary assignment list from one performance year to the next
for all ACOs.
In addition, we seek comments on whether a beneficiary attestation
process under the Shared Savings Program could bias performance year
results compared to the ACO's benchmark. For example, we believe that
such biases could occur because the beneficiaries used to establish
performance benchmarks would not have had the same opportunity to
designate their ``main doctor.'' Rather, for purposes of the benchmark
years, all beneficiaries would be assigned using the established
claims-based assignment methodology. Would it be appropriate for us to
use our authority to adjust an ACO's benchmark to account for
``beneficiary characteristics'' to address any such potential biases?
In connection with any implementation of beneficiary attestation,
we would revise our regulations as necessary, to protect beneficiaries
from undue coercion or influence in connection with whether they choose
to attest or not. Beneficiary attestation is not intended to be used as
a mechanism for ACOs (or ACO participants, ACO providers/suppliers, ACO
professionals, or others) to target potentially lucrative beneficiaries
or avoid those less likely to produce savings. To this end, we do not
believe ACOs or others should be permitted to offer gifts or other
inducements to beneficiaries, nor should they be allowed to withhold or
threaten to withhold items or services, for the purpose of coercing or
influencing their alignment decisions. The current regulations at Sec.
425.304(a)(1) prohibit 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 inducements for receiving items or services from, or
remaining in, an ACO. The regulation at Sec. 425.304(a)(2) permits
certain in-kind items or services to be provided to beneficiaries if
there is a reasonable connection between the items and services and the
medical care of the beneficiary and certain other conditions are met.
We would consider any inducement intended to coerce or influence a
beneficiary attestation decision to be prohibited under Sec.
425.304(a)(1) and not be considered reasonably connected to medical
care under Sec. 425.304(a)(2). We would not, however, prohibit an ACO
or its ACO participants and ACO providers/suppliers from providing a
beneficiary with accurate descriptive information about the potential
patient care benefits of aligning with an ACO. We are also soliciting
comments on this issue.
(2) Seeking Comment on a Step-Wise Progression for ACOs To Take on
Performance-Based Risk
Under the current Shared Savings Program rules, an ACO may not
include an entity on its list of ACO participants unless all ACO
providers/suppliers billing through the entity's Medicare-enrolled TIN
have agreed to participate in the program and comply with the program
rules (see discussion in section II.B. of this proposed rule).
Furthermore, it is not possible under our current regulations for some
ACO providers/suppliers to participate in Track 1, while other ACO
providers/suppliers that may be more ready to accept performance-based
risk participate under Track 2. Some stakeholders have commented that
requiring all ACO providers/suppliers billing through an ACO
participant TIN to participate in the same risk track could deter some
ACOs from entering higher risk arrangements (Tracks 2 or 3) if they do
not believe that all of the ACO providers/suppliers billing through a
given ACO participant TIN are prepared to operate under high levels of
risk.

[[Page 72830]]

Conversely, we have heard from other stakeholders that requiring all
ACO providers/suppliers billing though an ACO participant TIN to enter
the same risk track can motivate an organization to work toward a
common performance goal and implement uniform care processes that
streamline patient care within and between various sites of care. We
believe that the program works best when the incentives within an
organization are aligned among all providers and suppliers in that
organization. Given our policy objectives to encourage ACOs to redesign
their care processes and move to increasing levels of financial risk,
we are not proposing at this time to change our regulations in order to
allow providers and suppliers billing through the same ACO participant
TIN to participate in different tracks under the Shared Savings
Program. However, we are interested in stakeholder opinion on this
issue and seek comment on what options the program might consider in
the future to encourage organizations to participate in the program
while permitting the providers and suppliers within that organization
to accept varying degrees of risk. In particular, we are interested in
stakeholders' input on the advantages and disadvantages of allowing
Shared Savings Program ACOs that wish to enter a track with increased
risk to split their ACO participants into different tracks or split ACO
provider/suppliers billing through a given Medicare-enrolled TIN so
that a subset participate in a track that offers a higher sharing rate
in exchange for taking on a greater degree of performance-based risk,
while the remainder participate in a lower risk track. We intend to
carefully review any comments that are received on these issues during
the development of the final rule and will make an assessment at that
time as to whether any change to our current policy is necessary and
appropriate.
For reasons already stated in the November 2011 final rule (76 FR
67808 through 67811), we believe it is appropriate to use the Medicare-
enrolled TINs that make up each ACO as the basis for a number of
operational processes under the Shared Savings Program, including
beneficiary assignment, and that, as a result, all providers and
suppliers billing through the TIN of an ACO participant must agree to
participate in the ACO and comply with program regulations in order for
the ACO to include the entity on its ACO participant list. Therefore,
we do not believe it would be necessary or ideal to adopt an approach
under which ACOs would be permitted to pick and choose ACO provider/
suppliers for participation. However, we are considering ways to
encourage organizations to move in a step-wise progression to taking on
performance-based risk when some entities on its ACO participant list
are ready. Therefore, if we were to make modifications to our current
policies to permit organizations to split their ACO participant TIN
list into different risk tracks, we would anticipate the following:
The ACO must have completed a full agreement period under
Track 1 and meet requirements for renewing its agreement under Track 1
as proposed in this proposed rule.
The ACO must submit an ACO participant list in the form
and manner designated by CMS and by a deadline established by us.
The ACO must indicate, in the form and manner specified by
CMS, which ACO participants would continue under Track 1 and which
would participate under a performance-based risk track. We would
consider this list to be a ``segmented list'' of ACO participants.
The ACO as a whole would be required to meet the
eligibility requirements to participate in the program, including the
requirement that the ACO have at least 5,000 assigned beneficiaries and
the governance requirements.
Regarding quality measures submission, we considered
whether the ACO as a whole would be responsible for submitting quality
data in accordance with subpart F of the Shared Savings Program
regulations. On the one hand, the ability of the ACO to report quality
measures once on behalf of both segmented lists would reduce quality
reporting burden with the same aggregate quality score applying to each
segment of the ACO participants. On the other hand, if each segmented
list was required to report quality separately, we may be able to get a
more accurate assessment of the quality of care by each segmented list
leading to a more accurate determination of shared savings or losses.
Regarding benchmarking and assignment of beneficiaries, we
considered whether each half of the segmented list of ACO participants
would have its own benchmark and list of assigned beneficiaries. Under
this option, the two groups of ACO participants would each receive
their own performance reports from CMS and be subject to the data
sharing rules appropriate for their track, and the determination of
shared savings would occur according to the rules of the chosen track.
Another option would be to develop one benchmark and list of assigned
beneficiaries for the ACO as a whole. This option would require a
uniform assignment methodology to be applied, regardless in which track
the segmented lists are participating. Alternatively, we could limit
segmented lists to participation in only Tracks 1 and 2 because these
tracks have an assignment methodology that does not conflict.
Regarding changes in the ACO participant lists during the
agreement period, we considered whether an ACO would be permitted to
add or delete ACO participants from the segmented list of ACO
participants. One option considered would be to permit an ACO to add or
delete ACO participants from the segmented lists pursuant to the
proposed regulation at Sec. 425.118(b), but ACO participants would not
be permitted to change risk tracks during the agreement period. Another
option we considered and seek specific comments on is the option to
require such organizations to articulate and carry out the transition
of their Track 1 ACO participants to the list of ACO participants that
are under a risk-based arrangement during the course of the agreement
period. For example, in each year of the agreement period, the ACO
would be required to remove ACO participants from the Track 1 list and
add them to the list of ACO participants under the two-sided risk
model. In this way, the ACO and its ACO participants would be better
prepared to reapply to the Shared Savings Program under a two-sided
risk model in its third agreement period.
Although we are not specifically proposing to allow for different
risk tracks within the same ACO, we seek comments on these options and
other considerations for permitting organizations to move forward to
performance-based risk in a step-wise manner. We specifically seek
comment on ways to mitigate selection bias when considering these
options, in other words, we seek comment on whether additional
considerations should be made with regards to organizations that may
choose to create two different ACO participant lists in an effort to
advantage the part of the organization that is participating in the
two-sided model at the expense of the part of the organization
participating in the one-sided model. We believe the concern is
minimized by the option we considered that we would only make this
option available under an ACO's second agreement period. Moreover, we
note that our proposed criteria for renewal include a review of the
ACO's history of program integrity. We intend to

[[Page 72831]]

carefully review any comments that are received on these issues during
the development of the final rule and will make an assessment at that
time as to whether any change to our current policy is necessary and
appropriate.
5. Modifications to Repayment Mechanism Requirements
a. Overview
In the November 2011 final rule (76 FR 67937), we discussed the
importance of a program requirement that ensures ACOs entering the two-
sided model will be capable of repaying Medicare for shared losses. The
final rule established a requirement that ACOs applying to participate
in the two-sided model must establish a repayment mechanism to assure
CMS that they can repay losses for which they may be liable (Sec.
425.204(f)). For an ACO's first performance year, the repayment
mechanism must be equal to at least 1 percent of its total per capita
Medicare Parts A and B FFS expenditures for its assigned beneficiaries,
as determined based on expenditures used to establish the ACO's
benchmark (Sec. 425.204(f)).
Further, to continue participation in the program, each Track 2 ACO
must annually demonstrate the adequacy of its repayment mechanism
before the start of each performance year in which it takes risk (Sec.
425.204(f)(3)). The repayment mechanism for each performance year must
be equal to at least 1 percent of the ACO's total per capita Medicare
Parts A and B FFS expenditures for its assigned beneficiaries, as
determined based on expenditures for the ACO's most recent performance
year.
An ACO may demonstrate its ability to repay losses, or other monies
determined to be owed upon first year reconciliation, by obtaining
reinsurance, placing funds in escrow, obtaining surety bonds,
establishing a line of credit (as evidenced by a letter of credit that
the Medicare program can draw upon), or establishing another
appropriate repayment mechanism that will ensure its ability to repay
the Medicare program (Sec. 425.204(f)(2)). Given our experience in
implementing the program, we are proposing to revisit our requirements
to simplify them and to address stakeholder concerns regarding the
transition to risk, as discussed in the previous sections.
b. Proposals for Amount and Duration of the Repayment Mechanism
As noted previously, under the current regulations, ACOs entering a
two-sided risk track must submit an adequate repayment mechanism at the
time of application and again at the beginning of each performance
year. The amount must be equal to at least 1 percent of the ACO's total
per capita Medicare Parts A and B FFS expenditures for its assigned
beneficiaries, as determined based either on expenditures used to
establish the ACO's benchmark or expenditures for the ACO's most recent
performance year. This amount is estimated by CMS and reported to the
ACO so that it can set up its required mechanism. We have heard from
stakeholders that establishing multiple repayment mechanisms during the
agreement period can be very burdensome and ties up capital that could
otherwise be used to support ACO operations. Therefore, we have
considered whether it would be possible to streamline the repayment
mechanism requirements. Specifically, we considered whether it would be
feasible for an organization to establish a single repayment mechanism
to cover the entire 3-year agreement period. Initially we were
concerned that requiring an organization to establish a single
repayment mechanism to cover 3 performance years would involve
repayment amounts that were excessive and overly burdensome for
organizations. However, our actuaries have determined that this may not
be the case. We believe that rather than requiring ACOs to create and
maintain two separate repayment mechanisms for two consecutive
performance years, which would effectively double the amount of the
repayment mechanism during the overlapping time period between the
start of a new performance year and settlement of the previous
performance year, the repayment mechanism that is established for the
first performance year of an agreement period under a two-sided risk
model can be rolled over for subsequent performance years.
Thus, we propose to require an ACO to demonstrate at the time of
its application to the Shared Savings Program or participation
agreement renewal for a two-sided risk model and upon request
thereafter that it would be able to repay shared losses incurred at any
time within the agreement period, that is, upon each performance year
reconciliation during the agreement period. Thus, an ACO would be
required to establish a repayment mechanism for the required amount as
discussed in this section to cover the entire agreement period under a
two-sided risk model (that is, under Track 2 or under proposed Track 3)
and a reasonable period of time after the end of the agreement period
(the ``tail period''). The tail period shall 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. The length of the tail
period shall be established by CMS in guidance.
Under this approach, an ACO would be required to establish a
repayment mechanism once at the beginning of a 3-year agreement period.
We propose that an ACO must demonstrate the adequacy of its repayment
mechanism and maintain the ability to repay 1 percent of the ACO's
total per capita Medicare Parts A and B FFS expenditures for its
assigned beneficiaries based on the expenditures used to establish the
benchmark for the applicable agreement period, as estimated by CMS at
the time of application or participation agreement renewal. If the
repayment mechanism is used to repay any portion of shared losses owed
to CMS, the ACO must promptly replenish the amount of funds available
through the repayment mechanism within 60 days. This would ensure
continued availability of funds to cover any shared losses generated in
subsequent performance years. Given that we propose in section II.B. of
this proposed rule to adjust an ACO's benchmark annually to account for
changes in the ACO participant list, it is possible that an ACO's
benchmark could change such that the repayment mechanism amount
established at the beginning of the 3-year agreement period no longer
represents one percent of the ACO's benchmark expenditures. Therefore,
we are considering whether we should require the ACO to adjust the
repayment mechanism to account for this change, or whether a threshold
should be established that triggers a requirement for the ACO to add to
its repayment mechanism. We seek comment on this issue, including the
appropriate threshold that should trigger a requirement that the ACO
increase the amount guaranteed by the repayment mechanism.
These proposals are reflected in the proposed modifications to
Sec. 425.204(f). We note that the reference to ``other monies
determined to be owed'' in the current provision directly relates to
the interim payments that were available in the first performance year
only for ACOs that started participating in the program in 2012.
Because interim payments are no longer offered to ACOs, we also propose
to remove the reference to ``other monies determined to be owed'' from
Sec. 425.204(f).

[[Page 72832]]

c. Proposals Regarding Permissible Repayment Mechanisms
Under our current rules, ACOs may demonstrate their ability to
repay shared losses by obtaining reinsurance, placing funds in escrow,
obtaining surety bonds, establishing a line of credit (as evidenced by
a letter of credit that the Medicare program can draw upon), or
establishing another appropriate repayment mechanism that will ensure
their ability to repay the Medicare program. Based on our experience
with the program, we are proposing to remove the option that permits
ACOs to demonstrate their ability to pay using reinsurance or an
alternative mechanism. First, no Shared Savings Program ACOs have
obtained reinsurance for the purpose of establishing their repayment
mechanism. ACOs that have explored this option have told us that it is
difficult to obtain reinsurance, in part, because of insurers' lack of
experience with the Shared Savings Program and the ACO model, and
because Shared Savings Program ACOs take on performance-based risk not
insurance risk. Additionally, the terms of reinsurance policies
obtained by ACOs could vary greatly and prove difficult for CMS to
effectively evaluate. Second, based on our experience to date, 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 rejected by CMS than one of the
specified repayment mechanisms.
Therefore, we propose to revise Sec. 425.204(f)(2) to limit the
types of repayment mechanisms ACOs may use to demonstrate their ability
to repay shared losses to the following: Placing funds in escrow;
establishing a line of credit; or obtaining a surety bond. Under this
proposed revision, ACOs would retain the flexibility to choose a
repayment mechanism that best suits their organization. We also believe
that CMS would be more readily able to evaluate the adequacy of these
three types of arrangements, as compared to reinsurance policies and
other alternative repayment mechanisms. For instance, escrow account
agreements, letters of credit, and surety bonds typically have standard
terms, that CMS can more readily assess as compared to the
documentation for alternative repayment mechanisms, which tends to be
highly variable.
In addition, we propose to clarify that ACOs may use a combination
of the designated repayment mechanisms, if needed, such as placing
certain funds in escrow, obtaining a surety bond for a portion of
remaining funds, and establishing a line of credit for the remainder.
Thus, we are proposing to revise our rule at Sec. 425.204(f)(2) to
indicate that an ACO may demonstrate its ability to repay shared losses
owed by placing funds in escrow, obtaining surety bonds, establishing a
line of credit, or by using a combination of these mechanisms. We seek
comment on our proposed modifications to the repayment mechanism
requirements and also welcome comments on the availability and adequacy
of reinsurance as a repayment mechanism.
6. Seeking Comment on Methodology for Establishing, Updating, and
Resetting the Benchmark
a. Background on Establishing, Updating, and Resetting the Benchmark
Section 1899(d)(1)(B)(ii) of the Act addresses how ACO benchmarks
are to be established and updated. 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 and updated by the projected absolute amount of growth in
national per capita expenditures for parts A and B services under the
original Medicare fee-for-service program, as estimated by the
Secretary. Such benchmark shall be reset at the start of each agreement
period. Accordingly, through the initial rulemaking establishing the
Shared Savings Program, we adopted policies for establishing, updating
and resetting ACO benchmarks at Sec. 425.602. As described later in
this section, under this methodology, we establish ACO-specific
benchmarks that account for national FFS trends.
As the statute requires the use of historical expenditures to
establish an ACO's benchmark, the per capita costs for each benchmark
year must be trended forward to current year dollars and then a
weighted average is used to obtain the ACO's historical benchmark for
the first agreement period. The statute further requires that we update
the benchmark for each year of the agreement period based on the
projected absolute amount of growth in national per capita expenditures
for parts A and B services under the FFS program, as estimated by the
Secretary. In the April 2011 proposed rule (76 FR 19609 through 19611),
we considered a variety of options for establishing the trend factors
used in establishing the historical benchmark and for accounting for
FFS trends in updating the benchmark during the agreement period.
In addition to the statutory benchmarking methodology established
in section 1899(d), section 1899(i)(3) of the Act grants the Secretary
the authority to use other payment models, including payment models
that would 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. As described
later in this section, in the November 2011 final rule, we considered
whether to invoke this authority to modify certain aspects of the
statutory benchmarking methodology, but elected not to do so. We note
that we did invoke this authority to help create two-sided risk under
Track 2.
(1) Background on Use of National Growth Rate as a Benchmark Trending
Factor
The statute does not specify the trending factor to be used in
establishing the benchmark. In the April 2011 proposed rule (76 FR
19610), we considered use of either national, or state or local growth
factors for trending the benchmark. We explained that using the
national growth rate in Medicare A and B FFS expenditures appeared to
be more consistent with the statutory methodology for updating an ACO's
benchmark. Further, a national growth rate would allow a single growth
factor to be applied to all ACOs regardless of their size or geographic
area. However, a national rate could also disproportionately encourage
the development of ACOs in areas with historical growth rates below the
national average that would benefit from having a relatively higher
base, which increases the chances for shared savings, while
discouraging the development of ACOs in areas with historically higher
growth rates above the national average that would have a relatively
lower base.
In contrast, we explained in April 2011 proposed rule that trending
expenditures based on State or local area growth rates in Medicare A
and B expenditures may more accurately reflect the experience in an
ACO's area and mitigate differential incentives for

[[Page 72833]]

participation based on location. Therefore, we considered an option to
trend the benchmark by the lower of the national projected growth rate
or the State or the local growth rate. This option balanced providing a
more accurate reflection of local experience with not rewarding
historical growth higher than the national average. We believed this
method would instill strong saving incentives for ACOs in both high-
cost growth and low-cost growth areas.
We proposed to employ the national growth rate in Medicare Parts A
and B expenditures for FFS beneficiaries for trending forward the most
recent 3 years of per beneficiary expenditures for Parts A and B
services in order to establish the historical benchmark for each ACO.
We believed this approach would help to ensure that ACOs in both high
spending, high growth and low spending, low growth areas would have
appropriate incentives to participate in the Shared Savings Program. We
further indicated that this approach would allow us to move toward
establishing a national standard to calculate and measure ACO financial
performance. We sought comment on this proposal and on the alternatives
to using a national growth rate to establish the benchmark.
Some commenters supported our proposal to employ a national growth
rate for setting the benchmark and recognized the importance of using
national growth rates for rationalizing overall spending across regions
nationwide. Many more favored the use of either local, regional, or
State growth rates, and some favored our proposal to use the lower of
either the national or State or local growth rates. Commenters also
offered a number of alternative approaches for trending benchmark
expenditures, including the following:
Use a blend of national average growth and absolute dollar
growth.
Use the ACO's own percentage growth rate to trend forward
the historical benchmark data.
Account for local variation after analyzing national and
local growth rates. (76 FR 67925).
In the end, we finalized our policy under Sec. 425.602 of using
the national growth rate in Medicare Parts A and B expenditures for FFS
beneficiaries for trending forward the most recent 3 years of per
beneficiary expenditures for Parts A and B services in order to
establish the benchmark for each ACO. In doing so, we make calculations
for separate cost categories for each of the following populations of
beneficiaries: ESRD, disabled, aged/dual eligible and aged/non-dual
eligible. We stated our belief that implementing a historical benchmark
trending factor using the national growth rate for Parts A and B FFS
expenditures appropriately balanced commenters' concerns that benchmark
trending should encourage participation among providers that are
already efficient or operating in low cost regions without unduly
rewarding ACOs in high-cost areas. We further stated that we
anticipated the net effect of using the same trending factor for all
ACOs would be to provide a relatively higher expenditure benchmark for
low-growth/low spending ACOs and a relatively lower benchmark for high
growth/high spending ACOs. ACOs in high cost, high growth areas would
therefore have an incentive to reduce their rate of growth more to
bring their costs more in line with the national average; while ACOs in
low cost low, growth areas would have an incentive to continue to
maintain or improve their overall lower spending levels.
Over 330 ACOs entered the Shared Savings Program between 2012 and
2014 and are located throughout the country--across diverse
geographies--in a mix of high-cost/high-growth and low-cost/low-growth
areas. Further, within local markets where multiple ACOs have formed,
we have observed that ACOs can be a mix of both high- and low-cost and
high- and low-growth organizations. We are encouraged by the continued
interest in the program: Of the ACOs that entered the program, only two
voluntarily terminated at the end of the performance year concluding
December 31, 2013. (One was eligible for a performance payment of
shared savings and the other merged with another participating ACO.) In
addition, we continue to see strong interest in new entrants for the
January 2015 start date.
Under the Pioneer ACO model, we adopted a different methodology for
establishing an ACO's historical expenditure baseline for its first
three performance years. See https://innovation.cms.gov/Files/x/PioneerACOBmarkMethodology.pdf. The Pioneer model benchmarking
methodology trends forward baseline years 2009 and 2010 to 2011 by
applying the growth in expenditures for the reference population. The
reference population is defined as alignment-eligible beneficiaries
with the same state of residence, eligibility status, age and sex as
the ACO's aligned beneficiaries. The 3 historical baseline years under
the Pioneer ACO Model also correspond to the 3 years prior to when ACOs
entered the model, specifically 2009, 2010, and 2011. Further, baseline
expenditures in 2011 dollars are updated to the appropriate performance
year using a 50/50 blend of the national growth rate and the absolute
dollar equivalent of that national growth rate. However, the
benchmarking methodology used in the Pioneer ACO Model was revised for
performance years four and five of the model to be more consistent with
the benchmarking approach used in the Shared Savings Program, in part
due to stakeholder feedback.
(2) Background on Use of National FFS Growth Factors in Updating the
Benchmark During the Agreement Period
Section 1899(d)(1)(B)(ii) of the Act states that the benchmark
shall be updated by the projected absolute amount of growth in national
per capita expenditures for parts A and B services under the original
Medicare fee-for-service program, as estimated by the Secretary.
In the April 2011 proposed rule (76 FR 19610 through 19611), we
proposed to use a flat dollar amount equivalent of the absolute amount
of growth in the national FFS expenditures to update the benchmark
during an agreement period. We explained our view that in enacting
section 1899(d)(1)(B)(ii) of the Act, Congress demonstrated interest in
mitigating some of the regional differences in Medicare spending among
ACOs and that this approach would help to ensure that ACOs in both high
spending/high growth and low spending/low growth areas would have
appropriate incentives to participate in the Shared Savings Program. We
described the effect this update methodology might have in the 2nd and
3rd years of an agreement period: Using a flat dollar increase, which
would be the same for all ACOs, provides a relatively higher
expenditure benchmark for low growth, low spending ACOs and a
relatively lower benchmark for high growth, high spending ACOs. All
else being equal, an ACO can more likely share in savings when its
actual expenditures are judged against a higher, rather than a lower
benchmark. Thus, with a flat dollar increase to the benchmark, ACOs in
high cost/high growth areas must reduce their rate of growth more to
bring their costs more in line with the national average. We
acknowledged that this approach to updating the benchmark could
contribute to selective program participation by participants in low
growth areas, as well as result in Medicare costs due to an increase in
the amount of performance payments for unearned savings.
We also considered and sought comment on a second option, which

[[Page 72834]]

would be to use our authority under section 1899(i)(3) of the Act to
update the benchmark by the lower of the national projected absolute
amount of growth in national per capita expenditures or the local/State
projected absolute amount of growth in per capita expenditures. We
explained our belief that this option could instill strong saving
incentives for ACOs in low-cost areas, as well as for those in high-
cost areas. Incorporating more localized growth factors reflects the
expenditure and growth patterns within the geographic area served by
ACO participants, potentially providing a more accurate estimate of the
updated benchmark based on the area from which the ACO derives its
patient population. Capping the update at the projected absolute amount
of growth in national per capita expenditures, however, can advantage
ACOs in low cost/low growth areas that have already achieved greater
efficiencies, while still offering a strong incentive for those in high
cost/high growth areas to reduce their spending.
Commenters were mixed in their preference for either the proposed
policy of updating the benchmark by absolute growth in national FFS
expenditures, or use of the lower of the national projected absolute
amount or the local/State projected absolute amount. For example, one
commenter disagreed with the option to use the lower of the national
projected absolute amount or the local/State projected absolute amount,
suggesting it negatively prejudges all high growth sectors without
regard to the underlying clinical or quality issues. However, another
commenter favored this approach because this adjustment would afford
ACOs the greatest potential for achieving shared savings and minimize
the threat of an ACO being disadvantaged by virtue of pricing within
its geographic location. Along these lines, one commenter stated the
proposed approach offered insufficient incentives for efficient
providers to form an ACO. More generally, many commenters urged CMS to
adopt policies to encourage participation by organizations that are
already efficient or in low cost areas. Several commenters urged use of
regional or market-specific expense data for calculating the benchmark
update.
In the November 2011 final rule (76 FR 67926 through 67927), we
finalized a policy of using the flat dollar amount equivalent of the
projected absolute amount of growth in national per capita FFS
expenditures to update the benchmark. We stated our belief that this
method for updating the benchmark could best address the program's
goals and commenters' overall concerns about the participation of
efficient/low cost ACOs. The net effect of using the same update for
all ACOs is to provide a relatively higher expenditure benchmark for
low growth/low spending ACOs and a relatively lower benchmark for high
growth/high spending ACOs. Further, with a flat dollar increase to the
benchmark equivalent to the absolute amount of growth in the national
FFS expenditures, ACOs in high cost, high growth areas must reduce
their rate of growth more (compared to ACOs in low cost, low growth
areas) to bring their costs in line with the national average. We
stated that in light of the alternatives we considered, we believed
that the policy of updating benchmarks by the absolute amount of growth
in national FFS expenditures offers sufficient incentives for efficient
providers to form ACOs. Thus, under the final update methodology, ACOs
in low cost areas would achieve a greater amount of savings, based on
the same performance, than a comparable ACO in a higher cost area.
Moreover, we stated we believed that a benchmark methodology that
encourages providers in higher cost areas to bring their spending more
in line with the national average is a desirable outcome in furtherance
of the program's goal of lowering Medicare expenditures. Finally, we
noted that updating the benchmark during the agreement period using a
national growth factor aligns with our approach of using a national
growth rate to trend forward base year expenditures when establishing
the historical benchmark. We stated that we believed this alignment
could facilitate analysis of trends in ACO financial performance
relative to national trends in Medicare expenditures. For these
reasons, we finalized a policy of using the flat dollar amount
equivalent of the projected absolute amount of growth in national FFS
expenditures to update the benchmark.
In applying these policies for ACOs that joined the program in 2012
and 2013, we observed that the national growth factors used to trend
the historical benchmark were declining, highlighted by negative annual
per capita expenditure growth in three of four Medicare eligibility
categories in 2012. We also found during the first performance year
reconciliation that the national update amounts applied to the
historical benchmark continued to reflect historically low growth in
cost even after an adjustment to restore the effect of sequestration on
2013 claim payments. These updates reflected the slow or negative FFS
growth environment due to a number of factors, including demographic
changes in program enrollment, low price updates for physician, skilled
nursing, and other services, and a broad decrease in inpatient
utilization. This resulted in ACOs having very low or even negative
updates to their historical benchmarks. Recent projections estimate
total Medicare per capita expenditure trends are likely to remain
historically low through 2015 followed by a gradual return to
historically-familiar positive trend rates starting in 2016.
(3) Background on Managing Changes to ACOs During the Agreement Period
Section 425.214 of the Shared Savings Program regulations addresses
the circumstance under which an ACO adds or removes ACO participants or
ACO providers/suppliers (identified by TINs and NPIs, respectively)
during the term of the participation agreement. The regulation
specifies that the ACO's benchmark, risk scores, and preliminary
prospective assignment may be adjusted for this change at CMS'
discretion (Sec. 425.214(a)(3)). Subregulatory guidance further
describes our use of this discretion. See ``Changes in ACO participants
and ACO providers/suppliers during the Agreement Period'' available
online at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Updating-ACO-Participant-List.html. This guidance
explains:

After acceptance into the program and upon execution of the
participation agreement with CMS, the ACO must certify the
completeness and accuracy of its list of ACO participants. We set
the ACO's historical benchmark at the start of the agreement period
based on the assigned population in each of the three benchmark
years by using the ACO Participant List certified by the ACO. The
ACO must submit a new certified ACO Participant List at the start of
each new performance year.
CMS will adjust the ACO's historical benchmark at the start of a
performance year if the ACO Participant List that the ACO certified
at the start of that performance year differs from the one it
certified at the start of the prior performance year. CMS will use
the updated certified ACO Participant List to assign beneficiaries
to the ACO in the benchmark period (the 3 years prior to the start
of the ACO's agreement period) in order to determine the ACO's
adjusted historical benchmark. As a result of changes to the ACO's
certified ACO Participant List, we may adjust the historical
benchmark upward or downward. We'll use the new certified list of
ACO participants and the adjusted benchmark for the new performance
year's assignment, quality measurement and sampling, reports for the
new performance

[[Page 72835]]

year, and financial reconciliation. We will provide ACOs with the
adjusted Historical Benchmark Report.

During the program's first performance years, we experienced a high
volume of change requests from ACOs, both adding and removing ACO
participants. For example, cumulatively ACOs with 2012 and 2013 start
dates requested the addition of over 2,800 ACO participants and removal
of over 1,200 ACO participants. The ACO's composition of ACO
participant TINs is used to determine the ACO's assigned beneficiary
population. Changes to an ACO's participant list will result in changes
to the ACO's assigned beneficiary population. As a result, it is
necessary to make adjustments to the ACO's historical benchmark to
account for these changes. In accordance with our guidance, we adjusted
the historical benchmarks for 162 of 220 ACOs with 2012 and 2013 start
dates for their second performance year to reflect changes in ACO
participants. When an ACO adds new ACO participants or deletes existing
ACO participants, the adjustments that are made to its historical
benchmark will impact the ACO's performance in subsequent years, and
can make forecasting performance more challenging.
As noted in the guidance, when we adjust historical benchmarks
during the agreement period to account for changes in beneficiary
assignment arising from ACO participant list changes, the benchmark
period (the 3 years prior to the start of the ACO's agreement period)
remains the same. For instance, if an ACO with an agreement start date
of January 1, 2013, added ACO participants for its second performance
year, then the adjustments made to the historical benchmark to reflect
the ACO's certified ACO participant list for performance year 2 would
have been based on the same three benchmark years (2010, 2011, and
2012) originally used to calculate the historical benchmark for the ACO
based on its ACO participant list certified when it entered the program
(for its first performance year).
Further, changes in the ACO participant TINs that compose ACOs are
relevant to determining beneficiary assignment across the program. A
beneficiary is assigned to an ACO if the beneficiary received the
plurality of his or her primary care services (measured in allowed
charges) from ACO professionals billing under the TINs of ACO
participants in the ACO rather than outside the ACO (such as from ACO
professionals billing under the TINs of ACO participants in other ACOs,
individual providers, or provider organizations). We perform the
assignment process for ACOs simultaneously, including all eligible
organizations. To determine where a beneficiary got the plurality of
his or her primary care services, we compare the total allowed charges
for each beneficiary for primary care services provided by the ACO (in
total for all ACO participants) to the allowed charges for primary care
services provided by ACO participants in other ACOs and by non-ACO
providers and suppliers. See ``Medicare Shared Savings Program: Shared
Savings and Losses and Assignment Methodology Specifications''
available online at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Financial-and-Assignment-Specifications.html. Therefore, in the case where a beneficiary is
receiving primary care services from ACO participants in multiple ACOs
or from both ACO participants and non-ACO providers and suppliers, an
ACO's participant composition is important in determining whether the
beneficiary is assigned to the ACO at all, and in determining to which
(among several) ACO the beneficiary may be assigned.
In summary, in making adjustments to the historical benchmarks for
ACOs within an agreement period to account for ACO participant list
changes: The historical benchmark period remains constant, but
beneficiary assignment reflects the influence of ACO participant list
changes. Under this methodology, the historical benchmarks for ACOs
with participant list changes from one performance year to the next
continue to reflect the ACOs' historical costs in relation to their
current composition.
(4) Background on Resetting the Benchmark
In the November 2011 final rule (see 76 FR 67915) establishing the
Shared Savings Program, some commenters expressed concerns that
rebasing the benchmark at the start of each agreement period would make
savings more difficult to attain and eventually make savings
unattainable by ACOs. Stakeholders have continued to express concerns
about this methodology for rebasing the benchmark. They assert that the
current methodology may also reduce the incentive for ACOs to achieve
savings since any savings achieved during a given agreement period
would result in lower future benchmarks, generating an offsetting
reduction in the shared savings payments the ACO would receive in those
future agreement periods.
During the initial rulemaking, commenters suggested a variety of
alternatives to rebasing the benchmark for each agreement period, as
well as technical suggestions on how to reset the benchmark (76 FR
67915 through 76 FR 67916). In the November 2011 final rule, we adopted
a policy under which an ACO's benchmark would be reset at the start of
each agreement period, as required under section 1899(d)(1)(B)(ii) of
the Act. In finalizing this policy, we explained our belief that
resetting the benchmark at the beginning of each agreement period would
most accurately account for changes in an ACO's beneficiary population
over time. We explained that because of turnover in an ACO's assigned
beneficiary population, by the end of the agreement period, an ACO's
assigned population may be significantly different from the
historically assigned beneficiary population used to calculate the
ACO's initial benchmark. Further, resetting the benchmark at the
beginning of subsequent agreement periods would allow the benchmark to
more accurately reflect the composition of an ACO's population, and
therefore protect both the Trust Funds and ACOs. We acknowledged
commenters' concerns that resetting the benchmark after 3 years could
ultimately make it more challenging for ACOs to achieve savings,
particularly for low-cost ACOs. However, we explained our belief that
one of the fundamental purposes of the Shared Savings Program is to
provide incentives for ACOs to strive continually to make further
advances in the quality and efficiency of the care they provide (76 FR
67916).
Under Sec. 425.602(c) of the rule, an ACO's benchmark would be
reset at the start of its second or subsequent agreement period using
the same methodology for establishing the historical benchmark under
Sec. 425.602(a). The existing regulations do not specify any
alternative methodology for rebasing the benchmarks for ACOs that have
completed one or more agreement periods in the Shared Savings Program.
For example, for an ACO with a January 2013 agreement start date that
continues in the program for a second agreement period beginning
January 1, 2016, we would establish the ACO's historical benchmark for
its second agreement period according to the methodology set forth in
Sec. 425.602(a). In particular, we would compute the ACO's benchmark
for its second agreement period based on per capita Parts A and B fee-
for-service expenditures for beneficiaries that would have been
assigned to the ACO

[[Page 72836]]

in any of the 3 most recent years prior to the agreement period using
the ACO participants' TINs identified at the start of the agreement
period (Sec. 425.602(a)). In the example of an ACO with an initial
agreement period beginning January 1, 2013 and a second agreement
beginning January 1, 2016: The ACO's historical benchmark for its first
agreement period would have been based on the historical years of 2010,
2011 and 2012 and the ACO's historical benchmark for its second
agreement period would be based on the historical years of 2013, 2014
and 2015. In resetting the benchmark, the time period for the benchmark
shifts forward to capture the ACOs participants' more recent historical
spending. As noted previously, we adjust an ACO's benchmark based on
the ACO participant list that it certifies at the start of each
performance year, which may reflect changes during the course of the
prior performance year. Similarly, in resetting the ACO's benchmark at
the start of a second agreement period, we would effectively account
for any ACO participant list changes between the ACO's third
performance year under its first agreement period and its first
performance year under its second agreement period.
Early experience for ACOs participating in the Shared Savings
Program is limited to financial performance results for the first
performance year of ACOs with 2012 and 2013 start dates. However, we
anticipate that the trend for ACOs participating in the Shared Savings
Program will be similar to the trend for sites in the Physician Group
Practice (PGP) demonstration, with more organizations generating
savings as they gain experience in a shared savings model. In the
initial performance year of the PGP Demonstration, two sites were
eligible for shared savings payments. As the demonstration progressed,
more PGP sites demonstrated savings. Over the course of the 5-year
demonstration, 7 of the 10 PGP sites were eligible for shared savings
payments in one or more performance years.
The experience of PGP demonstration sites is also an indication
that resetting ACO benchmarks at the start of the second and each
subsequent agreement period would not deter ongoing participation in
the program by ACOs. We note, however, that unlike the update
methodology currently used in the Shared Savings Program, the
benchmarks used in the PGP demonstration were updated using regional
factors, as opposed to national factors. This approach is similar to
some of the alternatives discussed later in this section, on which we
are seeking comment. The benchmarks for the PGP sites were reset as
they moved from the PGP demonstration to the PGP Transition
Demonstration, and again when they transitioned into the Pioneer ACO
Model or the Shared Savings Program. We note that most of the
organizations participating in the PGP demonstration elected to
continue their voluntary participation under these shared savings
models, even though their benchmarks would be reset under the
applicable benchmarking methodology. Based on this experience, we
conclude that these organizations must have believed there was a
sufficient opportunity to share in savings as well as other strategic
and competitive advantages to warrant their continued participation in
a shared savings initiative, even under a rebased benchmark that
reflected the cost savings achieved by the site under the PGP
demonstration.
However, while the PGP experience establishes that the current
approach to rebasing is consistent with continued participation, at
least in some cases, it is possible that additional organizations would
have continued into the Pioneer ACO Model or the Shared Savings Program
under an alternative rebasing methodology. The PGP experience cannot
rule out the possibility that an alternative rebasing methodology could
induce ACOs to achieve greater savings, particularly as providers gain
more familiarity with the payment model, or could prove more
sustainable over time.
(5) Background on Stakeholders' Concerns about Benchmarking Methodology
Since the initial rulemaking, stakeholders have continued to
express their concern that resetting ACO benchmarks at the start of
each agreement period, as required under the existing methodology, may
disadvantage ACOs, particularly those that have generated shared
savings. A closely related concern is that because savings achieved
during one agreement period would lead to a lower benchmark in future
agreement periods, achieving savings could hypothetically be
financially unattractive for ACOs in some circumstances. Under the
existing benchmarking methodology, an ACO that performs well in its
first agreement period as a result of its effective strategies for
lowering Medicare expenditures may have a significantly lower
historical benchmark in its subsequent agreement period. Consequently,
some stakeholders believe that achieving savings may sometimes be
financially unattractive for ACOs because these savings would reduce
their benchmarks for future periods. They are concerned that the value
proposition of the program may diminish over time as ACOs become lower-
cost entities, and, as a result, face increased difficulty in achieving
additional efficiencies (hence savings) when judged against decreasing
benchmarks.
Further, some stakeholders have expressed concern that the existing
benchmarking methodology does not sufficiently account for the
influence of cost trends in the surrounding region or local market on
the ACO's financial performance. In particular, some stakeholders
voiced concerns about the low or negative update amounts used during
first performance year reconciliation under the existing benchmarking
methodology, and favor alternative approaches, which they believe are
more certain to yield positive updates to ACOs' historical benchmarks.
Others have suggested that we move away from an approach for setting
ACO-specific benchmarks and toward an approach for setting regionally-
specific benchmarks for ACOs. These concerns, as with those raised
regarding the methodology for resetting benchmarks in subsequent
agreement periods, center on whether the benchmarks are set at a level
ACOs perceive to be sufficient to make program participation
financially viable.
We believe it is timely to consider these issues in the context of
encouraging continued participation by ACOs in the program and
continued improvement in ACO performance, particularly as ACOs with
2012 and 2013 start dates begin to contemplate whether to continue in
the program for a second agreement period. Further, we believe there
may be important interactions between the way in which the benchmarks
for ACOs are set in their initial agreement period and reset in their
subsequent agreement periods and encouraging participation by ACOs in
the program's two-sided models (particularly ACOs that entered the
program under Track 1 and are contemplating moving to a risk based
track); namely in terms of the value proposition of moving to a
performance-based risk track.
b. Factors To Use in Resetting ACO Benchmarks and Alternative
Benchmarking Methodologies
We considered whether modifying the methodology used for
establishing, updating, and resetting ACO benchmarks to account for
factors relevant to ACOs that have participated in the program for 3 or
more years

[[Page 72837]]

would help ensure that the Shared Savings Program remains attractive to
ACOs and continues to encourage ACOs to improve their performance,
particularly those that have achieved shared savings. As discussed
later in this section, we considered a range of modifications to the
benchmarking methodology in order to expand the methodology for
resetting benchmarks to account for factors relevant to continued
participation by ACOs in subsequent agreement periods and to increase
incentives to achieve savings in a current agreement period,
specifically: (1) Equally weighting the 3-benchmark years; (2)
accounting for shared savings payments in benchmarks; (3) using
regional FFS expenditures (as opposed to national FFS expenditures) to
trend and update the benchmarks; (4) implementing an alternative
methodology for resetting ACO benchmarks that would hold an ACO's
historical costs, as determined for purposes of establishing the ACO's
initial historical benchmark for its first agreement period, constant
relative to costs in its region for all of the ACO's subsequent
agreement periods; and (5) implementing an alternative methodology for
resetting ACO benchmarks that would transition ACOs to benchmarks based
only on regional FFS costs, as opposed to the ACO's own historical
costs, over the course of multiple agreement periods. Further, we
considered whether to apply these changes broadly to all ACOs or to
apply these changes only when resetting benchmarks for ACOs entering
their second or subsequent agreement periods. We also considered
whether to apply these changes to a subset of ACOs, such as ACOs
participating under a two-sided model (Tracks 2 and 3) or Track 3 ACOs
only. In considering these potential options for modifying the
benchmarking methodology, it is necessary to balance the desire to make
the program more financially attractive to ACOs, against the need to
protect the Medicare Trust Funds.
Although we are not proposing any changes to our benchmarking
methodology at this time, we are seeking comment on these alternatives
for how we approach establishing, updating and resetting benchmarks, as
well as suggestions regarding alternative approaches not described
here. We will carefully consider the comments that are 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.
We note, however, that any option that relies upon the use of the
authority under section 1899(i)(3) of the Act to adopt alternate
payment models must be determined to improve quality and efficiency and
not to increase program spending.
(1) Equally Weighting the 3 Benchmark Years
Pursuant to section 1899(d)(1)(B)(ii) of the Act, in the November
2011 final rule, we adopted a methodology for establishing ACO
benchmarks under which we weight benchmark expenditures at 60 percent
for Benchmark Year (BY) 3, 30 percent for BY2, and 10 percent for BY1
(Sec. 425.602(a)(7)). As we explained in the November 2011 final rule
(76 FR 67915), this weighting helps ensure that the benchmark reflects
more accurately the latest expenditures and health status of the ACO's
assigned beneficiary population. We indicated that giving BY3 the
greatest weight would most accurately reflect recent cost trends for
the Medicare beneficiaries who receive the plurality of their primary
care from ACO providers/suppliers, and thus result in a more accurate
benchmark.
To establish an ACO's benchmark for an agreement period, we
determine the per capita Parts A and B fee-for-service expenditures for
beneficiaries that would have been assigned to the ACO in any of the 3
most recent years prior to the agreement period using the ACO
participants' TINs identified at the start of the agreement period
(Sec. 425.602(a)). Therefore, an ACO's benchmark under a second or
subsequent agreement period will reflect, to some degree, its previous
performance under the program. For example, for ACOs with 2013 start
dates that continue in the program for a second agreement period
beginning January 1, 2016, BY1 will be based on expenditures for
beneficiaries who were assigned to the ACO based on CY 2013 (the
timeframe corresponding to performance year 1 under the first agreement
period). Likewise, BY2 will be based on assignment for CY 2014
(performance year 2) and BY3 will be based on assignment for CY 2015
(performance year 3). We note, however, that a number of factors will
affect beneficiary assignment for purposes of establishing ACO
benchmarks in subsequent agreement periods, which may cause an ACO's
benchmark year assigned population to deviate from its assigned
population for the corresponding performance year. For example, an ACO
may add or remove ACO participant TINs in its second or subsequent
agreement period. Further, participation in the program by other
organizations in an ACO's market may also change in the time between
when we performed assignment for the performance year under the prior
agreement and when we assign beneficiaries for the purpose of resetting
the ACO's benchmark for the next agreement period, leading to changes
in the ACO's assigned beneficiary population for purposes of
establishing its benchmark for the new agreement period. The impact of
these kinds of changes in the assigned beneficiary population between
the performance year and the time the benchmark is established for a
subsequent agreement is uncertain, and could result in either upward or
downward adjustments to expenditures for purposes of establishing the
benchmark.
Among ACOs whose assigned beneficiary populations for purposes of
resetting the benchmark closely match their assigned beneficiary
population for the corresponding performance years, those ACOs that
generated savings during a prior agreement period will have
comparatively lower benchmarks for their next agreement period. This is
because the ACOs were effective in lowering expenditures for these
assigned beneficiaries. We assume, for example, that if an ACO
generates savings in its first agreement period it is likely that the
impact on claims would be most significant in the second or third
performance year as opposed to being uniformly distributed across all
three performance years. This hypothesis is supported by following
factors:
There may be a lag between when an ACO starts care
management activities and when these activities have a measurable
impact upon expenditures for the ACO's assigned beneficiary population.
ACOs may improve their effectiveness over time as they
gain experience with population management and improve processes.
There may be higher care costs during the early period of
performance to treat or stabilize certain patients, as the ACO's care
management activities involving these patients commence. Once
stabilized, these patients may show relatively lower care costs over
the course of time due to more effective, coordinated and quality care.
Under these circumstances, resetting the benchmark for ACOs
starting a second or subsequent agreement period under the Shared
Savings Program becomes a trade-off between the accuracy gained by
weighting the benchmark years at 60 percent for BY3, 30 percent for BY2
and 10 percent for BY1 and the potential for further reducing the
benchmarks for these ACOs by giving greater weight to the

[[Page 72838]]

later performance years of the preceding agreement period. Unchanged,
the application of this methodology for weighting the benchmark years
when resetting benchmarks could 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 to reduce
incentives for ACOs to achieve savings in their first agreement period.
For instance, ACOs that have previously performed well under the
program may be discouraged from continuing to participate in the
program if their rebased benchmark is so low that they would have
difficulty continuing to lower expenditures sufficiently to exceed
their MSR in order to be eligible for shared savings during their next
agreement period.
We considered an alternative methodology for resetting benchmarks
where we would weigh the benchmark years equally (ascribing a weight of
one-third to each benchmark year). We believe that equally weighting
the benchmark years could more gradually lower the benchmarks of ACOs
that perform well in their first agreement period, in contrast to
giving the greatest weight to the most recent prior benchmark year,
which, for the reasons discussed previously, is likely to be the year
in which an ACO would have been most effective in lowering expenditures
for its assigned population. This alternative approach would have the
most significant impact upon ACOs whose assigned population during the
three performance years of the preceding agreement period most closely
approximates the assigned population used to determine their benchmark
for the subsequent agreement period. This approach may be less
accurate, and therefore less protective of the Trust Funds, since it
may not sufficiently account for an ACO's most recent historical cost
experience, particularly in the case of an ACO whose ACO participant
composition (and therefore its assigned beneficiary population) changed
over the course of the agreement period, such that its assigned
beneficiary population in the subsequent agreement period is
significantly different from the beneficiary population in the early
years of its prior agreement period; this effect could be counteracted
to the extent that this approach encourages greater participation in
the Shared Savings Program or encourages ACOs to achieve greater shared
savings.
(2) Accounting for Shared Savings Payments in Benchmarks
We also considered revising the methodology for resetting ACO
benchmarks to account for shared savings earned by an ACO in its prior
agreement period, as a way to encourage ongoing participation by
successful ACOs and improve the incentive to achieve savings. Similar
to the option of equally weighting the benchmark years discussed above,
accounting for an ACO's shared savings during its prior agreement
period would more gradually lower the benchmarks of ACOs that perform
well in their prior agreement period.
The statute outlines the scope of Medicare expenditures to be used
in calculating ACO benchmarks. Section 1899(d)(1)(B)(ii) of the Act
specifies that the benchmark is established ``. . . using the most
recent available 3 years of per-beneficiary expenditures for parts A
and B services for Medicare fee-for-service beneficiaries assigned to
the ACO.'' This provision of the Act further specifies: ``Such
benchmark shall be adjusted for beneficiary characteristics and such
other factors as the Secretary determines appropriate.'' In the
November 2011 final rule establishing the Shared Savings Program, we
explained that in implementing section 1899(d)(1)(B)(ii) of the Act, we
would take into account payments made from the Medicare Trust Funds for
Parts A and B services, for assigned Medicare fee-for-service
beneficiaries, including payments made under a demonstration, pilot or
time limited program when computing average per capita Medicare
expenditures under the ACO. Our policies for determining per capita
expenditures for purposes of establishing the benchmark are specified
at Sec. 425.602(a)(1). Shared savings payments are paid from the
Medicare Trust Funds for the beneficiary population assigned to an ACO
and are intended to recognize the costs incurred by the ACO and its ACO
participants and ACO providers/suppliers in coordinating care and
improving the quality of care for the assigned beneficiaries.
Accordingly, we are considering whether it would be appropriate to
revise our methodology under Sec. 425.602(a)(1) for establishing an
ACO's benchmark to incorporate the ACO's share of savings for those
ACOs that receive shared savings payments under the prior agreement
period. We considered how to account for these payments in ACOs' 3-year
weighted average per capita benchmarks since ACO shared savings
payments are determined at the population-level, reflecting aggregated
per capita expenditures that have been truncated and annualized and
weighted by the proportion of assigned beneficiaries in each of the
four Medicare enrollment types: ESRD, disabled, aged/dual and aged/non-
dual. For instance, we could develop a per-beneficiary average based on
the shared savings payment for the particular performance year under
the prior agreement period and apply this adjustment on a per
beneficiary basis to the assigned population for the corresponding
benchmark year. We also considered whether to make a symmetric
adjustment in benchmarks for ACOs that owed losses in a previous
agreement period.
We believe there are merits to upwardly adjusting benchmarks for
ACOs in a second or subsequent agreement period to reflect any shared
savings payments in the most recent prior agreement period. An
adjustment that reflects the ACO's share of savings--based on its final
sharing rate, which is a function of its quality performance--in the
computation of the benchmark would increase the ACO's benchmark for the
subsequent agreement period. This increase in the benchmark, relative
to the ACO's prior success in the program, may address concerns
expressed by some stakeholders (described previously) that under the
existing benchmarking methodology achieving savings may sometimes be
financially unattractive for ACOs because of the potential impact on
their benchmarks in future agreement periods.
There are clear advantages of this adjustment for ACOs and the
Medicare program. In particular, ACOs would have an increased incentive
to continue to generate shared savings and improve quality because of
the prospect of having a higher benchmark in future agreement periods.
Consequently, ACOs may demonstrate improved performance over longer
term participation in the program. Further, ACOs may be encouraged to
enter the program's two-sided models (such as the proposed Track 3),
which offer higher final sharing rates because making an adjustment to
the benchmark for these ACOs to reflect successful participation during
one agreement period may improve their potential to receive shared
savings in the next agreement period. Other implications of this
adjustment for consideration include the following:
Not all ACOs would benefit. By making the adjustment only
for ACOs that receive shared savings payments in their prior agreement
period, some ACOs that reduce expenditures would

[[Page 72839]]

not receive the benefit of this adjustment. Specifically, ACOs whose
performance year expenditures are lower than their benchmark
expenditures by an amount that did not meet or exceed their MSR, and
ACOs that generated savings outside their MSRs, but that failed to
satisfy the quality reporting standard, would not receive the
adjustment.
Availability of performance data relative to timely
creation of benchmarks. We anticipate completing financial
reconciliation for an ACO's most recent prior performance year (for
example, PY3 under the first agreement period which corresponds to BY3
for the second agreement period) mid-way through its current
performance year (for example, PY1 under the second agreement period).
As a result, one downside of relying on the availability of performance
data from the most recent prior performance year is that it would delay
the finalization of an ACO's historical benchmark for its first
performance year during its subsequent agreement period.
(3) Use of Regional Factors (as Opposed to National Factors) in
Establishing and Updating Benchmarks
Some stakeholders have expressed concern that the existing
benchmarking methodology does not sufficiently account for the
influence of cost trends in the surrounding region or local market on
the ACO's financial performance. We considered addressing these
concerns by using regional FFS expenditures, instead of national FFS
expenditures, to trend forward the most recent 3 years of per
beneficiary expenditures for Parts A and B services in order to
establish the historical benchmark for each ACO under section
1899(d)(1)(B)(ii) of the Act. In addition, we considered making this
modification in combination with an alternative payment model under
section 1899(i)(3) of the Act under which we would use regional FFS
expenditures, instead of national FFS expenditures, to update the
benchmark for each performance year during an agreement period. We also
considered other approaches to address this concern, as discussed later
in this section describing alternative benchmarking methodologies.
In considering how to establish and update benchmarks based on
regional factors, we favor use of an approach similar to the method for
updating benchmarks used under the PGP demonstration, which has been
tested and validated with physician groups across the country,
including groups in rural, urban and suburban areas. Under this
approach, much of the Shared Savings Program's existing benchmarking
methodology would remain the same. Instead of using national Medicare
FFS expenditure data to trend expenditures in establishing the
historical benchmark (Sec. 425.602(a)(5)) and to update the benchmark
for each performance year (Sec. 425.602(b)(1)), we would use regional
FFS expenditure data to make these adjustments. We would calculate the
ACO's regional expenditure trend and update factors according to the
cost experience of a reference population. Specifically, in
establishing benchmarks under the PGP demonstration, a comparison group
was created using the PGP's service area. The growth rate of the
comparison group expenditures was calculated and used as the growth
rate for updating the PGP's benchmark. Specifically, we used each PGP's
annual assigned beneficiary population to determine the PGP's service
area. A PGP's service area was defined as all counties where one
percent or more of assigned PGP beneficiaries reside. We identified
which beneficiaries residing in each service area met the comparison
group assignment criteria and assigned them to the PGP comparison
group. The service area and comparison group for the PGP were re-
determined each year to account for changes in the PGP's assigned
beneficiaries. The expenditure growth rate for the PGP's comparison
group was calculated and used to update the PGP's historical benchmark
for purposes of determining each PGP's performance under the shared
savings calculation methodology used in the demonstration. This
benchmarking methodology was used over the course of the 5-year PGP
demonstration. Given that we have already tested and refined this
methodology, we believe that a similar approach could be implemented
within the Shared Savings Program. As noted previously, over the course
of the PGP demonstration, 7 of 10 sites were eligible for shared
savings payments in one or more performance years. Taking these factors
into consideration, we believe stakeholders may welcome this approach
to revising the program's benchmarking methodology.
However, we have also identified a number of additional factors
that must be considered in using this approach in the Shared Savings
Program:
Whether the comparison group counties should be weighted
by the percent of assigned beneficiaries in the county out of all
assigned beneficiaries in all comparison group counties. For example,
for an ACO in a rural or suburban county near a large metropolitan
area: On a weighted basis, the large metropolitan area would contribute
less to the comparison group than on an unweighted basis.
Alternatively, an ACO with high penetration in a specific county would
have its regional factors significantly influenced by that county.
Whether to establish a minimum sample size for the
comparison group, such as equal to or greater than 25,000. Smaller
comparison groups are more likely to demonstrate idiosyncratic
expenditure trends, for instance, if an ACO has a high penetration in
its service area, the remaining population may be non-representative
compared to the ACO's patient population. These factors would seem to
support the use of a minimum sample size threshold. Based on
statistical modeling for an effective sample size, we anticipate that
the minimum sample size threshold would be set not lower than 25,000
beneficiaries. In turn, a minimum sample size raises a question of what
criteria should be used to ensure the ACO's comparison group is large
enough. For instance, in markets where the ACO's assigned beneficiaries
represent a substantial share (for example, more than 40 percent) of
Medicare FFS beneficiaries, should the region be expanded--perhaps to
include the entire corresponding metropolitan statistical area (MSA),
hospital referral region (HRR), or another regional grouping approach?
Similarly, in markets where multiple ACOs represent a substantial share
(for example, more than 50 percent) of Medicare FFS beneficiaries,
should the region be similarly expanded as described previously? We
also considered whether to lock-in the counties composing the
comparison group at the start of the agreement period, since over the
course of the agreement the counties where one percent or more of
assigned ACO beneficiaries reside may fluctuate (for example, just
above or just below 1 percent).
(4) Alternative Benchmark Resetting Methodology: Holding the ACO's
Historical Costs Constant Relative to its Region
Some stakeholders have also expressed a preference for further
changes in the methodology used to reset ACO benchmarks to address the
concerns described previously. For example, some stakeholders have
suggested that ACOs would have stronger incentives to achieve shared
savings during a given agreement period and to continue to participate
in the program in subsequent agreement periods if we used a methodology
for resetting benchmarks that held the ACO's historical per assigned

[[Page 72840]]

beneficiary spending constant relative to its local market so that
improvements in efficiency that the ACO achieved during an agreement
period would not lower its benchmark for a subsequent agreement period.
Accordingly, we considered using the authority under section
1899(i)(3) of the Act to establish an approach to resetting an ACO's
benchmark at the start of a new agreement period under which the ACO's
benchmark from the prior agreement period would be updated according to
trends in FFS costs in the ACO's region, effectively holding a portion
of the ACO's benchmark constant relative to its region. Under this
approach, an ACO's benchmark for its initial agreement period would be
set according to an approach similar to the existing methodology. For
subsequent agreement periods, the trend in regional costs would be
calculated using an approach based on the PGP demonstration, described
previously, and the historical benchmark would be updated by increasing
it by a percentage equal to the percentage increase in regional costs.
This approach would prevent an ACO's improved efficiency during an
agreement period from lowering its benchmark in a future agreement
period.
We also considered a similar approach that would use information
regarding the ACO's historical costs under its first agreement period
to adjust regional FFS benchmarks developed for future agreement
periods by developing a scaling factor. The scaling factor could be
calculated as the ratio of--(1) an ACO's historical benchmark under its
first agreement period (computed using an approach similar to the
existing methodology) divided by; (2) the regional FFS benchmark that
would have been calculated for the ACO for the third benchmark year of
its first agreement period. We would compute an ACO's benchmark for
each subsequent performance year by multiplying this scaling factor by
the ACO's regional FFS benchmark for that performance year to account
for the difference originally exhibited between the ACO expenditures
and the regional FFS benchmark expenditures in the year prior to the
beginning of the ACO's first agreement period. The regional FFS
benchmark for an ACO in a given performance year would be computed
using an approach based on the PGP demonstration described above. For
example, if the ACO's assigned beneficiaries expenditures were 10
percent higher than what its regional FFS benchmark would have been in
its most recent base year of its initial agreement period, the ACO's
future benchmark based on regional FFS expenditures would be adjusted
by 10 percent to account for this baseline difference. This approach
would likely generate benchmarks very similar to those described in the
previous paragraph and thus have a similar effect on an ACO's
incentives to improve efficiency.
Under both of these approaches, we considered whether to adjust the
benchmark or scaling factor to reflect changes in the list of ACO
participant TINs over time, as we do now based on our authority under
Sec. 425.602((a)(8). We considered two approaches to making such
adjustments, each of which could be used with either of the basic
approaches to holding benchmarks constant relative to an ACO's region
that were previously described. Under the first approach, we considered
basing such adjustments off our current method of adjusting the
benchmark on an annual basis to reflect ACO participant changes. Under
the second approach, we considered an adjustment method to reflect the
historical cost experience of any ACO participant TINs that are added
to the ACO and to remove the influence of the cost experience of those
ACO participant TINs that leave the ACO, but not incorporate updated
cost information for ACO participants that have continued in the ACO.
First, we considered using an approach similar to our existing
method for adjusting the ACO's benchmark during the course of its
agreement period to account for changes in its ACO participant list as
described previously.
Under this approach, each performance year that the ACO's
participant list changed, we would recompute its initial historical
benchmark or scaling factor using cost information from the benchmark
period corresponding to the ACO's initial agreement period. This
approach has the advantage that it is similar to the approach we have
used successfully to adjust ACO benchmarks within an agreement period
in response to changes in ACO participant lists. However, we recognize
that not all ACO participants joining the ACO in subsequent agreement
periods may have historical claims data during the 3 years prior to the
start of the ACO's first agreement period. Therefore, we considered the
need to expand this approach to include adjustments to the benchmark or
scaling factor to account for ACO participant list changes.
Second, we considered an approach that would adjust an ACO's
benchmark (or scaling factor) after each annual change in the ACO
participant list based on the relative cost experience of patient
populations associated with the new performance year's set of TINs
relative to the prior performance year's set of TINs, as measured
during a period immediately preceding the change in the ACO participant
list. We note that under our current benchmarking methodology, assigned
beneficiaries and benchmark expenditures are determined in aggregate at
the ACO level rather than at the individual ACO participant TIN level.
Therefore, under this alternative approach, we would develop a
methodology for associating assigned beneficiary costs to individual
ACO participant TINs that continue in the program so as not to
incorporate updated cost information for the patient populations
associated with the continuing ACO participants, as well as to
incorporate updated cost information for the patient populations
associated with new ACO participants or remove the influence of cost
information for patient populations associated with departing ACO
participants.
The advantage of this type of approach is that it could generate
more accurate benchmarks in cases where an ACO adds many participant
TINs that were not active during the ACO's initial agreement period.
However, this approach could be more complicated to implement and could
reintroduce a limited ability for ACOs to influence future benchmarks
through current decisions.
A potential disadvantage of approaches that determine benchmarks by
holding an ACO's costs constant relative to its region is that future
benchmarks are influenced to a large degree by holding the cost
experience for the ACO participants that continue in the ACO static.
This static cost experience would become dated and would not
necessarily reflect the evolving complex factors that influence the
cost profile of the beneficiary populations assigned to the ACO in
future agreement periods. By holding costs static for existing ACO
participants, there would be incentives for successful ACOs to continue
to participate in the program (with the same ACO participant
composition) against more favorable benchmarks. Moreover, some ACOs may
``shop'' for a particularly advantageous benchmark, for instance by
delaying program entry, and only improving their expenditure and
utilization trends in later years. As a result, these approaches might
continue to yield shared savings for some ACOs despite marginal effort
to improve efficiency, and push out ACOs for whom cumulative variation
creates a

[[Page 72841]]

predictable and unrealistically low expenditure target.
To the extent that this approach for resetting ACO benchmarks also
incorporates elements of the other approaches described in this
section, we would be faced with related concerns. For instance, when
trending the benchmark according to regional FFS costs based on the PGP
demonstration approach described above, we would need to determine what
criteria to use in establishing the comparison group. Further, as
discussed under the alternative benchmarking methodology later in this
section, we may need to consider whether the risk adjustment
methodology would need to be modified, in this case to account for
changes in each ACO's risk profile relative to the risk profile of its
regional comparison population. The types of approaches described in
this section would require use of our authority under section
1899(i)(3) of the Act because we would be deviating from the
requirement at section 1899(d)(1)(B)(ii) of the Act that the benchmark
be reset at the start of each agreement period. Specifically, the
benchmark would not be reset using the most recent available 3 years of
per beneficiary expenditures for parts A and B services for those
Medicare FFS beneficiaries that were assigned to the ACO during the
preceding agreement period.
(5) Alternative Benchmark Methodology: Transitioning ACOs to Benchmarks
Based Only on Regional FFS Costs Over the Course of Multiple Agreement
Periods
We also considered using our authority under section 1899(i)(3) of
the Act to transition ACOs from benchmarks based on their historical
costs toward benchmarks based only on regional FFS costs, an approach
suggested by stakeholders, including MedPAC. We recognize that under
the existing benchmarking methodology, ACOs in the same market would
have unique benchmarks, which may vary widely depending on the
historical expenditures for the beneficiaries that receive care from
the ACO participants in each ACO. As a result, ACOs within the same
market may have substantially different benchmarks, such as the case of
a historically low-cost ACO within a traditionally high cost market.
Under the existing benchmarking methodology, the program may be more
attractive (initially) to historically high-cost ACOs able to enter the
program and achieve substantial shared savings by bringing costs down
compared to their historical cost performance. ACOs with historically
low costs may be less likely to enter and continue in the program
because of their perceived difficulty in further reducing their
assigned beneficiaries' costs relative to a benchmark based on their
assigned beneficiaries populations' past experiences. However, as noted
previously, the current benchmarking methodology may provide additional
opportunity for increased shared savings for ACOs with low costs
relative to the national average through the use of a flat dollar
update for growth in national FFS expenditures, assuming program
expenditure trends return to historically-familiar positive rates as
compared to the unusually low growth experienced in the first several
years of the program.
Under this alternative approach, over the course of several
agreement periods, we would transition to using regional FFS cost data
to make ACO benchmarks gradually more independent of the ACO's past
performance and gradually more dependent on the ACO's success in being
more cost efficient relative to its local market. For example, for the
ACO's first agreement period, we may use the existing benchmarking
methodology or one of the options described previously, which accounts
for regional FFS expenditures. Starting in an ACO's second agreement
period, we would calculate each ACO's benchmark as a weighted average
of the ACO benchmark using the existing approach or one of the
alternative approaches described above and risk adjusted regional FFS
costs. The weight placed on risk adjusted regional FFS costs would
increase over time. ACOs' assigned beneficiaries would be counted in
the calculation of regional FFS costs and the definition of an ACO's
region would require careful consideration so that the ACO's assigned
beneficiary population would not be allowed to make up an unreasonable
proportion of the region itself. This benchmarking methodology would
help ensure the program remains attractive to ACOs, particularly those
who have achieved shared savings in previous agreement periods, and
strengthen the connection between the determination of the amount of
shared savings earned by the ACO and an ACO's actual success in
achieving savings relative to its region and local market.
An approach where we transition from ACO-specific benchmarks based
on each ACO's historical costs to benchmarks based on regional FFS
spending may be attractive to low-cost ACOs in high-cost regions
because they would likely transition to a relatively higher (regional)
benchmark over time against which they could likely show more savings
because they have lower relative costs. However, high-cost ACOs in low-
cost regions may find a regional benchmark unattractive because they
would be required to create new efficiencies to fully offset their
higher costs relative to their region in order to show savings under
the benchmark. To mitigate the cost of any resulting selective
participation by favored low-cost ACOs in high cost regions we
considered whether a benchmark transition process could be employed
over a number of agreement periods involving a gradual shift from the
current methodology to one where benchmarks are set based on regional
FFS spending (for example, using a weighted average of the two
approaches whereby the weight for the regional FFS benchmark is
gradually increased over several agreement periods). Using regional FFS
spending to establish benchmarks could reward low-cost, high-quality
ACOs, and further encourage them to attract more ACO participants and
Medicare FFS beneficiaries over the course of time. We would also
expect that a gradual transition may at least initially maintain an
incentive for existing ACOs with high costs relative to their region to
remain in the program because the initial ACO-specific benchmark would
allow the ACOs to achieve shared savings for lowering their costs
compared to their own historical performance. As they transition to a
benchmark based on regional FFS spending, these ACOs' benchmarks would
likely decline (given the overall experience of the market),
encouraging these ACOs to continue to reduce their costs, while
maintaining high quality care under the program. However, we also note
that some ACOs may not perceive an ability to reduce their beneficiary
expenditures below the regional average and therefore there remains a
risk that the eventual transition to a regional benchmark would result
in selective participation regardless of how the transition is
performed. For instance, an ACO that perceives its patient population
as having high relative costs may perceive itself as disadvantaged
under this approach.
Therefore, to further mitigate selective participation and improve
the accuracy of the benchmarks, we considered whether the regional FFS
benchmark should be adjusted to reflect a regional or local reference
population, similar to the method used in the PGP demonstration.
However, as described previously, additional adjustment may be
necessary to ensure the comparison

[[Page 72842]]

population is sufficiently large and representative of the ACO's
assigned patient population, particularly in the cases where ACOs make
up a significant portion of their regional market.
We also considered whether the risk adjustment methodology would
need to be modified to account for changes in the risk profile of the
regional population rather than the national population. For instance,
it may be necessary to account for coding intensity differences
relative to the ACO's region rather than just the change in coding
intensity by the ACO. As we explained in the November 2011 final rule
(see 76 FR 67916), it may be necessary to guard against changes that
result from more specific or comprehensive coding as opposed to
improvements in the coordination and quality of health care. Thus, we
considered the need for normalization of risk scores for ACO assigned
beneficiaries and the comparison group beneficiaries relative to the
regionally based comparison group. For instance, the benchmark could be
normalized to the mix of beneficiaries assigned across the four
Medicare enrollment types (ESRD, disabled, aged/dual, aged/non-dual) to
the same strata within the regional comparison population. We also
considered risk adjusting the growth rates, for example based upon risk
scores for the comparison group, in combination with using a regional
coding intensity adjustment or independently.
We also considered how to account for ACO participant TIN changes,
over time, under a methodology where we transition ACOs from ACO-
specific to regionally based benchmarks. For instance, we considered
whether to continue to adjust the benchmark at the start of each
performance year to reflect changes in the set of ACO participant TINs
that constitutes the ACO, perhaps similar to our current approach to
managing changes to ACO participants during the agreement period.
We also considered the pace for transitioning ACOs from ACO-
specific to regional benchmarks, including the following factors:
The period of time for transitioning to regional FFS
benchmarks: For instance, should the transition occur over two
agreement periods, or five agreement periods, or longer.
Whether to consider the ACO's performance during a prior
agreement period in determining the pace of its transition to regional
FFS benchmarks. For example, should we delay downward adjustments to an
ACO's benchmark if the ACO fails to achieve shared savings.
Whether to consider the ACO's historical costs, relative
to regional Medicare FFS average per capita costs, in determining the
pace of its transition to regional FFS benchmarks. For example, should
low-cost ACOs (those below the risk adjusted regional Medicare FFS
average per capita costs) transition more quickly to regional FFS
benchmarks than high-cost ACOs.
Another consideration was whether this kind of benchmarking
methodology would allow the Shared Savings Program to maintain a fiscal
balance. For instance, would the shared savings paid to low-cost ACOs
(treating beneficiaries at below average costs) be more than offset
with savings from lower than expected spending in high-cost ACOs and
further control of spending growth in low-cost ACOs. We also recognize
that more customized benchmarking approaches make it more difficult to
provide ACOs with information they can use to predict their
performance.
(6) Seeking Comment on the Benchmarking Alternatives Considered and the
Applicability of These Approaches
In general we seek comment on the approaches to adjusting the
methodology for establishing, updating and resetting ACO benchmarks
discussed in detail above. In particular, we seek comment on the
following:
Using combinations of these approaches, as opposed to any
one approach. Specifically, we considered revising the methodology for
resetting ACO benchmarks by equally weighting the three benchmark
years, and/or accounting for shared savings payments received by an ACO
in its prior agreement period, and/or using regional FFS expenditures
instead of national FFS expenditures in establishing and updating the
benchmark. We also considered and seek comment on revising the
benchmarking methodology more broadly, shifting either to a methodology
that resets ACOs' benchmarks between agreement periods by holding an
ACO's historical costs constant relative to costs in its region or to a
methodology that transitions ACOs from benchmarks based on their
historical costs toward benchmarks based only on regional FFS costs,
potentially in combination with some or all of the other revisions we
are considering to the benchmarking methodology.
How broadly or narrowly to apply these alternative
benchmarking approaches to the program's Tracks. Specifically, we
envisioned that the revisions in the benchmarking methodology under
section 1899(d)(1)(B)(ii) of the Act. (for example, equally weighing
the three benchmark years, and accounting for shared savings payments
received by an ACO in its prior agreement period) would be applied when
resetting the benchmarks for all ACOs, regardless of the model they
participate under (Tracks 1, 2, and 3). We envisioned applying the
approaches requiring use of our authority under section 1899(i)(3) of
the Act to ACOs participating under performance-based risk models
(Tracks 2 and Track 3) because stakeholders' concerns about resetting
the benchmarks were closely related to ensuring the program remains
sustainable over time, and we envision ACOs would be transitioning to
the performance-based risk models over time, specifically given our
proposal to limit the number of agreement periods an ACO can remain
under Track 1. We also considered and seek comment on applying these
alternative benchmarking methodologies more broadly, specifically to
all ACOs participating in a risk-based model (Tracks 2 and 3), or to
all ACO financial models (Tracks 1, 2, and 3).
Whether to use regional FFS expenditures instead of
national FFS expenditures in establishing and updating the benchmark
and/or a methodology for transitioning ACOs from benchmarks based on
their historical costs toward benchmarks based only on regional FFS
costs only when resetting ACO benchmarks under their second or
subsequent agreement period, or when establishing the benchmark for all
participating ACOs (regardless of agreement start date) the next full
performance year after the effective date of the final rule. In other
words, if a final rule adopting a revised benchmarking methodology is
issued in early 2015, should the revised methodology be used to
determine the benchmark that will apply during the 2016 performance
year for all ACOs.
The criteria for defining the comparison group for using
regional FFS expenditure data to establish, update or reset the
historical benchmark. In particular we welcome comments on the criteria
we described previously and welcome commenters' suggestions for
different criteria.
We believe the concerns about risk adjustment raised in
this section in the context of the alternative benchmarking methodology
for establishing, updating and/or transitioning from ACO-specific
benchmarks to regionally based benchmarks are also relevant to the
approach where we would use regional FFS expenditures (as opposed to

[[Page 72843]]

national FFS expenditures) in establishing or in updating the
benchmark. We welcome comments on these concerns and commenters'
suggestions about the use of regional normalization or coding intensity
adjustments to guard against regional or other coding differences that
may affect the characteristics of the ACOs' assigned beneficiary
population in relation to the comparison group.
We welcome commenters' detailed suggestions on our
considerations of factors to use in resetting ACO benchmarks and for
the alternative benchmark methodology; as well as considerations or
concerns not described; and suggestions for alternative approaches for
a benchmarking methodology that transition to use of regional
benchmarks over the course of time. In particular, we seek commenters'
input on whether an approach that transitions ACOs to regional
benchmarks would encourage continued participation by existing low-cost
and high-cost ACOs.
We also request commenters' input on alternatives not described
here for resetting benchmarks to encourage ongoing participation by
ACOs who perform well in the program and are successful in reducing
expenditures for their assigned beneficiaries. We seek comment on
whether these alterative benchmarking approaches would have unintended
consequences for ACO participation in the program, for the Medicare
Trust Funds, or for Medicare FFS beneficiaries. We intend to carefully
review any comments that are received on these issues during the
development of the final rule and will make an assessment at that time
as to whether any change to our current methodology for establishing
benchmarks is necessary and appropriate.
7. Seeking Comment on Technical Adjustments to the Benchmark and
Performance Year Expenditures
When computing average per capita Medicare expenditures for an ACO
during both the benchmark period and performance years under Sec.
425.602, Sec. 425.604, and Sec. 425.606, we take into account all
Parts A and B expenditures, including payments made under a
demonstration, pilot or time limited program, with the exception of IME
and DSH adjustments, which are excluded from these calculations. In the
November 2011 final rule (76 FR 67919 through 67923), we considered
whether to make adjustments to benchmark and performance year
expenditures to exclude certain adjustments to Part A and B
expenditures, including IME and DSH payments, geographic payment
adjustments and some bonus payments and penalties. In the final rule,
we acknowledged that taking into consideration payment changes could
affect ACOs' financial performance and their ability to realize
savings. However, with the exception of the adjustment to account for
IME and DSH payments, we ultimately declined to make any adjustments to
account for various differences in payment rates among providers and
suppliers. We explained that while section 1899(d)(1)(B)(ii) of the Act
provides a way of adjusting an ACO's benchmark for such payments, the
statute does not include similar authority to adjust performance year
expenditures. Therefore, we noted that while we could make adjustments
to the ACO's benchmark to exclude certain payments under our authority
in section 1899(d)(1)(B)(ii) of the Act, we did not have a similar
authority to make adjustments in our calculation of an ACO's
performance year expenditures, which would create a mismatch in
expenditure calculations.
However, we were persuaded by commenters that not excluding IME and
DSH payments in determining ACO financial performance could adversely
affect the care of beneficiaries by creating an incentive for ACOs to
avoid making appropriate referrals to teaching hospitals in an effort
to demonstrate savings. Therefore, we considered using our authority
under section 1899(i)(3) of the Act, which authorizes us to use other
payment models for making payments under the Shared Savings Program
that the agency ``determines will improve the quality and efficiency of
items and services'' furnished under Medicare. Specifically we
considered whether it would be appropriate to use this authority to
include an adjustment to performance year expenditures to exclude IME
and DSH payments. To exercise our authority under section 1899(i)(3) of
the Act, we must also determine that the alternative payment model ``.
. . does not result in spending more for such ACO for such
beneficiaries than would otherwise be expended . . . if the model were
not implemented . . .''
In the November 2011 final rule (76 FR 67921 through 67922), we
stated that we believed excluding IME and DSH payments would be
consistent with the requirements under section 1899(i)(3) of the Act.
That is, excluding these payments would both improve the care for
beneficiaries while also not resulting in greater payments to ACOs than
would otherwise have been made if these payments were included.
Specifically, we stated that removing IME and DSH payments from
benchmark and performance year expenditures would allow us to more
accurately reward actual decreases in unnecessary utilization of
healthcare services, rather than decreases arising from changes in
referral patterns. In addition, we believed that excluding these
payments from our financial calculations would help to ensure
participation in ACOs by hospitals that receive these payments. Taken
in combination, we believed these factors could result in Medicare
beneficiaries receiving higher quality, better coordinated, and more
cost-efficient care. As a result, we did not expect that excluding IME
and DSH payments from the determination of ACOs' financial performance
would result in greater payments to ACOs than would otherwise have been
made. We also found that excluding these amounts was operationally
feasible since they are included in separate fields on claims allowing
them to be more easily excluded from financial calculations than
certain other payments that are included on Part A and B claims.
Therefore, we finalized a policy of excluding IME and DSH payments from
both the benchmark and performance year expenditure calculations. We
stated that we intended to monitor this issue and would revisit it if
we determine that excluding these payments has resulted in additional
program expenditures (76 FR 67922).
In addition to IME and DSH payments, we also considered whether
standardizing payments to account for other types of payment
adjustments would alleviate concerns resulting from changes in the
Medicare payment systems. However, in light of the numerous payment
adjustments included throughout the Medicare payment systems, we were
concerned about the complexity resulting from standardizing payments
and whether standardized payment information would provide meaningful
and consistent feedback regarding ACO performance. We stated that we
intended to evaluate this issue and would potentially address it in
future rulemaking.
We also considered requests from commenters that we make
adjustments to ACO benchmark and performance year expenditures to
account for a number of other payments (76 FR 67922). We specifically
considered how geographic payment adjustments, applied under Medicare
payment systems (for example, the IPPS wage index adjustments and the
physician fee schedule geographic practice cost index (GPCI)
adjustments) could affect an

[[Page 72844]]

ACO's ability to realize savings. These adjustments increase and
decrease payments under the applicable payment systems to account for
the different costs of providing care in different areas of the
country. We further noted that there have been a number of temporary
legislative adjustments to the wage indexes for various parts of the
country during recent years. In some cases these have been extended on
virtually an annual basis while others have been updated more
intermittently. We recognized that the timing of these adjustments
could result in changes being made during an ACO's agreement period and
between the benchmark and the performance years, thus influencing an
ACO's ability to realize savings under the program. Additionally, there
have been cases where hospitals have moved in and out of
reclassification status which can either increase or decrease the wage
index in the state.
Of the comments received, most favored excluding geographic
payments from benchmark and performance year expenditures (76 FR
67923). Commenters suggested specific adjustments, such as exclusion of
payments based on the area wage index, low cost county payment
adjustments, GPCI, and the frontier States policy adjustment. Some
commenters, however, expressed concerns that variations in cost growth
across geographic areas as well as the current CMS methods for
accounting for differences in local input and practice costs may create
incentives that reward ACO formation in some markets but not in others.
Others suggested that inclusion of these geographic payment adjustments
could have unintended consequences for referral patterns by ACOs, such
as driving referrals based on geographic wage adjustments rather than
performance. Yet others were generally concerned that making geographic
payment adjustments would disproportionately disadvantage some ACOs.
Ultimately, we disagreed with commenters' suggestions that we
adjust expenditures to account for various differences in cost and
payment. We stated that we believed that making such extensive
adjustments, or allowing for benchmark adjustments on a case-by-case
basis, would create an inaccurate and inconsistent picture of ACO
spending and may limit innovations in ACOs' redesign of care processes
or cost reduction strategies (76 FR 67920). Unlike the IME/DSH
adjustments, we stated we did not believe these other payment
adjustments that are made to Part A and B payments (such as geographic
payment adjustments) would result in a significant incentive to steer
patients away from particular hospitals or providers since an ACO's
financial performance would be compared to its own historical
expenditure benchmark, as updated.
Since the publication of the November 2011 final rule, some
questions have persisted regarding the most appropriate way to handle
payment differences and changes under Medicare FFS; including whether
to take into consideration certain payment changes that could affect
ACO financial performance. We are not proposing to make any further
adjustments at this time. However, now that both CMS and external
stakeholders have some experience with our policies, we are interested
in seeking further comment from stakeholders on this issue that we
could potentially consider in future rulemaking. We are particularly
interested in comments regarding standardization of payments, including
which elements to adjust for, the impact of value-based payment
adjustments on payments to physicians and hospitals, and the value of
providing feedback on nonstandardized results while using standardized
results to perform financial reconciliation.
Table 7 summarizes certain provisions of the current regulations
and our proposals to change them as discussed in this section.

Table 7--Shared Savings Financial Model Overview
--------------------------------------------------------------------------------------------------------------------------------------------------------
Track 1: One-sided risk model Tracks 2 and 3: Two-sided risk models
--------------------------------------------------------------------------------------------------------------------------------------------------------
Issue Current Proposed Current Track 2 Proposed Track 2 Proposed Track 3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Transition to Two-Sided Model...... First agreement period Remove requirement to ACOs may elect Track No change............ Same as Track 2.
under one-sided transition to two- 2 without completing
model. Subsequent sided model for a a prior agreement
agreement periods second agreement period under a one-
under two-sided model. period. sided model. Once
elected, ACOs cannot
go into Track 1 for
subsequent agreement
periods.
Assignment......................... Preliminary No change............. Preliminary No change............ Prospective
prospective prospective assignment for
assignment for assignment for reports and
reports; reports; financial
retrospective retrospective reconciliation.
assignment for assignment for
financial financial
reconciliation. reconciliation.
Benchmark.......................... Reset at the start of Seeking comment on Same as Track 1...... Seeking comment on Same as Tracks 1 and
each agreement period. alternative alternative 2 and seeking
methodology. methodology. comment on
alternative
methodology.

[[Page 72845]]

Adjustments for health status and Historical benchmark No change............. Same as Track 1...... No change............ Same as Tracks 1 and
demographic changes. expenditures adjusted 2.
based on CMS-HCC
model. Updated
historical benchmark
adjusted relative to
the risk profile of
the performance year.
Performance year:
Newly assigned
beneficiaries
adjusted using CMS-
HCC model;
continuously assigned
beneficiaries
adjusted using
demographic factors
alone unless CMS-HCC
risk scores result in
a lower risk score.
Adjustments for IME and DSH........ IME and DSH excluded No change............. Same as Track 1...... No change............ Same as Tracks 1 and
from benchmark and 2.
performance year
expenditures..
Other payment adjustments.......... Include other payment Seeking comment on Same as Track 1...... Seeking comment on Same as Tracks 1 and
adjustments included other technical other technical 2.
in Part A and B adjustments. adjustments.
claims such as,
geographic payment
adjustments and HVBP
payments, in
benchmark and
performance year
expenditures.
Quality Sharing Rate............... Up to 50 percent based Up to 50 percent based Up to 60 percent No change............ Up to 75 percent
on quality on quality based on quality based on quality
performance. performance for first performance. performance.
agreement period,
reduced by 10
percentage points for
each subsequent
agreement period
under the one-sided
model.
Minimum Savings Rate............... 2.0 percent to 3.9 No change............. Fixed 2.0 percent.... 2.0 percent to 3.9 Fixed 2.0 percent.
percent depending on percent depending on
number of assigned number of assigned
beneficiaries. beneficiaries.
Minimum Loss Rate.................. Not applicable........ No change............. Fixed 2.0 percent.... 2.0 percent to 3.9 Fixed 2.0 percent.
percent depending on
number of assigned
beneficiaries.
Performance Payment Limit.......... 10 percent............ No change............. 15 percent........... No change............ 20 percent.
Shared Savings..................... First dollar sharing No change............. Same as Track 1...... No change............ Same as Tracks 1 and
once MSR is met or 2.
exceeded.
Shared Loss Rate................... Not applicable........ No change............. One minus final No change............ One minus final
sharing rate applied sharing rate applied
to first dollar to first dollar
losses once minimum losses once minimum
loss rate is met or loss rate is met or
exceeded; shared exceeded; shared
loss rate not to loss rate may not be
exceed 60 percent. less than 40 percent
or exceed 75
percent.
Loss Sharing Limit................. Not applicable........ No change............. Limit on the amount No change............ 15 percent. Losses in
of losses to be excess of the annual
shared in phases in limit would not be
over 3-years shared.
starting at 5
percent in year 1;
7.5 percent in year
2; and 10 percent in
year 3 and any
subsequent year.
Losses in excess of
the annual limit
would not be shared.
--------------------------------------------------------------------------------------------------------------------------------------------------------

G. Additional Program Requirements and Beneficiary Protections

1. Background
Section 1899(a)(1)(A) of the Act authorizes the Secretary to
specify criteria that ACOs must satisfy in order to be eligible to
participate in the Shared Savings Program. In the November 2011 final
rule, we finalized policies regarding how ACOs will be monitored with
respect to program requirements and what actions will be taken against
ACOs that are not in compliance with the requirements of the Shared
Savings Program. Based on our initial experience with the Shared
Savings Program, we propose several refinements and clarifications to
our policies on--
Public reporting (Sec. 425.308);
Termination of the participation agreement (Sec. Sec.
425.218 and 425.220);
Enforcement of ACO compliance with quality performance
standards (Sec. 425.316(c)); and

[[Page 72846]]

Reconsideration review procedures (Sec. Sec. 425.802 and
425.804)).
2. Public Reporting and Transparency
a. Overview
Section 1899 of the Act sets forth a number of requirements for
ACOs. Section 1899(b)(2)(H) of the Act requires ACOs to demonstrate
that they meet patient-centeredness criteria specified by the
Secretary. We believe that one important aspect of patient-centeredness
is patient engagement and transparency. Increasingly, transparency of
information in the health care sector is seen as a means to help
patients become more active in their health care choices and to
generate feedback that may improve the quality of care and lower the
cost of care. In addition, transparency may improve oversight and
program integrity. Public reporting also supports the mandate for ACOs
to be willing to ``become accountable for the quality, cost, and
overall care'' of the Medicare beneficiaries assigned to them. Reports
on ACO quality and cost-performance hold ACOs accountable and
contribute to the dialogue on how to drive improvement and innovation
in health care. Public reporting of ACO cost and quality data may
improve a beneficiary's ability to make informed health care choices
and facilitate an ACO's ability to improve the quality and efficiency
of its care.
Therefore, for these reasons, which are described in more detail in
the November 2011 final rule, we finalized requirements specified at
Sec. 425.308 that ACOs must make certain information publicly
available. Since publication of the Shared Savings Program final rule,
minor updates were made to Sec. 425.308(e) in the 2013 PFS final rule
with comment period (77 FR 69164 through 69170) and in the 2015 PFS
final rule with comment period (79 FR 67769). For purposes of the
Shared Savings Program, each ACO is currently required at Sec. 425.308
to publicly report certain organizational information (such as the
identification of ACO participants and governing body members), the
amount of any shared savings or shared losses incurred, the proportion
of shared savings invested in resources that support the three-part aim
and certain quality performance information. (Specifically, ACOs are
required to report the results of the claims-based quality measures
while CMS will report the CAHPS and GPRO measure results on Physician
Compare.) We recommend that ACOs publicly report the specified
information in a standardized format that we have made available to
ACOs through guidance at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Statutes_Regulations_Guidance.html. Our guidance recommended that ACOs
report the required information on a Web site that complies with the
marketing requirements set forth at Sec. 425.310. Because Web pages
used to publicly report the information specified in Sec. 425.308
constitute ``marketing materials and activities,'' as defined at Sec.
425.20, any changes to such Web pages must be submitted for CMS review
in accordance with Sec. 425.310. Thus, if an ACO changes any of the
information on its public reporting Web page, such as adding an ACO
participant or replacing a member of the governing body, the ACO must
submit its Web page to us for marketing review. We believe this policy
creates undue burden on the ACO as well as on CMS.
b. Proposed Revisions
We continue to believe that publicly reporting the information
identified in Sec. 425.308 supports our goals of program transparency
and patient centeredness. We also continue to believe that it is
important for the ACO to be responsible for making this information
available to the public. We believe that the best way to do this is via
an ACO-maintained Web site, the mechanism through which most ACOs have
chosen to publicly report. However, based on our initial experience
with the Shared Savings Program and requests from some ACOs, we propose
some refinements to the requirements related to public reporting and
transparency.
We propose to modify Sec. 425.308 to reflect these new
requirements. In Sec. 425.308(a), we propose to require that each ACO
maintain a dedicated Web page on which the ACO must publicly report the
information listed in paragraph (b). In addition, we propose that an
ACO must report to us the address of the Web page on which it discloses
the information set forth in Sec. 425.308 and apprise us of changes to
that Web site address in the form and manner specified by CMS. We
solicit comment on when an ACO should be required to inform us of such
changes (for example, within 30 days after the change has occurred).
In Sec. 425.308(b), we require ACOs to report certain information
in a standardized format to be specified by CMS. Although we currently
set forth a recommended standardized format in guidance, we intend to
make a specific template available that ACOs must use so that ACOs
report information uniformly. This would minimize the compliance burden
on ACOs, enhance transparency for the public, and improve our oversight
of ACO compliance with the public reporting requirement. We envision
that the template would have fields in which the ACO must insert the
applicable public reporting information. Additionally, because the ACOs
would report information using a standard template, we do not believe
the information would require marketing review each time the
information is updated. Therefore, we propose in Sec. 425.308(c) that
information reported on an ACO's public reporting Web page which is in
compliance with the requirements of the standardized format specified
by CMS, (that is, through use of the template) is not subject to
marketing review and approval under Sec. 425.310. ACOs should keep in
mind that although information reported using the template would not be
subject to marketing review, we intend to monitor both the use of the
template and the information inserted by ACOs into the template as part
of our ongoing program monitoring and compliance oversight efforts.
Using a standardized format, such as a template, for this purpose
has several advantages over the way ACOs currently make this
information publicly available. First, using a template would improve
the usefulness of this information for the public by standardizing the
way the information is made available across ACOs. Second, using a
template would minimize the compliance burden on ACOs by ensuring the
information is reported in the way we intend. Finally, the use of a
standardized format also affords CMS a more streamlined approach for
our monitoring and compliance oversight activities. We seek comment on
the proposal to use a standardized format for public reporting
purposes.
We also propose to make a few changes to the information that must
be publicly reported. In Sec. 425.308(b), we propose to add two
categories of organizational information that must be publicly
reported. First, we propose to add a requirement at Sec.
425.308(b)(3)(iv) that ACOs publicly identify key clinical and
administrative leaders within their organization as part of the public
reporting requirements. ACOs are already required to identify the
members of their governing body, associated committees and committee
leadership. However, key members of the ACO's clinical and
administrative leadership might not be members of the governing body or
committee leadership. For example, the ACO's medical director may be a
stand-alone leadership position but not hold a committee leadership
position or be a

[[Page 72847]]

member on the ACO's governing body. Because clinical and administrative
leadership is an eligibility requirement for program participation, we
believe that requiring the ACO to publicly report its clinical and
administrative leadership would lend additional transparency and
insight into the ACO's organization.
Second, we believe it would be helpful for the public to have a
better understanding of the types of ACO participants or combinations
of ACO participants that have joined to form the ACO. At Sec.
425.102(a), we articulate the following types of ACO participants or
combinations of ACO participants that are eligible to form an ACO:
ACO professionals in group practice arrangement.
Networks of individual practices of ACO professionals.
Partnerships or joint venture arrangements between
hospitals and ACO professionals.
Hospitals employing ACO professionals.
CAHs that bill under Method II.
RHCs and FQHCs.
We note that if revised by our proposals in section II.E. of this
proposed rule, this list would also include teaching hospitals. On the
application to the Shared Savings Program, each ACO must indicate the
types of entities that formed the ACO. We propose to add a provision at
Sec. 425.308(b)(3)(vi) requiring ACOs to publicly report the types of
ACO participants or combinations of ACO participants, as listed in
Sec. 425.102(a), that form the ACO. Stakeholders have requested
information about the composition of ACOs. Providing the types and
combinations of ACO participants would assist stakeholders in
understanding the composition of ACOs.
In addition, we propose at Sec. 425.308(b)(5) to require each ACO
to publicly report its performance on all quality measures used to
assess the quality of care furnished by the ACO. We currently require
ACOs to post only the results of their performance on claims-based
measures. The results of quality measures are reported by CMS on
Physician Compare. We agree with the comments made by stakeholders that
requiring an ACO to publicly report its performance on all quality
measures (as defined at Sec. 425.20) would assist stakeholders in
getting a more accurate picture of the ACO's performance. Therefore, we
propose to broaden the public reporting requirement to require ACOs to
publicly report performance on all quality measures.
We also note a technical modification to our rules. Currently, we
require ACOs to report the amount of any ``shared savings performance
payment'' (Sec. 425.308(d)(1)). However, to conform this provision to
the definition of ``shared savings'' at Sec. 425.20, we propose to
remove the term ``performance payment'' from the phrase. The new
language is found at revised Sec. 425.308(b)(4)(i).
Finally, for purposes of program transparency, we find it useful to
post on Physician Compare and our Web site (www.cms.gov/sharedsavingsprogram/) certain information about ACOs, such as ACO
public contact information, ACO public reporting Web page addresses,
the amount of any shared savings or losses incurred, and quality
performance results. Therefore, in addition to information we already
post on our Web site and Physician Compare, we propose at Sec.
425.308(d) to post ACO-specific information, including information the
ACO is required to publicly report under Sec. 425.308, as is necessary
to support program goals and transparency. We solicit comment on what
other information should be published on our Web site. Because proposed
Sec. 425.308(d) encompasses our ability to publicly report ACO
performance on all quality measures, we propose to remove Sec.
425.308(e) or reserve it for future use. We intend to continue
reporting ACO quality measure performance on Physician Compare in the
same way as for group practices that report under PQRS.
3. Terminating Program Participation
a. Overview
Section 425.218 of our regulations sets forth the grounds for
terminating an ACO for failure to comply with the requirements of the
Shared Savings Program (Sec. 425.218(a)). For example, an ACO's or ACO
participant's failure to notify beneficiaries of their provider's
participation in the program as required under Sec. 425.312 would
constitute grounds for terminating the ACO. In addition, we may
terminate an ACO for a number of other violations, such as those
related to certain fraud and abuse laws, the antitrust laws, or other
applicable Medicare laws and regulations relevant to ACO operations, or
if certain sanctions have been imposed on the ACO by an accrediting
organization or a federal, state or local government agency (Sec.
425.218(b)).
Prior to termination, we may take interim steps such as issuing the
ACO a warning notice or placing the ACO on a corrective action plan
(CAP) (Sec. 425.216). However, we reserve the right to immediately
terminate a participation agreement if necessary (Sec. 425.218(c)). We
notify the ACO in writing if the decision is made to terminate the
participation agreement.
Under Sec. 425.220, an ACO may voluntarily terminate its
participation agreement. Such an ACO is required to provide CMS and all
of its ACO participants with a 60-day advance written notice of its
decision to terminate its participation in the Shared Savings Program.
An ACO is not required to notify beneficiaries of the ACO's decision to
terminate from the Shared Savings Program. Under current regulations,
an ACO that terminates its participation agreement before completion of
the participation agreement does not share in any savings for the
performance year during which it notifies CMS of its decision to
terminate the participation agreement (Sec. 425.220(b)). This is
because an ACO that terminates its participation agreement during a
performance year will have failed to complete the entire performance
year and will therefore have failed to meet the requirements for shared
savings.
b. Proposed Revisions
We propose several modifications to the regulations related to
termination of a participation agreement. First, we propose to permit
termination for failure to timely comply with requests for documents
and other information and for submitting false or fraudulent data. In
addition, we propose to add a new regulation at Sec. 425.221 requiring
ACOs to implement certain close-out procedures upon termination and
nonrenewal. Finally, we propose to address in new Sec. 425.221 the
payment consequences upon termination of a participation agreement.
(1) Grounds for Termination
First, at Sec. 425.218(b) we propose to modify the grounds for
termination to specifically include the failure to comply with CMS
requests for submission of documents and other information by the CMS
specified deadline. At times, we may request certain information from
the ACO in accordance with program rules. The submission of those
documents by the specified due date is important for program
operations. For example, we require each ACO to submit to us, on an
annual basis, its list of ACO participants and their TINs (existing
Sec. 425.304 and proposed Sec. 425.118). When ACOs do not submit
these lists by the due date specified, it prevents us from applying the
assignment methodology (which is dependent on having accurate lists of

[[Page 72848]]

ACO participants for all ACOs) and impacts the timelines for the
program, such as the calculation of the benchmarks for all ACOs.
Missing such deadlines is very disruptive to the program and other
ACOs. Therefore, we propose to modify Sec. 425.218(b) to permit
termination of an ACO agreement for failure to comply with requests for
information and documentation by the due date specified by CMS.
Additionally, under Sec. 425.302, an individual with the authority
to legally bind the individual or entity submitting data or information
to CMS must certify the accuracy, completeness, and truthfulness of the
data and information to the best of his or her knowledge and belief.
However, circumstances could arise in which the data and information
submitted was falsified or erroneous. Submission of false or fraudulent
data, (for example, data submitted through the CMS web interface used
to determine an ACO's quality performance) could impact the amount of
shared savings calculated for the ACO and cause CMS to overpay the ACO.
Because of the severity of the consequences of submitting false or
fraudulent data, we propose to modify Sec. 425.218(b) to permit
termination of an ACO agreement for submission of false or fraudulent
data. We note that ACOs are obligated to repay shared savings payments
to which they are not entitled, including, by way of example only, any
overpayment to the ACO based on the submission of false or fraudulent
data.
(2) Close-Out Procedures and Payment Consequences of Early Termination
We propose to add new Sec. 425.221 to address close-out procedures
and payment consequences of early termination. First, we believe it is
important to establish an orderly close-out process when an ACO's
participation agreement is terminated. Therefore, we are proposing in
Sec. 425.221(a) that an ACO whose participation agreement is
terminated prior to its expiration either voluntarily or by CMS must
implement close-out procedures in a form, manner, and deadline
specified by CMS. These close-out procedures shall address data sharing
issues such as data destruction, beneficiary notification issues (for
example removal of marketing materials and ensuring beneficiary care is
not interrupted), compliance with quality reporting, record retention
issues, and other issues established through guidance. We note that the
close-out procedures would also apply to those ACOs that have elected
not to renew their agreements upon expiration of the participation
agreement. We further propose in Sec. 425.221(a)(2) that any ACO that
fails to complete the close-out procedures in the form and manner and
by the deadline specified by CMS would not be eligible for shared
savings. We solicit comments on other strategies that would ensure
compliance with close-out procedures.
Second, we propose in Sec. 425.221(b) to address certain payment
consequences of early termination. Currently under Sec. 425.220(b), an
ACO that voluntarily terminates its agreement at any time during a
performance year will not share in any savings for the performance year
during which it notifies CMS of its decision to terminate the
participation agreement. However, stakeholders have suggested that
completion of the performance year, as part of an orderly close-out
process, could be mutually beneficial to the ACO, its ACO participants
and ACO providers/suppliers, and to CMS. Specifically, stakeholders
have suggested that an ACO should be entitled to receive shared savings
if the ACO completes a performance year through December 31 and
satisfies all requirements for sharing in savings for that performance
year (for example, the quality reporting for the performance year).
Additionally, by completing quality reporting as part of the close-out
process, the ACO participants would not be penalized by the ACO's
decision to terminate its participation agreement. For example,
eligible professionals that bill through the TIN of an ACO participant
could satisfy the reporting requirement to avoid the downward payment
adjustment under the PQRS in a subsequent year.
Therefore, we propose in Sec. 425.221(b) to permit an ACO whose
participation agreement is voluntarily terminated by the ACO under
Sec. 425.220 to qualify for shared savings, if--
The effective date of termination is December 31; and
By a date specified by CMS, it completes its close-out
process for the performance year in which the termination becomes
effective.
In order to effectively manage this option in the case of voluntary
termination, the ACO must specify in its termination notice, and CMS
must approve, a termination effective date of December 31 for the
current performance year. Because the proposed new provision at Sec.
425.221 will address the consequences of termination, including the
payment consequences, we also propose to make a conforming change to
Sec. 425.220 to remove paragraph (b) addressing the payment
consequences of early termination.
We note that the opportunity to share in savings for a performance
year would not extend to ACOs that terminate their participation
agreement with effective dates prior to December 31 or to ACOs that CMS
terminates under Sec. 425.218. Those ACOs that terminate prior to
December 31 will not have completed the performance year and thus would
not qualify for shared savings. ACOs terminated by CMS under Sec.
425.218 would not qualify for shared savings irrespective of the
termination date because maintaining eligibility to participate in the
Shared Saving Program is a pre-requisite for sharing in savings (see
Sec. Sec. 425.604(c) and 425.606(c)). In such cases, we strongly
encourage ACOs to fulfill their obligations to their ACO participants
and ACO providers/suppliers by reporting quality for the performance
year in which it terminates so that their ACO participants and ACO
providers/suppliers are not unduly penalized by the ACO's decision.
However, even if the ACO completes quality reporting on behalf of its
ACO participants and ACO provider/suppliers, if the ACO terminates its
participation midyear or is terminated by CMS under Sec. 425.218
(prior to December 31), it would not be eligible to share in savings
for the performance year. The ACO would not be eligible to share in
savings because the ACO would not have satisfied all requirements for
sharing in savings for that performance year.
(3) Reconsideration Review Process
(A) Overview
Under Sec. 425.802(a), an ACO may appeal an initial determination
that is not subject to the statutory preclusion on administrative or
judicial review (see section 1899(g) of the Act). Specifically, the
following determinations are not subject to administrative or judicial
review:
The specification of quality and performance standards
under Sec. Sec. 425.500 and 425.502.
The assessment of the quality of care furnished by an ACO
under the performance standards.
The assignment of beneficiaries.
The determination of whether the ACO is eligible for
shared savings and the amount of such shared savings (including the
determination of the estimated average per capita Medicare expenditures
under the ACO for beneficiaries assigned to the ACO and the average
benchmark for the ACO).
The percent of shared savings specified by the Secretary
and the limit on the total amount of shared savings established under
Sec. Sec. 425.604 and 425.606.

[[Page 72849]]

The termination of an ACO for failure to meet the quality
performance standards.
Initial determinations that are not precluded from administrative
or judicial review would include the denial of an ACO application or
the involuntary termination of an ACO's participation agreement by CMS.
Under Sec. 425.802(a), an ACO may appeal an initial determination
that is not prohibited from administrative or judicial review by
requesting reconsideration review by a CMS official. The request for
review must be submitted for receipt by CMS within 15 days of the
notice of the initial determination. Section 425.802(a)(2) provides
that reconsiderations may be heard orally (that is, in person, by
telephone or other electronic means) or on the record (review of
submitted documentation) at the discretion of the reconsideration
official.
(B) Proposed Changes
To date, CMS reconsideration official(s) have reviewed all
reconsideration requests received as on-the-record reviews. We believe
that on-the-record reviews are fair to both parties. Experience to date
has demonstrated that a robust oral review is not necessary in light of
the narrow scope of review. The issues eligible for review can be
easily communicated in a detailed writing by both parties and do not
require in-person witness testimony. Finally, we believe that on-the-
record reviews do not require as many agency resources and can
therefore ensure that decisions are made in a timely manner.
Accordingly, we propose to modify Sec. 425.802 to permit only on-
the-record reviews of reconsideration requests. Additionally, we
propose to similarly modify Sec. 425.804 and also clarify that the
reconsideration process allows both ACOs and CMS to submit one brief
each in support of its position by the deadline established by the CMS
reconsideration official.
4. Monitoring ACO Compliance With Quality Performance Standards
We propose a technical revision to Sec. 425.316(c) to clarify our
administrative enforcement authority when ACOs fail to meet the quality
reporting requirements. Specifically, we propose to remove Sec.
425.316(c)(3), which sets forth various required actions the ACO must
perform if it fails to report one or more quality measures or fails to
report completely and accurately on all measures in a domain. We also
propose to remove Sec. 425.316(c)(4), which sets forth the
administrative action we may take against an ACO if it exhibits a
pattern of inaccurate or incomplete reporting of quality measures or
fails to make timely corrections following notice to resubmit. The
actions identified in Sec. 425.316(c)(3) and (4) include request for
missing or corrected information, request for a written explanation for
the noncompliance, and termination. All of these actions are already
authorized under Sec. 425.216 and Sec. 425.218. Therefore, to reduce
redundancy, prevent confusion, and to streamline our regulations, we
propose to modify Sec. 425.316(c) to remove Sec. 425.316(c)(3) and
(c)(4).
In addition, we propose a technical change to Sec. 425.316(c)(5),
which currently provides that an ACO ``will not qualify to share in
savings in any year it fails to report fully and completely on the
quality performance measures.'' We propose to redesignate this
paragraph as Sec. 425.316(c)(3) and replace ``fully and completely''
with ``accurately, completely, and timely'' to align with Sec.
425.500(f) and to emphasize the importance of timely submission of
measures.

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. Response to Comments

Because of the large number of public comments we normally receive
on Federal Register documents, we are not able to acknowledge or
respond to them individually. We will consider all comments we receive
by the date and time specified in the DATES section of this proposed
rule, and, when we proceed with a subsequent document, we will respond
to the comments in the preamble to that document.

V. Regulatory Impact Analysis

A. Statement of Need

This proposed rule is necessary to propose 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, coordinates items and services
under parts A and B, and encourages investment in infrastructure and
redesigned care processes for high quality and efficient service
delivery.

B. Overall Impact

We have 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), 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.
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
Regulatory Impact Analysis, which to the best of our ability presents
the costs and benefits of the rulemaking.

C. Anticipated Effects

1. Effects on the Medicare Program
The Shared Savings Program is a voluntary program involving an
innovative mix of financial incentives

[[Page 72850]]

for quality of care and efficiency gains within FFS Medicare. As a
result, the changes being proposed to the Shared Savings Program could
result in a range of possible outcomes. In previous rulemaking (76 FR
67904), we indicated that participation in Track 1 might enable ACOs to
gain the experience necessary to take on risk in a subsequent agreement
period under a two-sided arrangement, possibly enhancing the
opportunity for greater program savings in years beyond the first
agreement period. Conversely, if in that first agreement period, ACOs
come to reliably predict a bias that ensures an outcome--whether
favorable or unfavorable--the program would be at risk for increasingly
selective participation from favored ACOs and any real program savings
could be overwhelmed by outsized shared-savings payments (76 FR 67964).
Further, even ACOs that opt for a two-sided arrangement could
eventually terminate their agreements if they anticipate that efforts
to improve efficiency are overshadowed by their particular market
circumstances. This scenario could also contribute to selective program
participation by ACOs favored by the national flat-dollar growth
target, or favored by other unforeseen biases affecting performance.
However, as we indicated in the previous rulemaking, even with the
optional liability for a portion of excess expenditures, which offers
less incentive to reduce costs than a model involving full capitation,
the opportunity to share in FFS Medicare savings still represents an
incentive for efficiency. The actual effects of shared savings (and
potential liabilities in the form of shared losses) will have varying
degrees of influence on hospitals, primary care physicians, specialty
physicians, and other providers and suppliers. Moreover, while certain
care improvements might be achieved relatively quickly (for example,
prevention of hospital readmissions and emergency-room visits for
certain populations with chronic conditions), some ACOs might need more
than 3 years to achieve comprehensive efficiency gains.
As of the spring of 2014, over 330 organizations have chosen to
participate in the Shared Savings Program. These organizations care for
nearly 5 million assigned FFS beneficiaries living in 47 states, plus
Puerto Rico and the District of Columbia. Half of all ACOs characterize
themselves as networks of individual practices and the other half
include hospitals. In the fall of 2014, CMS announced the final
financial reconciliation and quality performance results for
performance year 1 for ACOs with 2012 and 2013 agreement start dates.
Of the 220 ACOs with 2012 and 2013 start dates, 58 ACOs generated
shared savings during their first performance year. They held spending
$705 million below their targets and earned shared savings payments of
more than $315 million as their share of program savings. One ACO in
Track 2 overspent its target by $10 million and owed shared losses of
$4 million. Total net savings to Medicare is close to $383 million,
including repayment of shared losses by one Track 2 ACO. An additional
60 ACOs reduced health costs compared to their benchmark, but did not
qualify for shared savings, as they did not meet the minimum savings
threshold. While evaluation of the program's overall impact is ongoing,
the performance year 1 final financial reconciliation and quality
results are within the range originally projected for the program's
first year. Also, at this point, we have seen no evidence of systematic
bias in ACO participation or performance that would raise questions
about the savings that have been achieved.
Earlier in this proposed rule, we proposed additions to or changes
in policy that are intended to better encourage ACO participation in
risk-based models by--
Easing the transition from Track 1 to Track 2;
Reducing risk under Track 2; and
Adopting an alternative risk-based model--Track 3.
First, as is currently the case, an ACO would be able to apply to
participate in Track 1 for its initial agreement period during which
the ACO could be eligible for shared savings payments in all 3
performance years of the agreement period without the risk of being
responsible for repayment of any losses if actual expenditures exceed
the benchmark. However, rather than requiring all Track 1 ACOs to
transition to a risk-based model in their second agreement period, as
is currently required, we are proposing to improve the transition from
the shared-savings only model to a risk-based model for Track 1 ACOs
that might require additional experience with the program before taking
on performance-based risk. Specifically, in this proposed rule, we are
proposing that Track 1 ACOs may elect to continue participation under
Track 1 for a subsequent agreement period, albeit with a lower sharing
rate, provided that they meet the eligibility requirements to continue
in the program under Track 1.
Second, we are proposing to reduce the current level of risk for
ACOs that participate in Track 2, which provides an opportunity for an
ACO to receive a higher percentage of shared savings for all years of
the agreement period, but with potential liability for shared losses in
each of the agreement years if annual expenditures exceed the
benchmark. Specifically, in this proposed rule, we are proposing to
replace the current flat 2 percent MSR and MLR under Track 2 with a
variable MSR and MLR using the same methodology as is currently used to
establish the MSRs for ACOs under Track 1. Under this methodology an
ACO's MSR varies based on the number of assigned beneficiaries using a
sliding scale. Similarly, we are proposing to vary a Track 2 ACO's MSR
and MLR based on the number of assigned beneficiaries. This proposal
would reduce risk for many Track 2 ACOs by increasing the threshold
before they would have to share in additional costs that they had
incurred for the program.
Third, in this proposed rule, we are proposing to establish an
additional risk-based option (Track 3) that offers a higher maximum
shared savings percentage (75 percent) and performance payment limit
(20 percent) than is available under Track 2 (60 percent and 15 percent
respectively), a fixed MSR and MLR of 2 percent, and a cap on the
amount of losses for which an ACO is liable that is fixed at 15 percent
of its updated benchmark in each year. Also, under this model,
beneficiaries would be assigned prospectively so an ACO would know in
advance those beneficiaries for which it would be responsible.
As detailed in Table 8, we estimate at baseline (that is, without
the proposed changes detailed in this proposed rule) a total aggregate
median impact of $730 million in net federal savings for calendar years
(CY) 2016 through 2018 from the continued operation of the Shared
Savings Program for ACOs electing a second agreement period starting in
January 2016. The 10th and 90th percentiles of the estimate
distribution, for this same time period, yield a net savings of $380
million and $1,160 million, respectively. These estimated impacts
represent the effect on federal transfers of payments to Medicare
providers and suppliers. The median estimated federal savings are
higher than the estimate for the program effects over the preceding
calendar years (CY) 2012 through 2015 published in the previous final
rule (estimated median net savings of $470 million for such 4 year
period). This increase in savings is due to multiple factors related to
maturation of the program, including continued phase-in of assumed
savings potentials, lowered effective sharing

[[Page 72851]]

rates due in part to rebased benchmarks, and increased collection of
shared losses due to mandatory enrollment in Track 2 in a second
agreement period. However, absent changes to improve the viability of
participation for ACOs considering a second agreement period, we
estimate fewer than one in four ACOs will opt for continued
participation under downside risk in Track 2 as required under the
current regulations. Further, we estimate approximately one in three of
such re-enrolling ACOs would ultimately drop out of the program by 2018
to avoid future shared loss liability.
Alternatively, as detailed in Table 9, by including the proposed
changes detailed in this rule, the total aggregate median impact would
increase to $1,010 million in net federal savings for calendar years
(CY) 2016 through 2018. The 10th and 90th percentiles of the estimate
distribution, for the same time period, would also be higher, yielding
net savings of $430 million and $1,650 million, respectively. Such
median estimated federal savings are $280 million greater than the $730
million median net savings estimated at baseline absent proposed
changes. A key driver of an anticipated increase in net savings is
through improved ACO participation levels in a second agreement period.
We estimate that at least 90 percent of eligible ACOs will renew their
participation in the Shared Savings Program if presented with the new
options, primarily under Track 1 and, to a lesser extent, under Track
3. This expansion in the number of ACOs willing to continue their
participation in the program is estimated to result in additional
improvements in care efficiency of a magnitude significantly greater
than the reduced shared loss receipts estimated from baseline (median
shared loss dollars reduced by $140 million relative to baseline) and
the added shared savings payments flowing from a higher sharing rate in
Track 3 and continued one-sided sharing available in Track 1 (median
shared savings payments increased by $320 million relative to
baseline).
With respect to costs incurred by ACOs, as discussed later in this
section, for purposes of this analysis, we are retaining our assumption
included in our November 2011 final rule (76 FR 67969) of an average of
$0.58 million for start-up investment costs but are revising our
assumption for average ongoing annual operating costs for an ACO
participating in the Shared Savings Program to $0.86 million, down from
the $1.27 million assumed in our November 2011 final rule (76 FR
67969). This revision is related to the lower average number of
beneficiaries currently observed to be assigned to existing Shared
Savings Program ACOs compared to the larger organizations participating
in the Physician Group Practice Demonstration upon which the original
assumption was based. We also believe that our proposals to streamline
the administrative requirements for the program could further assist in
lowering administrative costs.
For our analysis, we are comparing the effects of the proposed
changes in this proposed rule for a cohort of ACOs that either
continued their participation, beginning in 2016 or newly began
participation in that same year. For purposes of our analysis, we
assume that roughly one quarter of ACOs will incur aggregate start-up
investment costs in 2016, ranging from $7 million under the baseline
scenario to $30 million under the alternative (all proposed changes)
scenario in aggregate. Aggregate-ongoing operating costs are estimated
to range from $43 million under the baseline scenario to $181 million
under the alternative scenario. Both start-up investment and ongoing
operating cost ranges assume an anticipated average participation level
of 50 (baseline scenario) to 210 (alternative scenario) new or
currently participating ACOs that establish or renew participation
agreements in 2016. For purposes of this analysis, we assume that some
portion of ACOs currently participating in the program will not renew
their participation agreement for a subsequent agreement period. As a
result, under our baseline scenario, we assume 50 ACOs will either
renew or begin an agreement period in 2016--far fewer than the 100 new
ACOs that have entered the program in each of the last 2 years. The 3-
year aggregate ongoing operating cost estimate also reflects our
assumption that, under the baseline scenario, there would be a greater
propensity for ACOs that have completed the full term of their initial
agreement period, and that would be required to participate under Track
2 in their second agreement period, to drop out of the program after
receiving poor results from their final settlement for the first
performance year under Track 2 in the new agreement period. Therefore,
as illustrated in Table 8 for the baseline scenario, for CYs 2016
through 2018, total median ACO shared savings payments of $310 million
offset by $170 million in shared losses coupled with the aggregate
average start-up investment and ongoing operating cost of $121 million
result in an estimated net private benefit of $19 million.
Alternatively, as illustrated in Table 9 for the all changes scenario,
for CYs 2016 through 2018 the total median ACO shared savings payments
of $630 million, offset by $30 million in shared losses, coupled with
the aggregate average start-up investment and ongoing operating costs
of $562 million, result in an estimated net private benefit of $38
million. By proposing to no longer require ACOs to accept risk in their
second agreement period, our proposed changes also provide the benefit
of reducing the per-ACO average shared loss liability by over 95
percent compared to the baseline. Therefore, the proposed changes would
likely prevent a significant number of ACOs that would renew their
participation agreements in 2016 from leaving the program prior to
2018.
By encouraging greater Shared Savings Program participation, the
changes proposed in this rule will also benefit beneficiaries through
broader improvements in accountability and care coordination than would
occur under current regulations. Accordingly, we have prepared a
regulatory impact analysis (RIA) that to the best of our ability
presents the costs and benefits of this proposed rule.

Table 8--Baseline (Absent All Proposed Changes) Estimated Net Federal Savings, Costs and Benefits, CYs 2016
Through 2018
----------------------------------------------------------------------------------------------------------------
CY 2016 CY 2017 CY 2018 CYs (2016-2018)
----------------------------------------------------------------------------------------------------------------
Net Federal Savings:
10th Percentile............. $200 million...... $150 million...... $20 million....... $380 million.
Median...................... $340 million...... $270 million...... $110 million...... $730 million.
90th Percentile............. $510 million...... $430 million...... $240 million...... $1160 million.
ACO Shared Savings:
10th Percentile............. $40 million....... $60 million....... $70 million....... $180 million.
Median...................... $80 million....... $110 million...... $120 million...... $310 million.

[[Page 72852]]

90th Percentile............. $130 million...... $170 million...... $190 million...... $480 million.
ACO Shared Losses:
10th Percentile............. $20 million....... $40 million....... $10 million....... $80 million.
Median...................... $60 million....... $80 million....... $30 million....... $170 million.
90th Percentile............. $100 million...... $150 million...... $60 million....... $290 million.
----------------------------------------------------------------------------------------------------------------
Costs........................... The estimated aggregate average start[dash]up investment and 3[dash]year
operating costs is $121 million. The total estimated start[dash]up investment
costs average $7 million, with ongoing costs averaging $43 million, for the
anticipated mean baseline participation of 50 ACOs.
----------------------------------------------------------------------------------------------------------------
Benefits........................ Improved healthcare delivery and quality of care and better communication to
beneficiaries through patient[dash]centered care.
----------------------------------------------------------------------------------------------------------------
* Note that the percentiles for each individual year do not necessarily sum to equal the corresponding
percentiles estimated for the total 3-year impact, in the column labeled CYs 2016 through 2018, due to the
annual and overall distributions being constructed independently.

Table 9--Alternative Scenario Assuming All Proposed Changes Estimated Net Federal Savings, Costs and Benefits,
CYs 2016 Through 2018
----------------------------------------------------------------------------------------------------------------
CY 2016 CY 2017 CY 2018 CYs (2016-2018)
----------------------------------------------------------------------------------------------------------------
Net Federal Savings:
10th Percentile............. $190 million...... $150 million...... $80 million....... $430 million.
Median...................... $380 million...... $350 million...... $280 million...... $1,010 million.
90th Percentile............. $590 million...... $570 million...... $510 million...... $1650 million.
ACO Shared Savings:
10th Percentile............. $90 million....... $150 million...... $220 million...... $470 million.
Median...................... $140 million...... $210 million...... $280 million...... $630 million.
90th Percentile............. $200 million...... $280 million...... $350 million...... $820 million.
ACO Shared Losses:
10th Percentile............. $0 million........ $0 million........ $0 million........ $10 million.
Median...................... $10 million....... $20 million....... $0 million........ $30 million.
90th Percentile............. $30 million....... $40 million....... $20 million....... $70 million.
----------------------------------------------------------------------------------------------------------------
Costs........................... The estimated aggregate average start[dash]up investment and 3[dash]year
operating costs is $562 million. The total estimated start[dash]up investment
costs average $30 million, with ongoing costs averaging $181 million, for the
anticipated mean baseline participation of 210 ACOs.
----------------------------------------------------------------------------------------------------------------
Benefits........................ Improved healthcare delivery and quality of care and better communication to
beneficiaries through patient-centered care.
----------------------------------------------------------------------------------------------------------------
Note that the percentiles for each individual year do not necessarily sum to equal the corresponding percentiles
estimated for the total 3-year impact in the column labeled CYs 2016 through 2018, due to the annual and
overall distributions being constructed independently. Also, the cost estimates for this table reflect our
assumptions for increased ACO participation as well as changes in the mix of new and continuing ACOs.

There remains uncertainty as to the number of ACOs that will
continue to participate in the program, provider and supplier response
to the financial incentives offered by the program in the medium and
long run, and the ultimate effectiveness of the changes in care
delivery that may result as ACOs work to improve the quality and
efficiency of patient care. These uncertainties continue to complicate
efforts to assess the financial impacts of the Shared Savings Program
and result in a wide range of potential outcomes regarding the net
impact of the proposed changes in this proposed rule on Medicare
expenditures.
To best reflect these uncertainties, we continue to utilize a
stochastic model that incorporates assumed probability distributions
for each of the key variables that will affect the overall financial
impact of the Shared Savings Program. Using a Monte Carlo simulation
approach, the model randomly draws a set of specific values for each
variable, reflecting the expected covariance among variables, and
calculates the program's financial impact based on the specific set of
assumptions. We repeated the process for a total of 2,500 random
trials, tabulating the resulting individual cost or savings estimates
to produce a distribution of potential outcomes that reflects the
assumed probability distributions of the incorporated variables, as
shown in Table 9. In this way, we can evaluate the full range of
potential outcomes based on all combinations of the many factors that
will affect the financial impact, and with an indication of the
likelihood of these outcomes. It is important to note that these
indications do not represent formal statistical probabilities in the
usual sense, since the underlying assumptions for each of the factors
in the model are based on reasonable judgments, using independent
expert opinion when available.
The median result from the distribution of simulated outcomes
represents the ``best estimate'' of the financial effect of the
proposed changes to the Shared Savings Program. The full distribution
illustrates the uncertainty surrounding the mean or median financial
impact from the simulation.
The median estimate involves a combination of--
Reduced actual Medicare expenditures due to more efficient
care;
Shared savings payments to ACOs; and
Payments to CMS for shared losses when actual expenditures
exceed the

[[Page 72853]]

benchmark, resulting in a projected total of $1,010 million in net
savings over CYs 2016 through 2018, or $280 million greater than the
median projected total at baseline without the changes proposed in this
rule.
This net Federal savings estimate, detailed at the top of Table 9,
can be summed with the projected ACO shared savings less projected ACO
shared losses--both also detailed in Table 9--to show the median
expected effect on Medicare claim expenditures before accounting for
shared savings payments (that is, the reduction in actual Medicare
expenditures due to more efficient care).
A net savings (cost) occurs when payments of earned and unearned
shared savings (less shared losses collected) resulting from: (1)
Reductions in spending; (2) care redesign; and (3) random group claim
fluctuation, in total are less than (greater than) assumed savings from
reductions in expenditures.
As continued emerging data become available on the differences
between actual expenditures and the target expenditures reflected in
ACO benchmarks, it may be possible to evaluate the financial effects
with greater certainty. The estimate distribution shown in Table 10
provides an objective and reasonable indication of the likely range of
financial outcomes, given the chosen variables and their assumed
distributions at this time in the program's operation.
a. Assumptions and Uncertainties
We continue to rely on input gathered as part of the analysis for
the existing regulation from a wide range of external experts,
including credentialed actuaries, consultants, and academic
researchers, to identify the pertinent variables that could determine
the efficacy of the program, and to identify the reasonable ranges for
each variable. We also continue to monitor emerging evidence from
current participation in this program, the Pioneer ACO Model, and
related published evidence where available. The factors that we are
continuing to consider for modeling include all of the following:
Number of participating ACOs, including the sensitivity to
burdens of participation and the generosity of the sharing arrangement.
Size mix of participating ACOs.
Type of ACO that would consider accepting risk.
Participating ACOs' current level of integration and
preparedness for improving the quality and efficiency of care delivery.
Baseline per-capita costs for ACOs, relative to the
national average.
Number and profile of providers and suppliers available to
participate in the Shared Savings Program as a result of Innovation
Center model initiatives.
Range of gross savings achieved by ACOs, and the time
required for full phase-in.
Local variation in expected claims cost growth relative to
the national average.
Quality reporting scores and resulting attained sharing
(or loss) percentages.
Potential 'spillover' effects between the Shared Savings
Program and other value-based incentive programs implemented by CMS
and/or other payers.
We assumed that overall between 0.8 million Medicare beneficiaries
(under baseline) and 3.3 million Medicare beneficiaries (with all
proposed changes) would annually be assigned to between 50 and 210 ACOs
beginning a new agreement period in 2016. Given data on current
participation, we anticipate the program will continue to garner
comparable levels of participation from markets exhibiting baseline
per-capita FFS expenditures above, at, or below the national average.
In addition, we assumed the level of savings generated by an ACO to
positively correlate to the achieved quality performance score and
resulting sharing percentage.
For estimating the impact of the proposed changes, we assume that
most ACOs (approximately 9 out of 10, on average) will choose Track 1
despite a proposed decrease in the savings sharing percentage. This is
because the ACOs will seek to simultaneously: (1) Avoid the potential
for financial loss if expenditures experience a significant upward
fluctuation or efficiency improvements are less effective than planned;
and (2) continue to build organizational experience to achieve a per-
capita cost target as determined under the program's benchmark
methodology.
In contrast, we assume that a minority of ACOs--disproportionately
represented from a more capable subset of the total program
participation--will opt for Track 3 in the second agreement period.
These ACOs will be enabled by experience accepting risk and/or
achieving success in their first agreement period in this program, and
motivated by the provision for prospective assignment of beneficiaries
and the greater sharing percentage as proposed for this new option. A
particularly important cause for uncertainty in our estimate is the
high degree of variability observed for local per-capita cost growth
rates relative to the national average ``flat dollar'' growth (used to
update ACO benchmarks). The benchmark or expenditure target effectively
serves as the chief measure of efficiency for participating ACOs.
Factors such as lower-than-average baseline per-capita expenditure and
variation in local growth rates relative to the national average can
trigger shared savings payments even in the absence of any efficiency
gains. Similarly, some ACOs could find that factors, such as prevailing
per-capita expenditure growth in their service area that is higher than
the national average, limit efficiency gains and reduce or prevent
shared savings.
b. Detailed Stochastic Modeling Results
Table 10 shows the distribution of the estimated net financial
impact for the 2,500 stochastically generated trials under the scenario
where all proposed changes are implemented. (The amounts shown are in
millions, with negative net impacts representing Medicare savings). The
net impact is defined as the total cost of shared savings less--(1) any
amount of savings generated by reductions in actual expenditures; and
(2) any shared losses collected from ACOs that accepted risk and have
actual expenditures exceeding their benchmark.
The median estimate of the Shared Savings Program financial impact
for ACOs potentially entering a second agreement period as proposed in
this rule and covering calendar years 2016 through 2018 is a net
federal savings of $1,010 million, which is $280 million higher than
our estimate for the same period assuming a baseline scenario, which
excludes the changes proposed in this rule. This amount represents the
``best estimate'' of the financial impact of the Shared Savings Program
during the applicable period. However, it is important to note the
relatively wide range of possible outcomes. While over 99 percent of
the stochastic trials resulted in net program savings, the 10th and
90th percentiles of the estimated distribution show net savings of $430
million to net savings of $1,650 million, respectively. In the extreme
scenarios, the results were as large as $2.9 billion in savings or $200
million in costs.
The stochastic model and resulting financial estimates were
prepared by the CMS Office of the Actuary (OACT). The median result of
$1,010 million in savings is a reasonable ``point estimate'' of the
impact of the Shared Savings Program during the period between 2016 and
2018 if the changes proposed

[[Page 72854]]

in this proposed rule are finalized and implemented. However, we
emphasize the possibility of outcomes differing substantially from the
median estimate, as illustrated by the estimate distribution. As we
analyze additional data on ACO performance in the first agreement
period, we may likely improve the precision of future financial impact
estimates.
To the extent that the Shared Savings Program will result in net
savings or costs to Part B of Medicare, revenues from Part B
beneficiary premiums would also be correspondingly lower or higher. In
addition, because MA payment rates depend on the level of spending
within traditional FFS Medicare, savings or costs arising from the
Shared Savings Program would result in corresponding adjustments to MA
payment rates. Neither of these secondary impacts has been included in
the analysis shown.
[GRAPHIC] [TIFF OMITTED] TP08DE14.000

Table 11 shows the median estimated financial effects for the
Shared Savings Program of ACOs entering in a new agreement period
starting in 2016 and the associated 10th and 90th percentile ranges,
assuming all changes in this proposed rule are implemented. Net savings
(characterized by a negative net impact on federal outlays) are
expected to moderately contract over the 3-year period, from a median
of $380 million in 2016 to $270 million in 2018. This progression is
related to the maturation of efficiencies achieved by renewing ACOs
contrasted by progressive increases in shared savings payments due to
increasing variability in expenditures in later performance years
relative to a static benchmark expenditure baseline. To similar effect,
the potential that Track 3 ACOs experiencing losses may elect to
voluntarily terminate their participation in the program could work to
decrease net savings in the last year of the period relative to prior
years. We note that the percentiles are tabulated for each year
separately. Therefore, the overall net impact distribution (Table 9)
will not necessarily exactly match the sum of distributions for each
distinct year.

[[Page 72855]]

[GRAPHIC] [TIFF OMITTED] TP08DE14.001

c. Further Consideration
The impact analysis shown is only for the 3 years 2016 through 2018
corresponding to the second agreement period potentially available for
the up to nearly 220 ACOs that will complete their first agreement
period in 2015. As of January 1, 2014, 123 additional ACOs have joined
the program and would potentially be eligible for a second agreement
period beginning in 2017. For both groups of ACOs, uncertainties exist
regarding providers' continued engagement with program goals and
incentives, especially for providers who fail to generate shared
savings revenue comparable to the cost of effective participation in
the program. It is possible that, notwithstanding the enhancements
proposed in this rule, a significant drop-off in participation could
materialize from ACOs failing to achieve significant revenue from
shared savings in the short run. On the other hand, value-based payment
models are showing significant growth in arrangements from state
Medicaid programs, private insurers, and employer-sponsored plans.
Moreover, we would also note that the number of providers and suppliers
participating in these models and in the existing ACOs continues to
grow. Therefore, providers may view continued participation in this
program as part of a wider strategy for care redesign rather than be
driven only by the potential for receiving incentives in the form of
shared savings payments from the Medicare Shared Savings Program.
Therefore, there remains a potential for broad gains in efficiency and
quality of care delivery across all populations served by ACOs
participating in the Shared Savings Program with possible additional
``spillover'' effects on federal savings potentially traceable to
momentum originally created by this program. The stochastic model for
estimating future program impacts starting in 2016 does not incorporate
either of these divergent longer-run scenarios, but both remain
possibilities. An impact estimate expanded to include performance
beyond the 2016 through 2018 agreement period would likely entail a
significantly wider range of possible outcomes. However, emerging
results of the first performance cycle will help inform estimates of
the ongoing financial effects of the Shared Savings Program.
2. Effects on Beneficiaries
This program is still in the early stages of implementation.
However, we continue to believe that the Shared Savings Program will
benefit beneficiaries because the intent of the program is to--
Encourage providers and suppliers to join together to form
ACOs that will be accountable for the care provided to an assigned
population of Medicare beneficiaries;
Improve the coordination of FFS items and services; and

[[Page 72856]]

Encourage investment in infrastructure and redesigned care
processes for high quality and efficient service delivery that
demonstrates a dedication to, and focus on, patient-centered care that
results in higher quality care.
The benefits of a payment model that encourages providers and
suppliers to become accountable for the overall care furnished to
Medicare beneficiaries were evidenced by the PGP demonstration, upon
which many features of the Shared Savings Program are based. Under the
PGP demonstration, all of the PGP participants achieved improvements in
their scores for most of the quality measures over time. While only 2
PGP participants met all 10 quality measure targets active in their
first performance year, by the fifth performance year, seven sites met
all 32, or 100 percent of their targets, and the remaining 3 PGP
participants met over 90 percent of the targets. More specifically, as
we previously discussed in our November 2011 final rule (76 FR 67968),
over the first 4 years of the PGP Demonstration, physician groups
increased their quality scores an average of 10 percentage points on
the ten diabetes measures, 13 percentage points on the ten congestive
heart failure measures, 6 percentage points on the seven coronary
artery disease measures, 9 percentage points on the 2 cancer screening
measures, and 3 percentage points on the 3 hypertension measures.
Further analysis is provided in the Physician Group Practice
Demonstration Evaluation Report (Report to Congress, 2009; https://www.cms.gov/DemoProjectsEvalRpts/downloads/PGP_RTC_Sept.pdf).
As we have also previously discussed (76 FR 67968), in addition to
the overall increases in quality scores, we can examine the impact of
the PGP Demonstration on quality by comparing the values of the seven
claims-based quality measures for each PGP site and its comparison
group. Our analysis found that, on the claims-based measures, PGP
performance exceeded that of the comparison groups (CGs) on all
measures between the base year (BY) and performance year 2 (PY2). It
also found that the PGP sites exhibited more improvement than their CGs
on all but one measure between the BY and PY2. Even after adjusting for
pre-demonstration trends in the claims-based quality indicators, the
PGP sites improved their claims-based quality process indicators more
than their comparison groups.
Further, for the first year of the Pioneer ACO Model, all 32
Pioneer ACOs successfully reported quality measures and achieved the
maximum quality score for complete and accurate reporting, earning
incentive payments for their reporting accomplishments. Overall,
Pioneer ACOs performed better than published rates in FFS Medicare for
all 15 clinical quality measures for which comparable data are
available. For example,
Twenty-five of 32 Pioneer ACOs generated lower risk-
adjusted readmission rates for their aligned beneficiaries than the
benchmark rate for all Medicare FFS beneficiaries.
Pioneer ACOs performed better on clinical quality measures
that assess hypertension control for patients. The median rate among
Pioneer ACOs on blood pressure control among beneficiaries with
diabetes was 68 percent compared to 55 percent as measured in adult
diabetic population in 10 managed care plans across 7 states from 2000
to 2001.
Pioneer ACOs performed better on clinical quality measures
that assess low density lipoprotein (LDL) control for patients with
diabetes. The median rate among Pioneer ACOs for LDL control among
beneficiaries with diabetes was 57 percent compared to 48 percent in an
adult diabetic population in 10 managed care plans across 7 states from
2000 to 2001.
Additionally, under the Shared Savings Program, all but 6
organizations fully and completely reported quality measures for the
2013 reporting period, providing important information on current
performance that can be used to improve patient engagement and make
meaningful positive impacts on patient care.
Above and beyond the early quality data generated by participating
organizations, we have anecdotal evidence that illustrates the
importance of encouraging participation in the Shared Savings Program.
For example, ACO providers/suppliers report very meaningful changes in
patient engagement through beneficiary participation on the governing
body of the ACO and on patient advisory committees. In response to
beneficiary input, clinical practices are offering extended office
hours, including weekend hours, and ensuring timely appointments and
access to clinical staff. Using the data shared by CMS, ACOs are able
to identify high risk beneficiaries that require additional clinical
attention, assign case managers, and actively work to improve care for
these beneficiaries. One ACO reported that it has implemented a process
for performing in-home medication reconciliation and review of care
plans as a follow up to hospital discharge and for one third of those
patients, discovered an intervention that avoided an unnecessary
hospital readmission. Active identification and management of these
patients has uncovered previously unaddressed issues that factored into
patient inability to adhere to treatment plans. For example, one ACO
reported that it has uncovered several psycho-social issues that were
resulting in avoidable readmissions such as--
The inability to self-medicate (the ACO arranged for home
health services);
Lack of transportation to clinical practices (the ACO's
affiliated hospitals had a taxi service voucher program that the ACO
was able to expand to the beneficiary population assigned to the ACO):
Inadequate access to healthy food resources (the ACO
worked with community stakeholders to have meals delivered to the
patient's home).
Additionally, ACOs are using claims data to identify diagnoses
prevalent in the assigned population and develop best practice
guidelines for those conditions, and educating and alerting ACO
participants and ACO providers/suppliers to standardize care.
We expect that the changes proposed in this proposed rule,
specifically those easing administrative requirements, smoothing the
transition to a risk-based model, and expanding opportunities to share
in a higher level of savings will encourage greater program
participation by ACOs, which will in turn increase the number of
beneficiaries that can potentially benefit from high quality and more
coordinated care. Nonetheless, this program does not affect
beneficiaries' freedom of choice regarding which providers and
suppliers they see for care since beneficiaries assigned to an ACO
continue to be in the traditional Medicare program. Thus, beneficiaries
may continue to choose providers and suppliers that do not participate
in ACOs under the Shared Savings Program.
3. Effect on Providers and Suppliers
Based on discussions with ACOs that generated interim shared
savings and demonstrated high quality care during their first
performance year in the Shared Savings Program, we know that ACOs are
busy implementing a variety of strategies designed to improve care
coordination for beneficiaries and lower the rate of growth in
expenditures. Most of these ACOs consider themselves to be ``physician-
based'' organizations, rather than ``hospital-based'', although many
state that a strong collaboration between

[[Page 72857]]

inpatient and outpatient facilities is critical to better care
coordination across sites of care. ACOs mentioned several strategies
they believed were important such as careful pre-participation
planning, transparency between the ACO leadership and its ACO
participants and ACO providers/suppliers, education of ACO providers/
suppliers regarding the ACO's care processes, strong physician
leadership, and working to streamline and transform practices for
highly efficient coordinated care across sites of care. Several
clinicians in ACOs have reported to us that the ACO is providing them
with the support and structure needed to practice ``how [they] always
hoped [they] could''. All of the ACOs recognize that they are early in
the process of implementing their strategies to improve care
coordination and reduce the rate of growth in expenditures and have
plans to refine and improve based upon their early lessons learned.
We realize that ACOs bear costs in building the organizational,
financial and legal infrastructure that is necessary to participate in
the Shared Savings Program and implementing the strategies previously
articulated, as well as performing the tasks required of an ACO, such
as: Quality reporting, conducting patient surveys, and investing in
infrastructure for effective care coordination. While provider and
supplier participation in the Shared Savings Program is voluntary, we
have examined the potential costs of continued program participation.
In this proposed rule, we are proposing to revise several program
policies in order to reduce the burden associated with the
infrastructure, start-up and ongoing annual operating costs for
participating ACOs in the Shared Savings Program. These proposals
include simplifying the application process for certain ACOs with
experience under either Pioneer ACO Model or the Shared Savings Program
streamlining sharing of beneficiary data. These significant proposed
policy modifications are discussed in detail in sections II.B., C., and
D. of this proposed rule.
The Shared Savings Program is still relatively new, and the initial
group of organizations that applied to participate has only recently
completed the first performance year. Because of this limited
experience with the program and flexibility regarding the composition
of providers and suppliers within an ACO and the strategies that the
provider community will pursue in order to improve quality and reduce
cost of care, precise estimates of expected provider costs or changes
to their costs due to this proposed rule are difficult to create.
In our November 2011 final rule (76 FR 67968), we discussed a
Government Accountability Office analysis of the PGP demonstration. The
GAO study showed that both start-up and annual operating costs varied
greatly across the participating practices. Thus, as we indicated in
the November 2011 final rule (76 FR 67968), we use GAO's analysis not
to predict cost investment and operating expenditures, but to
demonstrate that we expect the range of investment to vary greatly
across ACOs and to provide the potential scope for aspiring
participants.
For purposes of our current impact analysis, we are retaining the
assumption included in our November 2011 final rule (76 FR 67969) of
$0.58 million in average start-up investment cost but are revising our
assumption for average ongoing annual operating costs for an ACO from
$1.27 million to $0.86 million to reflect the lower average number of
beneficiaries assigned to existing Shared Savings Program ACOs
(approximately 14,700 beneficiaries) compared to the ten PGP sites
examined by GAO (average size approximately 22,400 beneficiaries).
Therefore, our cost estimates for purposes of this proposed rule
reflect an average estimate of $0.58 million for the start-up
investment costs and $0.86 million in ongoing annual operating costs
for an ACO participating in the Shared Savings Program. Assuming an
expected range of ACOs participating in the Shared Savings Program of
50 to 210 ACOs (baseline scenario and all changes scenario,
respectively) yields an estimated aggregate start-up investment cost
ranging from $7 million to $30 million (assuming 1 in 4 ACOs will incur
start-up costs), with aggregate ongoing operating costs ranging from
$43 million to $181 million for the agreement period coinciding with
CYs 2016 through 2018. We are also assuming that ACOs participating in
a track that includes two-sided performance-based risk will in certain
cases drop out of the program after receiving poor results for the
first performance period beginning in 2016. Such drop out activity is
assumed to affect a greater proportion of ACOs at baseline than under
the all changes scenario because of the requirement that all renewing
ACOs participate in Track 2 under the baseline scenario. When utilizing
the anticipated mean participation rate of ACOs in the Shared Savings
Program for such agreement period coupled with the average start-up
investment and ongoing annual operating costs for the up to 3 years
that ACOs may participate for such agreement period, this yields
estimated aggregate average start-up investment and ongoing operating
costs of $121 million for 50 ACOs (assuming no regulatory changes) to
$562 million for 210 ACOs (assuming the proposed regulatory changes)
for the agreement period covering CYs 2016 through 2018.
While there will be a financial cost placed on ACOs that
participate, there will be benefits to the respective organizations in
the form of increased operational and healthcare delivery efficiency.
Furthermore, as discussed previously, and explained in more detail in
the preamble of this proposed rule, there will be an opportunity for
financial reward for success in the program in the form of shared
savings. As shown in Table 12, the estimate of the shared savings that
will be paid to participating ACOs is a median of $630 million during
CYs 2016 through 2018, with $470 million and $820 million reflecting
the 10th and 90th percentiles, respectively. (Similar to the previously
presented stochastic distributions, the distribution represents
uncertainty given the range of expert opinion, rather than a true
statistical probability distribution.)
Compared to shared savings payments, under our proposed changes to
the program, we anticipate collection from participating ACOs of a
relatively moderate $30 million in shared losses during the same
period, with our 10th and 90th percentiles projecting $10 million and
$70 million in shared losses collected, respectively. Shared losses
decrease relative to the baseline (median of $170 million over the same
3 years) because, in contrast to the baseline requirement, not all
renewing ACOs would be required to enter Track 2 and take on downside
risk. Modeling indicates that not all ACOs choosing downside risk in a
second agreement period, whether required, as under the current
regulation or as an alternative option under the proposed changes, will
achieve shared savings and some may incur a financial loss, due to the
requirement to repay a share of actual expenditures in excess of their
benchmark as shared losses. The significantly reduced level of shared
losses anticipated under the all proposed changes scenario is largely
attributable to the proposed option for eligible ACOs to be able to
renew under a modified Track 1, and illustrates a key reason why the
program would be anticipated to see significantly stronger continued
participation under the proposed changes than at baseline.

[[Page 72858]]

Assuming the proposed changes in this proposed rule, total median
ACO shared savings payments ($630 million) net of median shared losses
($30 million) to ACOs with agreement periods covering CYs 2016 through
2018 are $600 million in net payments. Such median total net payment
amount, coupled with the aggregate average start-up investment and
ongoing operating cost of $562 million, incurred by the mean
participation rate of ACOs in the Shared Savings Program during the
same time period, yields a net private benefit of $38 million. At
baseline, absent the proposed changes, the median net payments to ACOs
over the same time period would be only $140 million ($310 million in
shared savings payments less $170 million in shared losses). Such lower
net sharing at baseline, combined with baseline average start-up
investment and ongoing operating costs of $121 million, yields a net
private benefit of $19 million. We expect that a significant portion of
Track 1 ACOs that are assumed to be unwilling to renew under the
program without the protection from downside risk will welcome the
opportunity to continue under Track 1 for a second agreement period,
albeit with a lower maximum sharing rate of 40 percent. Moreover, the
proposed changes reduce the estimated per-ACO average shared loss
liability by over 95 percent compared to the baseline, and increase the
chance an ACO renewing in 2016 will continue to participate for all 3
years of the new agreement period.
We would note that our estimates of net private benefits under the
baseline and all proposed changes scenarios are influenced by
assumptions that could vary in practice and thus result in a very
different actual result than what was estimated. First, we assume that
savings realized by existing ACOs during their first agreement period
are built into their benchmarks and our baseline for their successive
agreement period. This means that these ACOs may have to achieve
greater efficiencies and quality improvements during their successive
agreement period compared to their prior one in order to share in
savings. Moreover, the extent to which these ACOs actually exceed or
fall short of our assumed baseline savings will result in higher or
lower actual net private benefits relative to our estimate. Second, our
estimates assume a large proportion of existing Track 1 ACOs will
continue participating under Track 1 for 2016 to 2018, albeit at the
lower 40 percent sharing rate. This assumption has the effect of
diminishing estimated benefits under our model. Thus, all else being
equal, the extent to which a smaller or larger percentage of these ACOs
remain under Track 1 for their second agreement period will also
respectively increase or decrease the actual net private benefits
relative to what we estimated. Finally, to the extent that actual ACO
quality performance exceeds or falls short of our estimates, the net
private benefits could be respectively higher or lower than what we
estimated.
We also note that the net private benefits actually experienced by
a given ACO may increase as a result of other benefits associated with
participation in the Shared Savings Program. For example, an ACO that
is participating in the Shared Savings Program and simultaneously
receives value-based contracts from other payers may receive additional
benefits. Such potential benefits are not considered in our analysis
because they are not readily quantifiable. Therefore, we limit our
benefit-cost estimate to shared savings and shared loss dollars
received under the Shared Savings Program relative to estimated
operational costs associated with participating in the program as
previously described.

[[Page 72859]]

[GRAPHIC] [TIFF OMITTED] TP08DE14.002

4. Effect on Small Entities
The RFA requires agencies to analyze options for regulatory relief
of small entities, if a rule has a significant impact on a substantial
number of small entities. For purposes of the RFA, small entities
include small businesses, nonprofit organizations, and small
governmental jurisdictions. Most physician practices, hospitals and
other providers are small entities, either by virtue of their nonprofit
status or by qualifying as small businesses under the Small Business
Administration's size standards (revenues of less than $7.5 to $38.5
million in any 1 year; NAIC Sector-62 series). States and individuals
are not included in the definition of a small entity. For details, see
the Small Business Administration's Web site at https://www.sba.gov/content/small-business-size-standards. For purposes of the RFA,
approximately 95 percent of physicians are considered to be small
entities. There are over 1 million physicians, other practitioners, and
medical suppliers that receive Medicare payment under the Physician Fee
Schedule (PFS).
Although the Shared Savings Program is a voluntary program and
payments for individual items and services will continue to be made on
a FFS basis, we acknowledge that the program can affect many small
entities and have drafted the proposed changes to our rules and
regulations accordingly in order to minimize costs and administrative
burden on such entities as well as to maximize their opportunity to
participate. Small entities are both allowed and encouraged to
participate in the Shared Savings Program, provided they have a minimum
of 5,000 assigned beneficiaries, thereby potentially realizing the
economic benefits of receiving shared savings resulting from the
utilization of enhanced and efficient systems of care and care
coordination. Therefore, a solo, small physician practice or other
small entity may realize economic benefits as a function of
participating in this program and the utilization of enhanced clinical
systems integration, which otherwise may not have been possible.
We have determined that this proposed rule will have a significant
impact on a substantial number of small entities and we present more
detailed analysis of these impacts, including costs and benefits to
small entities and alternative policy considerations throughout this
RIA. However, as detailed in this RIA, total median shared

[[Page 72860]]

savings payments net of shared losses will offset about 107 percent of
the average costs borne by entities participating in the Shared Savings
Program, with an offset significantly greater than the cost of
participation for the subset of ACOs that achieve shared savings in a
given year, and no downside risk of significant shared losses for ACOs
choosing to remain under Track 1 for a second agreement period. As a
result, this regulatory impact section, together with the remainder of
the preamble, constitutes our preliminary Regulatory Flexibility
Analysis.
5. Effect on Small Rural Hospitals
Section 1102(b) of the Act requires us to prepare a regulatory
impact analysis if a rule may have a significant impact on the
operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 603 of the RFA. For
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of a metropolitan
statistical area and has fewer than 100 beds. Although the Shared
Savings Program is a voluntary program, this proposed rule will have a
significant impact on the operations of a substantial number of small
rural hospitals. We have proposed changes to our regulations such that
rural hospitals will have stronger incentives to participate in the
program through offering a smoother transition to risk-based models,
additional opportunities to potentially share in savings under proposed
new Track 3, and streamlined administrative requirements. As detailed
in this RIA, the estimated aggregate median impact of shared savings
payments to participating ACOs is approximately 107 percent of the
average costs borne by entities that voluntarily participate in the
Shared Savings Program, with an offset significantly greater than the
cost of participation for the subset of ACOs that achieve shared
savings in a given year, and no downside risk of significant shared
loss penalties for ACOs choosing to remain under Track 1 for a second
agreement period.
6. Unfunded Mandates
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also
requires that agencies assess anticipated costs and benefits before
issuing any rule whose mandates require spending in any 1 year of $100
million in 1995 dollars, updated annually for inflation. In 2014, that
is approximately $141 million. This proposed rule does not include any
mandate that would result in spending by state, local or tribal
governments, in the aggregate, or by the private sector in the amount
of $141 million in any 1 year. Further, participation in this program
is voluntary and is not mandated.

D. Alternatives Considered

In the November 2011 final rule (76 FR 67971), we noted in the
regulatory impact analysis that many tenets of the program are
statutorily mandated and thus allow for little, if any, flexibility in
the rulemaking process. Where there was flexibility, we made our policy
decisions regarding alternatives based on a balance between creating
the least possible negative impact on the stakeholders affected by the
program and satisfactorily fitting the vision of the program within
given operational constraints. This proposed rule contains a range of
modifications to program policies that take this balance into
consideration. The preceding preamble provides descriptions of the
various statutory provisions that are addressed in this proposed rule,
identifies those policies where discretion has been allowed and
exercised, presents the rationales for our proposals and, where
relevant, alternatives that were considered.
In addition to estimating the difference between impacts at
baseline and assuming all proposed changes are adopted, the stochastic
model was also adapted to isolate marginal impacts for several
alternative scenarios related to individual proposals within the
overall set of proposed changes to the program. In one scenario, all
proposed changes were assumed except the addition of Track 3. Relative
to the all-changes scenario, this modification was not anticipated to
materially reduce overall participation. However, we estimated that
excluding Track 3 as a proposal would reduce median gross savings by
$70 million over 3 years as fewer ACOs would be willing to accept the
stronger incentive of downside risk without the opportunity to earn
enhanced shared savings up to the 75 percent maximum sharing percentage
under Track 3. Lastly, median shared losses under this scenario would
decline by $10 million. Thus, the overall impact on net federal savings
of offering Track 3 in the context of all other proposed changes to the
program is minimal. However for individual ACOs, the higher sharing
rate available under Track 3 may boost efforts to build capacity for
accepting downside risk while potentially accelerating activities
related to improving the efficiency of care. Also, the opportunity
under Track 3 to share in a greater percentage of the savings that are
achieved could assist in addressing the concerns of ACOs that were
successful in achieving savings in their first agreement period but are
concerned that their new expenditure baseline for the agreement period
starting in 2016 will be lower as a result of their prior success in
reducing the cost of care for their assigned beneficiaries, thus making
it more difficult to achieve savings.
Another alternative scenario we considered included all proposed
changes except for lowering the Track 1 sharing rate from 50 percent to
40 percent for Track 1 ACOs that elect to renew for a second agreement
period under this model starting in 2016. Similar to the previous
scenario, this change would not be expected to materially change
overall assumed participation. However, relative to the all changes
model, the net effect of this alternative would be to increase median
shared savings payments by $110 million over 3 years. Furthermore,
because a portion of ACOs that would have otherwise chosen Track 3
under the all changes scenario would now be expected to choose Track 1
given the higher sharing rate, overall median gross savings would
decline by $30 million under this alternative, resulting in an overall
reduction of $140 million in median net federal savings compared to the
all changes scenario.
Lastly, an alternative scenario was considered where no changes
were proposed other than to allow current Track 1 ACOs a 2-year
extension to their current agreement period, after which they would
then be limited to participating under Track 2 as required under the
current regulations. This alternative was assumed to boost ACO
participation in 2016 and 2017 comparable to the participation level
expected for such years in the all-changes scenario. However, we would
anticipate a significant contraction in participation in 2018 similar
to the rate of participation assumed at baseline for that year. The net
impact of this alternative would be $220 million in reduced net federal
savings compared to all changes as proposed in this rule, driven mainly
by reduced program participation in the third year and by increased
shared savings payments in 2016 and 2017 because ACO benchmarks would
not be rebased until 2018.

E. Accounting Statement and Table

As required by OMB Circular A-4 under Executive Order 12866, in
Table 13, we have prepared an accounting statement showing the change
in (A) net

[[Page 72861]]

federal monetary transfers, (B) shared savings payments to ACOs net of
shared loss payments from ACOs and (C) the aggregate cost of ACO
operations for ACO participants and ACO providers/suppliers from 2016
to 2018 that are associated with the provisions of this proposed rule
as compared to baseline.

Table 13--Accounting Statement Estimated Impacts
[CYs 2016-2018]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Primary estimate Minimum estimate Maximum estimate
Category (in millions) (in millions) (in millions) Source citation (RIA, preamble, etc.)
--------------------------------------------------------------------------------------------------------------------------------------------------------
BENEFITS:
Annualized monetized transfers........... -$76.3 -$12.0 -$129.7 Change from baseline (Table 8) to proposed
Discount rate: 7%........................ changes (Table 9)
----------------------------------------------------------------------------------------------------------
Annualized monetized transfers........... -$83.8 -$13.7 -$142.0
Discount rate: 3%........................
--------------------------------------------------------------------------------------------------------------------------------------------------------
From whom to whom?....................... Negative values reflect reduction in federal net cost resulting from care management by ACOs
--------------------------------------------------------------------------------------------------------------------------------------------------------
BENEFITS:
Annualized monetized transfers........... $124.1 $96.5 $152.0 Change from baseline (Table 8) to proposed
Discount rate: 7%........................ changes (Table 9)
----------------------------------------------------------------------------------------------------------
Annualized monetized transfers........... $134.8 $105.1 $164.7
Discount rate: 3%........................
--------------------------------------------------------------------------------------------------------------------------------------------------------
From whom to whom?....................... Positive values reflect increase in aggregate shared savings net of shared losses
--------------------------------------------------------------------------------------------------------------------------------------------------------
OPERATIONAL COST:
Annualized monetized transfers........... $121.3 .................. .................. Change from baseline (Table 8) to proposed
Discount rate: 7%........................ changes (Table 9)
----------------------------------------------------------------------------------------------------------
Annualized monetized transfers........... $130.7 .................. ..................
Discount rate: 3%........................
--------------------------------------------------------------------------------------------------------------------------------------------------------
From whom to whom?....................... Positive values reflect increase in aggregate ACO operating costs largely attributable to assumed
increased participation as a result of the proposals included in this proposed rule compared to baseline
--------------------------------------------------------------------------------------------------------------------------------------------------------

F. Conclusion

The analysis in this section, together with the remainder of this
preamble, provides a Regulatory Impact Analysis. As a result of this
proposed rule, the median estimate of the financial impact of the
Shared Savings Program for CYs 2016 through 2018 would be net federal
savings (after shared savings payments) of $1,010 million. Under this
proposed rule, median savings would be about $280 million higher than
we estimate assuming none of the proposed changes for this period.
Although this is the ``best estimate'' of the financial impact of the
Shared Savings Program during CYs 2016 through 2018, a relatively wide
range of possible outcomes exists. While over 99 percent of the
stochastic trials resulted in net program savings, the 10th and 90th
percentiles of the estimated distribution show net savings of $430
million to net savings of $1,650 million, respectively. In the extreme
scenarios, the results were as large as $2.9 billion in savings or $200
million in costs.
In addition, at the anticipated mean participation rate of ACOs in
the Shared Savings Program, participating ACOs may experience an
estimated aggregate average start-up investment and ongoing operating
cost of $815 million for CYs 2016 through 2018. Lastly, we estimate an
aggregate median impact of $630 million in shared savings payments to
participating ACOs in the Shared Savings Program for CYs 2016 through
2018. The 10th and 90th percentiles of the estimate distribution, for
the same time period, yield shared savings payments to ACOs of $470
million and $820 million, respectively. Therefore, the total median ACO
shared savings payments of $630 million during CYs 2016 through 2018,
net of a median $30 million shared losses, coupled with the aggregate
average start-up investment and ongoing operating cost of $562 million
yields a net private benefit of $38 million.
Overall, we assumed greater participation by ACOs under the
policies contained in this proposed rule due to our proposals to ease
the transition from Track 1 to Track 2, reduce risk under Track 2, and
adopt an alternative risk-based model--Track 3. This resulted in total
shared savings increasing significantly, while shared losses decreased
due to these changes. Moreover, as participation in the Shared Savings
Program continues to expand, we anticipate there will be a broader
focus on care coordination and quality improvement among providers and
suppliers within the Medicare program that will lead to both increased
efficiency in the provision of care and improved quality of the care
that is provided to beneficiaries.
In accordance with the provisions of Executive Order 12866, this
rule was

[[Page 72862]]

reviewed by the Office of Management and Budget.

List of Subjects in 42 CFR Part 425

Administrative practice and procedure, Health facilities, Health
professions, Medicare, Reporting and recordkeeping requirements.

For the reasons set forth in the preamble, the Centers for Medicare
& Medicaid Services proposes to amend 42 CFR part 425 as follows:

PART 425--MEDICARE SHARED SAVINGS PROGRAM

0
1. The authority citation for part 425 continues to read as follows:

Authority: Secs. 1102, 1106, 1871, and 1899 of the Social
Security Act (42 U.S.C. 1302 and 1395hh).

Sec. 425.10 [Amended]

0
2. Amend Sec. 425.10 (b)(6) by removing the phrase ``two-sided model''
and adding in its place the phrase ``two-sided models''.
0
3. Amend Sec. 425.20 as follows:
0
A. By revising the definition of ``ACO participant''.
0
B. By adding the definition of ``ACO participant agreement'' in
alphabetical order.
0
C. By revising the definitions of ``ACO professional'', ``ACO provider/
supplier'', ``Agreement period'', and ``Assignment''.
0
D. By adding the definition of ``Assignment window'' in alphabetical
order.
0
E. By revising the definitions of ``Continuously assigned
beneficiary'', ``Hospital'', and ``Newly assigned beneficiary''.
0
F. By adding the definition of ``Participation agreement'' in
alphabetical order.
0
G. In the definition of ``Performance year'' by removing the phrase
``in the ACO's agreement'' and adding in its place the phrase ``in the
participation agreement''.
0
H. In paragraph (2) of the definition of ``Primary care services'', by
removing the ``;'' and adding in its place ``.''.
0
I. By adding paragraphs (4) and (5) to the definition of ``Primary care
services''.
The revisions and additions read as follows:

Sec. 425.20 Definitions.

* * * * *
ACO participant means an entity identified by a Medicare-enrolled
billing TIN through which one or more ACO providers/suppliers bill
Medicare, that alone or together with one or more other ACO
participants compose an ACO, and that is included on the list of ACO
participants that is required under Sec. 425.118.
ACO participant agreement means the written agreement (as required
at Sec. 425.116) between the ACO and ACO participant in which the ACO
participant agrees to participate in, and comply with, the requirements
of the Shared Savings Program.
ACO professional means an individual who is Medicare-enrolled and
bills for items and services furnished to Medicare fee-for-service
beneficiaries under a Medicare billing number assigned to the TIN of an
ACO participant in accordance with applicable Medicare regulations and
who is either of the following:
(1) A physician legally authorized to practice medicine and surgery
by the State in which he or she performs such function or action.
(2) A practitioner who is one of the following:
(i) A physician assistant (as defined at Sec. 410.74(a)(2) of this
chapter).
(ii) A nurse practitioner (as defined at Sec. 410.75(b) of this
chapter).
(iii) A clinical nurse specialist (as defined at Sec. 410.76(b) of
this chapter)
ACO provider/supplier means an individual or entity that meets all
of the following:
(1) Is a--
(i) Provider (as defined at Sec. 400.202 of this chapter); or
(ii) Supplier (as defined at Sec. 400.202 of this chapter).
(2) Is enrolled in Medicare.
(3) Bills for items and services furnished to Medicare fee-for-
service beneficiaries during the agreement period under a Medicare
billing number assigned to the TIN of an ACO participant in accordance
with applicable Medicare regulations.
(4) Is included on the list of ACO providers/suppliers that is
required under Sec. 425.118.
Agreement period means the term of the participation agreement,
which is 3 performance years unless otherwise specified in the
participation agreement.
* * * * *
Assignment means the operational process by which CMS determines
whether a beneficiary has chosen to receive a sufficient level of the
requisite primary care services from ACO professionals so that the ACO
may be appropriately designated as exercising basic responsibility for
that beneficiary's care during a given benchmark or performance year.
Assignment window means the 12-month period used to assign
beneficiaries to an ACO.
* * * * *
Continuously assigned beneficiary means a beneficiary assigned to
the ACO in the current performance year who was either assigned to or
received a primary care service from any of the ACO participants during
the assignment window for the most recent prior benchmark or
performance year.
* * * * *
Hospital means a hospital as defined in section 1886(d)(1)(B) of
the Act.
* * * * *
Newly assigned beneficiary means a beneficiary that is assigned to
the ACO in the current performance year who was neither assigned to nor
received a primary care service from any of the ACO participants during
the assignment window for the most recent prior benchmark or
performance year.
* * * * *
Participation agreement means the written agreement required under
Sec. 425.208(a) between the ACO and CMS that, along with the
regulations in this part, govern the ACO's participation in the Shared
Savings Program.
* * * * *
Primary care services * * *
(4) CPT codes 99495 and 99496 and HCPCS code GXXX1.
(5) Additional codes designated by CMS as primary care services for
purposes of the Shared Savings Program, including new HCPCS/CPT and
revenue center codes and any subsequently modified or replacement codes
for the HCPCS/CPT and revenue center codes identified in paragraphs (1)
through (4) of this definition.
* * * * *

Sec. 425.100 [Amended]

0
4. Amend Sec. 425.100 as follows:
0
A. In paragraph (b) by removing the reference ``under Sec. 425.604 or
Sec. 425.606'' and adding in its place the reference ``under Sec.
425.604, Sec. 425.606 or Sec. 425.610''.
0
B. In paragraph (c) by removing the phrase ``under the two-sided
model'' and adding in its place the phrase ``under a two-sided model''.
0
C. In paragraph (c) by removing the reference ``under Sec. 425.606''
and adding in its place the reference ``under Sec. 425.604, Sec.
425.606 or Sec. 425.610''.
0
5. Amend Sec. 425.102 as follows:
0
A. By adding paragraph (a)(8).
0
B. In paragraph (b) by removing the phrase ``eligible participate'' and
adding in its place the phrase ``eligible to participate''.
The addition reads as follows:

Sec. 425.102 Eligible providers and suppliers.

(a) * * *
(8) Teaching hospitals that have elected under Sec. 415.160 of
this chapter

[[Page 72863]]

to receive payment on a reasonable cost basis for the direct medical
and surgical services of their physicians.
* * * * *

Sec. 425.104 [Amended]

0
6. Amend Sec. 425.104(b), by removing the phrase ``otherwise
independent ACO participants must'' and adding in its place the phrase
``ACO participants, each of which is identified by a unique TIN,
must''.
0
7. Amend Sec. 425.106 by revising paragraphs (a), (b)(3), (c)(1),
(c)(2), and (c)(5) to read as follows:

Sec. 425.106 Shared governance.

(a) General rule. (1) An ACO must maintain of an identifiable
governing body with ultimate authority to execute the functions of an
ACO as defined under this part, including but not limited to the
processes defined under Sec. 425.112 to promote evidence-based
medicine and patient engagement, to report on quality and cost
measures, and to coordinate care.
(2) The governing body of the ACO must satisfy all of the following
criteria:
(i) Be the same as the governing body of the legal entity that is
the ACO.
(ii) Be separate and unique to the ACO and must not be the same as
the governing body of any ACO participant, in the case of an ACO that
comprises two or more ACO participants.
(iii) Satisfy all other requirements of this section.
(b) * * *
(3) The governing body members must have a fiduciary duty to the
ACO, including the duty of loyalty, and must act consistent with that
fiduciary duty.
* * * * *
(c) * * *
(1) The ACO must--(i) Establish a mechanism for shared governance
among the ACO participants or combinations of ACO participants (as
identified in Sec. 425.102(a)) that formed the ACO; and
(ii) Provide for meaningful participation in the composition and
control of the ACO's governing body for ACO participants or their
designated representatives.
(2) The ACO governing body must include a Medicare beneficiary
who--
(i) Is served by the ACO;
(ii) Is not an ACO provider/supplier;
(iii) Does not have a conflict of interest with the ACO; and
(iv) Does not have an immediate family member who has a conflict of
interest with the ACO.
* * * * *
(5) In cases in which the composition of the ACO's governing body
does not meet the requirements of paragraphs (c)(2) of this section,
the ACO must describe--
(i) Why it seeks to differ from this requirement; and
(ii) How it will provide meaningful representation of Medicare
beneficiaries in ACO governance.
* * * * *
0
8. Amend Sec. 425.108 by removing paragraph (e) and revising paragraph
(c) to read as follows:

Sec. 425.108 Leadership and management.

* * * * *
(c) Clinical management and oversight must be managed by a senior-
level medical director. The medical director must be--
(1) A board-certified physician;
(2) Licensed in a State in which the ACO operates; and
(3) Physically present on a regular basis at any clinic, office or
other location of the ACO, ACO participant or ACO provider/supplier.
* * * * *
0
9. Amend Sec. 425.110 by revising paragraphs (a)(2) and (b) to read as
follows:

Sec. 425.110 Number of ACO professionals and beneficiaries.

(a) * * *
(2) CMS deems an ACO to have initially satisfied the requirement to
have at least 5,000 assigned beneficiaries as specified in paragraph
(a)(1) of this section if 5,000 or more beneficiaries are historically
assigned to the ACO participants in each of the 3 benchmark years, as
calculated using the assignment methodology set forth in subpart E of
this part. In the case of the third benchmark year, CMS uses the most
recent data available to estimate the number of assigned beneficiaries.
(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 actions
described in Sec. Sec. 425.216 and 425.218.
(1) While under a CAP, the ACO remains eligible for shared savings
and losses and the MSR is set at a level consistent with the number of
assigned beneficiaries.
(2) 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 participation agreement and the ACO is not eligible
to share in savings for that performance year.
0
10. Amend Sec. 425.112 by adding paragraphs (b)(4)(ii)(C), (D), and
(E) to read as follows:

Sec. 425.112 Required processes and patient-centeredness criteria.

* * * * *
(b) * * *
(4) * * *
(ii) * * *
(C) Describe how the ACO will encourage and promote use of enabling
technologies for improving care coordination for beneficiaries.
Enabling technologies may include one or more of the following:
(1) Electronic health records and other health IT tools.
(2) Telehealth services, including remote patient monitoring.
(3) Electronic exchange of health information.
(4) Other electronic tools to engage beneficiaries in their care.
(D) Describe how the ACO intends to partner with long-term and
post-acute care providers, both inside and outside the ACO, to improve
care coordination for their assigned beneficiaries.
(E) Define and submit a set of major milestones or performance
metrics the ACO will use in each performance year to assess the
progress of its ACO participants in implementing the processes
described in paragraph (b)(4) of this section.
0
11. Add Sec. 425.116 to subpart B to read as follows:

Sec. 425.116 Agreements with ACO participants and ACO providers/
suppliers.

(a) ACO participant agreements. The ACO must have an ACO
participant agreement with each ACO participant that complies with the
following criteria:
(1) The only parties to the agreement are the ACO and the ACO
participant.
(2) The agreement must be signed on behalf of the ACO and the ACO
participant by individuals who are authorized to bind the ACO and the
ACO participant, respectively.
(3) The agreement must expressly require the ACO participant to
agree, and to ensure that each ACO provider/supplier billing through
the TIN of the ACO participant agrees, to participate in the Shared
Savings Program and to comply with the requirements of the Shared
Savings Program and all other applicable laws and regulations
(including, but not limited to, those specified at Sec. 425.208(b)).
(4) The agreement must set forth the ACO participant's rights and
obligations in, and representation by, the ACO, including without
limitation, the quality reporting requirements set forth in subpart F
of this part, the beneficiary notification requirements set forth at
Sec. 425.312, and how participation in the Shared Savings Program
affects the

[[Page 72864]]

ability of the ACO participant and its ACO providers/suppliers to
participate in other Medicare demonstration projects or programs that
involve shared savings.
(5) The agreement must describe how the opportunity to receive
shared savings or other financial arrangements will encourage the ACO
participant to adhere to the quality assurance and improvement program
and evidence-based medicine guidelines established by the ACO.
(6) The agreement must require the ACO participant to update its
enrollment information, including the addition and deletion of ACO
professionals and ACO providers/suppliers billing through the TIN of
the ACO participant, on a timely basis in accordance with Medicare
program requirements and to notify the ACO of any such changes within
30 days after the change.
(7) The agreement must permit the ACO to take remedial action
against the ACO participant, and must require the ACO participant to
take remedial action against its ACO providers/suppliers, including
imposition of a corrective action plan, denial of incentive payments,
and termination of the ACO participant agreement, to address
noncompliance with the requirements of the Shared Savings Program and
other program integrity issues, including those identified by CMS.
(8) The agreement must be for a term of at least one performance
year and must articulate potential consequences for early termination
from the ACO.
(9) The agreement must require completion of a close-out process
upon termination or expiration of the agreement that requires the ACO
participant to furnish all data necessary to complete the annual
assessment of the ACO's quality of care and addresses other relevant
matters.
(b) Agreements with ACO providers/suppliers. ACOs have the option
of contracting directly with its ACO providers/suppliers regarding
items and services furnished to beneficiaries aligned to the ACO. An
ACO's agreement with an ACO provider/supplier regarding such items and
services must satisfy the following criteria:
(1) The only parties to the agreement are the ACO and the ACO
provider/supplier.
(2) The agreement must be signed by the ACO provider/supplier and
by an individual who is authorized to bind the ACO.
(3) The agreement must expressly require the ACO provider/supplier
to agree to participate in the Shared Savings Program and to comply
with the requirements of the Shared Savings Program and all other
applicable laws and regulations (including, but not limited to, those
specified at Sec. 425.208(b)).
(4) The agreement must set forth the ACO provider's/supplier's
rights and obligations in, and representation by, the ACO, including
without limitation, the quality reporting requirements set forth in
subpart F of this part, the beneficiary notification requirements set
forth at Sec. 425.312, and how participation in the Shared Savings
Program affects the ability of the ACO provider/supplier to participate
in other Medicare demonstration projects or programs that involve
shared savings.
(5) The agreement must describe how the opportunity to receive
shared savings or other financial arrangements will encourage the ACO
provider/supplier to adhere to the quality assurance and improvement
program and evidence-based medicine guidelines established by the ACO.
(6) The agreement must require the ACO provider/supplier to--
(i) Update its enrollment information on a timely basis in
accordance with Medicare program requirements; and
(ii) Notify the ACO of any such changes within 30 days after the
change.
(7) The agreement must permit the ACO to take remedial action
including the following against the ACO provider/supplier to address
noncompliance with the requirements of the Shared Savings Program and
other program integrity issues, including those identified by CMS:
(i) Imposition of a corrective action plan.
(ii) Denial of incentive payments.
(iii) Termination of the ACO participant agreement.
(c) Submission of agreements. The ACO must submit an executed ACO
participant agreement in accordance with CMS guidance for each ACO
participant at the time of its initial application, participation
agreement renewal process, and when adding to its list of ACO
participants in accordance with Sec. 425.118. The agreements may be
submitted in the form and manner set forth in Sec. 425.204(c)(6).
0
12. Add new Sec. 425.118 to subpart B to read as follows:

Sec. 425.118 Required reporting of ACO participants and ACO
providers/suppliers.

(a) List requirements. (1) The ACO must maintain, update, and
submit to CMS an accurate and complete list identifying each ACO
participant (including its Medicare-enrolled TIN) and each ACO
provider/supplier (including its NPI or other identifier) in accordance
with this section.
(2) Before the start of an agreement period, before each
performance year thereafter, and at such other times as specified by
CMS, the ACO must submit to CMS an ACO participant list and an ACO
provider/supplier list.
(3) The ACO must certify the submitted lists in accordance with
Sec. 425.302(a)(2).
(4) All Medicare enrolled individuals and entities that have
reassigned their right to receive Medicare payment to the TIN of the
ACO participant must be included on the ACO provider/supplier list and
must agree to participate in the ACO and comply with the requirements
of the Shared Savings Program before the ACO submits the ACO
participant list and the ACO provider/supplier list.
(b) Changes to the ACO participant list. (1) Additions. (i) An ACO
must submit to CMS a request to add an entity and its Medicare enrolled
TIN to its ACO participant list. This request must be submitted at such
time and in the form and manner specified by CMS.
(ii) If CMS approves the request, the entity and its Medicare
enrolled TIN is added to the ACO participant list effective January 1
of the following performance year.
(iii) CMS may deny the request on the basis that the entity is not
eligible to be an ACO participant or on the basis of the results of the
screening performed under Sec. 425.304(b).
(2) Deletions. (i) An ACO must notify CMS no later than 30 days
after the termination of an ACO participant agreement. Such notice must
be submitted in the form and manner specified by CMS and must include
the termination date of the ACO participant agreement.
(ii) The entity is deleted from the ACO participant list as of the
termination date of the ACO participant agreement.
(3) Adjustments. (i) CMS annually adjusts an ACO's assignment,
historical benchmark, the quality reporting sample, and the obligation
of the ACO to report on behalf of ACO providers/suppliers for certain
CMS quality initiatives to reflect the addition or deletion of entities
from the list of ACO participants that is submitted to CMS before the
start of a performance year in accordance with paragraph (a) of this
section.
(ii) Absent unusual circumstances, CMS does not make adjustments
during the performance year to the ACO's assignment, historical
benchmark, performance year financial calculations, the quality
reporting sample, or the obligation of the ACO to report on

[[Page 72865]]

behalf of ACO providers/suppliers for certain CMS quality initiatives
to reflect the addition or deletion of entities from the ACO
participant list that become effective during the performance year. CMS
has sole discretion to determine whether unusual circumstances exist
that would warrant such adjustments.
(c) Changes to the ACO provider/supplier list. (1) Additions. (i)
An ACO must notify CMS within 30 days after an individual or entity
becomes a Medicare-enrolled provider or supplier that bills for items
and services it furnishes to Medicare fee-for-service beneficiaries
under a billing number assigned to the TIN of an ACO participant. The
notice must be submitted in the form and manner specified by CMS.
(ii) If the ACO timely submits notice to CMS, the addition of an
individual or entity to the ACO provider/supplier list is effective on
the date specified in the notice furnished to CMS, but no earlier than
30 days before the date of the notice. If the ACO fails to submit
timely notice to CMS, the addition of an individual or entity to the
ACO provider/supplier list is effective on the date of the notice.
(2) Deletions. (i) An ACO must notify CMS no later than 30 days
after an individual or entity ceases to be a Medicare-enrolled provider
or supplier that bills for items and services it furnishes to Medicare
fee-for-service beneficiaries under a billing number assigned to the
TIN of an ACO participant. The notice must be submitted in the form and
manner specified by CMS.
(ii) The deletion of an ACO provider/supplier from the ACO
provider/supplier list is effective on the date the individual or
entity ceased to be a Medicare-enrolled provider or supplier that bills
for items and services it furnishes to Medicare fee-for-service
beneficiaries under a billing number assigned to the TIN of an ACO
participant.
(d) Update of Medicare enrollment information. The ACO must ensure
that all changes to enrollment information for ACO participants and ACO
providers/suppliers, including changes to reassignment of the right to
receive Medicare payment, are reported to CMS consistent with Sec.
424.516.
0
13. Amend Sec. 425.200 as follows:
0
A. By revising the section heading.
0
B. In paragraph (a), by removing the term ``three'' and adding in its
place the figure ``3''.
0
C. In the heading of paragraph (b), and paragraphs (b)(1) introductory
text, (b)(1)(i), (b)(1)(ii), (b)(2)(ii), and (c)(1) by removing the
term ``agreement'' each time it appears and adding in its place the
terms ``participation agreement''.
The revision reads as follows:

Sec. 425.200 Participation agreement with CMS.

* * * * *
0
14. Amend Sec. 425.202 by revising paragraphs (b) and (c) to read as
follows:

Sec. 425.202 Application procedures.

* * * * *
(b) Condensed application form. (1) PGP demonstration sites
applying to participate in the Shared Savings Program will have an
opportunity to complete a condensed application form.
(2) A Pioneer ACO may use a condensed application form to apply for
participation in the Shared Savings Program if it satisfies all of the
following criteria:
(i) The applicant is the same legal entity as the Pioneer ACO.
(ii) ACO participant list does not contain any ACO participant TINs
that did not appear on the ``Confirmed Annual TIN/NPI List'' (as
defined in the Pioneer ACO Model Innovation Agreement with CMS) for the
applicant ACO's last full performance year in the Pioneer ACO Model.
(iii) The applicant is not applying to participate in the one-sided
model.
(c) Application review. CMS reviews applications in accordance with
Sec. 425.206.
0
15. Amend Sec. 425.204 as follows:
0
A. In paragraph (b)(2) by removing the terms ``ACO agreement'' and
adding in its place the terms ``participation agreement''.
0
B. In paragraph (b)(3) by removing the term ``agreement'' and adding in
its place the terms ``participation agreement''.
0
C. By revising paragraphs (c)(1) introductory text and (c)(1)(i),
(iii), and (iv).
0
D. In paragraph (c)(1)(vi) by removing the terms ``ACO's agreement''
and adding in its place the terms ``participation agreement''.
0
E. By revising paragraph (c)(3).
0
F. In paragraph (c)(4)(ii), by removing the phrase '' among multiple,
independent ACO participants'' and adding in its place the phrase
``among two or more ACO participants''.
0
G. By revising paragraph (c)(5)(i).
0
H. By adding paragraph (c)(6).
0
I. In paragraph (e)(1), removing the phrase ``an ACO must specify
whether it is applying to participate in Track 1 or Track 2'' and
adding in its place the phrase ``an ACO must specify the Track for
which it is applying''
0
J. By revising paragraph (f).
0
K. By adding paragraph (g).
The revisions and additions read as follows:

Sec. 425.204 Content of the application.

* * * * *
(c) * * *
(1) As part of its application, and upon request thereafter, an ACO
must submit to CMS the following supporting materials to demonstrate
that the ACO satisfies the requirements set forth in this part:
(i) Documents (for example, ACO participant agreements, agreements
with ACO providers/suppliers, employment contracts, and operating
policies) sufficient to describe the ACO participants' and ACO
providers'/suppliers' rights and obligations in and representation by
the ACO, and how the opportunity to receive shared savings or other
financial arrangements will encourage ACO participants and ACO
providers/suppliers to adhere to the quality assurance and improvement
program and evidence-based clinical guidelines.
* * * * *
(iii) Materials documenting the ACO's organization and management
structure, including an organizational chart, a list of committees
(including names of committee members) and their structures, and job
descriptions for senior administrative and clinical leaders
specifically noted in Sec. 425.108 and Sec. 425.112(a)(2).
(iv) Evidence that the governing body--
(A) Is an identifiable body;
(B) Represents a mechanism for shared governance for ACO
participants;
(C) Is composed of representatives of its ACO participants; and
(D) Is at least 75 percent controlled by its ACO participants.
* * * * *
(3) If an ACO requests an exception to the governing body
requirement in Sec. 425.106(c)(2), the ACO must describe--
(i) Why it seeks to differ from this requirement; and
(ii) How the ACO will provide meaningful representation in ACO
governance by Medicare beneficiaries.
* * * * *
(5) * * *
(i) The ACO must submit a list of all ACO participants and ACO
providers/suppliers in accordance with Sec. 425.118.
* * * * *
(6) As part of the application process and upon request by CMS, the
ACO must submit documents demonstrating that its ACO participants, ACO
providers/suppliers, and other individuals or entities performing

[[Page 72866]]

functions or services related to ACO activities are required to comply
with the requirements of the Shared Savings Program. The evidence to be
submitted must include, without limitation, sample or form agreements
and, in the case of ACO participant agreements, the first and signature
page(s) of each executed ACO participant agreement. CMS may request all
pages of an executed ACO participant agreement to confirm that it
conforms to the sample form agreement submitted by the ACO. The ACO
must certify that all of its ACO participant agreements comply with the
requirements of this part.
* * * * *
(f) Assurance of ability to repay. (1) An ACO must have the ability
to repay all shared losses for which it may be liable under a two-sided
model.
(i) As part of the application or participation agreement renewal
process, an ACO that is seeking to participate under a two-sided model
of the Shared Savings Program must submit for CMS approval
documentation that it is capable of repaying shared losses that it may
incur during the agreement period.
(ii) The documentation specified in paragraph (f)(1)(i) of this
section must include details supporting the adequacy of the mechanism
for repaying shared losses equal to at least 1 percent of the ACO's
total per capita Medicare parts A and B fee-for-service expenditures
for its assigned beneficiaries based on expenditures used to calculate
the benchmark for the applicable agreement period, as estimated by CMS
at the time of application or participation agreement renewal.
(2) An ACO may demonstrate its ability to repay shared losses by
placing funds in escrow, obtaining a surety bond, establishing a line
of credit (as evidenced by a letter of credit that the Medicare program
can draw upon), or establishing a combination of such repayment
mechanisms, that will ensure its ability to repay the Medicare program.
(3) An ACO participating under a two-sided model must demonstrate
the adequacy of this repayment mechanism prior to the start of each
agreement period in which it takes risk, and upon request thereafter.
After the repayment mechanism has been used to repay any portion of
shared losses owed to CMS, the ACO must replenish the amount of funds
available through the repayment mechanism within 60 days.
(4) 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.
(g) Consideration of claims billed under merged and acquired
Medicare-enrolled TINs. An ACO may request that CMS consider, for
purposes of beneficiary assignment and establishing the ACO's benchmark
under Sec. 425.602, claims billed by Medicare-enrolled entities' TINs
that have been acquired through sale or merger by an ACO participant.
(1) The ACO may include an acquired Medicare-enrolled entity's TIN
on its ACO participant list under the following circumstances:
(i) The ACO participant has subsumed the acquired entity's TIN in
its entirety, including all of the providers and suppliers that
reassigned their right to receive Medicare payment to the acquired
entity's Medicare-enrolled TIN.
(ii) Each provider or supplier that previously reassigned his or
her right to receive Medicare payment to the acquired entity's TIN has
reassigned his or her right to receive Medicare payment to the TIN of
the acquiring ACO participant and has been added to the ACO provider/
supplier list under paragraph (c)(5) of the section.
(iii) The acquired entity's TIN is no longer used to bill Medicare.
(2) The ACO must submit the following supporting documentation in
the form and manner specified by CMS.
(i) An attestation that--
(A) Identifies by Medicare-enrolled TIN both the acquired entity
and the ACO participant that acquired it;
(B) Specifies that all the providers and suppliers that previously
reassigned their right to receive Medicare payment to the acquired
entity's TIN have reassigned such right to the TIN of the identified
ACO participant and have been added to the ACO provider/supplier list
under paragraph (c)(5) of this section; and
(C) Specifies that the acquired entity's TIN is no longer used to
bill Medicare.
(ii) Documentation sufficient to demonstrate that the acquired
entity's TIN was merged with or purchased by the ACO participant.
0
16. Amend Sec. 425.206 by revising paragraph (a) to read as follows:

Sec. 425.206 Evaluation procedures for applications.

(a) Basis for evaluation and determination. (1) CMS evaluates an
ACO's application to determine whether an applicant satisfies the
requirements of this part and is qualified to participate in the Shared
Savings Program. Applications are approved or denied on the basis of
the following:
(i) Information contained in and submitted with the application by
a deadline specified by CMS.
(ii) Supplemental information that was submitted by a deadline
specified by CMS in response to CMS' request for information.
(iii) Other information available to CMS.
(2) CMS notifies an ACO applicant when supplemental information is
required for CMS to make such determination and provides an opportunity
for the ACO to submit the information.
(3) CMS may deny an application if an ACO applicant fails to submit
information by the deadlines established by CMS.
* * * * *
0
17. Amend Sec. 425.212 by revising the section heading and paragraph
(a) to read as follows:

Sec. 425.212 Changes to program requirements during the agreement
period.

(a) An ACO is subject to all regulatory changes that become
effective during the agreement period, with the exception of the
following program areas, unless otherwise required by statute:
(1) Eligibility requirements concerning the structure and
governance of ACOs.
(2) Calculation of sharing rate.
* * * * *
0
18. Amend Sec. 425.214 as follows:
0
A. By revising the section heading.
0
B. By removing paragraph (a).
0
C. By redesignating paragraphs (b) and (c) as paragraphs (a) and (b),
respectively.
0
D. By revising newly redesignated paragraph (a).
0
E. In newly redesignated paragraph (b) introductory text, removing the
phrase ``Upon receiving'' and adding in its place the phrase ``Upon
becoming aware of a significant change or receiving''.
0
F. In newly redesignated paragraphs (b)(2) and (4) by removing the term
``agreement'' and adding in its place the terms ``participation
agreement''.
The revisions read as follows:

Sec. 425.214 Managing changes to the ACO during the agreement period.

(a)(1) An ACO must notify CMS within 30 days of any significant
change.
(2) An ACO's failure to notify CMS of a significant change shall
not preclude CMS from determining that the ACO has experienced a
significant change.
(3) A ``significant change'' occurs when --
(i) An ACO is no longer able to meet the eligibility or program
requirements of this part; or

[[Page 72867]]

(ii) The number or identity of the ACO participants on the ACO's
list of ACO participants has changed by 50 percent or more.
* * * * *

Sec. 425.216 [Amended]

0
19. Amend Sec. 425.216 in paragraph (b) by removing the term ``ACO's
agreement'' and adding in its place the terms ``participation
agreement''.
0
20. Amend Sec. 425.218 by revising the section heading and adding
paragraphs (b)(4) and (5) to read as follows:

Sec. 425.218 Termination of the participation agreement by CMS.

* * * * *
(b) * * *
(4) Failure to comply with CMS requests for documentation or other
information by the deadline specified by CMS.
(5) Submitting false or fraudulent data or information.
* * * * *

Sec. 425.220 [Amended]

0
21. Amend Sec. 425.220 by removing and reserving paragraph (b).
0
22. Add Sec. 425.221 to read as follows:

Sec. 425.221 Close-out procedures and payment consequences of early
termination.

(a) Close-out procedures. (1) An ACO whose participation agreement
has expired or is terminated by CMS under Sec. 425.218 or by the ACO
under Sec. 425.220 must implement close-out procedures regarding the
following in a form and manner and by a deadline specified by CMS:
(i) Notice to ACO participants of termination.
(ii) Record retention.
(iii) Data sharing.
(iv) Quality reporting.
(v) Beneficiary continuity of care
(vi) Other relevant operational matters established through
guidance.
(2) ACOs that fail to complete close-out procedures in the form and
manner and by the deadline specified by CMS will not be eligible to
share in savings.
(b) Payment consequences of early termination. (1) An ACO whose
participation agreement is terminated by the ACO under Sec. 425.220 is
eligible to receive shared savings for the performance year during
which the termination becomes effective only if--
(i) CMS designates or approves an effective date of termination of
December 31st of such performance year;
(ii) The ACO has completed all close-out procedures by the deadline
specified by CMS; and
(iii) The ACO has satisfied the criteria for sharing in savings for
the performance year.
(2) An ACO that terminates its participation agreement under Sec.
425.220 before December 31 of a performance year or whose participation
agreement is terminated by CMS under Sec. 425.218 at any time is not
eligible to receive shared savings for the performance year during
which the termination becomes effective.
0
23. Amend Sec. 425.222 by revising paragraph (c) to read as follows:

Sec. 425.222 Reapplication after termination.

* * * * *
(c) An ACO whose participation agreement was previously terminated
may reenter the program under a subsequent agreement period.
(1) If the termination occurred less than half way through the
agreement period, an ACO that was previously under a one-sided model
may reenter the program under the one-sided model or a two-sided model.
If the ACO reenters the program under the one-sided model, the ACO will
be considered to be in its first agreement period under the one-sided
model.
(2) If the termination occurred more than half way through the
agreement period, an ACO that was previously under a one-sided model
may reenter the program under the one-sided model or a two-sided model.
If the ACO reenters the program under the one-sided model, the ACO will
be considered to be in its second agreement period under the one-sided
model.
(3) Regardless of the date of termination, an ACO that was
previously under a two-sided model may only reapply for participation
in a two-sided model.
0
24. Add Sec. 425.224 to subpart C to read as follows:

Sec. 425.224 Renewal of participation agreements.

(a) General rules. An ACO may request renewal of its participation
agreement for a second or subsequent agreement period.
(1) In order to obtain a determination regarding whether it meets
the requirements for renewal of its participation agreement, the ACO
must submit a complete renewal request in the form and manner and by
the deadline specified by CMS.
(2) An ACO executive who has the authority to legally bind the ACO
must certify to the best of his or her knowledge, information, and
belief that the information contained in the renewal request is
accurate, complete, and truthful.
(3) An ACO that seeks renewal of its participation agreement and
was newly formed after March 23, 2010, as defined in the Antitrust
Policy Statement, must agree that CMS can share a copy of its renewal
request with the Antitrust Agencies.
(b) Review of renewal request. (1) CMS determines whether to renew
a participation agreement based on an evaluation of all of the
following factors:
(i) Whether the ACO satisfies the criteria for operating under the
selected risk track.
(ii) The ACO's history of compliance with the requirements of the
Shared Savings Program.
(iii) 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 losses, if applicable.
(iv) Whether the ACO met the quality performance standard during at
least one of the first 2 years of the previous agreement period.
(v) For ACOs under a two-sided model, whether the ACO has repaid
losses owed to the program that it generated during the first 2 years
of the previous agreement period.
(vi) The results of a program integrity screening of the ACO, its
ACO participants, and its ACO providers/suppliers (conducted in
accordance with Sec. 425.304(b)).
(2) Renewal requests are approved or denied on the basis of the
following information:
(i) Information contained in and submitted with the renewal request
by a deadline specified by CMS.
(ii) Supplemental information that was submitted by a deadline
specified by CMS in response to CMS' request for information.
(iii) Other information available to CMS.
(3) CMS notifies the ACO when supplemental information is required
for CMS to make such a determination and provides an opportunity for
the ACO to submit the information.
(c) Notice of determination. (1) CMS notifies in writing each ACO
of its determination to approve or deny the ACO's renewal request.
(2) If CMS denies the renewal request, the notice of
determination--
(i) Specifies the reasons for the denial; and
(ii) Informs the ACO of its right to request reconsideration review
in accordance with the procedures specified in subpart I of this part.

Sec. 425.304 [Amended]

0
25. Amend Sec. 425.304 by removing paragraph (d).

[[Page 72868]]

0
26. Revise Sec. 425.306 to read as follows:

Sec. 425.306 Participant agreement and exclusivity of ACO
participants.

(a) Each ACO participant must commit to the term of the
participation agreement and sign an ACO participant agreement that
complies with the requirements of this part.
(b)(1) Except as specified in paragraph (b)(2) of this section, ACO
participants are not required to be exclusive to one Shared Savings
Program ACO.
(2) Each ACO participant that submits claims for primary care
services used to determine the ACO's assigned population under subpart
E of this part must be exclusive to one Shared Savings Program ACO.
0
27. Revise Sec. 425.308 to read as follows:

Sec. 425.308 Public reporting and transparency.

(a) ACO public reporting Web page. Each ACO must create and
maintain a dedicated Web page on which it publicly reports the
information set forth in paragraph (b) of this section. The ACO must
report the address of such Web page to CMS in a form and manner
specified by CMS and must notify CMS of changes to the Web address in
the form and manner specified by CMS.
(b) Information to be reported. The ACO must report the following
information in a standardized format specified by CMS:
(1) Name and location.
(2) Primary contact.
(3) Organizational information, including all of the following:
(i) Identification of ACO participants.
(ii) Identification of participants in joint ventures between ACO
professionals and hospitals.
(iii) Identification of the members of its governing body.
(iv) Identification of key clinical and administrative leadership.
(v) Identification of associated committees and committee
leadership.
(vi) Identification of the types of ACO participants or
combinations of ACO participants (as listed in Sec. 425.102(a)) that
formed the ACO.
(4) Shared savings and losses information, including the following:
(i) Amount of any payment of shared savings received by the ACO or
shared losses owed to CMS.
(ii) Total proportion of shared savings invested in infrastructure,
redesigned care processes and other resources required to support the
three-part aim goals of better health for populations, better care for
individuals and lower growth in expenditures, including the proportion
distributed among ACO participants.
(5) The ACO's performance on all quality measures.
(c) Approval of public reporting information. Information reported
on an ACO's public reporting Web page in compliance with the
requirements of the standardized format specified by CMS is not subject
to marketing review and approval under Sec. 425.310.
(d) Public reporting by CMS. CMS may publicly report ACO-specific
information, including but not limited to the ACO public reporting Web
page address and the information required to be publicly reported under
paragraph (b) of this section.
0
28. Amend Sec. 425.312 by removing and reserving paragraph (b) and
revising paragraph (a) to read as follows:

Sec. 425.312 Notification to beneficiaries of participation in the
shared savings program.

(a) ACO participants must notify beneficiaries at the point of care
that their ACO providers/suppliers are participating in the Shared
Savings Program and of the opportunity to decline claims data sharing
under Sec. 425.708.
(1) Notification is carried out when an ACO participant posts signs
in its facilities and, in settings in which beneficiaries receive
primary care services, by making standardized written notices available
upon request.
(2) The ACO must use template language developed by CMS for
notifications described in paragraph (a)(1) of this section.
* * * * *

Sec. 425.314 [Amended]

0
29. Amend Sec. 425.314 in paragraph (c) by removing the word
``agreement'' and adding in its place the words ``participation
agreement''.

Sec. 425.316 [Amended]

0
30. Amend Sec. 425.316 as follows:
0
A. By removing paragraphs (c)(3) and (4).
0
B. By redesignating paragraph (c)(5) as (c)(3).
0
C. In newly redesignated paragraph (c)(3) by removing the phrase
``fully and completely'' and adding in its place the phrase
``accurately, completely, and timely''.
0
31. Amend Sec. 425.400 as follows:
0
A. By adding paragraph (a)(1) introductory text.
0
B. By revising paragraph (a)(1)(i).
0
C. In paragraph (a)(1)(ii), by removing the phrase ``by a physician who
is an ACO provider/supplier during the performance year'' and adding in
its place the phrase ``by a physician who is an ACO professional during
each benchmarking year and during each performance year''.
0
D. By adding a subject heading to paragraph (a)(2).
0
E. By adding paragraph (a)(3).
The additions read as follows:

Sec. 425.400 General.

(a)(1) General. (i) A Medicare fee-for-service beneficiary is
assigned to an ACO for a performance year if the--
(A) Beneficiary meets the eligibility criteria under Sec.
425.401(a); and
(B) Beneficiary's utilization of primary care services meets the
criteria established under the assignment methodology described in
Sec. 425.402 and Sec. 425.404.
* * * * *
(2) Assignment under Tracks 1 and 2.
* * * * *
(3) Prospective assignment under Track 3. (i) Medicare fee-for-
service beneficiaries are prospectively assigned to an ACO under Track
3 at the beginning of each performance year based on the beneficiary's
use of primary care services in the most recent 12 months for which
data are available, using the assignment methodology described in Sec.
425.402 and Sec. 425.404.
(ii) Beneficiaries that are prospectively assigned to an ACO under
paragraph (a)(3)(i) of this section will remain assigned to the ACO at
the end of the performance year unless they meet any of the exclusion
criteria under Sec. 425.401(b).
* * * * *
0
32. Add Sec. 425.401 to read as follows:

Sec. 425.401 Criteria for a beneficiary to be assigned to an ACO.

(a) A beneficiary may be assigned to an ACO under the assignment
methodology in Sec. Sec. 425.402 and 425.404, for a performance or
benchmark year, if the beneficiary meets all of the following criteria
during the assignment window:
(1)(i) Has at least 1 month of Part A and Part B enrollment; and
(ii) Does not have any months of Part A only or Part B only
enrollment.
(2) Does not have any months of Medicare group (private) health
plan enrollment.
(3) Is not assigned to any other Medicare shared savings
initiative.
(4) Lives in the United States or U.S. territories and possessions,
based on the most recent available data in our beneficiary records
regarding the beneficiary's residence at the end of the assignment
window.
(b) A beneficiary will be excluded from the prospective assignment
list of

[[Page 72869]]

an ACO participating under Track 3 at the end of a performance or
benchmark year, if the beneficiary meets any of the following criteria
during the performance or benchmark year:
(1)(i) Does not have at least 1 month of Part A and Part B
enrollment; and
(ii) Has any months of Part A only or Part B only enrollment.
(2) Has any months of Medicare group (private) health plan
enrollment.
(3) Did not live in the United States or U.S. territories and
possessions, based on the most recent available data in our beneficiary
records regarding the beneficiary's residency at the end of the year.
0
33. Revise Sec. 425.402 to read as follows:

Sec. 425.402 Basic assignment methodology.

(a) For purposes of benchmarking, preliminary prospective
assignment (including quarterly updates) and retrospective
reconciliation, and prospective assignment, CMS employs the following
step-wise methodology to assign Medicare fee-for-service beneficiaries
to an ACO:
(1) Identify all beneficiaries that had at least one primary care
service with a physician who is an ACO professional in the ACO and who
is a primary care physician as defined under Sec. 425.20 or who has
one of the primary specialty designations included in paragraph (b) of
this section.
(2) Identify all primary care services furnished to beneficiaries
identified in paragraph (a)(1) by ACO professionals of that ACO who are
primary care physicians as defined under Sec. 425.20, non-physician
ACO professionals, and physicians with specialty designations included
in paragraph (b) of this section during the applicable assignment
window.
(3) Under the first step, a beneficiary identified in paragraph
(a)(1) of this section is assigned to an ACO if the allowed charges for
primary care services furnished to the beneficiary by primary care
physicians who are ACO professionals and non-physician ACO
professionals in the ACO are greater than the allowed charges for
primary care services furnished by primary care physicians, nurse
practitioners, physician assistants, and clinical nurse specialists who
are--
(i) ACO professionals in any other ACO; or
(ii) Not affiliated with any ACO and identified by a Medicare-
enrolled billing TIN.
(4) The second step considers the remainder of the beneficiaries
identified in paragraph (a)(1) of this section who have not had a
primary care service rendered by any primary care physician, nurse
practitioner, physician assistant, or clinical nurse specialist, either
inside the ACO or outside the ACO. The beneficiary will be assigned to
an ACO if the allowed charges for primary care services furnished to
the beneficiary by physicians who are ACO professionals with specialty
designations as specified in paragraph (b) of this section are greater
than the allowed charges for primary care services furnished by
physicians with specialty designations as specified in paragraph (b) of
this section--
(i) Who are ACO professionals in any other ACO; or
(ii) Who are unaffiliated with an ACO and are identified by a
Medicare-enrolled billing TIN.
(b) ACO professionals considered in the second step of the
assignment methodology in paragraph (a)(4) of this section include
physicians who have one of the following primary specialty
designations:
(1) Allergy/immunology.
(2) Cardiology.
(3) Gastroenterology.
(4) Neurology.
(5) Obstetrics/gynecology.
(6) Hospice and palliative care.
(7) Sports medicine.
(8) Physical medicine and rehabilitation.
(9) Pulmonary disease.
(10) Pediatric medicine.
(11) Nephrology.
(12) Infectious disease.
(13) Endocrinology.
(14) Rheumatology.
(15) Multispecialty clinic or group practice.
(16) Hematology.
(17) Hematology/oncology.
(18) Preventive medicine.
(19) Medical oncology.
(20) Gynecology/oncology.
(c) When considering services furnished by ACO professionals in
teaching hospitals that have elected under Sec. 415.160 to receive
payment on a reasonable cost basis for the direct medical and surgical
services of their physicians in the assignment methodology under
paragraph (a) of this section, CMS uses the amount payable under the
physician fee schedule for the specified HCPCS code as a proxy for the
amount of the allowed charges for the service.
0
34. Amend Sec. 425.404 by revising paragraph (b) to read as follows:

Sec. 425.404 Special assignment conditions for ACOs including FQHCs
and RHCs.

* * * * *
(b) Under the assignment methodology in Sec. 425.402, CMS treats a
service reported on an FQHC/RHC claim as--
(1) A primary care service if the claim includes a HCPCS or revenue
center code that meets the definition of primary care services under
Sec. 425.20;
(2) A primary care service performed by a primary care physician if
the NPI of a physician identified in the attestation provided under
paragraph (a) of this section is reported on the claim for a primary
care service (as described in paragraph (b)(1) of this section) as the
attending provider; and
(3) A primary care service performed by a non-physician ACO
professional if the NPI reported on the claim for a primary care
service (as described in paragraph (b)(1) of this section) as the
attending provider is an ACO professional but is not identified in the
attestation provided under paragraph (a) of this section.
0
36. Amend Sec. 425.600 as follows:
0
A. In paragraph (a)(2), by removing the phrase ``under the two-sided
model'' and adding in its place the phrase ``under a two-sided model''.
0
B. By adding paragraph (a)(3).
0
C. By revising paragraph (b).
The addition and revision read as follows:

Sec. 425.600 Selection of risk model.

(a) * * *
(3) Track 3. Under Track 3, the ACO operates under a two-sided
model (as described under Sec. 425.610), sharing both savings and
losses with the Medicare program for the agreement period.
(b) An ACO may not operate under the one-sided model for a second
agreement period unless the--
(1) Immediately preceding agreement period was under the one-sided
model;
(2) The ACO did not generate losses in excess of its negative MSR
in both of the first 2 performance years of the previous agreement
period; and
(3) The ACO meets the criteria established for ACOs seeking to
renew their agreements under Sec. 425.224(b).
* * * * *

Sec. 425.602 [Amended]

0
37. Amend Sec. 425.602 (a)(8), by removing the phrase ``The ACO's
benchmark may be adjusted'' and adding in its place the phrase ``The
ACO's benchmark will be adjusted in accordance with Sec. 425.118(b)''.
0
38. Amend Sec. 425.604 as follows:
0
A. By redesignating the text of paragraph (d) as paragraph (d)(1).
0
B. In newly redesignated paragraph (d)(1), removing the phrase ``under
the one-sided model'' and adding in its place the phrase ``during a
performance year in its first agreement period under the one-sided
model''.

[[Page 72870]]

0
D. By adding a paragraph (d)(2).
The addition reads as follows:

Sec. 425.604 Calculation of savings under the one-sided model.

* * * * *
(d) * * *
(2) An ACO that meets all the requirements for receiving shared
savings payments during a performance year in its second agreement
period under the one-sided model will receive a shared savings payment
of up to 40 percent of all savings under the updated benchmark, as
determined on the basis of its quality performance under Sec. 425.502
(up to the performance payment limit described in paragraph (e)(2) of
this section).
* * * * *
0
39. Amend Sec. 425.606 as follows:
0
A. By revising the section heading.
0
B. In paragraph (a) introductory text, by removing the phrase ``under
the two-sided model,'' and adding in its place the phrase ``under Track
2,''.
0
C. By revising paragraph (b).
0
D. In paragraph (d), by removing the phrase ``under the two-sided
model'' and adding in its place the phrase ``under Track 2''.
0
E. In paragraph (e)(2), by removing the phrase ``under the two-sided
model'' and adding in its place the phrase ``under Track 2''.
0
F. In paragraph (g)(1), by removing the phrase ``in a two-sided model''
and adding in its place the phrase ``in Track 2''.
The revisions read as follows:

Sec. 425.606 Calculation of shared savings and losses under Track 2.

* * * * *
(b) Minimum savings or loss rate. CMS uses a sliding scale, based
on the number of beneficiaries assigned to the ACO under subpart E of
this part, to establish the MSR and MLR for an ACO participating under
Track 2. The MSR under Track 2 is the same as the MSR that would apply
in the one-sided model under Sec. 425.604(b) and is based on the
number of assigned beneficiaries. The MLR under Track 2 is equal to the
negative MSR.
(1) To qualify for shared savings under Track 2, an ACO's average
per capita Medicare expenditures for the performance year must be below
its updated benchmark costs for the year by at least the MSR
established for the ACO.
(2) To be responsible for sharing losses with the Medicare program,
an ACO's average per capita Medicare expenditures for the performance
year must be above its updated benchmark costs for the year by at least
the MLR established for the ACO.
* * * * *
0
40. Add Sec. 425.610 to subpart G to read as follows:

Sec. 425.610 Calculation of shared savings and losses under Track 3.

(a) General rule. For each performance year, CMS determines whether
the estimated average per capita Medicare expenditures under the ACO
for Medicare fee-for-service beneficiaries for Parts A and B services
are above or below the updated benchmark determined under Sec.
425.602. In order to qualify for a shared savings payment under Track
3, or to be responsible for sharing losses with CMS, an ACO's average
per capita Medicare expenditures under the ACO for Medicare fee-for-
service beneficiaries for Parts A and B services for the performance
year must be below or above the updated benchmark, respectively, by at
least the minimum savings or loss rate under paragraph (b) of this
section.
(1) Newly assigned beneficiaries. CMS uses an ACO's HCC prospective
risk score to adjust for changes in severity and case mix in this
population.
(2) Continuously assigned beneficiaries. (i) CMS uses demographic
factors to adjust for changes in the continuously assigned beneficiary
population.
(ii) If the prospective HCC risk score is lower in the performance
year for this population, CMS adjusts for changes in severity and case
mix for this population using this lower prospective HCC risk score.
(3) Assigned beneficiary changes in demographics and health status
are used to adjust benchmark expenditures as described in Sec.
425.602(a). In adjusting for health status and demographic changes CMS
makes separate adjustments for each of the following populations of
beneficiaries:
(i) ESRD.
(ii) Disabled.
(iii) Aged/dual eligible Medicare and Medicaid beneficiaries.
(iv) Aged/non-dual eligible Medicare and Medicaid beneficiaries.
(4) To minimize variation from catastrophically large claims, CMS
truncates an assigned beneficiary's total annual Parts A and B fee-for-
service per capita expenditures at the 99th percentile of national
Medicare fee-for-service expenditures as determined for each
performance year.
(5) CMS uses a 3-month claims run out with a completion factor to
calculate an ACO's per capita expenditures for each performance year.
(6) Calculations of the ACO's expenditures will include the payment
amounts included in Part A and B fee-for-service claims.
(i) These calculations will exclude indirect medical education
(IME) and disproportionate share hospital (DSH) payments.
(ii) These calculations will take into consideration individually
beneficiary identifiable payments made under a demonstration, pilot or
time limited program.
(7) In order to qualify for a shared savings payment, the ACO's
average per capita Medicare expenditures for the performance year must
be below the applicable updated benchmark by at least the minimum
savings rate established for the ACO under paragraph (b) of this
section.
(b) Minimum savings or loss rate. (1) To qualify for shared savings
under Track 3 an ACO's average per capita Medicare expenditures for the
performance year must be below its updated benchmark costs for the year
by at least 2 percent.
(2) To be responsible for sharing losses with the Medicare program
under Track 3, an ACO's average per capita Medicare expenditures for
the performance year must be at least 2 percent above its updated
benchmark costs for the year.
(c) Qualification for shared savings payment. To qualify for shared
savings, an ACO must meet the minimum savings rate requirement
established under paragraph (b) of this section, meet the minimum
quality performance standards established under Sec. 425.502, and
otherwise maintain its eligibility to participate in the Shared Savings
Program under this part.
(d) Final sharing rate. An ACO that meets all the requirements for
receiving shared savings payments under Track 3 will receive a shared
savings payment of up to 75 percent of all the savings under the
updated benchmark, as determined on the basis of its quality
performance under Sec. 425.502 (up to the performance payment limit
described in paragraph (e)(2) of this section).
(e) Performance payment. (1) If an ACO qualifies for savings by
meeting or exceeding the MSR, the final sharing rate will apply to an
ACO's savings on a first dollar basis.
(2) The amount of shared savings an eligible ACO receives under
Track 3 may not exceed 20 percent of its updated benchmark.
(f) Shared loss rate. The shared loss rate--
(1) For an ACO that is required to share losses with the Medicare
program for expenditures over the updated

[[Page 72871]]

benchmark, the amount of shared losses is determined based on the
inverse of its final sharing rate described in Sec. 425.610(d) (that
is, 1 minus the final shared savings rate determined under Sec.
425.610(d));
(2) May not exceed 75 percent; and
(3) May not be less than 40 percent.
(g) Loss recoupment limit. The amount of shared losses for which an
eligible ACO is liable may not exceed 15 percent of its updated
benchmark as determined under Sec. 425.602.
(h) Notification of savings and losses. (1) CMS notifies an ACO in
writing regarding whether the ACO qualifies for a shared savings
payment, and if so, the amount of the payment due.
(2) CMS provides written notification to an ACO of the amount of
shared losses, if any, that it must repay to the program.
(3) If an ACO has shared losses, the ACO must make payment in full
to CMS within 90 days of receipt of notification.
0
41. Amend Sec. 425.702 by revising paragraph (c)(1) to read as
follows:

Sec. 425.702 Aggregate reports.

* * * * *
(c) * * *
(1) At the beginning of the agreement period, during each quarter
(and in conjunction with the annual reconciliation), and at the
beginning of each performance year, CMS, upon the ACO's request for the
data for purposes of population-based activities relating to improving
health or reducing growth in health care costs, process development,
care management, and care coordination, will provide the ACO with
information about its fee-for-service population.
(i) Under Tracks 1 and 2, the following information is made
available regarding preliminarily prospectively assigned beneficiaries
and beneficiaries that received a primary care service during the
previous 12 months from one of the ACO participants that submits claims
for primary care services used to determine the ACO's assigned
population under subpart E of this part:
(A) Beneficiary name.
(B) Date of birth.
(C) Health Insurance Claim Number (HICN).
(D) Sex.
(ii) Under Tracks 1 and 2, information in the following categories,
which represents the minimum data necessary for ACOs to conduct health
care operations work is made available regarding preliminarily
prospectively assigned beneficiaries:
(A) Demographic data such as enrollment status.
(B) Health status information such as risk profile and chronic
condition subgroup.
(C) Utilization rates of Medicare services such as the use of
evaluation and management, hospital, emergency, and post-acute
services, including the dates and place of service.
(D) Expenditure information related to utilization of services.
(iii) The information under paragraphs (c)(1)(i) and (c)(1)(ii) of
this section will be made available to ACOs in Track 3, but will be
limited to the ACO's prospectively assigned beneficiaries.
* * * * *
0
42. Amend Sec. 425.704 as follows:
0
A. By revising the section heading.
0
B. In the introductory text, by removing the phrase ``claims data for
preliminary prospectively assigned beneficiaries'' and adding in its
place the phrase ``claims data for preliminarily prospectively and
prospectively assigned beneficiaries''.
0
C. In the introductory text, by removing the phrase ``upon whom
assignment is based during the agreement period'' and adding in its
place the phrase ``that submits claims for primary care services used
to determine the ACO's assigned population under subpart E of this part
during the performance year''.
0
D. In paragraph (a) by removing the phrase ``ACOs may request data as
often'' and adding in its place ``ACOs may access requested data as
often''.
0
E. By revising paragraph (d)(1).
0
F. In paragraph (d)(2) by removing the phrase ``has been notified in
writing how the ACO intends to use'' and adding in its place the phrase
``has been notified in compliance with Sec. 425.708 that the ACO has
requested access to''.
The revisions read as follows:

Sec. 425.704 Beneficiary-identifiable claims data.

* * * * *
(d) * * *
(1) For an ACO participating--
(i) In Track 1 or 2, the beneficiary's name appears on the
preliminary prospective assignment list provided to the ACO at the
beginning of the performance year, during each quarter (and in
conjunction with the annual reconciliation) or the beneficiary has
received a primary care service from an ACO participant upon whom
assignment is based (under subpart E of this part) during the most
recent 12-month period.
(ii) In Track 3, the beneficiary's name appears on the prospective
assignment list provided to the ACO at the beginning of the performance
year.
* * * * *
0
43. Amend Sec. 425.708 as follows:
0
A. Revising the section heading and paragraph (a).
0
B. Removing paragraphs (b) and (c).
0
C. Redesignating paragraphs (d) through (f) as paragraphs (b) through
(d), respectively.
0
D. Revising newly redesignated paragraphs (b) and (c).
The revisions read as follows:

Sec. 425.708 Beneficiaries may decline claims data sharing.

(a) Beneficiaries must receive notification about the Shared
Savings Program and the opportunity to decline claims data sharing and
instructions on how to inform CMS directly of their preference.
(1) FFS beneficiaries are notified about the opportunity to decline
claims data sharing through CMS materials such as the Medicare & You
Handbook and through the notifications required under Sec. 425.312.
(2) The notifications provided under Sec. 425.312 must state that
the ACO may have requested beneficiary identifiable claims data about
the beneficiary for purposes of its care coordination and quality
improvement work, and inform the beneficiary how to decline having his
or her claims information shared with the ACO in the form and manner
specified by CMS.
(3) Beneficiary requests to decline claims data sharing will remain
in effect unless and until a beneficiary subsequently contacts CMS to
amend that request to permit claims data sharing with ACOs.
(b) The opportunity to decline having claims data shared with an
ACO under paragraph (a) of this section does not apply to the
information that CMS provides to ACOs under Sec. 425.702(c).
(c) In accordance with 42 U.S.C. 290dd-2 and the implementing
regulations at 42 CFR part 2, CMS does not share beneficiary
identifiable claims data relating to the diagnosis and treatment of
alcohol and substance abuse without the explicit written consent of the
beneficiary.
* * * * *
0
44. Amend Sec. 425.802 by revising paragraph (a)(2) to read as
follows:

Sec. 425.802 Request for review.

(a) * * *
(2) The reconsideration review must be held on the record (review
of submitted documentation).
* * * * *
0
45. Amend Sec. 425.804 as follows:
0
A. By revising paragraph (a)(3).

[[Page 72872]]

0
B. By removing paragraph (d).
0
C. Redesignating paragraphs (e) and (f) as paragraphs (d) and (e),
respectively.
The revision reads as follows:

Sec. 425.804 Reconsideration review process.

(a) * * *
(3) A briefing schedule that permits each party to submit only one
written brief, including any evidence, for consideration by the
reconsideration official in support of the party's position.
* * * * *

Dated: November 20, 2014.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.
Dated: November 21, 2014.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2014-28388 Filed 12-1-14; 4:15 pm]
BILLING CODE 4120-01-P

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