Medicare Program; Medicare Shared Savings Program; Accountable Care Organizations-Pathways to Success and Extreme and Uncontrollable Circumstances Policies for Performance Year 2017, 67816-68082 [2018-27981]

Download as PDF 67816 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services 42 CFR Part 425 [CMS–1701–F2 and CMS–1702–F] RINs 0938–AT45 and 0938–AT51 Medicare Program; Medicare Shared Savings Program; Accountable Care Organizations—Pathways to Success and Extreme and Uncontrollable Circumstances Policies for Performance Year 2017 Centers for Medicare & Medicaid Services (CMS), HHS. ACTION: Final rules. AGENCY: Under the Medicare Shared Savings Program (Shared Savings Program), providers of services and suppliers that participate in an Accountable Care Organization (ACO) continue to receive traditional Medicare fee-for-service (FFS) payments under Parts A and B, but the ACO may be khammond on DSK30JT082PROD with RULES2 SUMMARY: VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 eligible to receive a shared savings payment if it meets specified quality and savings requirements. The policies included in this final rule provide a new direction for the Shared Savings Program by establishing pathways to success through redesigning the participation options available under the program to encourage ACOs to transition to two-sided models (in which they may share in savings and are accountable for repaying shared losses). These policies are designed to increase savings for the Trust Funds and mitigate losses, reduce gaming opportunities, and promote regulatory flexibility and free-market principles. This final rule also provides new tools to support coordination of care across settings and strengthen beneficiary engagement; and ensure rigorous benchmarking. In this final rule, we also respond to public comments we received on the extreme and uncontrollable circumstances policies for the Shared Savings Program that were used to assess the quality and financial performance of ACOs that were subject to extreme and uncontrollable events, PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 such as Hurricanes Harvey, Irma, and Maria, and the California wildfires, in performance year 2017, including the applicable quality data reporting period for performance year 2017. Effective Date: This rule is effective February 14, 2019. Applicability Dates: In the SUPPLEMENTARY INFORMATION section of this final rule, we provide a table (Table 1) which lists key changes in this final rule that have an applicability date other than the effective date of this final rule. DATES: FOR FURTHER INFORMATION CONTACT: Elizabeth November, (410) 786–8084 or via email at aco@cms.hhs.gov. Table 1 lists key changes that have an applicability date other than 60 days after the date of publication of this final rule. By indicating that a provision is applicable to a performance year (PY) or agreement period, activities related to implementation of the policy may precede the start of the performance year or agreement period. SUPPLEMENTARY INFORMATION: BILLING CODE 4120–01–P E:\FR\FM\31DER2.SGM 31DER2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations 67817 TABLE 1-APPLICABILITY DATES OF SELECT PROVISIONS OF THE FINAL RULE II.A.2. II.A.2. Discontinuing deferred renewal option. ll.A.4.b. Permitting annual election of differing levels of risk and potential reward within the BASIC track's glide path. Permitting annual election of beneficiary assigmnent methodology for ACOs in BASIC track or ENHANCED track. Evaluation criteria for determining participation options based on ACO participants' Medicare FFS revenue, ACO legal entity and ACO participant experience with performance-based risk Medicare ACO initiatives, and prior performance (if applicabl~). Monitoring for fmancial performance. Timing of election of MSR/MI.R. ModifYing the MSRIMLR to address small population sizes. Annual recalculation of repayment mechanism amounts. II.A.4.c. II.A.5.c. II.A.5.d.(2). II.A.6.b.(2). TT.A.6.b.(3). khammond on DSK30JT082PROD with RULES2 TT.A.6.c.(2). VerDate Sep<11>2014 Section Titleffiescription Availability of an additional participation option under a new BASIC track (including glide path) under an agreement period of at least 5 years; Availability of Track 3 as the ENHANCED track under an agreement period of at least 5 years. Discontinuing Track I and Track 2. 16:59 Dec 28, 2018 Jkt 247001 PO 00000 Frm 00003 Fmt 4701 Applicability Date Agreement periods starting on or after July I, 2019. No longer available for applicants for agreement periods starting in 2019 and subsequent years. No longer available for renewal applicants for agreement periods starting in 20 19 and subsequent years. Performance year beginning on July 1, 2019, and subsequent years for eligible A COs. Performance year beginning on July 1, 2019, and subsequent years. Agreement periods starting on or after July 1, 2019. Performance year beginning on July I, 2019, and subsequent years. Agreement periods starting on or after July 1, 2019. Performance year beginning on July 1, 2019, and subsequent years. Agreement periods starting on or after July 1,2019. Sfmt 4725 E:\FR\FM\31DER2.SGM 31DER2 ER31DE18.000</GPH> Preamble Section II.A.2. Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations BILLING CODE 4120–01–C khammond on DSK30JT082PROD with RULES2 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. Statutory and Regulatory Background II. Provisions of the August 2018 Proposed Rule and Analysis of and Responses to Public Comments A. Redesigning Participation Options To Facilitate Transition to PerformanceBased Risk 1. Background on Shared Savings Program Participation Options 2. Modified Participation Options Under 5-Year Agreement Periods 3. Creating a BASIC Track With Glide Path to Performance-Based Risk 4. Permitting Annual Participation Elections VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 5. Determining Participation Options Based on Medicare FFS Revenue and Prior Participation 6. Requirements for ACO Participation in Two-Sided Models 7. Participation Options for Agreement Periods Beginning in 2019 B. Fee-for-Service Benefit Enhancements 1. Background 2. Proposed Revisions C. Providing Tools To Strengthen Beneficiary Engagement 1. Background on Beneficiary Engagement 2. Beneficiary Incentives 3. Empowering Beneficiary Choice D. Benchmarking Methodology Refinements 1. Background 2. Risk Adjustment Methodology for Adjusting Historical Benchmark Each Performance Year 3. Use of Regional Factors When Establishing and Resetting ACOs’ Benchmarks PO 00000 Frm 00004 Fmt 4701 Sfmt 4700 4. Technical Changes To Incorporate References to Benchmark Rebasing Policies E. Updating Program Policies 1. Overview 2. Coordination of Pharmacy Care for ACO Beneficiaries F. Applicability of Final Policies to Track 1+ Model ACOs 1. Background 2. Unavailability of Application Cycles for Entry Into the Track 1+ Model in 2019 and 2020 3. Applicability of Final Policies to Track 1+ Model ACOs Through Revised Program Regulations or Revisions to Track 1+ Model Participation Agreements III. Provisions of the December 2017 Interim Final Rule With Comment Period and Analysis of and Response to Public Comments A. Background E:\FR\FM\31DER2.SGM 31DER2 ER31DE18.001</GPH> 67818 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations B. Shared Savings Program Extreme and Uncontrollable Circumstances Policies for Performance Year 2017 1. Determination of Quality Performance Scores for ACOs in Affected Areas 2. Mitigating Shared Losses for ACOs Participating in a Performance-Based Risk Track IV. Collection of Information Requirements V. Regulatory Impact Analysis A. Statement of Need B. Overall Impact 1. Medicare Program; Medicare Shared Savings Program; Accountable Care Organizations—Pathways to Success (CMS–1701–F2) 2. Medicare Program; Medicare Shared Savings Program; Accountable Care Organizations—Extreme and Uncontrollable Circumstances Policies (CMS–1701–F) C. Anticipated Effects 1. Effects on the Medicare Program 2. Effects on Beneficiaries 3. Effects on Providers and Suppliers 4. Effect on Small Entities 5. Effect on Small Rural Hospitals 6. Unfunded Mandates 7. Regulatory Review Cost Estimation 8. Other Impacts on Regulatory Burden D. Alternatives Considered E. Compliance With Requirements of Section 1899(i)(3)(B) of the Act F. Accounting Statement and Table G. Regulatory Reform Analysis Under Executive Order 13771 H. Conclusion VI. Effective Date Exception Regulation Text I. Executive Summary and Background khammond on DSK30JT082PROD with RULES2 A. Executive Summary 1. Purpose In August 2018 we issued a proposed rule, titled ‘‘Medicare Program; Medicare Shared Savings Program; Accountable Care Organizations— Pathways to Success’’ (hereinafter referred to as the ‘‘August 2018 proposed rule’’), which appeared in the Federal Register on August 17, 2018 (83 FR 41786). On November 1, 2018, we issued a final rule, titled ‘‘Medicare Program; Revisions to Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2019; Medicare Shared Savings Program Requirements; Quality Payment Program; Medicaid Promoting Interoperability Program; Quality Payment Program—Extreme and Uncontrollable Circumstance Policy for the 2019 MIPS Payment Year; Provisions From the Medicare Shared Savings Program—Accountable Care Organizations—Pathways to Success; and Expanding the Use of Telehealth Services for the Treatment of Opioid Use Disorder Under the Substance UseDisorder Prevention That Promotes Opioid Recovery and Treatment (SUPPORT) for Patients and VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 Communities Act’’ (hereinafter referred to as the ‘‘November 2018 final rule’’), that appeared in the Federal Register on November 23, 2018 (83 FR 59452). In the November 2018 final rule, we finalized certain policies from the August 2018 proposed rule in order to ensure continuity of participation, and finalize time-sensitive program policy changes for currently participating ACOs. We also finalized provisions to streamline the ACO core quality measure set to reduce burden and encourage better outcomes, which we proposed in the proposed rule for the CY 2019 PFS, entitled Medicare Program; Revisions to Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2019; Medicare Shared Savings Program Requirements; Quality Payment Program; and Medicaid Promoting Interoperability Program; Proposed Rule (83 FR 35704). This final rule addresses the remaining policies from the August 2018 proposed rule that were not addressed in the November 2018 final rule. Since the Medicare Shared Savings Program (Shared Savings Program) was established in 2012, CMS has continued to monitor and evaluate program results to look for additional ways to streamline program operations, reduce burden, and facilitate transition to risk that promote a competitive and accountable marketplace, while improving the quality of care for Medicare beneficiaries. This final rule makes changes to the regulations for the Shared Savings Program that were promulgated through rulemaking between 2011 and 2017, and are codified in 42 CFR part 425. The changes in this final rule are based on the additional program experience we have gained and on lessons learned from testing of Medicare ACO initiatives by the Center for Medicare and Medicaid Innovation (Innovation Center). As we implement these changes, we will continue to monitor the program’s ability to reduce healthcare spending and improve care quality, including whether the program provides beneficiaries with the value and choice demonstrated by other Medicare options such as Medicare Advantage (MA), and will use the results of this monitoring to inform future development of the program. This rule also finalizes changes to address new requirements of the Bipartisan Budget Act of 2018 (Pub. L. 115–123) (herein referred to as the Bipartisan Budget Act). In December 2017, we issued an interim final rule with comment period, titled ‘‘Medicare Shared Savings PO 00000 Frm 00005 Fmt 4701 Sfmt 4700 67819 Program: Extreme and Uncontrollable Circumstances Policies for Performance Year 2017’’ (hereinafter referred to as the ‘‘December 2017 interim final rule with comment period’’), which appeared in the Federal Register on December 26, 2017 (82 FR 60912). The December 2017 interim final rule with comment period established policies for assessing the financial and quality performance of Shared Savings Program ACOs that were affected by extreme and uncontrollable circumstances during performance year 2017, including the applicable quality reporting period for performance year 2017. This final rule includes an analysis of and responses to comments received on the December 2017 interim final rule with comment period. Section 1899 of the Social Security Act (the Act) established the Medicare Shared Savings Program, which promotes accountability for a patient population, fosters coordination of items and services under Medicare Parts A and B, encourages investment in infrastructure and redesigned care processes for high quality and efficient health care service delivery, and promotes higher value care. The Shared Savings Program is a voluntary program that encourages groups of doctors, hospitals, and other health care providers to come together as an ACO to lower growth in expenditures and improve quality. An ACO agrees to be held accountable for the quality, cost, and experience of care of an assigned Medicare FFS beneficiary population. ACOs that successfully meet quality and savings requirements share a percentage of the achieved savings with Medicare. Shared Savings Program ACOs are an important innovation for moving CMS’ payment systems away from paying for volume and towards paying for value and outcomes because ACOs are held accountable for spending in relation to a historical benchmark and for quality performance, including performance on outcome and patient experience measures. The program began in 2012, and as of January 2018, 561 ACOs were participating in the program and serving over 10.5 million Medicare FFS beneficiaries. (See the Medicare Shared Savings Program website at https:// www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/sharedsavings program/ for information about the program, the program’s statutory authority, regulations and guidance, the program’s application process, participating ACOs, and program performance data.) The Shared Savings Program currently includes three financial models that allow ACOs to select an E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67820 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations arrangement that makes the most sense for their organization. The vast majority of Shared Savings Program ACOs, 82 percent in 2018,1 have chosen to enter and maximize the allowed time under a one-sided, shared savings-only model (Track 1), under which eligible ACOs receive a share of any savings under their benchmark, but are not required to pay back a share of spending over the benchmark. In comparison, there is relatively low participation in the program’s two-sided, shared savings and shared losses models, under which eligible ACOs share in a larger portion of any savings under their benchmark, but are required to share losses if spending exceeds the benchmark. Participation in Track 2 (introduced at the start of the program in 2012) has slowly declined in recent years, particularly following the availability of Track 3 (beginning in 2016), although participation in Track 3, the program’s highest-risk track, remains modest. Recently, the Innovation Center designed an additional option available to eligible Track 1 ACOs, referred to as the Track 1+ Model, to facilitate ACOs’ transition to performance-based risk. The Track 1+ Model is a time-limited model that began on January 1, 2018, and is based on Shared Savings Program Track 1, but tests a payment design that incorporates more limited downside risk, as compared to Track 2 and Track 3. Our early experience with the design of the Track 1+ Model demonstrates that the availability of a lower-risk, twosided model is an effective way to encourage Track 1 ACOs (including ACOs within a current agreement period, initial program entrants, and renewing ACOs) to progress more rapidly to performance-based risk. Fiftyfive ACOs entered into Track 1+ Model agreements effective on January 1, 2018, the first time the model was offered. These ACOs represent our largest cohort of performance-based risk ACOs to date. ACOs in two-sided models have shown significant savings to the Medicare program while advancing the quality of care furnished to FFS beneficiaries; but, the majority of ACOs have yet to assume any performancebased risk although they have the ability to benefit from waivers of certain federal requirements in connection with their participation in the Shared Savings Program. Even more concerning is the finding that for performance years beginning in 2012 through 2016, onesided model ACOs, which are not accountable for sharing in losses, actually increased Medicare spending relative to their benchmarks under the program’s financial methodology. Further, the presence of an ‘‘upsideonly’’ track may be encouraging consolidation in the marketplace, reducing competition and choice for Medicare FFS beneficiaries. While we understand that systems need time to adjust, Medicare cannot afford to continue with models that are not producing desired results. Our results to date have shown that ACOs in two-sided models perform better over time than one-sided model ACOs, low revenue ACOs, which are typically physician-led, perform better than high revenue ACOs, which often include hospitals, and the longer ACOs are in the program the better they do at achieving the program goals of lowering growth in expenditures and improving quality. For example, in performance year 2016, about 68 percent of Shared Savings Program ACOs in two-sided models (15 of 22 ACOs) shared savings compared to 29 percent of Track 1 ACOs; 41 percent of low revenue ACOs shared savings compared to 23 percent of high revenue ACOs; and 42 percent of April and July 2012 starters shared savings, compared to 36 percent of 2013 and 2014 starters, 26 percent of 2015 starters, and 18 percent of 2016 starters. Shortly after the August 2018 proposed rule was announced, CMS made publicly available performance year 2017 results that showed similarities to 2016. In performance year 2017, 51 percent of Shared Savings Program ACOs in two-sided models (20 of 39 ACOs) shared savings compared to 33 percent of Track 1 ACOs; 44 percent of low revenue ACOs shared savings compared to 28 percent of high revenue ACOs; and 51 percent of April and July 2012 starters shared savings, compared to 43 percent of 2013 and 2014 starters, 28 percent of 2015 and 2016 starters, and 21 percent of 2017 starters. In the August 2018 proposed rule, we explained our belief that additional policy changes to the Shared Savings Program and its financial models are required to support the move to value, achieve savings for the Medicare program, and promote a competitive and accountable healthcare marketplace. Accordingly, we proposed to redesign the Shared Savings Program to provide pathways to success in the future through a combination of policy changes, informed by the following guiding principles: 1 See, for example, Medicare Shared Savings Program Fast Facts (January 2018), available at https://www.cms.gov/Medicare/Medicare-Fee-forService-Payment/sharedsavingsprogram/ Downloads/SSP-2018-Fast-Facts.pdf. • Accountability—Increase savings for the Medicare Trust Funds, mitigate losses by accelerating the move to two-sided risk by ACOs, and ensure rigorous benchmarking. VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 PO 00000 Frm 00006 Fmt 4701 Sfmt 4700 • Competition—Promote free-market principles by encouraging the development of physician-only and rural ACOs in order to provide a pathway for physicians to stay independent, thereby preserving beneficiary choice. • Engagement—Promote regulatory flexibility to allow ACOs to innovate and be successful in coordinating care, improving quality, and engaging with and incentivizing beneficiaries to achieve and maintain good health. • Integrity—Reduce opportunities for gaming. • Quality—Improve quality of care for patients with an emphasis on promoting interoperability and the sharing of healthcare data between providers, focusing on meaningful quality measures, and combatting opioid addiction. In the August 2018 proposed rule, we explained that the need for a new approach or pathway to transition Track 1 ACOs to performance-based risk is particularly relevant at this time, given the current stage of participation for the initial entrants to the Shared Savings Program under the program’s current design. The program’s initial entrants are nearing the end of the time allowed under Track 1 (a maximum of two, 3year agreement periods). Among the program’s initial entrants (ACOs that first entered the program in 2012 and 2013), there are 82 ACOs that would be required to renew their participation agreements to enter a third agreement period beginning in 2019, and they face transitioning from a one-sided model to a two-sided model with significant levels of risk that some are not prepared to accept. Another 114 ACOs that have renewed for a second agreement period under a one-sided model, including 59 ACOs that started in 2014 and 55 ACOs that started in 2015, will face a similar transition to a two-sided model with significant levels of risk in 2020 and 2021, respectively. The transition to performance-based risk remains a pressing concern for ACOs, as evidenced by a recent survey of the 82 ACOs that would be required to move to a two-sided payment model in their third agreement period beginning in 2019. The survey results, based on a 43 percent response rate, indicate that these Track 1 ACOs are reluctant to move to two-sided risk under the current design of the program. See National Association of ACOs, Press Release (May 2018), available at https:// www.naacos.com/press-release-may-22018. In the August 2018 proposed rule, we explained our belief that the long term success and sustainability of the Shared Savings Program is affected by a combination of key program factors: The savings and losses potential of the E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations program established through the design of the program’s tracks; the methodology for setting and resetting the benchmark, which is the basis for determining shared savings and shared losses; the length of the agreement period, which determines the amount of time an ACO remains under a financial model; and the frequency of benchmark rebasing. In the proposed rule, we carefully considered each of these factors and proposed a framework that we believed, on balance, would create sufficient incentives for participation in a voluntary program, while also achieving program goals to increase quality of care for Medicare beneficiaries and reduce expenditure growth to protect the Trust Funds. In order to achieve these program goals and preserve the long term success and sustainability of the program, we explained the need to create a pathway for ACOs to more rapidly transition to performance-based risk. ACOs and other program stakeholders have urged CMS to smooth the transition to risk by providing more time to gain experience with risk and more incremental levels of risk. Through the proposed program redesign, we aimed to create a pathway for success that facilitates ACOs’ transition to performance-based risk more quickly and makes this transition smooth by phasing-in risk more gradually. Through the creation of a new BASIC track, we proposed to allow ACOs to gain experience with more modest levels of performance-based risk on their way to accepting greater levels of performance-based risk over time (as the proposed BASIC track’s maximum level of risk is similar to that of the Track 1+ Model, and substantially less than the proposed ENHANCED track). As stakeholders have suggested, we proposed to provide flexibility to allow ACOs that are ready to accelerate their move to higher risk within agreement periods, and enable such ACOs to participate in Advanced APMs for purposes of the Quality Payment Program. We proposed to streamline the program and simplify the participation options by retiring Track 1 and Track 2. We proposed to retain Track 3, which we would rename as the ENHANCED track, to encourage ACOs that are able to accept higher levels of potential risk and reward to drive the most significant systematic change in providers’ and suppliers’ behavior. We proposed to further strengthen the program by establishing policies to deter gaming by limiting more experienced ACOs to higher-risk participation options; more rigorously screening for good standing among ACOs seeking to renew their VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 participation in the program or re-enter the program after termination or expiration of their previous agreement; identifying ACOs re-forming under new legal entities as re-entering ACOs if greater than 50 percent of their ACO participants have recent prior participation in the same ACO in order to hold these ACOs accountable for their ACO participants’ experience with the program; and holding ACOs in twosided models accountable for partialyear losses if either the ACO or CMS terminates the agreement before the end of the performance year. Under the proposed redesign of the program, our policies would recognize the relationship between the ACO’s degree of control over total Medicare Parts A and B FFS expenditures for its assigned beneficiaries and its readiness to accept higher or lower degrees of performance-based risk. Comparisons of ACO participants’ total Medicare Parts A and B FFS revenue to a factor based on total Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries would be used in determining the maximum amount of losses (loss sharing limit) under the BASIC track, the estimated amount of repayment mechanism arrangements for BASIC track ACOs (required for ACOs entering or continuing their participation in a two-sided model to assure CMS of the ACO’s ability to repay shared losses), and in determining participation options for ACOs. Using revenue-based loss sharing limits and repayment mechanism amounts for eligible BASIC track ACOs would help to ensure that low revenue ACOs have a meaningful pathway to participate in a two-sided model that may be more consistent with their capacity to assume risk. By basing participation options on the ACO’s degree of control over total Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries, low revenue ACOs, which tend to be smaller and have less capital, would be able to continue in the program longer under lower levels of risk; whereas high revenue ACOs, which tend to include institutional providers and are typically larger and better capitalized, would be required to move more quickly to higher levels of performance-based risk in the ENHANCED track, because they should be able to exert more influence, direction, and coordination over the full continuum of care. By requiring high revenue ACOs to enter higher levels of performance-based risk under the ENHANCED track after no more than one agreement period under the BASIC track, we aimed to drive more PO 00000 Frm 00007 Fmt 4701 Sfmt 4700 67821 meaningful systematic change in these ACOs, which have greater potential to control their assigned beneficiaries’ Medicare Parts A and B FFS expenditures by coordinating care across care settings, and thus to achieve significant change in spending. Further, allowing low revenue ACOs a longer period of participation under the lower level of performance-based risk in the BASIC track, while challenging high revenue ACOs to more quickly move to higher levels of performance-based risk, could give rise to more innovative arrangements for lowering growth in expenditures and improving quality, particularly among low revenue ACOs that tend to be composed of independent physician practices. The program’s benchmarking methodology, a complex calculation that incorporates the ACO’s riskadjusted historical expenditures and reflects either national or regional spending trends, is a central feature of the program’s financial models. We proposed to continue to refine the benchmarking approach based on our experience using factors based on regional FFS expenditures in resetting the benchmark in an ACO’s second or subsequent agreement period, and to address ACOs’ persistent concerns over the risk adjustment methodology. Through the proposed redesign of the program, we would provide for more accurate benchmarks for ACOs that are protective of the Trust Funds by ensuring that ACOs do not unduly benefit from any one aspect of the benchmark calculations, while also helping to ensure the program continues to remain attractive to ACOs, especially those caring for the most complex and highest risk patients who could benefit from high-quality, coordinated care from an ACO. We proposed to accelerate the use of factors based on regional FFS expenditures in establishing the benchmark by applying this methodology in setting an ACO’s benchmark beginning with its first agreement period. This would allow the benchmark to be a more accurate representation of the ACO’s costs in relation to its localized market (or regional service area), and could strengthen the incentives of the program to drive meaningful change by ACOs. Further, allowing agreement periods of at least 5 years, as opposed to the current 3-year agreement periods, would provide greater predictability for benchmarks by reducing the frequency of benchmark rebasing, and therefore provide greater opportunity for ACOs to achieve savings against these benchmarks. In combination, these E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67822 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations policies would protect the Trust Funds, provide more accurate and predictable benchmarks, and reduce selection costs, while creating incentives for ACOs to transition to performance-based risk. The existing regional adjustment under § 425.603(c) can provide overly inflated benchmarks for ACOs that are relatively low spending compared to their region, while ACOs with higher spending compared to their region may find little value in remaining in the program when faced with a significantly reduced benchmark. To address this dynamic, we proposed to reduce the maximum weight used in calculating the regional adjustment, and cap the adjustment amount for all agreement periods, so as not to excessively reward or punish an ACO based on where the ACO is located. This would make the benchmark more achievable for ACOs that care for medically complex patients and are high spending compared to their region, thereby encouraging their continued participation, while at the same time preventing windfall shared savings payments for ACOs that have relatively low spending levels relative to their region. We also sought to provide more sustainable trend factors for ACOs with high penetration in markets with lower spending growth compared to the nation, and less favorable trend factors for ACOs with high penetration in markets with higher spending growth compared to the nation. This approach would have little impact on ACOs with relatively low to medium penetration in counties in their regional service area. ACOs and other program stakeholders have continued to express concerns that the program’s methodology for risk adjusting the benchmark for each performance year does not adequately account for changes in acuity and health status of patients over time. We proposed to modify the current approach to risk adjustment to allow changes in health status to be more fully recognized during the agreement period, providing further incentives for continued participation by ACOs faced with higher spending due to the changing health status of their population. ACOs and other program stakeholders have urged CMS to allow additional flexibility of program and payment policies to enable ACOs to engage beneficiaries and provide the care for beneficiaries in the most appropriate care setting. It is also critical that patients have the tools to be more engaged with their doctors in order to play a more active role in their care coordination and the quality of care they receive, and that ACOs empower VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 and incentivize beneficiaries to achieve good health. The Bipartisan Budget Act allows for certain new flexibilities for Shared Savings Program ACOs to support these aims, including new beneficiary incentive programs, telehealth services furnished in accordance with section 1899(l) of the Act, and a choice of beneficiary assignment methodology. We proposed to establish policies in accordance with the new law in these areas. For example, in accordance with section 1899(m)(1)(A) of the Act (as added by section 50341 of the Bipartisan Budget Act), we would allow certain ACOs under two-sided risk to establish CMSapproved beneficiary incentive programs, through which an ACO would provide incentive payments to assigned beneficiaries who receive qualifying primary care services. We proposed to establish policies to govern telehealth services furnished in accordance with 1899(l) of the Act by physicians and practitioners in eligible two-sided model ACOs. We also proposed to allow broader access to the program’s existing SNF 3-day rule waiver for ACOs under performancebased risk. Lastly, we sought comment on how Medicare ACOs and the sponsors of stand-alone Part D prescription drug plans (PDPs) could be encouraged to collaborate in order to improve the coordination of pharmacy care for Medicare FFS beneficiaries. 2. Summary of the Major Provisions This final rule restructures the participation options for ACOs applying to participate in the program in 2019 by discontinuing Track 1 (one-sided shared savings-only model), and Track 2 (twosided shared savings and shared losses model) while maintaining Track 3 (renamed the ENHANCED track) and offering a new BASIC track. Under the approach we are adopting in this final rule, the program’s two tracks are: (1) A BASIC track, offering a glide path from a one-sided model for eligible ACOs to progressively higher increments of risk and potential reward within a single agreement period; and (2) an ENHANCED track based on the existing Track 3 (two-sided model), for ACOs that take on the highest level of risk and potential reward. As part of this approach we are replacing the current 3year agreement period structure with an agreement period of at least 5 years, allowing eligible BASIC track ACOs greater flexibility to select their level of risk within an agreement period in the glide path, and allowing all BASIC track and ENHANCED track ACOs the flexibility to change their selection of PO 00000 Frm 00008 Fmt 4701 Sfmt 4700 beneficiary assignment methodology prior to the start of each performance year, consistent with the requirement under the Bipartisan Budget Act to provide ACOs with a choice of prospective assignment. We are finalizing Level A and B of the BASIC track as one-sided models with a maximum shared savings rate of 40 percent, not to exceed 10 percent of updated benchmark; Level C of the BASIC track with a maximum shared savings rate of 50 percent not to exceed 10 percent of updated benchmark, and loss sharing rate of 30 percent, not to exceed 2 percent of ACO participant revenue capped at 1 percent of updated benchmark; Level D of the BASIC track with a maximum shared savings rate of 50 percent, not to exceed 10 percent of updated benchmark, and loss sharing rate of 30 percent, not to exceed 4 percent of ACO participant revenue capped at 2 percent of updated benchmark; Level E of the BASIC track with a maximum shared savings rate of 50 percent, not to exceed 10 percent of updated benchmark, and loss sharing rate of 30 percent, not to exceed the percentage of revenue specified in the revenue-based nominal amount standard under the Quality Payment Program (for example, 8 percent in 2019–2020), capped at the amount that is 1 percentage point higher than the percentage of the updated benchmark specified in the expenditure-based nominal amount standard under the Quality Payment Program (for example, 4 percent in 2019–2020); and the ENHANCED track with a maximum shared savings rate of 75 percent, not to exceed 20 percent of updated benchmark, and loss sharing rate determined based on the inverse of the final sharing rate, but not less than 40 percent (that is, between 40–75 percent), not to exceed 15 percent of updated benchmark. Additionally, new, low revenue ACOs will have the option to participate under one-sided risk for 3 years and in exchange will be required to move to Level E of the BASIC track for the final 2 years of their 5-year agreement period. To provide ACOs time to consider the new participation options and prepare for program changes, make investments and other business decisions about participation, obtain buy-in from their governing bodies and executives, and to complete and submit a Shared Savings Program application for a performance year beginning in 2019, we will offer a July 1, 2019 start date for the first agreement period under the new participation options. This midyear start in 2019 will also allow both new E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations applicants and ACOs currently participating in the program an opportunity to make any changes to the structure and composition of their ACO as may be necessary to comply with the new program requirements for the ACO’s preferred participation option. ACOs entering a new agreement period on July 1, 2019, will have the opportunity to participate in the program under an agreement period spanning 5 years and 6 months, with a 6-month first performance year. We are finalizing modifications to the repayment mechanism arrangement requirements, which help ensure that an ACO can repay losses for which it may be liable. Our modifications include: (1) Adding a provision to align repayment mechanism requirements across all ACOs in two-sided models under the BASIC track and ENHANCED track to allow a repayment mechanism equal to 2 percent of the ACO participants’ total Medicare Parts A and B FFS revenue up to 1 percent of total per capita Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries; (2) adding a provision to permit recalculation of the estimated amount of the repayment mechanism each performance year to account for changes in ACO participant composition; (3) specifying the required duration of repayment mechanism arrangements and the options available to ACOs for fulfilling this requirement; (4) adding a provision to allow a renewing ACO the flexibility to maintain a single, existing repayment mechanism arrangement to support its ability to repay shared losses in the new agreement period so long as the term of the arrangement is extended and the repayment mechanism amount is modified to cover any increase to the repayment mechanism amount during the new agreement period; and (5) establishing requirements regarding the issuing institutions for a repayment mechanism arrangement. This final rule establishes regulations in accordance with the Bipartisan Budget Act on coverage for telehealth services furnished on or after January 1, 2020, by physicians and other practitioners participating in an ACO under performance-based risk that has selected prospective assignment. This policy allows for payment for telehealth services furnished to prospectively assigned beneficiaries receiving telehealth services in non-rural areas, and allow beneficiaries to receive certain telehealth services at their home, to support care coordination across settings. The final rule also provides for limited waivers of the originating site and geographic requirements to allow for payment for otherwise covered VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 telehealth services provided to beneficiaries who are no longer prospectively assigned to an applicable ACO (and therefore no longer eligible for payment for these services under section 1899(l) of the Act) during a 90day grace period. In addition, ACO participants are prohibited, under certain circumstances, from charging beneficiaries for telehealth services, where CMS does not pay for those telehealth services under section 1899(l) of the Act solely because the beneficiary was never prospectively assigned to the applicable ACO or was prospectively assigned, but the 90-day grace period has lapsed. We are finalizing the policy to allow eligible ACOs under performance-based risk under either prospective assignment or preliminary prospective assignment with retrospective reconciliation to use the program’s existing SNF 3-day rule waiver. We also are amending the existing SNF 3-day rule waiver to allow critical access hospitals (CAHs) and other small, rural hospitals operating under a swing bed agreement to be eligible to partner with eligible ACOs as SNF affiliates for purposes of the SNF 3-day rule waiver. We are finalizing policies to expand the role of choice and incentives in engaging beneficiaries in their health care. First, we are establishing regulations in accordance with section 1899(m)(1)(A) of the Act, as added by section 50341 of the Bipartisan Budget Act, to permit ACOs under certain twosided models to operate CMS-approved beneficiary incentive programs. The beneficiary incentive programs will encourage beneficiaries assigned to certain ACOs to obtain medically necessary primary care services while requiring such ACOs to comply with program integrity and other requirements, as the Secretary determines necessary. Any ACO that operates a CMS-approved beneficiary incentive program will be required to ensure that certain information about its beneficiary incentive program is made available to CMS and the public on its public reporting web page. Second, to empower beneficiary choice and further program transparency, we are revising policies related to beneficiary notifications. For example, we are requiring that ACOs notify Medicare FFS beneficiaries about voluntary alignment in the written notifications they must provide to beneficiaries. An ACO or its ACO participants will be required to provide each beneficiary with such notification prior to or at the beneficiary’s first primary care visit of each performance year. In addition, such information must be posted in an PO 00000 Frm 00009 Fmt 4701 Sfmt 4700 67823 ACO participant’s facility and available upon request (as currently required). Additionally, any ACO that operates a beneficiary incentive program must also notify its beneficiaries of the availability of the program. We are finalizing new policies for determining the participation options for ACOs based on the degree to which ACOs control total Medicare Parts A and B FFS expenditures for their assigned beneficiaries (low revenue ACO versus high revenue ACO), and the experience of the ACO’s legal entity and ACO participants with the Shared Savings Program and performance-based risk Medicare ACO initiatives. We also are revising the criteria for evaluating the eligibility of ACOs seeking to renew their participation in the program for a subsequent agreement period and ACOs applying to re-enter the program after termination or expiration of the ACO’s previous agreement, based on the ACO’s prior participation in the Shared Savings Program. We also will identify new ACOs as re-entering ACOs if greater than 50 percent of their ACO participants have recent prior participation in the same ACO in order to hold these ACO accountable for their ACO participants’ experience with the program. We will use the same criteria to review applications from renewing and re-entering ACOs to more consistently consider ACOs’ prior experience in the Shared Savings Program. We will also modify existing review criteria, such as the ACO’s history of meeting the quality performance standard and the ACO’s timely repayment of shared losses to ensure applicability to ACOs with an agreement period that is not less than 5 years. We will also strengthen the program’s requirements for monitoring ACOs within an agreement period for poor financial performance to ensure that ACOs with poor financial performance are not allowed to continue their participation in the program, or to re-enter the program without addressing the deficiencies that resulted in termination. We are updating program policies related to termination of ACOs’ participation in the program. We are reducing the amount of notice an ACO must provide CMS of its decision to voluntarily terminate. We also address the timing of an ACO’s re-entry into the program after termination. Specifically, we are modifying current requirements that prevent an ACO from terminating its participation agreement and quickly re-entering the program to allow the flexibility for an ACO in a current 3-year agreement period to terminate its E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67824 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations participation agreement and immediately enter a new agreement period of not less than 5 years under one of the redesigned participation options. We are also finalizing policies that will prevent ACOs from taking advantage of this flexibility to avoid transitioning to risk by repeatedly participating in the BASIC track’s glide path for a short time, terminating, and then entering a one-sided model in a future agreement period under the BASIC track. Specifically, we will restrict eligibility for the BASIC track’s glide path to ACOs inexperienced with performance-based risk Medicare ACO initiatives, and we define performancebased risk Medicare ACO initiative to include all levels of the BASIC track’s glide path. We also will differentiate between initial entrants (ACOs entering the program for the first time), ‘‘reentering ACOs’’ (ACOs re-entering after a break in participation following termination or expiration of a prior participation agreement, and new ACOs identified as re-entering ACOs because greater than 50 percent of their ACO participants have recent prior participation in the same ACO), and ‘‘renewing ACOs’’ (ACOs that participate continuously in the program, without interruption, including ACOs that choose to renew early by terminating their current agreement and immediately entering a new agreement period). This differentiation is relevant for determining the agreement period the ACO is entering for purposes of applying policies that phase-in over time (benchmarking methodology and quality performance standards) and for determining whether an ACO can extend the use of its existing repayment mechanism when it enters a new agreement period. Further, we will impose payment consequences for early termination by holding ACOs in two-sided models liable for pro-rated shared losses. This approach will apply to ACOs that voluntarily terminate their participation more than midway through a 12-month performance year and all ACOs that are involuntarily terminated by CMS. ACOs will continue to be ineligible to share in savings for a performance year if the effective date of their termination from the program is prior to the last calendar day of the performance year; however, we will allow an exception for ACOs that are participating in the program as of January 1, 2019, that terminate their agreement with an effective date of June 30, 2019, and enter a new agreement period under the BASIC track or ENHANCED track beginning July 1, 2019. Under this exception, an ACO VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 would be eligible for pro-rated shared savings or liable for pro-rated shared losses. In these cases, we will perform separate reconciliations to determine shared savings and shared losses for the ACO’s first 6 months of participation in 2019 and for the ACO’s 6-month performance year from July 1, 2019, to December 31, 2019, under the subsequent participation agreement. To strengthen ACO financial incentives for continued program participation and improve the sustainability of the program, we are finalizing changes to the methodology for establishing, adjusting, updating and resetting benchmarks for agreement periods beginning on July 1, 2019, and in subsequent years, to include the following: • Application of factors based on regional FFS expenditures to establish, adjust, and update the ACO’s benchmark beginning in an ACO’s first agreement period, to move benchmarks away from being based solely on the ACO’s historical costs and allow them to better reflect costs in the ACO’s region. • Mitigating the risk that an excessive positive or negative regional adjustment will be used to establish and reset the benchmark by— ++ Reducing the maximum weight used in calculating the regional adjustment from 70 percent to 50 percent; ++ Modifying the phase in schedule for applying increased weights in calculating the regional adjustment for ACOs with spending above their region; and ++ Capping the amount of the adjustment based on a percentage of national FFS expenditures. • Calculating growth rates used in trending expenditures to establish the benchmark and in updating the benchmark each performance year as a blend of regional and national expenditure growth rates with increasing weight placed on the national component of the blend as the ACO’s penetration in its region increases. • Better accounting for certain health status changes by using full CMSHierarchical Condition Category (HCC) risk scores to adjust the benchmark each performance year, although restricting the upward effects of these adjustments to positive 3 percent over the agreement period. We also discuss comments received in response to our request for comment on approaches for encouraging Medicare ACOs to collaborate with the sponsors of stand-alone Part D PDPs (Part D sponsors) to improve the coordination of pharmacy care for Medicare FFS beneficiaries to reduce the risk of adverse events and improve medication adherence. In particular, we sought comment to understand how Medicare ACOs, and specifically Shared Savings Program ACOs, and Part D sponsors could work together and be encouraged to improve the coordination of PO 00000 Frm 00010 Fmt 4701 Sfmt 4700 pharmacy care for Medicare FFS beneficiaries to achieve better health outcomes, what clinical and pharmacy data may be necessary to support improved coordination of pharmacy care for Medicare FFS beneficiaries, and approaches to structuring financial arrangements to reward ACOs and Part D sponsors for improved health outcomes and lower growth in expenditures for Medicare FFS beneficiaries. Lastly, in the December 2017 interim final rule with comment period we established policies for assessing the financial and quality performance of Shared Savings Program ACOs that were affected by extreme and uncontrollable circumstances during performance year 2017, including the applicable quality reporting period for performance year 2017. These policies were used to assess quality and financial performance during performance year 2017 for ACOs subject to extreme and uncontrollable events, such as Hurricanes Harvey, Irma, and Maria, and the California wildfires, during performance year 2017, including the applicable quality data reporting period for the performance year. In this final rule, we provide an analysis of and responses to the public comments we received in response to the December 2017 interim final rule with comment period. 3. Summary of Costs and Benefits As detailed in section V. of this final rule, the faster transition from one-sided model agreements to performance-based risk arrangements, tempered by the option for eligible ACOs of a gentler exposure to downside risk calculated as a percentage of ACO participants’ total Medicare Parts A and B FFS revenue and capped at a percentage of the ACO’s benchmark, can affect broader participation in performance-based risk in the Shared Savings Program and reduce overall claims costs. A second key driver of estimated net savings is the reduction in shared savings payments from the limitation on the amount of the regional adjustment to the ACO’s historical benchmark. Such reduction in overall shared savings payments is projected to result despite the benefit of higher net adjustments expected for a larger number of ACOs from the use of a simpler HCC risk adjustment methodology, the blending of national and regional expenditure growth rates for certain benchmark calculations, and longer (at least 5 years, instead of 3-year) agreement periods that allow ACOs a longer horizon from which to benefit from efficiency gains before benchmark rebasing. Overall, the decreases in claims costs and shared E:\FR\FM\31DER2.SGM 31DER2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations khammond on DSK30JT082PROD with RULES2 saving payments to ACOs are projected to result in $2.9 billion in federal savings over 10 years. B. Statutory and Regulatory Background On March 23, 2010, the Patient Protection and Affordable Care Act (Pub. L. 111–148) was enacted, followed by enactment of the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111–152) on March 30, 2010, which amended certain provisions of Public Law 111–148. Section 3022 of the Affordable Care Act amended Title XVIII of the Act (42 U.S.C. 1395 et seq.) by adding section 1899 to the Act to establish the Shared Savings Program to facilitate coordination and cooperation among health care providers to improve the quality of care for Medicare FFS beneficiaries and reduce the rate of growth in expenditures under Medicare Parts A and B. See 42 U.S.C. 1395jjj. The final rule establishing the Shared Savings Program appeared in the November 2, 2011 Federal Register (Medicare Program; Medicare Shared Savings Program: Accountable Care Organizations; Final Rule (76 FR 67802) (hereinafter referred to as the ‘‘November 2011 final rule’’)). We viewed this final rule as a starting point for the program, and because of the scope and scale of the program and our limited experience with shared savings initiatives under FFS Medicare, we built a great deal of flexibility into the program rules. Through subsequent rulemaking, we have revisited and amended Shared Savings Program policies in light of the additional experience we gained during the initial years of program implementation as well as from testing through the Pioneer ACO Model, the Next Generation ACO Model, and other initiatives conducted by the Center for Medicare and Medicaid Innovation (Innovation Center) under section 1115A of the Act. A major update to the program rules appeared in the June 9, 2015 Federal Register (Medicare Program; Medicare Shared Savings Program: Accountable Care Organizations; Final Rule (80 FR 32692) (hereinafter referred to as the ‘‘June 2015 final rule’’)). A final rule addressing changes related to the program’s financial benchmark methodology appeared in the June 10, 2016 Federal Register (Medicare Program; Medicare Shared Savings Program; Accountable Care Organizations—Revised Benchmark Rebasing Methodology, Facilitating Transition to Performance-Based Risk, and Administrative Finality of Financial Calculations (81 FR 37950) (hereinafter VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 referred to as the ‘‘June 2016 final rule’’)). We have also made use of the annual CY Physician Fee Schedule (PFS) rules to address updates to the Shared Savings Program quality measures, scoring, and quality performance standard, the program’s beneficiary assignment methodology and certain other issues.2 Policies applicable to Shared Savings Program ACOs have continued to evolve based on changes in the law. The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) established the Quality Payment Program (Pub. L. 114–10). In the CY 2017 Quality Payment Program final rule with comment period (81 FR 77008), CMS established regulations for the Merit-Based Incentive Payment System (MIPS) and Advanced Alternative Payment Models (APMs) and related policies applicable to eligible clinicians who participate in the Shared Savings Program. The requirements for assignment of Medicare FFS beneficiaries to ACOs participating under the program were amended by the 21st Century Cures Act (Pub. L. 114–255). Accordingly, we revised the program’s regulations in the CY 2018 PFS final rule to reflect these new requirements. On February 9, 2018, the Bipartisan Budget Act of 2018 was enacted (Pub. L. 115–123), amending section 1899 of the Act to provide for the following: Expanded use of telehealth services by physicians or practitioners participating 2 See for example, Medicare Program; Revisions to Payment Policies under the Physician Fee Schedule, Clinical Laboratory Fee Schedule & Other Revisions to Part B for CY 2014; Final Rule (78 FR 74230, Dec. 10, 2013). Medicare Program; Revisions to Payment Policies under the Physician Fee Schedule, Clinical Laboratory Fee Schedule & Other Revisions to Part B for CY 2015; Final Rule (79 FR 67548, Nov. 13, 2014). Medicare Program; Revisions to Payment Policies under the Physician Fee Schedule, Clinical Laboratory Fee Schedule & Other Revisions to Part B for CY 2016; Final Rule (80 FR 70886, Nov. 16, 2015). Medicare Program; Revisions to Payment Policies under the Physician Fee Schedule, Clinical Laboratory Fee Schedule & Other Revisions to Part B for CY 2017; Final Rule (81 FR 80170, Nov. 15, 2016). Medicare Program; Revisions to Payment Policies under the Physician Fee Schedule, Clinical Laboratory Fee Schedule & Other Revisions to Part B for CY 2018; Final Rule (82 FR 52976, Nov. 15, 2017). Medicare Program; Revisions to Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2019; Medicare Shared Savings Program Requirements; Quality Payment Program; Medicaid Promoting Interoperability Program; Quality Payment Program—Extreme and Uncontrollable Circumstance Policy for the 2019 MIPS Payment Year; Provisions From the Medicare Shared Savings Program—Accountable Care Organizations— Pathways to Success; and Expanding the Use of Telehealth Services for the Treatment of Opioid Use Disorder Under the Substance Use-Disorder Prevention That Promotes Opioid Recovery and Treatment (SUPPORT) for Patients and Communities Act’’ (83 FR 59452, Nov. 23, 2018). PO 00000 Frm 00011 Fmt 4701 Sfmt 4700 67825 in an applicable ACO to a prospectively assigned beneficiary, greater flexibility in the assignment of Medicare FFS beneficiaries to ACOs by allowing ACOs in tracks under retrospective beneficiary assignment a choice of prospective assignment for the agreement period, permitting Medicare FFS beneficiaries to voluntarily identify an ACO professional as their primary care provider and requiring that such beneficiaries be notified of the ability to make and change such identification, and mandating that any such voluntary identification will supersede claimsbased assignment, and allowing ACOs under certain two-sided models to establish CMS-approved beneficiary incentive programs. In the November 2018 final rule, we finalized a subset of the provisions proposed in the August 2018 proposed rule and the CY 2019 PFS proposed rule as follows: • Offering existing ACOs whose participation agreements expire on December 31, 2018, the opportunity to elect a voluntary 6-month extension of their current agreement period, and the methodology for determining financial and quality performance for the 6month performance year from January 1, 2019, through June 30, 2019. • Allowing beneficiaries greater flexibility in selecting their primary care provider and in the use of that selection for purposes of assigning the beneficiary to an ACO, if the clinician they align with is participating in an ACO, as provided for in the Bipartisan Budget Act. • Revising the definition of primary care services used in beneficiary assignment. • Providing relief for ACOs and their clinicians impacted by extreme and uncontrollable circumstances in performance year 2018 and subsequent years. • Reducing the Shared Savings Program core quality measure set by eight measures; and promoting interoperability among ACO providers/suppliers by adding a new CEHRT threshold criterion to determine ACOs’ eligibility for program participation and retiring the current Shared Savings Program quality measure on the percentage of eligible clinicians using CEHRT. II. Provisions of the August 2018 Proposed Rule and Analysis of and Responses to Public Comments In the August 17, 2018 Federal Register (83 FR 41786), we published a proposed rule titled ‘‘Medicare Program; Medicare Shared Savings Program; Accountable Care Organizations— Pathways to Success’’. The proposed rule would provide a new direction for the Shared Savings Program by establishing pathways to success through redesigning the participation options available under the program to encourage ACOs to transition to twosided models (in which they may share E:\FR\FM\31DER2.SGM 31DER2 67826 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations in savings and are accountable for repaying shared losses). These policies are designed to increase savings for the Trust Funds and mitigate losses, reduce gaming opportunities, and promote regulatory flexibility and free-market principles. The rule would also provide new tools to support coordination of care across settings and strengthen beneficiary engagement; ensure rigorous benchmarking; promote interoperable electronic health record technology among ACO providers/suppliers; and improve information sharing on opioid use to combat opioid addiction. We received 469 timely pieces of correspondence in response to the proposed rule. Stakeholders offered comments that addressed both high level issues related to the Shared Savings Program as well as our specific proposals and requests for comments. We extend our deep appreciation to the public for their interest in the program and the many comments that were made in response to our proposed policies. In some instances, the public comments offered were outside the scope of the proposed rule and will not be addressed in this final rule. As summarized in section I.B of this final rule, in the November 2018 final rule, we addressed a subset of changes to the Shared Savings Program proposed in the August 2018 proposed rule. In the following sections of this final rule, we summarize and respond to public comments on the following proposed policies and discuss our final policies after taking into consideration the public comments we received on the August 2018 proposed rule. A. Redesigning Participation Options To Facilitate Transition to PerformanceBased Risk khammond on DSK30JT082PROD with RULES2 In this section, we discuss a series of interrelated proposals around transition to risk, including: (1) Length of time an ACO may remain under a one-sided model; (2) the levels of risk and reward under the program’s participation options; (3) the duration of the ACO’s agreement period; and (4) the degree of flexibility ACOs have to choose their beneficiary assignment methodology and also to select their level of risk within an agreement period. 1. Background on Shared Savings Program Participation Options In this section, we review the statutory and regulatory background for the program’s participation options by track and the length of the ACO’s agreement period for participation in the program, and also provide an overview of current ACO participation VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 in the program for performance year 2018. a. Background on Development of Track 1, Track 2 and Track 3 Section 1899(d) of the Act establishes the general requirements for shared savings payments to participating ACOs. Specifically, section 1899(d)(1)(A) of the Act specifies that providers of services and suppliers participating in an ACO will continue to receive payments under the original Medicare FFS program under Parts A and B in the same manner as would otherwise be made, and that an ACO is eligible to receive payment for a portion of savings generated for Medicare provided that the ACO meets both the quality performance standards established by the Secretary and achieves savings against its historical benchmark based on average per capita Medicare FFS expenditures during the 3 years preceding the start of the agreement period. Additionally, section 1899(i) of the Act authorizes the Secretary to use other payment models rather than the one-sided model described in section 1899(d) of the Act, as long as the Secretary determines that the other payment model will improve the quality and efficiency of items and services furnished to Medicare beneficiaries without additional program expenditures. In the November 2011 final rule establishing the Shared Savings Program (76 FR 67909), we created two tracks from which ACOs could choose to participate: The one-sided model (Track 1) that is based on the statutory payment methodology under section 1899(d) of the Act, and a two-sided model (Track 2) that is also based on the payment methodology under section 1899(d) of the Act, but incorporates performancebased risk using the authority under section 1899(i)(3) of the Act to use other payment models. Under the one-sided model, ACOs can qualify to share in savings but are not responsible for losses. Under a two-sided model, ACOs can qualify to share in savings with an increased sharing rate, but must also take on risk for sharing in losses. ACOs entering the program or renewing their agreement may elect to enter a twosided model. Once an ACO has elected to participate under a two-sided model, the ACO cannot go into Track 1 for subsequent agreement periods (see § 425.600). In the initial rulemaking for the program, we considered several approaches to designing the program’s participation options, principally: (1) Base the program on a two-sided model, thereby requiring all participants to accept risk from the first program year; PO 00000 Frm 00012 Fmt 4701 Sfmt 4700 (2) allow applicants to choose between program tracks, either a one-sided model or two-sided model, for the duration of the agreement; or (3) allow a choice of tracks, but require ACOs electing the one-sided model to transition to the two-sided model during their initial agreement period (see, for example, 76 FR 19618). We proposed a design for Track 1 whereby ACOs would enter a 3-year agreement period under the one-sided model and would automatically transition to the twosided model (under Track 2) in the third year of their initial agreement period. Thereafter, those ACOs that wished to continue participating in the Shared Savings Program would only have the option of participating under performance-based risk (see 76 FR 19618). We explained that this approach would have the advantage of providing an entry point for organizations with less experience with risk models, such as some physician-driven organizations or smaller ACOs, to gain experience with population management before transitioning to a risk-based model while also providing an opportunity for more experienced ACOs that are ready to share in losses to enter a sharing arrangement that provides the potential for greater reward in exchange for assuming greater potential responsibility. A few commenters favored this proposed approach, indicating the importance of performance-based risk in the health care delivery system transformation necessary to achieve the program’s aims and for ‘‘good stewardship’’ of Medicare Trust Fund dollars. However, most commenters expressed concerns about requiring ACOs to quickly accept performance-based risk. Therefore, we finalized a policy where an ACO could remain under the one-sided model for the duration of its first agreement period (see 76 FR 67904 through 67909). In earlier rulemaking, we explained that offering multiple tracks with differing degrees of risk across the Shared Savings Program tracks would create an ‘‘on-ramp’’ for the program to attract both providers and suppliers that are new to value-based purchasing, as well as more experienced entities that are ready to share performance-based risk. We stated that a one-sided model would have the potential to attract a large number of participants to the program and introduce value-based purchasing broadly to providers and suppliers, many of whom may never have participated in a value-based purchasing initiative before (see, for example, 76 FR 67904 through 67909). Another reason we included the option for a one-sided track with no E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations downside risk was that this model would be accessible to and attract small, rural, safety net, and/or physician-only ACOs (see 80 FR 32759). Commenters identified groups that may be especially challenged by the upfront costs of ACO formation and operations, including: Private primary care practitioners, small to medium sized physician practices, small ACOs, safety net providers (that is, Rural Health Clinics (RHCs), CAHs, Federally Qualified Health Centers (FQHCs), community-funded safety net clinics), and other rural providers (that is, Method II CAHs, rural prospective payment system hospitals designated as rural referral centers, sole community hospitals, Medicare dependent hospitals, or rural primary care providers) (see 76 FR 67834 through 67835). Further, commenters also indicated that ACOs that are composed of small- and medium-sized physician practices, loosely formed physician networks, safety net providers, and small and/or rural ACOs would be encouraged to participate in the program based on the availability of a one-sided model (see, for example, 76 FR 67906). Commenters also expressed concerns about requiring ACOs that may lack experience with care management or managing performance-based risk to quickly transition to performance-based risk. Some commenters suggested that small, rural and physician-only ACOs be exempt from downside risk (see, for example, 76 FR 67906). In establishing the program’s initial two track approach, we acknowledged that ACOs new to the accountable care model—and particularly small, rural, safety net, and physician-only ACOs— would benefit from additional time under the one-sided model before being required to accept risk (76 FR 67907). However, we also noted that although a one-sided model could provide incentives for participants to improve quality, it might not be sufficient incentive for participants to improve the efficiency and cost of health care delivery (76 FR 67904 and 80 FR 32759). We explained that payment models where ACOs bear a degree of financial risk have the potential to induce more meaningful systematic change in providers’ and suppliers’ behavior (see, for example, 76 FR 67907). We also explained that performance-based risk options could have the advantage of providing more experienced ACOs an opportunity to enter a sharing arrangement with the potential for greater reward in exchange for assuming greater potential responsibility (see, for example, 76 FR 67907). VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 We note that in earlier rulemaking we have used several terms to refer to participation options in the Shared Savings Program under which an ACO is potentially liable to share in losses with Medicare. In the initial rulemaking for the program, we defined ‘‘two-sided model’’ to mean a model under which the ACO may share savings with the Medicare program, if it meets the requirements for doing so, and is also liable for sharing any losses incurred (§ 425.20). We have also used the term ‘‘performance-based risk’’ to refer to the type of risk an ACO participating in a two-sided model undertakes. As we explained in the November 2011 final rule (76 FR 67945), in a two-sided model under the Shared Savings Program, the Medicare program retains the insurance risk and responsibility for paying claims for the services furnished to Medicare beneficiaries. It is only shared savings payments (and shared losses in a two-sided model) that will be contingent upon ACO performance. The agreement to share risk against the benchmark would be solely between the Medicare program and the ACO. As a result, we have tended to use the terms ‘‘two-sided model’’ and ‘‘performancebased risk’’ interchangeably, considering them to be synonymous when describing payment models offered under the Shared Savings Program and Medicare ACO initiatives more broadly. In the June 2015 final rule, we modified the existing policies to allow eligible Track 1 ACOs to renew for a second agreement period under the onesided model, and to require that they enter a performance-based risk track in order to remain in the program for a third or subsequent agreement period. We explained the rationale for these policies in the prior rulemaking and we refer readers to the December 2014 proposed rule and June 2015 final rule for more detailed discussion. (See, for example, 79 FR 72804, and 80 FR 32760 through 32761.) In developing these policies, we considered, but did not finalize, approaches to make Track 1 less attractive for continued participation, in order to support progression to risk, including offering a reduced sharing rate to ACOs remaining under the one-sided model for a second agreement period.3 We also modified 3 See 79 FR 72805 (discussing proposal to reduce the sharing rate by 10 percentage points for ACOs in a second agreement period under Track 1 to make staying in the one-sided model less attractive than moving forward along the risk continuum); 80 FR 32766 (In response to our proposal in the December 2014 proposed rule to offer a 40 percent sharing rate to ACOs that remained in Track 1 for a second agreement period, several commenters PO 00000 Frm 00013 Fmt 4701 Sfmt 4700 67827 the two-sided performance-based risk track (Track 2) and began to offer an alternative two-sided performancebased risk track (Track 3) for agreement periods beginning on or after January 1, 2016 (80 FR 32771 through 32781). Compared to Track 2, which uses the same preliminary prospective beneficiary assignment methodology with retrospective reconciliation as Track 1, Track 3 includes prospective beneficiary assignment and a higher sharing rate for shared savings as well as the potential for greater liability for shared losses. Further, we established a SNF 3-day rule waiver (discussed further in section II.B.2.a. of this final rule), for use by eligible Track 3 ACOs. The Innovation Center has tested progressively higher levels of risk for more experienced ACOs through the Pioneer ACO Model (concluded December 31, 2016) and the Next Generation ACO Model (ongoing).4 Lessons learned from the Pioneer ACO Model were important considerations in the development of Track 3, which incorporates several features of the Pioneer ACO Model, including prospective beneficiary assignment, higher levels of risk and reward (compared to Track 2), and the availability of a SNF-3-day rule waiver. Since Track 3 was introduced as a participation option under the Shared Savings Program, we have seen a growing interest, with 16 Track 3 ACOs completing PY 2016 and 38 Track 3 ACOs participating in PY 2018. The continued increase in the number of ACOs participating in Track 3, a higher proportion of which have achieved shared savings compared to Track 1 ACOs, suggests that the track offers a pathway to improve care for beneficiaries at a level of risk and reward sufficient to induce ACOs to improve their financial performance. recommended dropping the sharing rate under the one-sided model even further to encourage ACOs to more quickly accept performance-based risk, for example to 20 percent, 25 percent or 30 percent under the second agreement period, or making a 5 percentage point reduction for each year under the second agreement period). 4 See Pioneer ACO Model website, https:// innovation.cms.gov/initiatives/Pioneer-aco-model/ (the Pioneer ACO Model ‘‘was designed for health care organizations and providers that were already experienced in coordinating care for patients across care settings’’); see also CMS Press Release, New Participants Join Several CMS Alternative Payment Models (January 18, 2017), available at https:// www.cms.gov/Newsroom/MediaReleaseDatabase/ Press-releases/2017-Press-releases-items/2017-0118.html (the ‘‘Next Generation ACO Model was designed to test whether strong financial incentives for ACOs can improve health outcomes and reduce expenditures for Medicare fee-for-service beneficiaries. Provider groups in this model assume higher levels of financial risk and reward than are available under the Shared Savings Program.’’). E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67828 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations For example, for performance year 2016, about 56 percent of Track 3 ACOs (9 of 16 ACOs) achieved shared savings compared to 29 percent of Track 1 ACOs (119 of 410 ACOs). See 2016 Shared Savings Program Accountable Care Organization Public Use File, available at https://www.cms.gov/ResearchStatistics-Data-and-Systems/ Downloadable-Public-Use-Files/ SSPACO/index.html. Further, the Innovation Center has tested two models for providing upfront funding to eligible small, rural, or physician-only Shared Savings Program ACOs. Initially, CMS offered the Advance Payment ACO Model, beginning in 2012 and concluding December 31, 2015. See https:// innovation.cms.gov/initiatives/ Advance-Payment-ACO-Model/. The ACO Investment Model (AIM), which began in 2015, builds on the experience with the Advance Payment ACO Model. The AIM is ongoing, with 45 participating ACOs. See https:// innovation.cms.gov/initiatives/ACOInvestment-Model/. In the June 2016 final rule, to further encourage ACOs to transition to performance-based risk, we finalized a participation option for eligible Track 1 ACOs to defer by one year their entrance into a second agreement period under a two-sided model (Track 2 or Track 3) by extending their first agreement period under Track 1 for a fourth performance year (§ 425.200(e); 81 FR 37994 through 37997). Under this deferred renewal option, we defer resetting the benchmark as specified at § 425.603 until the beginning of the ACO’s second agreement period. This participation option became available to ACOs seeking to enter their second agreement period beginning in 2017 and in subsequent years. However, only a small number of ACOs have made use of this option. In prior rulemaking for the Shared Savings Program, we have indicated that we would continue to evaluate the appropriateness and effectiveness of our incentives to encourage ACOs to transition to a performance-based risk track and, as necessary, might revisit alternative participation options through future notice and comment rulemaking (81 FR 37995 through 37996). We stated that it is timely to reconsider the participation options available under the program in light of the financial and quality results for the first four performance years under the program, participation trends by ACOs, and feedback from ACOs and other program stakeholders’ about factors that encourage transition to risk. Therefore, VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 we issued the August 2018 proposed rule. b. Background on Factors Affecting Transition to Performance-Based Risk Based on comments submitted by ACOs and other program stakeholders in response to earlier rulemaking and our experience with implementing the Shared Savings Program, a combination of factors affect ACOs’ transition to performance-based risk.5 These factors include the following: (1) Length of time allowed under a one-sided model and availability of options to transition from a one-sided model to a two-sided model within an ACO’s agreement period. (Discussed in detail within this section. See also discussion of related background in section II.A.1.a. of this final rule.) (2) An ACO’s level of experience with the accountable care model and the Shared Savings Program.6 (3) Choice of methodology used to assign beneficiaries to ACOs, which determines the beneficiary population for which the ACO is accountable for both the quality and cost of care. (Background on choice of assignment methodology is discussed within this section; see also section II.A.4. of this final rule.) Specifically, the assignment methodology is used to determine the populations that are the basis for determining the ACO’s historical benchmark and the population assigned to the ACO each performance year, which is the basis for determining whether the ACO will share in savings or losses for that performance year. (4) Availability of program and payment flexibilities to ACOs participating under performance-based risk to support beneficiary engagement and the ACO’s care coordination activities (see discussion in sections II.B. and II.C. of this final rule). (5) Financial burden on ACOs in meeting program requirements to enter into two-sided models, specifically the requirement to establish an adequate 5 See, for example, 80 FR 32761 (summarizing comments suggesting a combination of factors could make the program more attractive and encourage ACOs to transition to risk, such as: The level of risk and reward offered under the program’s financial models, tools to enable ACOs to more effectively control and manage their patient populations, opportunity for ACOs to gain experience with the program under the one-sided model under the same rules that would be applied under a two-sided model, including the assignment methodology, allowing ACOs to move to two-sided risk within an agreement period, and allowing for longer agreement periods). 6 See discussion in section II.A.1.a of this final rule. See also 81 FR 37996 (summarizing comments suggesting that if a Track 1 ACO is uncertain about its ability to successfully manage financial risk, the ACO would more likely simply choose to continue under Track 1 for a second agreement period.) PO 00000 Frm 00014 Fmt 4701 Sfmt 4700 repayment mechanism (see discussion in section II.A.6.c. of this final rule). (6) Value proposition of the program’s financial model under one-sided and two-sided models. The value proposition of the program’s financial models raises a number of key considerations that pertain to an ACO’s transition to risk. One consideration is the level of potential reward under the one-sided model in relation to the levels of potential risk and reward under a twosided model. A second consideration is the availability of asymmetrical levels of risk and reward, such as in the Medicare ACO Track 1+ Model (Track 1+ Model), where, for certain eligible ACOs, the level of risk is determined based on a percentage of ACO participants’ total Medicare Parts A and B FFS revenue, not to exceed a percentage of the ACO’s benchmark (determined based on historical expenditures for its assigned population). A third consideration is the interactions between the ACO’s participation in a two-sided model of the Shared Savings Program and incentives available under other CMS value-based payment initiatives; in particular, eligible clinicians participating in an ACO under a twosided model of the Shared Savings Program may qualify to receive an APM incentive payment under the Quality Payment Program for sufficient participation in an Advanced APM. Lastly, the value proposition of the program is informed by the methodology for setting and resetting the benchmark, which is the basis for determining shared savings and shared losses, and the length of agreement period, which determines the amount of time an ACO remains under a financial model and the frequency of benchmark rebasing. See discussion in sections II.D. (benchmarking) and II.A.1.c. (length of agreement period) of this final rule. Currently, the design of the program locks in the ACO’s choice of financial model, which also determines the applicable beneficiary assignment methodology, for the duration of the ACO’s 3-year agreement period. For an ACO’s initial or subsequent agreement period in the Shared Savings Program, an ACO applies to participate in a particular financial model (or ‘‘track’’) of the program as specified under § 425.600(a). If the ACO’s application is accepted, the ACO must remain under that financial model for the duration of its 3-year agreement period. Beneficiary assignment and the level of performance-based risk (if applicable) are determined consistently for all ACOs participating in a particular track. Under Track 1 and Track 2, we assign E:\FR\FM\31DER2.SGM 31DER2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations khammond on DSK30JT082PROD with RULES2 beneficiaries using preliminary prospective assignment with retrospective reconciliation (§ 425.400(a)(2)). Under Track 3, we prospectively assign beneficiaries (§ 425.400(a)(3)). As described in earlier rulemaking, commenters have urged that we offer greater flexibility for ACOs in their choice of assignment methodology.7 In the June 2015 final rule, we acknowledged there is additional complexity and administrative burden to implementing an approach under which ACOs in any track may choose either prospective assignment or preliminary prospective assignment with retrospective reconciliation, with an opportunity to switch their selection on an annual basis. At that time, we declined to implement prospective assignment in Track 1 and Track 2, and we also declined to give ACOs in Track 3 a choice of either prospective assignment or preliminary prospective assignment with retrospective reconciliation. Further, we explained that implementing prospective assignment only in a two-sided model track may encourage Track 1 ACOs that prefer this assignment methodology, and the other features of Track 3, to more quickly transition to performancebased risk (80 FR 32773). We also have considered alternative approaches to allow ACOs greater flexibility in the timing of their transition to performance-based risk, including within an ACO’s agreement period. For example, as described in earlier rulemaking, commenters suggested approaches that would allow less than two 3-year agreement periods under Track 1.8 Some commenters recommended that CMS allow ACOs to ‘‘move up’’ the risk tracks (that is, move from Track 1 to Track 2 or Track 3, or move from Track 2 to Track 3) between performance years without being required to wait for the start of a new agreement period, to provide more flexibility for ACOs prepared to accept 7 See, for example, 76 FR 67864 (summarizing comments suggesting allowing ACOs a choice of prospective or retrospective assignment); 80 FR 32772 through 32774 (In response to our proposal to use a prospective assignment methodology in Track 3, many commenters generally encouraged CMS to extend the option for prospective assignment beyond Track 3 to Track 1 and Track 2. Other commenters saw the value in retaining both assignment methodologies, and encouraged CMS to allow all ACOs, regardless of track, a choice of prospective or retrospective assignment. Several commenters suggested CMS allow ACOs a choice of retrospective or prospective assignment annually, within the ACO’s 3-year agreement period). 8 See, for example, 76 FR 67907 through 67909 (discussing comments suggesting ACOs be allowed 3, 4, 5, or 6 years under Track 1 prior to transitioning to a performance-based risk track). VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 performance-based risk, or a higher level of performance-based risk. These commenters suggested that allowing an ACO to accept varying degrees of risk within an agreement period would position the ACO to best balance its exposure to and tolerance for financial risk and would create a true glide path for participating healthcare providers (81 FR 37995 through 37996). Transition to performance-based risk has taken on greater significance with the introduction of the Quality Payment Program. Under the CY 2017 Quality Payment Program final rule with comment period,9 ACO initiatives that require ACOs to bear risk for monetary losses of more than a nominal amount, and that meet additional criteria, can qualify as Advanced APMs beginning in performance year 2017. Eligible clinicians who sufficiently participate in Advanced APMs such that they are Qualifying APM Participants (QPs) for a performance year receive APM Incentive Payments in the corresponding payment year between 2019 through 2024, and then higher fee schedule updates starting in 2026. Track 2 and Track 3 of the Shared Savings Program, and the Track 1+ Model, are currently Advanced APMs under the Quality Payment Program. ACOs and other program stakeholders continue to express a variety of concerns about the transition to risk under Track 2 and Track 3. For example, as described in the CY 2017 Quality Payment Program final rule with comment period (see, for example, 81 FR 77421 through 77422), commenters suggested a new Shared Savings Program track as a meaningful middle path between Track 1 and Track 2 (‘‘Track 1.5’’), that meets the Advanced APM generally applicable nominal amount standard, to create an option for ACOs with relatively low revenue or small numbers of participating eligible clinicians to participate in an Advanced APM without accepting the higher degrees of risk involved in Track 2 and Track 3. Commenters suggested this track would be a viable on-ramp for ACOs to assume greater amounts of risk in the future. Commenters’ suggestions for Track 1.5 included prospective beneficiary assignment, asymmetric levels of risk and reward, and payment rule waivers, such as the SNF 3-day rule waiver available to ACOs participating in 9 See Merit-Based Incentive Payment System (MIPS) and Alternative Payment Model (APM) Incentive under the Physician Fee Schedule, and Criteria for Physician-Focused Payment Models final rule with comment period, 81 FR 77008 (Nov. 4, 2016), herein referred to as the CY 2017 Quality Payment Program final rule with comment period. PO 00000 Frm 00015 Fmt 4701 Sfmt 4700 67829 Shared Savings Program Track 3.10 Another key component of commenters’ suggestions was to allow Track 1 ACOs to transition to Track 1.5 within their current agreement periods.11 These commenters’ suggestions were considered in developing the Track 1+ Model, which began on January 1, 2018. This Model, which is being tested by the Innovation Center, includes a two-sided payment model that incorporates the upside of Track 1 with more limited downside risk than is currently present in Track 2 or Track 3 of the Shared Savings Program. The Track 1+ Model is currently an Advanced APM under the Quality Payment Program. The Track 1+ Model is designed to encourage ACOs, especially those made up of small physician practices, to advance to performance-based risk. ACOs that include hospitals, including small rural hospitals, are also allowed to participate. See CMS Fact Sheet, New Accountable Care Organization Model Opportunity: Medicare ACO Track 1+ Model, Updated July 2017 (herein Track 1+ Model Fact Sheet), available at https://www.cms.gov/Medicare/ Medicare-Fee-for-Service-Payment/ sharedsavingsprogram/Downloads/ New-Accountable-Care-OrganizationModel-Opportunity-Fact-Sheet.pdf. In performance year 2018, 55 ACOs began in the Track 1+ Model, demonstrating strong interest in this financial model design. The availability of the Track 1+ Model increased the number of ACOs participating under a two-sided risk model in connection with their participation in the Shared Savings Program to approximately 18 percent, with approximately 22.7 percent of assigned beneficiaries receiving care through an ACO in a two-sided model. Of the 55 Track 1+ Model ACOs, based on the ACOs’ self-reported composition: 58.2 percent attested to the presence of 10 See CY 2017 Quality Payment Program final rule with comment period for summary of comments and responses. Individual comments are available at https://www.regulations.gov, search on file code CMS–5517–P, docket ID CMS–2016–0060 (https://www.regulations.gov/docketBrowser?rpp= 25&so=DESC&sb=commentDue Date&po=0&dct=PS&D=CMS-2016-0060). See for example, Letter from Clif Gaus, NAACOS to Andrew Slavitt, Acting Administrator, Centers for Medicare & Medicaid Services, regarding CMS– 5517–P (June 27, 2016); Letter from Tonya K. Wells, Trinity Health to Slavitt regarding CMS–5517–P (June 27, 2016); Letter from Joseph Bisordi, M.D., Ochsner Health System to Slavitt regarding CMS– 5517–P (June 27, 2016); Letter from Kevin Bogari, Lancaster General Health Community Care Collaborative to Slavitt regarding CMS–5517–P (June 27, 2016). 11 See 81 FR 77421 (describing comments suggesting CMS adopt a Track 1.5 and also suggesting that Track 1 ACOs should be permitted to move into this suggested Track 1.5 before the end of their current agreement period). E:\FR\FM\31DER2.SGM 31DER2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations an ownership or operational interest by an inpatient prospective payment system (IPPS) hospital, cancer center or rural hospital with more than 100 beds among their ACO participants, and therefore these ACOs were under a benchmark-based loss sharing limit; and 41.8 percent attested to the absence of such ownership or operational interests by these institutional providers among their ACO participants (likely ACOs composed of independent physician practices and/or ACOs that include small rural hospitals), which qualified these ACOs for generally lower levels of risk under the Track 1+ Model’s revenue-based loss sharing limit. c. Background on Length of Agreement Period khammond on DSK30JT082PROD with RULES2 Section 1899(b)(2)(B) of the Act requires participating ACOs to enter into an agreement with CMS to participate in the program for not less than a 3-year period referred to as the agreement period. Further, section 1899(d)(1)(B)(ii) of the Act requires us to reset the benchmark at the start of each agreement period. In initial rulemaking for the program, we limited participation agreements to 3-year periods (see 76 FR 19544, and 76 FR 67807). We have considered the length of the ACO’s agreement period in the context of the amount of time an ACO may remain in a one-sided model and also the frequency with which we reset (or rebase) the ACO’s historical benchmark. For example, in the June 2015 final rule, we discussed commenters’ suggestions that we extend the agreement period from the current 3 years to a 5-year agreement period, for all tracks, including not only the initial 12 See 80 FR 32763. See also 80 FR 32761 (discussing several commenters’ recommendation to move to 5 or 6 year agreements for ACOs and the suggestion that ACOs have the opportunity to move to a performance-based risk model during their first agreement period, for example, after their first 3 years under the one-sided model. A commenter suggested encouraging ACOs to VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 agreement period, but all subsequent agreement periods.12 These commenters explained that extending the length of the agreement period would make the program more attractive by increasing program stability and providing ACOs with the necessary time to achieve the desired quality and financial outcomes. We declined to adopt these suggestions, believing at that time it was more appropriate to maintain a 3-year agreement period to provide continuity with the initial design of the program. At that time we did not find it necessary to extend agreement periods past 3 years to address the renewal of initial program entrants, particularly in light of the policies we finalized in the June 2015 final rule allowing Track 1 ACOs to apply to continue under the one-sided model for a second 3-year agreement period and modifying the benchmark rebasing methodology. However, we explained that longer agreement periods could increase the likelihood that ACOs would build on the success or continue the failure of their current agreement period. For this reason we noted that rebasing every 3 years, at the start of each 3-year agreement period, is important to protect both the Trust Funds and ACOs. See 80 FR 32763. See also 81 FR 37957 (noting commenters’ suggestions that we eliminate rebasing or reducing the frequency of rebasing). d. Background on Shared Savings Program Participation There remains a high degree of interest in participation in the Shared Savings Program. Although most ACOs continue to participate in the program’s one-sided model (Track 1), ACOs have demonstrated significant interest in the transition to two-sided risk by offering lower loss sharing rates for ACOs that move from Track 1 to the two-sided model during the course of an agreement period, and phasing-in loss sharing rates for these ACOs (for example, 15 percent in year 1, 30 percent in year 2, 60 percent in year 3). Another commenter suggested that CMS allow all ACOs PO 00000 Frm 00016 Fmt 4701 Sfmt 4725 Track 1+ Model. Table 2 summarizes the total number of ACOs that are participating in the Shared Savings Program, including those also participating in the Track 1+ Model, for performance year 2018 with the total number of assigned beneficiaries by track.13 Of the 561 ACOs participating in the program as of January 1, 2018, 55 were in the Track 1+ Model, 8 were in Track 2, 38 were in Track 3, and 460 were in Track 1. As of performance year 2018, there are over 20,000 ACO participant Taxpayer Identification Numbers (TINs) that include 377,515 clinicians (physicians, physician assistants, nurse practitioners and clinical nurse specialists) some of whom are in small and solo practices. About half of ACOs are provider networks, and 66 ACOs include rural providers. See Medicare Shared Savings Program Fast Facts (January 2018) available at https:// www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/sharedsavings program/Downloads/SSP-2018-FastFacts.pdf. Based on the program’s existing requirements, ACOs can participate in Track 1 for a maximum of two agreement periods. There are a growing number of ACOs that have entered into their second agreement period, and, starting in 2019, many that will begin a third agreement period and will be required to enter a risk-based track. The progression by some ACOs to performance-based risk within the Shared Savings Program remains relatively slow, with approximately 82 percent of ACOs participating in Track 1 in 2018, 43 percent (196 of 460) of which are within a second agreement period in Track 1. (regardless of track) the option to increase their level of risk annually during the agreement period.) 13 See Performance Year 2018 Medicare Shared Savings Program Accountable Care Organizations available at Data.CMS.gov, https://data.cms.gov/ Special-Programs-Initiatives-Medicare-SharedSaving/Performance-Year-2018-Medicare-SharedSavings-Prog/28n4-k8qs/data. E:\FR\FM\31DER2.SGM 31DER2 ER31DE18.002</GPH> 67830 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations khammond on DSK30JT082PROD with RULES2 However, the recent addition of the Track 1+ Model provided a significant boost in Shared Savings Program ACOs taking on performance-based risk, with over half of the 101 ACOs participating in the Shared Savings Program and taking on performance-based risk opting for the Track 1+ Model in 2018. The lower level of risk offered under the Track 1+ Model has been positively received by the industry and provided a pathway to risk for many ACOs. 2. Modified Participation Options Under 5-Year Agreement Periods As described in the August 2018 proposed rule (83 FR 41797 through 41801), in developing the proposed policies described in this section, we considered a number of factors related to the program’s current participation options in light of the program’s financial results and stakeholders’ feedback on program design, including the following. First, we considered the program’s existing policy allowing ACOs up to 6 years of participation in a one-sided model. We have found that the policy has shown limited success in encouraging ACOs to advance to performance-based risk. By the fifth year of implementing the program, only about 18 percent of the program’s participating ACOs are under a twosided model, over half of which are participating in the Track 1+ Model (see Table 2). As discussed in detail in the August 2018 proposed rule (see 83 FR 41916 through 41918), our experience with the program indicates that ACOs in twosided models generally perform better than ACOs that participate under a onesided model. For example, for performance year 2016, about 68 percent of Shared Savings Program ACOs in two-sided models (15 of 22 ACOs) shared savings compared to 29 percent of Track 1 ACOs. For performance year 2015, prior to the first year of Track 3, one of the three remaining Track 2 ACOs shared savings, while about 30 percent of Track 1 ACOs (118 of 389 ACOs) shared savings. For performance year 2014, two of the three remaining Track 2 ACOs shared savings while about 25 percent of Track 1 ACOs (84 of 330 ACOs) shared savings. In the program’s first year, concluding December 31, 2013, 40 percent of Track 2 ACOs (2 of 5 ACOs) compared to 23 percent of Track 1 ACOs (50 of 215 ACOs) shared savings. See Shared Savings Program Accountable Care Organization Public Use Files, available at https://www.cms.gov/ResearchStatistics-Data-and-Systems/ Downloadable-Public-Use-Files/ VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 SSPACO/index.html. These observations, in combination with participation trends that show most ACOs prefer to remain in Track 1 for a second 3-year agreement period, suggests that a requirement for ACOs to more rapidly transition to performancebased risk could be effective in creating incentives for ACOs to more quickly meet the program’s goals. The program’s current design lacks a sufficiently incremental progression to performance-based risk, the need for which is evidenced by robust participation in the new Track 1+ Model. A significant issue that contributes to some ACOs’ reluctance to participate in Track 2 or Track 3 is that the magnitude of potential losses is very high compared to the ACO’s degree of control over the total Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries, particularly when its ACO participants have relatively low total Medicare Parts A and B FFS revenue. We are encouraged by the interest in the Track 1+ Model as indicated by the 55 Shared Savings Program ACOs participating in the Model for the performance year beginning on January 1, 2018; the largest group of Shared Savings Program ACOs to enter into performance-based risk for a given performance year to date. Based on the number of ACOs participating in the Track 1+ Model for performance year 2018, a lower risk option appears to be important for Track 1 ACOs with experience in the program seeking to transition to performance-based risk, as well as ACOs seeking to enter an initial agreement period in the program under a lower risk model. Interest in the Track 1+ Model suggests that the opportunity to participate in an Advanced APM while accepting more moderate levels of risk (compared to Track 2 and Track 3) is an important financial model design for ACOs. Allowing more manageable levels of risk within the Shared Savings Program is an important pathway for helping organizations to gain experience with managing risk as well as participating in Advanced APMs under the Quality Payment Program. The high uptake we have observed with the Track 1+ Model also suggests that the current design of Track 1 may be unnecessarily generous since the Track 1+ Model has the same level of upside as Track 1 but under which ACOs must also assume performance-based risk. Second, under the program’s current design, CMS lacks adequate tools to properly address ACOs with patterns of negative financial performance. Track 1 ACOs are not liable for repaying any portion of their losses to CMS, and PO 00000 Frm 00017 Fmt 4701 Sfmt 4700 67831 therefore may have potentially weaker incentives to improve quality and reduce growth in FFS expenditures within the accountable care model. These ACOs may take advantage of the potential benefits of continued program participation (including the receipt of program data and the opportunity to enter into certain contracting arrangements with ACO participants and ACO providers/suppliers in connection with their participation in the Shared Savings Program), without providing a meaningful benefit to the Medicare program. ACOs under twosided models may similarly benefit from program participation and seek to continue their participation despite owing shared losses. Third, differences in performance of ACOs indicate a pattern where low revenue ACOs outperformed high revenue ACOs. As discussed in the August 2018 proposed rule (see 83 FR 41916 through 41918), we have observed a pattern of performance, across tracks and performance years, where low revenue ACOs show better average results compared to high revenue ACOs. We explained that high revenue ACOs, which typically include hospitals, have a greater opportunity to control assigned beneficiaries’ total Medicare Parts A and B FFS expenditures, as they coordinate a larger portion of the assigned beneficiaries’ care across care settings, and have the potential to perform better than what has been demonstrated in performance trends from 2012 through 2016. We concluded that the trends in performance by high revenue ACOs in relation to their expected capacity to control growth in expenditures are indications that these ACOs’ performance would improve through greater incentives, principally a requirement to take on higher levels of performance-based risk, and thus drive change in FFS utilization for their Medicare FFS populations. This conclusion is further supported by our initial experience with the Track 1+ Model, for which our preliminary findings support the conclusion that the degree of control an ACO has over expenditures for its assigned beneficiaries is an indication of the level of performance-based risk an ACO is prepared to accept and manage, where control is determined by the relationship between ACO participants’ total Medicare Parts A and B FFS revenue and the total Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries. Our experience with the Track 1+ Model has also shown that ACO participants’ total Medicare E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67832 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations Parts A and B FFS revenue as a percentage of the total Medicare Parts A and B FFS expenditures of the assigned beneficiaries can serve as a proxy for ACO composition (that is, whether the ACO includes one or more institutional providers as an ACO participant, and therefore is likely to control a greater share of Medicare Parts A and B FFS expenditures and to have greater ability to coordinate care across settings for its assigned beneficiaries). Fourth, permitting choice of level of risk and assignment methodology within an ACO’s agreement period would create redundancy in some participation options, and eliminating this redundancy would allow CMS to streamline the number of tracks offered while allowing ACOs greater flexibility to design their participation to meet the needs of their organizations. ACOs and stakeholders have indicated a strong preference for maintaining an option to select preliminary prospective assignment with retrospective reconciliation as an alternative to prospective assignment for ACOs under performance-based risk within the Shared Savings Program. We considered what would occur if we retained Track 2 in addition to the ENHANCED track and offered a choice of prospective assignment and preliminary prospective assignment (see section II.A.4.c. of this final rule) for both tracks. We stated that ACOs prepared to accept higher levels of benchmark-based risk would be more likely to enter the ENHANCED track (which allows the greatest risk and potential reward). This is suggested by participation statistics, where 8 ACOs are participating in Track 2 compared to the 38 ACOs participating in Track 3 as of January 1, 2018. We noted that for agreement periods beginning in 2018, only 2 ACOs entered Track 2, both of which had deferred renewal in 2017, while 4 ACOs entered Track 3 (for their first or second agreement period). ACOs may be continuing to pick Track 2 because of the preliminary prospective assignment methodology, and we would expect participation in Track 2 to decline further if we finalize the proposal to allow a choice of assignment methodology in the ENHANCED track, since we would expect ACOs ready for higher risk (that is, a level of risk that is higher than the highest level of risk and potential reward under the proposed BASIC track) to prefer the ENHANCED track over Track 2. Fifth, longer agreement periods could improve program incentives and support ACOs’ transition into performance-based risk when coupled with changes to improve the accuracy of the program’s benchmarking VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 methodology. Extending agreement periods for more than 3 years could provide more certainty over benchmarks and in turn give ACOs a greater chance to succeed in the program by allowing them more time to understand their performance, gain experience and implement redesigned care processes before rebasing of the ACO’s historical benchmark. Shared Savings Program results show that ACOs tend to perform better the longer they remain in the program. Further, under longer agreement periods, historical benchmarks would become more predictable, since the benchmark would continue to be based on the expenditures for beneficiaries who would have been assigned to the ACO in the 3 most recent years prior to the start of the ACO’s agreement period (see §§ 425.602(a) and 425.603(c)) and the benchmark would be risk adjusted and updated each performance year relative to benchmark year 3. However, a number of factors can affect the amount of the benchmark, and therefore its predictability, during the agreement period regardless of whether the agreement period spans 3 or 5 years, including: Adjustments to the benchmark during the ACO’s agreement period resulting from changes in the ACO’s certified ACO participant list and regulatory changes to the assignment methodology; as well as variation in the benchmark value that occurs each performance year as a result of annual risk adjustment to the ACO’s benchmark (§§ 425.602(a)(9) and 425.603(c)(10)) and annual benchmark updates (§§ 425.602(b) and 425.603(d)). We explained that the proposed approach to incorporating factors based on regional FFS expenditures in establishing, adjusting and updating the benchmark beginning with the ACO’s first agreement period (discussed in section II.D. of this final rule) would result in more accurate benchmarks. This improved accuracy of benchmarks would mitigate the impact of the more generous updated benchmarks that could result in the later years of longer agreement periods. In summary, taking these factors into consideration, we proposed to redesign the program’s participation options by discontinuing Track 1, Track 2 and the deferred renewal option, and instead offering two tracks that eligible ACOs would enter into for an agreement period of at least 5 years: (1) BASIC track, which would include an option for eligible ACOs to begin participation under a one-sided model and incrementally phase-in risk (calculated based on ACO participant revenue and PO 00000 Frm 00018 Fmt 4701 Sfmt 4700 capped at a percentage of the ACO’s updated benchmark) and potential reward over the course of a single agreement period, an approach referred to as a glide path; and (2) ENHANCED track, based on the program’s existing Track 3, for ACOs that take on the highest level of risk and potential reward. We proposed to require ACOs to enter one of two tracks for agreement periods beginning on July 1, 2019, and in subsequent years (as described in section II.A.7. of this final rule): Either the ENHANCED track, which would be based on Track 3 as currently designed and implemented under § 425.610, or the new BASIC track, which would offer eligible ACOs a glide path from a onesided model to incrementally higher performance-based risk. (We referred to this participation option for eligible ACOs entering the BASIC track as the BASIC track’s glide path, or simply the glide path.) We proposed to add a new provision to the Shared Savings Program regulations at § 425.605 to establish the requirements for this BASIC track. The BASIC track would offer lower levels of risk compared to the levels of risk currently offered in Track 2 and Track 3, and the same maximum level of risk as offered under the Track 1+ Model. Compared to the design of Track 1, this glide path approach, which requires assumption of gently increasing levels of risk and potential reward beginning no later than an ACO’s fourth performance year under the BASIC track for agreement periods starting on July 1, 2019 or third performance year under the BASIC track for agreement periods starting in 2020 and all subsequent years, could provide stronger incentives for ACOs to improve their performance. For agreement periods beginning on July 1, 2019, and in subsequent years, we proposed to modify the regulations at §§ 425.600 and 425.610 to designate Track 3 as the ENHANCED track. We proposed that all references to the ENHANCED track in the program’s regulations would be deemed to include Track 3. We explained that we intend references to the ENHANCED track to apply to Track 3 ACOs, unless otherwise noted. We explained that as part of the redesign of the program’s participation options, it is timely to provide the program’s tracks with more descriptive and meaningful names. ‘‘Enhanced’’ is indicative of the increased levels of risk and potential reward available to ACOs under the current design of Track 3, the new tools and flexibilities available to performance-based risk ACOs, and the relative incentives for ACOs under this E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations financial model designed to improve the quality of care for their assigned beneficiaries (for example, through the availability of the highest sharing rates based on quality performance under the program) and their potential to drive towards reduced costs for Medicare FFS beneficiaries and therefore increased savings for the Medicare Trust Funds. In contrast, ‘‘basic’’ suggests a foundational level, which is reflected in the opportunity under the BASIC track to provide a starting point for ACOs on a pathway to success from a one-sided shared savings model to two-sided risk. We proposed that for agreement periods beginning on July 1, 2019, the length of the agreement would be 5 years and 6 months. For agreement periods beginning on January 1, 2020, and in subsequent years, the length of the agreement would be 5 years. In the November 2018 final rule (83 FR 59946) we finalized a revision to the definition of ‘‘agreement period’’ to broadly mean the term of the participation agreement. For consistency, we also revised the heading in § 425.200(b) from ‘‘term of the participation agreement’’ to ‘‘agreement period,’’ based on the modification to the definition of ‘‘agreement period’’ in § 425.20. In the August 2018 proposed rule (83 FR 41799), we proposed to specify the term of participation agreements beginning on July 1, 2019 and in subsequent years in revisions to § 425.200, which currently specifies the term of the participation agreement for each agreement start date since the beginning of the program. In the August 2018 proposed rule (83 FR 41800), we also proposed to revise § 425.502(e)(4)(v), specifying calculation of the quality improvement reward as part of determining the ACO’s quality score, which includes language based on 3-year agreement periods. Through these revisions, we would specify that the comparison for performance in the first year of the new agreement period would be the last year in the previous agreement period, rather than the third year of the previous agreement period. The regulation on renewal of participation agreements (§ 425.224(b)) includes criteria regarding an ACO’s quality performance and repayment of shared losses that focus on specific years in the ACO’s prior 3-year agreement period. We discussed proposals to revise these evaluation criteria to be more relevant to assessing prior participation of ACOs under an agreement period of at least 5 years, among other factors (83 FR 41823 through 41825). VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 For ACOs entering agreement periods beginning on July 1, 2019, and in subsequent years, we proposed to allow ACOs annually to elect the beneficiary assignment methodology (preliminary prospective assignment with retrospective reconciliation, or prospective assignment) to apply for each remaining performance year within their agreement period. See discussion in section II.A.4.c. of this final rule. For ACOs entering agreement periods beginning on July 1, 2019, and in subsequent years, we proposed to allow eligible ACOs in the BASIC track’s glide path the option to elect entry into a higher level of risk and potential reward under the BASIC track for each performance year within their agreement period. See the discussion in section II.A.4.b. of this final rule. We proposed to discontinue Track 1 as a participation option for the reasons described elsewhere in this section. We proposed to amend § 425.600 to limit availability of Track 1 to agreement periods beginning before July 1, 2019. We proposed to discontinue Track 2 as a participation option. We proposed to amend § 425.600 to limit availability of Track 2 to agreement periods beginning before July 1, 2019. We based these proposals on the following considerations. For one, the proposal to allow ACOs to select their assignment methodology (section II.A.4.c. of this final rule) and the availability of the proposed BASIC track with relatively low levels of risk compared to the ENHANCED track would ensure the continued availability of a participation option with moderate levels of risk and potential reward in combination with the optional availability of the preliminary prospective beneficiary assignment in the absence of Track 2. We explained that maintaining Track 2 as a participation option between the lower risk of the proposed BASIC track and the higher risk of the ENHANCED track would create redundancy in participation options, while removing Track 2 would offer an opportunity to streamline the tracks offered. Although Track 2 was the initial twosided model of the Shared Savings Program, the statistics on Shared Savings Program participation by track (and in the Track 1+ Model) summarized in Table 2 show few ACOs entering and completing their risk bearing agreement period under Track 2 in recent years, and suggest that ACOs prefer either a lower level of risk and potential reward under the Track 1+ Model or a higher level of risk and potential reward under Track 3 than the PO 00000 Frm 00019 Fmt 4701 Sfmt 4700 67833 Track 2 level of risk and potential reward. Further, under the proposed modifications to the regulations (see section II.A.5.c. of this final rule), Track 2 ACOs prepared to take on higher risk would have the option to elect to enter the ENHANCED track by completing their agreement period in Track 2 and applying to renew for a subsequent agreement period under the ENHANCED track or by voluntarily terminating their current 3-year agreement and entering a new agreement period under the ENHANCED track, without waiting until the expiration of their current 3-year agreement period. Certain Track 2 ACOs that may not be prepared for the higher level of risk under the ENHANCED track could instead elect to enter the proposed BASIC track at the highest level of risk and potential reward, under the same circumstances. We proposed to discontinue the policy that allows Track 1 ACOs in their first agreement period to defer renewal for a second agreement period in a twosided model by 1 year, to remain in their current agreement period for a fourth performance year, and to also defer benchmark rebasing. We proposed to amend § 425.200(e) to discontinue the deferred renewal option, so that it would be available to only those Track 1 ACOs that began a first agreement period in 2014 or 2015 and have already renewed their participation agreement under the deferred renewal option, and therefore this option would not be available to Track 1 ACOs seeking to renew for a second agreement period beginning on July 1, 2019, or in subsequent years. We proposed to amend § 425.200(b)(3) to specify that the extension of a first agreement period in Track 1 under the deferred renewal option is available only for ACOs that began a first agreement period in 2014 or 2015 and therefore deferred renewal in 2017 or 2018 (respectively). We considered the following issues in developing this proposal. For one, continued availability of this option is inconsistent with our proposed redesign of the program, which encourages rapid transition to performance-based risk and requires ACOs on the BASIC track’s glide path to enter performance-based risk within their first agreement period under the BASIC track. Deferral of benchmark rebasing was likely a factor in some ACOs’ decisions to defer renewal, particularly for ACOs concerned about the effects of the rebasing methodology on their benchmark. Under the proposal to extend the length of agreement periods E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67834 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations from 3 years to not less than 5 years, benchmark rebasing would be delayed by 2 years (relative to a 3-year agreement), rather than 1 year, as provided under the current deferred renewal policy. Eliminating the deferred renewal option would streamline the program’s participation options and operations. Very few ACOs have elected the deferred renewal participation option, with only 8 ACOs that began participating in the program in either 2014 or 2015 renewing their Shared Savings Program agreement under this option to defer entry into a second agreement period under performancebased risk until 2018 or 2019, respectively. We stated that the very low uptake of this option demonstrates that it is not effective at facilitating ACOs’ transition to performance-based risk. The proposed timing of applicability would prevent ACOs from electing to defer renewal in 2019 for a second agreement period beginning in 2020. Further, as discussed in section II.A.5.c. of this final rule, we proposed to discontinue the ‘‘sit-out’’ period under § 425.222(a), which is crossreferenced in the regulation at § 425.200(e) establishing the deferred renewal option. Under the proposed modifications to § 425.222(a), ACOs that have already been approved to defer renewal until 2019 under this participation option (ACOs with 2015 start dates in the Shared Savings Program that deferred entering a second agreement period under two-sided risk until January 1, 2019), would have the option of terminating their participation agreement for their second agreement period under Track 2 or Track 3 and applying to enter the BASIC track at the highest level of risk and potential reward (Level E), or the ENHANCED track, for a new agreement period. We proposed to modify the Shared Savings Program participation options to offer a new performance-based risk track using the Secretary’s authority under section 1899(i)(3) of the Act. In the August 2018 proposed rule, we explained use of our authority under section 1899(i)(3) of the Act (83 FR 41801). In order to add the BASIC track, we must determine that it will improve the quality and efficiency of items and services furnished to Medicare beneficiaries, without additional program expenditures. Consistent with our earlier discussions of the use of this authority to establish the current twosided models in the Shared Savings Program (see 76 FR 67904 and 80 FR 32771), we explained that the BASIC track would provide an additional opportunity for organizations to enter a VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 risk-sharing arrangement and accept greater responsibility for beneficiary care. We explained that the proposed restructuring of participation options, more generally, would help ACOs transition to performance-based risk more quickly than under the program’s current design. Under the proposed program redesign we would eliminate Track 1 (under which a one-sided model currently is available for up to 6 years), offering instead a glide path with up to 2 performance years under a one-sided model (three, for ACOs that enter the glide path on July 1, 2019), followed by the incremental phase-in of risk and increasing potential for reward over the remaining 3 performance years of the agreement period. We proposed that ACOs that previously participated in Track 1, or new ACOs identified as reentering ACOs because more than 50 percent of their ACO participants have recent prior experience in a Track 1 ACO, entering the BASIC track’s glide path would be eligible for a single performance year under a one-sided model (two, for ACOs that enter the glide path on July 1, 2019). We proposed a one-time exception to be specified in revisions to § 425.600, under which the automatic advancement policy would not apply to the second performance year for an ACO entering the BASIC track’s glide path for an agreement period beginning on July 1, 2019. For performance year 2020, the ACO may remain in the same level of the BASIC track’s glide path that it entered for the performance year beginning on July 1, 2019 (6-month period). The ACO would be automatically advanced to the next level of the BASIC track’s glide path at the start of performance year 2021 and all subsequent performance years of the agreement period, unless the ACO elects to advance to a higher level of risk and potential reward under the glide path more quickly, as proposed in section II.A.4.b. of this final rule. The glide path concludes with the ACO entering a level of potential reward that is the same as is currently available under Track 1, with a level of risk that is similar to the lesser of either the revenue-based or benchmark-based loss sharing limit under the Track 1+ Model. Further, we realized that a significant incentive for ACOs to transition more quickly to the highest level of risk and reward under the BASIC track would be the opportunity to participate in an Advanced APM for purposes of the Quality Payment Program. Under the BASIC track’s Level E, an ACO’s eligible clinicians would have the opportunity to receive APM Incentive Payments and PO 00000 Frm 00020 Fmt 4701 Sfmt 4700 ultimately higher fee schedule updates starting in 2026, in the payment year corresponding to each performance year in which they attain QP status. We explained in the Regulatory Impact Analysis section of the proposed rule (83 FR 41927) that the proposed BASIC track is expected to increase participation in performance-based risk by ACOs that may not otherwise take on the higher exposure to risk required in the ENHANCED track (or in the current Track 2). Such added participation in performance-based risk is expected to include a significant number of low revenue ACOs, including physician-led ACOs. These ACOs have shown stronger performance in the first years of the program despite mainly opting to participate in Track 1. Furthermore, the option for BASIC track ACOs to progress gradually toward risk within a single agreement period or accelerate more quickly to the BASIC track’s Level E is expected to further expand eventual participation in performance-based risk by ACOs that would otherwise hesitate to immediately transition to this level of risk because of uncertainty related to benchmark rebasing. Therefore, adding the BASIC track as a participation option under the Shared Savings Program would not likely result in an increase in spending beyond the expenditures that would otherwise occur under the statutory payment methodology in section 1899(d). Further, we expected that adding the BASIC track would continue to lead to improvement in the quality of care furnished to Medicare FFS beneficiaries because participating ACOs would have an incentive to perform well on the quality measures in order to maximize the shared savings they may receive and minimize any shared losses they must pay. The proposed rule included other policy proposals that require that we reassess the policies adopted under the authority of section 1899(i)(3) of the Act to ensure that they comply with the requirements under section 1899(i)(3)(B) of the Act. As described in the August 2018 proposed rule (83 FR 41927), the elimination of Track 2 as an on-going participation option, the addition of the BASIC track, the benchmarking changes (see section II.D. of this final rule), and the proposal to determine shared savings and shared losses for the 6month performance years starting on January 1, 2019, and July 1, 2019, using expenditures for the entire CY 2019 and then pro-rating these amounts to reflect the shorter performance year (see section II.A.7. of this final rule, as well as the November 2018 final rule), require the use of our authority under E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations section 1899(i) of the Act. These proposed changes to our payment methodology would not be expected to result in a situation in which all policies adopted under the authority of section 1899(i) of the Act, when taken together, result in more spending under the program than would have resulted under the statutory payment methodology in section 1899(d) of the Act. We noted that we would continue to reexamine this projection in the future to ensure that the requirement under section 1899(i)(3)(B) of the Act that an alternative payment model not result in additional program expenditures continues to be satisfied. In the event that we later determine that the payment model established under section 1899(i)(3) of the Act no longer meets this requirement, we would undertake additional notice and comment rulemaking to make adjustments to the payment model to assure continued compliance with the statutory requirements. As discussed in the Regulatory Impact Analysis section of this final rule (see section V), we believe the BASIC track meets the requirements for use of our authority under section 1899(i)(3) of the Act. The considerations we previously described, as included in the August 2018 proposed rule and the November 2018 final rule (83 FR 59949), were relevant in making this determination. Specifically, we do not believe that the BASIC track, as finalized in this section of this final rule, will result in an increase in spending beyond the expenditures that would otherwise occur under the statutory payment methodology in section 1899(d), and adding the BASIC track would continue to lead to improvement in the quality of care furnished to Medicare FFS beneficiaries. Comment: We received feedback from several commenters that favored the proposed Shared Savings Program two track redesign and the incremental transition to two-sided risk, including effectively consolidating Track 1 and the Track 1+ Model into the single BASIC track and the preservation of Track 3 in the ENHANCED track. Generally, commenters supported the overall framework and supported CMS’ proposal to pursue a tiered approach to introducing downside financial risk for ACOs. One commenter in support of the proposal noted that the renamed tracks are ‘‘more descriptive’’ than the current ones and applauded the permanent inclusion of the Track 1+ Model (described as Level E of the BASIC track). One commenter stated that the approach would strike an appropriate balance between encouraging the VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 transition to performance-based risk while not creating an undue burden on clinicians and ACOs as they make this transition. Another commenter believed that the new transition from one-sided to two-sided risk within the BASIC track would reward participants for providing beneficiaries with good care while holding ACOs accountable for potential losses. Another commenter believed that the proposed rule would provide an opportunity to make changes to the Medicare program that advance highquality, affordable, and value-based care to improve patient outcomes and reduce costs. One commenter strongly supported and shared CMS’ goal of strengthening the Shared Savings Program to make it successful for patients, providers, and Medicare over the long-term so that Medicare beneficiaries can benefit from the advantage of high-quality, costefficient, and highly coordinated care. Another commenter urged CMS to continue providing a variety of ways to participate in the Shared Savings Program, including different tracks and levels of risk. The commenter stated that each organization is unique and will follow its own path to gain experience in redesigning care processes, learning where to appropriately direct resources so that its patients can receive patientcentered, team-based, and integrated healthcare, while at the same time, providing system savings to programs, patients and healthcare professionals. However, many commenters disagreed with the more aggressive transition of ACOs to performancebased risk under the proposed program redesign. Some commenters cautioned that although the requirement that all ACOs undertake two-sided risk at some point during their participation agreement may improve the performance of the ACOs that continue to participate in the Shared Savings Program, it may also reduce ACO participation in the program. Several commenters expressed concern that the change in program requirements may cause ACOs to end their participation with the Shared Savings Program and create a barrier to entry for ACOs to join the program. One commenter recommended that CMS carefully monitor Shared Savings Program participation and change course if participation falls precipitously. Several commenters expressed concern that the rapid assumption of significant levels of risk by ACOs would discourage new participants and impede current ACOs’ ability to make patient-centered infrastructure investments that are necessary for successful participation. PO 00000 Frm 00021 Fmt 4701 Sfmt 4700 67835 Another commenter believed that reducing the amount of time permitted in upside only programs is ill advised and jeopardizes ACOs’ continued participation. Response: We appreciate the support of some commenters favoring the Shared Savings Program redesign and the more rapid transition from onesided to two-sided risk. We continue to believe that the proposed policies for the new BASIC track and the ENHANCED track generally strike an appropriate balance between risk and reward, appropriately distinguish available participation options by ACO and ACO participant characteristics, and will be effective in creating incentives for better coordinating care and assisting ACOs with the transition to risk. We continue to believe that models under which ACOs bear a degree of financial risk hold greater potential than one-sided models to induce more meaningful systematic change, promote accountability for a patient population and coordination of patient medical care, and encourage investment in redesigned care processes. In response to commenters’ concerns about the potential impact of the proposed redesign on program participation, we note the discussion in the Regulatory Impact Analysis (section V of this final rule), where we describe that potentially fewer new ACOs may enter the program, although ACOs within current agreement periods may be more likely to continue their participation. However, in general, we believe that the benefits associated with making the BASIC track’s glide path available to eligible ACOs, including the incremental increase in risk and reward, outweigh the risk of reduced ACO participation. With respect to the concerns about reduced ACO participation in the program, the potential effects of the proposed policies regarding the required transition to a two-sided model on participation decisions must be viewed together with other proposed program design elements that factor into participation decisions, including the methodology used to set and reset the ACO’s historical benchmark; the approach used to calculate the ACO’s shared savings and/or shared losses; the level of performance-based risk for ACOs; availability of the SNF 3-Day Rule Waiver, expanded coverage of telehealth services under section 1899(l) of the Act and Beneficiary Incentive Program; and the choice of methodologies for assigning beneficiaries to the ACO. Further, we believe that offering a glide path to transition ACOs to a two- E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67836 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations sided model through progressive levels of increasing risk and potential reward is responsive to commenters’ requests for additional program options for ACOs, including those less experienced with performance-based risk in an accountable care model. We believe that the addition of the new BASIC track, including a glide path with multiple levels of risk and potential reward, will help ACOs inexperienced with performance-based risk Medicare ACO initiatives to match their infrastructure and organizational readiness to an available participation option to support their achievement of the program’s goals of better care for individuals, better health for populations, and lower growth in Medicare Parts A and B expenditures. Further, as described elsewhere in this final rule, in response to commenters’ suggestions, we are finalizing several modifications to our proposals to further smooth ACOs’ transitions to performance-based risk. For example, as described in section II.A.5.c. of this final rule, we are finalizing a policy modification to allow additional flexibility for new ACO legal entities that qualify as low revenue ACOs and inexperienced with performance-based risk Medicare ACO initiatives, to participate for up to 3 performance years under a one-sided model (4 performance years in the case of ACOs entering an agreement period beginning on July 1, 2019) of the BASIC track’s glide path before transitioning to Level E (the highest level of risk and potential reward under the BASIC track). We believe that this option may address some commenters’ concerns. For instance, this option could be an attractive alternative to new ACOs that are inexperienced with the Shared Savings Program, by providing an additional year for the ACO to earn shared savings payments and make patient-centered infrastructure investments that would support their successful participation under a twosided model. Additionally, as described in section II.A.6.c. of this final rule, we are finalizing modifications to the approach for determining repayment mechanism arrangement amounts to potentially reduce the burden of these arrangements for both lower-revenue and higher-revenue ACOs participating in the ENHANCED track. We will continue to monitor program participation and consider further refinements to the program’s participation options as we gain experience with implementing the redesigned program. Comment: As we summarize and respond to elsewhere in this section of VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 this final rule, some commenters expressed concerns about the high level of risk under the ENHANCED track, and suggested that CMS allow for additional participation options that would smooth the transition from level of risk and potential reward within Level E of the BASIC track to the ENHANCED track. Some of these comments included suggestions for alternative designs of the ENHANCED track. Several commenters offered suggestions for how to modify the design of the financial model of, or participation options under, the ENHANCED track. A few commenters suggested that CMS should increase the shared savings rate to 80 percent for each performance year under the ENHANCED track (the same as the Next Generation ACO Model) and increase the performance payment limits over the agreement period. Response: We continue to believe it is important to maintain a participation option with the level of risk and potential reward as currently available under Track 3, proposed to be the ENHANCED track under the redesign of the program’s participation options. We believe that the opportunity for greater shared savings as compared to Level E of the BASIC track will encourage ACOs to undertake greater performance-based risk under the ENHANCED track, as well as provide a suitable participation option for ACOs more experienced with the accountable care model. Further, the design of the ENHANCED track offers symmetrical levels of risk and reward. To maintain this overall design, to increase the level of reward for the ENHANCED track (as suggested by one commenter), we would likewise need to consider increasing the level of risk as well. In light of commenters’ concerns about the level of risk in the design of this track, we are concerned about changing the design of the ENHANCED track to include even higher levels of risk and potential reward. Comment: Several commenters recommended that the ENHANCED track should include a revenue-based loss sharing limit. One commenter recommended that CMS should incorporate a revenue-based loss sharing limit into the ENHANCED track, similar to the BASIC track design. A few commenters suggested that CMS apply a loss sharing limit that is the lesser of 20 percent of the ACO participant’s revenue or 10 percent of updated benchmark for the ENHANCED track. Response: We decline at this time to adopt the commenters’ suggestion to include an opportunity for ENHANCED track ACOs to qualify for a revenuebased loss sharing limit. The loss PO 00000 Frm 00022 Fmt 4701 Sfmt 4700 sharing limit under the ENHANCED track will remain 15 percent of the ACO’s updated benchmark. We continue to believe that ACOs participating under higher levels of risk and reward can drive more meaningful systematic change in the behavior of providers and suppliers towards meeting the program’s goals. As we describe elsewhere in this final rule, we continue to believe that all ACOs should transition to the level of risk and reward under the ENHANCED track. Therefore, we do not believe it is necessary to decrease the overall downside risk in the ENHANCED track or develop a financial model within the ENHANCED track, similar to the design of the twosided models of the BASIC track. Thus, we decline to apply the revenue-based loss sharing limit to the ENHANCED track, which would potentially provide a relatively lower level of risk and weaken the incentives of the track’s financial model. We note that, as discussed in section II.A.6.c. of this final rule, we are modifying the methodology for calculating repayment mechanism amounts for ENHANCED track ACOs, so that lower-revenue ACOs may be eligible for potentially lower repayment mechanism amounts under a revenue-based calculation. We believe this approach may assist ACOs by potentially reducing the financial burden of setting aside capital to establish a repayment mechanism before transitioning to greater risk under the ENHANCED track. Comment: Some commenters supported the consideration of allowing a participation option that would provide a gentler transition from the level of risk and potential reward under the BASIC track’s Level E and the level of risk and potential reward under the ENHANCED track, which we described and sought comment on in section II.A.5.b. of the August 2018 proposed rule (83 FR 41818). Several commenters expressed concern about the steep increase in risk between the BASIC track’s Level E and the ENHANCED track. Several commenters called attention to the difference between the maximum amount of loss liability under the BASIC track’s Level E (4 percent of the ACO’s updated historical benchmark) and the ENHANCED track (15 percent of the ACO’s updated historical benchmark). Several commenters indicated the likelihood of decreasing participation from low revenue ACOs if they are required to take on the level of two-sided risk in the ENHANCED track. One commenter stated that this significant increase in risk may present a barrier to successful E:\FR\FM\31DER2.SGM 31DER2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations participation by smaller and less experienced ACOs. One commenter, concerned about the increase in risk between Level E of the BASIC track and the ENHANCED track, indicated that differences in exposure to loss liability and the repayment mechanism requirements between these tracks are unbalanced. One commenter, comparing the ENHANCED track to the Pioneer ACO model, cautioned CMS that we should expect attrition from the ENHANCED track based on the Pioneer ACO model experience. Several commenters suggested alternatives to ease the transition into risk from BASIC Level E to the ENHANCED track. Commenters suggested alternative participation options to create a series of gradual increases in both risk and reward, rather than a few inflection points to significantly different levels of risk. For example, creating a glide path to the highest risk level within the ENHANCED track or offer an additional track to help bridge the gap between the BASIC track and ENHANCED track that offers more options for gradual risk increases between Level E of the BASIC track and the ENHANCED track. Commenters’ specific suggestions included the following: khammond on DSK30JT082PROD with RULES2 • Establishing a glide path from Level E of the BASIC track to the ENHANCED track based on the design of Track 2. One commenter suggested that CMS create a ‘‘BASIC Level E+’’ alternative that mimics the maximum shared savings and loss rates of the current Track 2. It would have an up to 60 percent maximum shared savings rate and a loss sharing rate that is not less than 40 percent but would not exceed 60 percent and would qualify as an Advanced APM. • Installing Track 2 as a three year glide path for all ACO entities within the ENHANCED track. • Creating a voluntary intermediate track with a loss sharing limit of 8 percent of the ACO’s updated benchmark and shared savings rate of 65 percent. • Phasing-in the loss sharing limits within the ENHANCED track incrementally. One commenter suggested that the loss sharing limits be phased-in at 7 percent of benchmark in year 1, 10 percent in year 2, and then 15 percent in years 3, 4, and 5. Another commenter suggested a slower phase-in of the loss sharing limit, with a more incremental increase in the percentage each performance year. One commenter encouraged CMS to continue to assess the ability of low revenue ACOs to assume higher levels of downside risk. According to the commenter, CMS should also evaluate the success rates of low revenue ACOs that move to the ENHANCED track and monitor the number of ACOs that return to the BASIC track, particularly due to inability to assume higher levels of risk. VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 Response: We continue to believe that the transition to risk from Level E of the BASIC track to the ENHANCED track best supports achieving our goal of driving more meaningful systematic change in providers’ and suppliers’ behavior towards achieving the program’s goals. Allowing more manageable levels of risk within the BASIC track’s glide path within the Shared Savings Program is an important pathway for helping organizations gain experience with managing risk as well as participating in Advanced APMs under the Quality Payment Program. We also recognize that it may be more difficult for low revenue ACOs to transition to higher levels of risk and potential reward and are therefore allowing eligible low revenue ACOs the opportunity to participate in the BASIC track for up to two agreement periods before advancing to the ENHANCED track (as discussed in section II.A.5.b.(2) of this final rule). As discussed in section II.A.6.c of this final rule, we are modifying our approach to determining the amount of the repayment mechanism for ENHANCED track ACOs, to allow for potentially lower estimated amounts for lower-revenue ACOs, to support their transition to the ENHANCED track. Although the financial model of the ENHANCED track will remain the same as the design of Track 3, the modified repayment mechanism arrangement estimation approach may reduce the financial burden on ACOs of establishing these arrangements, for example in setting aside capital, when transitioning to greater risk. One purpose of the proposed redesign is to streamline participation options under the Shared Savings Program. At this time, and considering the factors we described in this response as well as previous comment responses in this section, we decline to establish additional participation options that would include a bridge or intermediate track between Level E of the BASIC track and the ENHANCED track. Specifically, we decline the suggestion to modify the design of the ENHANCED track at this time to more closely resemble the design of Track 2, with a phase-in of the loss sharing limits over a single agreement period (as suggested by one commenter). As explained elsewhere in this final rule we are finalizing our proposal to discontinue Track 2, in part reflective of the reduced rates of participation in this track, and the availability of the BASIC track with relatively lower levels of risk and reward that, for ACOs eligible for the PO 00000 Frm 00023 Fmt 4701 Sfmt 4700 67837 glide path, gradually increase over the term of the agreement period. As suggested by the commenter, we agree with the need to continue to monitor the redesigned participation options, including with respect to low revenue ACOs that move to the ENHANCED track as well as performance by high revenue ACOs under the ENHANCED track. We note that as described in section II.A.5.c of this final rule, we are finalizing a policy to monitor ACOs for composition changes during their agreement period that would affect their participation options. Comment: Many commenters opposed the proposal to discontinue Track 1 or an equivalent option that would allow for ACOs to participate for an entire agreement period, or up to 6 performance years (to match the two 3year agreement periods that are currently allowed), under a one-sided model. Many of these commenters believed that the current Track 1 is the only viable opportunity for rural ACOs to participate in a Medicare value-based payment model. The comments stated that although there are other options for health care providers to work together to address the cost and quality of care, collaborating in a Shared Savings Program ACO remains the most viable option for ACO participants, specifically independent rural healthcare organizations. One commenter stated that as a non-profit, low revenue ACO, they may be forced out of the Shared Savings Program because they lack the capital required for the repayment mechanism. Another commenter strongly opposed the elimination of Track 1 and urged its retention for physician-led organizations. The commenter proposed that if CMS chose to retain Track 1, it would recommend modifications to increase net savings for Medicare, such as terminating ACOs that have not achieved savings over several years, reducing shared savings payments for ACOs that fail to meet quality performance standards, or allowing ACOs to be accountable only for the spending they control versus the total cost of care. A few commenters asserted that CMS does not have authority under section 1899(i) of the Act to discontinue Track 1 and replace it with the BASIC track. These commenters noted that section 1899(i)(2)(B) of the Act says that ‘‘payments to an ACO for items and services . . . for beneficiaries for a year . . . shall be established in a manner that does not result in spending more for such ACO for such beneficiaries than would otherwise be expended for such ACO for such beneficiaries for such year E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67838 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations if the model were not implemented.’’ As a result, the commenters contend that the statute is not referring to a measure of overall program spending, but to the change in spending for each individual ACO. Further, these commenters noted that the current Track 1 model meets the statutory requirements for determining shared savings payments under section 1899(d) of the Act. Section 1899(i) of the Act permits CMS to use partial capitation or other payment models instead of the shared savings approach under section 1899(d). However, one of the requirements for both of these other payment models is that spending cannot be more for such an ACO than would otherwise be expended for such ACO if the model were not implemented. In the proposed BASIC track and ENHANCED track, if Medicare spending exceeds an ACO’s benchmark, the ACO would be required to repay a portion of the difference but not the full amount. Because the ACO would not be required to repay the full increase, these commenters assert that Medicare would spend more for that ACO than it would otherwise have spent and, as a result, the two-sided payment model under the proposed BASIC track and ENHANCED track does not satisfy the statutory requirement in section 1899(i) of the Act. Response: After evaluating commenters’ concerns related to discontinuing Track 1, and as further detailed in section II.A.5 of this final rule, we are modifying our proposals and are finalizing an approach that would allow new legal entities that are low revenue ACOs and inexperienced with performance-based risk Medicare ACO initiatives the option to elect an additional year in a one-sided model of the BASIC track’s glide path, for a total of 3 performance years in a one-sided model (or 4 performance years in the case of ACOs entering an agreement period beginning on July 1, 2019). The ACO would enter the glide path at Level A, and automatically advance to Level B. Prior to the automatic advancement of the ACO to Level C, an eligible ACO may elect to remain in Level B for another performance year, and then be automatically advanced to Level E for the remaining two years. As we discuss in section II.A.3 of this final rule, we are also modifying our proposals regarding the design of the BASIC track’s glide path in order to increase the final shared savings rate to 40 percent for one-sided levels (Levels A and B) and allow for a 50 percent shared savings rate for twosided levels (Levels C, D, and E) to further incentivize ACOs to move to risk while also providing the opportunity for VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 ACOs to share in a greater percentage of savings to support their ongoing operating costs. We believe this approach will allow for a smoother progression to two-sided risk within the BASIC track’s glide path, particularly for new legal entities that are low revenue ACOs and inexperienced with the Shared Savings Program and other Medicare ACO initiatives. We also note that, under the policies we are adopting in this final rule, eligible ACOs will have the opportunity to participate for up to 3 performance years (or 4 performance years in the case of ACOs entering an agreement period beginning on July 1, 2019) under a one-sided model of approximately the same design as is currently offered in Track 1. This approach allows an ACO to benefit from the stability and predictability of their benchmark when moving to two-sided risk within the same agreement period. However, we disagree with commenters on the need to allow ACOs to continue under a one-sided model for longer periods of time. For example, allowing ACOs to continue under a onesided model for up to 6 performance years (as with the program’s current design). We believe that such an approach would, at best, maintain the status quo of the program, and therefore continue a pattern where ACOs are allowed to remain under the one-sided model without strong incentives to become accountable for the cost and quality of care for their assigned populations. Finally, we disagree with the commenters’ assertions that CMS does not have authority to discontinue Track 1 and replace it with the BASIC track, which includes a glide path beginning with a one-sided model that offers the opportunity to earn shared savings determined under section 1899(d) of the Act. Section 1899(i)(3) of the Act authorizes the Secretary to use other payment models rather than the onesided model described in section 1899(d) of the Act, as long as the Secretary determines that the other payment model will improve the quality and efficiency of items and services furnished to Medicare beneficiaries without additional program expenditures. As we described in the August 2018 proposed rule and restate in this final rule, we believe that the requirements for use of our authority under section 1899(i)(3) are met with respect to establishing the new BASIC track, as well as the other policies we proposed and are finalizing that require use of this authority. In particular, we note that the Regulatory Impact Analysis in Section V of this final rule PO 00000 Frm 00024 Fmt 4701 Sfmt 4700 includes a description of the comparison that was conducted between the projected impact of the payment methodology that incorporates all program elements implemented using our authority under section 1899(i)(3) of the Act, versus a hypothetical baseline payment methodology that excludes the elements that require section 1899(i)(3) authority. As detailed in that section, the analysis estimates approximately $4 billion greater average net program savings under the alternative payment model that includes all policies that require the authority of section 1899(i)(3) of the Act than would be expected under the hypothetical baseline in total over the 2019 to 2028 projection period. The alternative payment model, as finalized in this rule, is projected to result in greater savings via a combination of reduced Medicare Parts A and B FFS expenditures and reduced net payments to ACOs. Comment: Some commenters agreed with discontinuing the deferred renewal option for Track 1 ACOs that is available under the current regulations. However, most commenters disagreed with CMS’ decision to discontinue the current policy to allow Track 1 ACOs in their first agreement period to defer renewal for a second agreement period prior to taking on risk in a two-sided model. Response: As we previously explained, very few ACOs have elected the deferred renewal participation option, and we have concluded that the deferred renewal policy has shown limited success in encouraging ACOs to advance to performance-based risk. As we explained in the proposed rule, and reiterated in this section of this final rule, we continue to believe that the deferred renewal option would be inconsistent with our proposed redesign of the program that would transition ACOs from a one-sided model to twosided models within one agreement period under the BASIC track’s glide path. Further, extending the length of the agreement period from 3 years to 5 years, as we are finalizing in this final rule, creates another redundancy with the deferred renewal option which allows ACOs to defer benchmark rebasing by 1 year. We are finalizing as proposed our policy to discontinue the availability of the deferred renewal option for Track 1 ACOs applying to enter a second agreement period in the Shared Savings Program under a twosided model. Comment: Generally, most commenters favored the proposal to move from three to five year agreement periods. Most commenters believed that E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations the five year agreement periods would be beneficial due to the amount of time it takes for ACOs to operationalize changes to support improved performance in the program. Other commenters stated that the change would advance greater predictability for providers and health systems that are making investments and other system changes to support participation. One commenter noted that a three year agreement period has been insufficient in terms of enabling participants to implement reforms to care delivery and workflow. Many other commenters agreed and believed that the five year agreement periods would help with program predictability and increase stability. A few commenters stated that historical benchmarks would become more predictable, since the benchmark would continue to be based on the expenditures for beneficiaries who would have been assigned to the ACO in the three most recent years prior to the start of the ACO’s agreement period. Other commenters believed that the longer agreement periods would provide a meaningful length of time to measure ACO successes and challenges. Further, one of the commenters contended that as the Shared Savings Program matures, it will be important to evaluate and measure ACO performance and the 5year agreement period will allow for a more robust evaluation of financial performance. However, some commenters disagreed with the change in the length of the agreement period. Several commenters asserted that the greatest factor undermining stability within the Shared Savings Program is CMS’ changes to policy repeatedly within and between agreement periods, and these commenters expressed that moving to a 5-year agreement period would expose participants to extra potential change within a single agreement period. One of these commenters stated that this kind of instability can only be mitigated via shorter agreement periods. Another commenter stated that it would support the change from three- to five-years if CMS minimized year-over-year policy changes. One commenter stated that ACOs who began participating in the Shared Savings Program in 2012/2013 were either sheltered from consequences or put at a significant disadvantage. The commenter stated that early adopters were put at a competitive disadvantage when the regional benchmarking formulas were introduced for later entrants, and cited the uncertainty inherent in the potential for future changes in the regulatory landscape. The commenter further VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 contended that these ACOs also had the ability to remain under one-sided risk for an extended period of time, which the commenter believed sheltered these ACOs from consequences of two-sided risk. The commenter proposed that CMS either shorten the agreement period or provide for annual updates and renewals, similar to the Medicare Advantage regulations. Another commenter stated that, although they accept CMS’ decision to extend the agreement period from three to five years to promote stability, the commenter was also critical of the fact that CMS regularly changes, rewrites, or clarifies the Shared Savings Program rules, creating instability in the program. Other commenters urged CMS to reconsider the change to a 5-year agreement period due to their concern that the length of the agreement period in relation to CMS’ proposed risk ratio cap is too long to properly reflect changes in the attributes of the assigned beneficiary population. Another commenter was concerned about procuring a repayment mechanism for the 5-year agreement period plus the additional 24 month tail period. Specifically, the commenter contended that the extended duration of the participation agreement might limit the availability of the surety bond as a repayment mechanism option. Finally, several commenters recommended that CMS extend the agreement period to 7 years. Once commenter was concerned that the proposed rule, with its new and shorter transition to shared losses, could lead to even greater pressure on providers to respond to the program’s financial incentives to reduce spending on services. The commenter further contended that these pressures, in turn, may lead to greater risk that patient access to greater innovations and technologies will be compromised, especially when these are more expensive than the standard of care embedded in benchmarks. Response: We appreciate the general support for moving from three to five year agreement periods. During previous rulemaking in 2011, we received a large number of comments surrounding the length of the agreement period that specifically requested that it be extended to five years. As part of reevaluating the program requirements, we believe that it may benefit ACOs to extend the 3-year agreement period to five years so they will have more predictable benchmarks and therefore a greater opportunity for return on investment through achieving shared savings with the longer agreement PO 00000 Frm 00025 Fmt 4701 Sfmt 4700 67839 period. We also believe that extending the agreement period to five years allows ACOs to gradually transition to risk and establish an operational structure to support quality reporting and other Shared Savings Program requirements, and provides adequate time for data evaluation during the early part of the agreement period. Further, we recognize that the longer the agreement period, the greater an ACO’s chance to build on the success or continue the failure of its current agreement. CMS’ PY 2016 results show that ACOs produce a higher level of net savings and more optimal financial performance results the longer they have been in the Shared Savings Program and with additional participation experience (83 FR 41917). We also understand commenters’ concern that CMS policy may evolve during the five year agreement period. However, we will continue to evaluate the effectiveness of Shared Savings Program policies and make adjustments, as necessary, to further promote accountability for a patient population, foster the coordination of Medicare Parts A and B items and services, and encourage high quality and efficient service delivery. We reviewed quality and financial results to date in developing these policy proposals to refine the program. We continue to review ACO quality and financial results to ensure that the program is providing as much value as possible, is responsive to stakeholders’ feedback, and is meeting its objectives of improving care coordination for beneficiaries and lowering growth in Medicare expenditures. We also make available, to researchers and other external parties, public use files and research identifiable files with program data, to promote program transparency and to allow researchers and others to evaluate and comment on program results. We appreciate the comments related to the proposed symmetrical 3 percent cap on CMS–HCC risk scores in relation to the proposal for 5-year agreement periods. In developing our proposed policies, we considered alternate levels for the cap or allowing full CMS–HCC risk adjustment with no cap at all. However, we were concerned that a lower cap would not offer ACOs enough protection against greater health status changes relative to our current approach. At the same time, we were concerned that adopting a higher cap, or allowing for full, uncapped risk adjustment would not provide sufficient protection against potential coding initiatives. Our choice of 3 percent as the preferred level for the cap was E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67840 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations influenced by program experience as described in more detail in section II.D.2.b of the August 2018 proposed rule. We appreciate the concerns raised regarding the availability of repayment mechanism arrangements and, in particular, the availability of surety bonds. As we explain in section II.A.6 of this final rule, based on our experience, we believe ACOs will be able to work with financial institutions to establish the required arrangement to cover the full 5-year agreement period and tail period plus the 12-month tail period we are finalizing. However, as described in section II.A.6 of this final rule, we are also permitting ACOs to satisfy the repayment mechanism duration requirement by establishing a repayment mechanism that has a term that covers at least the first two performance years that an ACO is participating under a two-sided model and provides for automatic, annual 12 month extensions of the repayment mechanism such that the repayment mechanism will eventually remain in effect for the duration of the agreement period plus 12 months following the conclusion of the agreement period. We believe that these changes will reduce the burden of establishing a repayment mechanism that satisfies the duration requirement. We will monitor the use of repayment mechanisms and may revisit the issue in future rulemaking if we determine that the ability of an ACO to establish an adequate repayment mechanism that meets the duration requirement is constrained by the availability or cost of repayment mechanism options. Furthermore, we note that nothing in our program rules prohibits an ACO from establishing multiple repayment mechanisms, as long as the total of the repayment mechanisms meets the repayment mechanism amount provided by CMS. Finally, we appreciate the suggestion for a 7-year agreement period but due to potential financial and administrative burdens on ACOs, including procuring a repayment mechanism for a longer period of time, we are declining to extend the agreement period to that span at this time. Comment: One commenter suggested that current ACOs participating in Track 3 should be provided reward options for undertaking risk such as the ability to participate in the BASIC track, extension of their current agreement period, and reduction of the new agreement period to three years for the first renewal period under the new participation options for current Track 3 ACOs. VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 Response: We decline the commenter’s suggestions to allow current Track 3 ACOs the option to choose alternative participation options, including participation under an initial 3-year agreement period rather than a 5year agreement period under the ENHANCED track. As described elsewhere in this section of this final rule, we are finalizing an approach to require all ACOs entering agreement periods beginning July 1, 2019 and subsequent years to participate under agreement periods of at least 5 years. We note that, in the November 2018 final rule, we finalized a policy which allows all ACOs whose agreement periods expire on December 31, 2018 to elect a voluntary 6-month extension of their current agreement period, which includes current Track 3 ACOs with participation agreements expiring on that date. In addition, we note that eligible low revenue ACOs that are determined to be experienced with performance-based risk Medicare ACO initiatives may participate for an agreement period under Level E of the BASIC track, including such qualifying ACOs that currently are participating under Track 3. As described in section II.A.5. of this final rule, low revenue ACOs may participate in the BASIC track for up to two agreement periods, which are not required to be sequential. For example, this would allow low revenue ACOs that transition to the ENHANCED track after a single agreement period under the BASIC track the opportunity to return to the BASIC track if the ENHANCED track initially proves to involve too high a level of performance-based risk. Comment: One commenter sought clarification as to the interaction between the Bundled Payments for Care Improvement Advanced (BPCI Advanced) model and the proposed redesigned Shared Savings Program participation options. Specifically, the commenter stated that given its financial and operational investment that they recently made to participate in the BPCI Advanced model, providers need to understand explicitly how CMS intends to handle the interaction of the two programs as the commenter makes its business decision regarding participation in the Shared Savings Program for the next agreement period. Response: Entities may concurrently participate in BPCI Advanced and the Shared Savings Program. The interactions between the Shared Savings Program assigned beneficiaries and episodes that are initiated under the BPCI Advanced model are governed by the model participation agreement. The current BPCI Advanced participation PO 00000 Frm 00026 Fmt 4701 Sfmt 4700 agreement addresses financial reconciliation and indicates that clinical episodes may not be initiated for beneficiaries assigned to a Shared Savings Program ACO in Track 3, but can be initiated for beneficiaries assigned to a Shared Savings Program ACO in Track 1, the Track 1+ Model or Track 2. We will continue to work with our colleagues in the Innovation Center to address interactions between models and Shared Savings Program ACOs, including the interaction between BPCI Advanced and the BASIC track and ENHANCED track, and provide such information in future guidance. We work to align and create synergies between the Shared Savings Program and the payment and service delivery models tested by the Innovation Center. We have policies in place to take into account overlap between the Shared Savings Program and Innovation Center models, which are designed to test new payment and service delivery models to reduce expenditures and preserve or enhance quality of care, whenever possible. We continue to monitor these policies and make refinements as we gain experience and lessons learned from these interactions. When new models are announced, we encourage ACOs and their leaders to engage in dialogue with the Innovation Center and Shared Savings Program staff to inform their decision-making regarding the participation options. Comment: Several commenters suggested CMS consider how to align the design parameters across Medicare ACO initiatives in redesigning the Shared Savings Program. One commenter explained that inconsistency across different Medicare ACO initiatives presents challenges for organizations that want to progress from one initiative to the next, as well for organizations that have participants in different Medicare ACO models at the same time. Another commenter specifically suggested that CMS continue to identify areas such as with beneficiary attribution and payment methodologies to create consistency across different Medicare ACO initiatives and even more broadly across CMS’ delivery system reform portfolio. One commenter specifically suggested that CMS incorporate several elements of the Next Generation ACO Model into the Shared Savings Program such as the choice of allowing participation by TINs or NPIs (as opposed to Shared Savings Program’s current requirement for participation by all NPIs enrolled in an ACO participant TIN), infrastructure payments, prepayment of shared savings and primary capitation, which were E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations suggestions echoed by other commenters. Response: We appreciate commenters’ support for and interest in CMS’ Medicare ACO initiatives, more generally. We note that the Innovation Center’s time-limited Medicare ACO models, including the Next Generation ACO Model, are designed to test alternative payment and service delivery models. Lessons learned from these initiatives may be used to inform the development of future policies under the Shared Savings Program, which is a permanent program established under the authority of section 1899 of the Act. We also believe the alternative designs of these ACO models provide important pathways for ACOs to select to participate under a Medicare ACO model that may be more in line with their organizational preferences and experience with the accountable care model or the needs of the populations they serve. CMS provides education and outreach to explain the designs of ACO models, and requirements for participation in these initiatives, to support ACOs’ compliance with initiative requirements and their success in achieving the goals of these initiatives. Some changes suggested by commenters were not contemplated in the August 2018 proposed rule. We decline to undertake these additional policy modifications at this time. Specifically, we decline to redefine ACO participants to allow participation by some but not all NPIs that have reassigned their billing rights to a TIN, allow for infrastructure payments or prepayment of shared savings as part of the national program, or to create a capitated payment model. Comment: Several commenters encouraged CMS to take steps towards aligning the Shared Savings Program with Medicare Advantage as part of the redesign of the Shared Savings Program. One commenter stated that Medicare Advantage plans are rewarded with higher benchmarks for higher quality, which puts Shared Savings Program ACOs at a financial disadvantage. Other commenters suggested that CMS incorporate into the Shared Savings Program aspects of Medicare Advantage such as utilization management and more extensive beneficiary incentive payments (such as under the Innovation Center’s Medicare Advantage ValueBased Insurance Design model). One commenter suggested that Shared Savings Program ACOs need to be more clearly defined as an alternative to both traditional FFS Medicare and Medicare Advantage. Another commenter suggested that there may not be a need for the Shared Savings Program in light VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 of the availability of Medicare Advantage and other value-based payment initiatives such as the Innovation Center’s Comprehensive Primary Care Plus (CPC+) Model. Response: Elsewhere in this final rule, we discuss commenters’ specific suggestions for bringing greater alignment between the design of the Shared Savings Program and Medicare Advantage, such as the modifications to the Shared Savings Program’s methodology to annually risk adjust the historical benchmark (see section II.D of this final rule). In section II.C.2. of this final rule, we also address commenters’ suggestions that CMS align its proposed beneficiary incentive program policies with MA. Although we frequently relied on our experience in other Medicare programs, including MA, to help develop the original framework for the Shared Savings Program and will continue to explore opportunities to align the requirements of the Shared Savings Program and Medicare Advantage, we believe that the Shared Savings Program offers an alternative to both volumebased payments under traditional Medicare FFS and Medicare Advantage. Under the Shared Savings Program, the providers and suppliers that form an ACO agree to become accountable for the quality, cost, and overall care of the Medicare FFS beneficiaries assigned to the ACO. Shared Savings Program ACOs only share in savings if they meet both the quality performance standards and generate shareable savings. Medicare FFS beneficiaries assigned to Shared Savings Program ACOs retain all rights and benefits under traditional Medicare, including the right to see any physician of their choosing, and they do not enroll in the Shared Savings Program. Further, we will continue to offer the Shared Savings Program, as required by law, and decline the commenters’ suggestion that CMS discontinue the program. Final Action: We are finalizing our proposed policies to redesign the program’s participation options by discontinuing Track 1, Track 2, and the deferred renewal option under §§ 425.200(b)(3), and 425.200(e). We are also finalizing our policy to offer two tracks that eligible ACOs would enter into for an agreement period of at least 5 years: • BASIC track, added as a new provision at § 425.605, which includes an option for eligible ACOs to begin participation under a one-sided model and incrementally phase-in risk (calculated based on ACO participant revenue and capped at a percentage of the ACO’s updated benchmark) and potential reward over the course of a single agreement PO 00000 Frm 00027 Fmt 4701 Sfmt 4700 67841 period, an approach referred to as a glide path (as described in section II.A.3. of this final rule). We are finalizing our proposal in § 425.600(a)(4) for eligible ACOs to elect to operate under the BASIC track. Under the BASIC track’s glide path, the level of risk and potential reward phases in over the course of the agreement period in the following order: ++ Level A. The ACO operates under a one-sided model as described under § 425.605(d)(1)(i). ++ Level B. The ACO operates under a one-sided model as described under § 425.605(d)(1)(ii). ++ Level C. The ACO operates under a two-sided model as described under § 425.605(d)(1)(iii). ++ Level D. The ACO operates under a two-sided model as described under § 425.605(d)(1)(iv). ++ Level E. The ACO operates under a two-sided model as described under § 425.605(d)(1)(v). • ENHANCED track as currently designed and implemented under §§ 425.600(a)(3), 425.610, based on the program’s existing Track 3. Additionally, we are finalizing changes to § 425.200 to specify that ACOs will agree to participate for a period of not less than 5 years for agreement periods beginning on July 1, 2019 and in subsequent years. Lastly, we are finalizing revisions to § 425.502(e)(4)(v), specifying calculation of the quality improvement reward as part of determining the ACO’s quality score, which previously included language based on 3-year agreements. 3. Creating a BASIC Track With Glide Path to Performance-Based Risk a. Overview We proposed that the BASIC track would be available as a participation option for agreement periods beginning on July 1, 2019 and in subsequent years. Special considerations and proposals with respect to the midyear start of the first BASIC track performance year and the limitation of this first performance year to a 6-month period are discussed in section II.A.7. of this final rule and, as needed, throughout this preamble. In general, we proposed to model the BASIC track on the current provisions governing Shared Savings Program ACOs under 42 CFR part 425, including the general eligibility requirements (subpart B), application procedures (subpart C), program requirements and beneficiary protections (subpart D), beneficiary assignment methodology (subpart E), quality performance standards (subpart F), data sharing opportunities and requirements (subpart H), and benchmarking methodology (which as discussed in section II.D. of this final rule, we proposed to specify in a new section of the regulations at E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67842 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations § 425.601). Further, we proposed that the policies on reopening determinations of shared savings and shared losses to correct financial reconciliation calculations (§ 425.315), the preclusion of administrative and judicial review (§ 425.800), and the reconsideration process (subpart I) would apply to ACOs participating in the BASIC track in the same manner as for all other Shared Savings Program ACOs. Therefore, we proposed to amend certain existing regulations to incorporate references to the BASIC track and the proposed new regulation at § 425.605. This includes amendments to §§ 425.100, 425.315, 425.600, and 425.800. As part of the revisions to § 425.800, we proposed to clarify that the preclusion of administrative and judicial review with respect to certain financial calculations applies only to the extent that a specific calculation is performed in accordance with section 1899(d) of the Act. As discussed in section II.A.4.c. of this final rule, we proposed that ACOs in the BASIC track would have an opportunity to annually elect their choice of beneficiary assignment methodology. As discussed in section II.B. of this final rule, we proposed to make the SNF 3-day rule waiver available to ACOs in the BASIC track under two-sided risk. If these ACOs select prospective beneficiary assignment, their physicians and practitioners billing under ACO participant TINs would also have the opportunity to provide telehealth services under section 1899(l) of the Act, starting in 2020. As described in section II.C. of this final rule, BASIC track ACOs under two-sided risk (Levels C, D, or E) would be allowed to apply for and, if approved, establish a CMSapproved beneficiary incentive program to provide incentive payments to eligible beneficiaries for qualifying services. We proposed that, unless otherwise indicated, all current policies that apply to ACOs under a two-sided model would apply also to ACOs participating under risk within the BASIC track. This includes the selection of a Minimum Savings Rate (MSR)/Minimum Loss Rate (MLR) consistent with the options available under the ENHANCED track, as specified in § 425.610(b)(1) (with related proposals discussed in section II.A.6.b. of this final rule), and the requirement to establish and maintain an adequate repayment mechanism under § 425.204(f) (with related proposals discussed in section II.A.6.c. of this final rule). ACOs participating under the one-sided models of the BASIC track’s glide path (Level A and VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 Level B), would be required to select a MSR/MLR and establish an adequate repayment mechanism prior to their first performance year in performancebased risk. Additionally, the same policies regarding notification of savings and losses and the timing of repayment of any shared losses that apply to ACOs in the ENHANCED track (see § 425.610(h)) would apply to ACOs in two-sided risk models under the BASIC track, including the requirement that an ACO must make payment in full to CMS within 90 days of receipt of notification of shared losses. As described in section II.E.4. of the August 2018 proposed rule, we proposed to extend the policies for addressing the impact of extreme and uncontrollable circumstances on ACO quality and financial performance, as established for performance year 2017 to performance year 2018 and subsequent years. We finalized this proposal in the November 2018 final rule (83 FR 59968 through 59979) to ensure that relief is available for ACOs affected by the recent hurricanes in North Carolina and Florida and other disasters during 2018. In the August 2018 proposed rule, we proposed that these policies would also apply to BASIC track ACOs. Section 425.502(f) specifies the approach to calculating an ACO’s quality performance score for all affected ACOs. Further, we proposed that the policies regarding the calculation of shared losses for ACOs under a two-sided risk model that are affected by extreme and uncontrollable circumstances (see § 425.610(i)) would also apply to BASIC track ACOs under performance-based risk. Final Action: There were no comments directed specifically at our proposal to model the BASIC track on the current provisions governing Shared Savings Program ACOs under 42 CFR part 425, including the general eligibility requirements (subpart B), application procedures (subpart C), program requirements and beneficiary protections (subpart D), beneficiary assignment methodology (subpart E), quality performance standards (subpart F), data sharing opportunities and requirements (subpart H), and benchmarking methodology (subpart G). We are finalizing our proposals to model the BASIC track on the existing provisions governing other tracks of the Shared Savings Program. Elsewhere in this final rule we describe in detail our final policies for the other proposed revisions to the program’s regulations to establish the BASIC track. We did not receive any comments specifically addressing our proposal to extend the policies on extreme and PO 00000 Frm 00028 Fmt 4701 Sfmt 4700 uncontrollable circumstances to ACOs participating in the BASIC track. We are finalizing without modification our proposal to specify the policies regarding extreme and uncontrollable circumstances for the BASIC track in a new provision at § 425.605(f). We are also finalizing without modification our proposal to apply § 425.502(f) in calculating the quality performance score of BASIC track ACOs affected by extreme and uncontrollable circumstances. Additionally, we received no comments on our proposal to apply policies on reopening determinations of shared savings or shared losses to correct financial reconciliation calculations (§ 425.315) to ACOs in the BASIC track. Further, no comments addressed our proposal to apply the policies on the preclusion of administrative and judicial review (§ 425.800), and the reconsideration process (subpart I) to ACOs in the BASIC track. We are finalizing these policies as proposed and accordingly we are amending §§ 425.315, and 425.800 to incorporate references to the new provision for the BASIC track at § 425.605. We also received no comments addressing our proposal to revise § 425.100, which includes a general description of ACOs that are eligible to receive payments for shared savings or that must share losses under the program, to incorporate references to the new provision for the BASIC track at § 425.605, and we are finalizing the revisions as proposed. b. Phase-In of Performance-Based Risk in the BASIC Track (1) Background on Levels of Risk and Reward To qualify for shared savings, an ACO must have savings equal to or above its MSR, meet the minimum quality performance standards established under § 425.502, and otherwise maintain its eligibility to participate in the Shared Savings Program (§§ 425.604(a)(7), (b) and (c), 425.606(a)(7), (b) and (c), 425.610(a)(7), (b) and (c)). If an ACO qualifies for savings by meeting or exceeding its MSR, then the final sharing rate (based on quality performance) is applied to the ACO’s savings on a first dollar basis, to determine the amount of shared savings up to the performance payment limit (§§ 425.604(d) and (e), 425.606(d) and (e), 425.610(d) and (e)). Under the current program regulations, an ACO that meets all of the requirements for receiving shared savings under the one-sided model can qualify to receive a shared savings E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations payment of up to 50 percent of all savings under its updated benchmark, as determined on the basis of its quality performance, not to exceed 10 percent of its updated benchmark. A Track 2 ACO can potentially receive a shared savings payment of up to 60 percent of all savings under its updated benchmark, not to exceed 15 percent of its updated benchmark. A Track 3 ACO can potentially receive a shared savings payment of up to 75 percent of all savings under its updated benchmark, not to exceed 20 percent of its updated benchmark. The higher sharing rates and performance payment limits under Track 2 and Track 3 were established as incentives for ACOs to accept greater financial risk for their assigned beneficiaries in exchange for potentially higher financial rewards. (See 76 FR 67929 through 67930, 67934 through 67936; 80 FR 32778 through 32779.) Under the current two-sided models of the Shared Savings Program, an ACO is responsible for sharing losses with the Medicare program when the ACO’s average per capita Medicare expenditures for the performance year are above its updated benchmark costs for the year by at least the MLR established for the ACO (§§ 425.606(b)(3), 425.610(b)(3)). For an ACO that is required to share losses with the Medicare program for expenditures over its updated benchmark, the shared loss rate (also referred to as the loss sharing rate) is determined based on the inverse of its final sharing rate, but may not be less than 40 percent. The loss sharing rate is applied to an ACO’s losses on a first dollar basis, to determine the amount of shared losses up to the loss recoupment limit (also referred to as the loss sharing limit) (§§ 425.606(f) and (g), 425.610(f) and (g)). In earlier rulemaking, we discussed considerations related to establishing the loss sharing rate and loss sharing limit for Track 2 and Track 3. See 76 FR 67937 (discussing shared loss rate and loss sharing limit for Track 2) and 80 FR 32778 through 32779 (including discussion of shared loss rate and loss sharing limit for Track 3). Under Track 2 and Track 3, the loss sharing rate is determined as 1 minus the ACO’s final sharing rate based on quality performance, up to a maximum of 60 percent or 75 percent, respectively (except that the loss sharing rate may not be less than 40 percent for Track 3). This creates symmetry between the sharing rates for savings and losses. The 40 percent floor on the loss sharing rate under both Track 2 and Track 3 ensures comparability in the minimum level of performance-based risk that ACOs VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 accept under these tracks. The higher ceiling on the loss sharing rate under Track 3 reflects the greater risk Track 3 ACOs accept in exchange for the possibility of greater reward compared to Track 2. Under Track 2, the limit on the amount of shared losses phases in over 3 years starting at 5 percent of the ACO’s updated historical benchmark in the first performance year of participation in Track 2, 7.5 percent in year 2, and 10 percent in year 3 and any subsequent year. Under Track 3, the loss sharing limit is 15 percent of the ACO’s updated historical benchmark, with no phase-in. Losses in excess of the annual limit would not be shared. The level of risk under both Track 2 and Track 3 exceeds the Advanced APM generally applicable nominal amount standard under § 414.1415(c)(3)(i)(B) (set at 3 percent of the expected expenditures for which an APM Entity is responsible under the APM). CMS has determined that Track 2 and Track 3 meet the Advanced APM criteria under the Quality Payment Program, and are therefore Advanced APMs. Eligible clinicians that sufficiently participate in Advanced APMs such that they are QPs for a performance year receive APM Incentive Payments in the corresponding payment year between 2019 through 2024, and then higher fee schedule updates starting in 2026. The Track 1+ Model is testing whether combining the upside sharing parameters of the popular Track 1 with limited downside risk sufficient for the model to qualify as an Advanced APM will encourage more ACOs to advance to performance-based risk. The Track 1+ Model has reduced risk in two main ways relative to Track 2 and Track 3. First, losses under the Track 1+ Model are shared at a flat 30 percent loss sharing rate, which is 10 percentage points lower than the minimum qualityadjusted loss sharing rate used in both Track 2 and Track 3. Second, a bifurcated approach is used to set the loss sharing limit for a Track 1+ Model ACO, depending on the ownership and operational interests of its ACO participants, as identified by TINs and CMS Certification Numbers (CCNs). The applicable loss sharing limit under the Track 1+ Model is determined based on whether the ACO includes an ACO participant (TIN/CCN) that is an IPPS hospital, cancer center or a rural hospital with more than 100 beds, or that is owned or operated, in whole or in part, by such a hospital or by an organization that owns or operates such a hospital. If at least one of these criteria is met, then a potentially higher level of performance-based risk applies, and the PO 00000 Frm 00029 Fmt 4701 Sfmt 4700 67843 loss sharing limit is set at 4 percent of the ACO’s updated historical benchmark (described herein as the benchmark-based loss sharing limit). For the Track 1+ Model, this is a lower level of risk than is required under either Track 2 or Track 3, and greater than the Advanced APM generally applicable nominal amount standard under § 414.1415(c)(3)(i)(B) for 2018, 2019 and 2020. If none of these criteria is met, as may be the case with some ACOs composed of independent physician practices and/or ACOs that include small rural hospitals, then a potentially lower level of performancebased risk applies, and the loss sharing limit is determined as a percentage of the total Medicare Parts A and B FFS revenue of the ACO participants (described herein as the revenue-based loss sharing limit). For Track 1+ Model ACOs under a revenue-based loss sharing limit, in performance years 2018, 2019 and 2020, total liability for shared losses is limited to 8 percent of total Medicare Parts A and B FFS revenue of the ACO participants. If the loss sharing limit, as a percentage of the ACO participants’ total Medicare Parts A and B FFS revenue, exceeds the amount that is 4 percent of the ACO’s updated historical benchmark, then the loss sharing limit is capped and set at 4 percent of the updated historical benchmark. For performance years 2018 through 2020, this level of performancebased risk qualifies the Track 1+ Model as an Advanced APM under § 414.1415(c)(3)(i)(A). In subsequent years of the Track 1+ Model, if the relevant percentage specified in the Quality Payment Program regulations changes, the Track 1+ Model ACO would be required to take on a level of risk consistent with the percentage required in § 414.1415(c)(3)(i)(A) for an APM to qualify as an Advanced APM. The loss sharing limit under this bifurcated structure is determined by CMS near the start of an ACO’s agreement period under the Track 1+ Model (based on the ACO’s application to the Track 1+ Model), and redetermined annually based on an annual certification process prior to the start of each performance year under the Track 1+ Model. The Track 1+ Model ACO’s loss sharing limit could be adjusted up or down on this basis. See Track 1+ Model Fact Sheet at https:// www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/sharedsavings program/Downloads/New-AccountableCare-Organization-Model-OpportunityFact-Sheet.pdf for more detail. Since the start of the Shared Savings Program, we have heard a variety of concerns and suggestions from ACOs E:\FR\FM\31DER2.SGM 31DER2 67844 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations khammond on DSK30JT082PROD with RULES2 and other program stakeholders about the transition from a one-sided model to performance-based risk (see discussion in section II.A.1. of this final rule). Through rulemaking, we developed a one-sided shared savings only model and extended the allowable time in this track to support ACOs’ readiness to take on performance-based risk. As a result, the vast majority of Shared Savings Program ACOs have chosen to enter and remain in the one-sided model. Our early experience with the design of the Track 1+ Model demonstrates that the availability of a lower-risk, two-sided model is effective to encourage a large cohort of ACOs to rapidly progress to performance-based risk. (2) Levels of Risk and Reward in the BASIC Track’s Glide Path In general, we proposed the following participation options within the BASIC track. First, we proposed the BASIC track’s glide path as an incremental approach to higher levels of risk and potential reward. The glide path includes 5 levels: A one-sided model available only for the first 2 consecutive performance years of a 5-year agreement period (Level A and B), each year of which is identified as a separate level; and three levels of progressively higher risk and potential reward in performance years 3 through 5 of the agreement period (Level C, D, and E). ACOs would be automatically advanced at the start of each participation year along the progression of risk/reward levels, over the course of a 5-year agreement period, until they reach the track’s maximum level of risk/reward (designed to be the same as the level of risk and potential reward as under the Track 1+ Model). The automatic advancement policy would not apply to the second performance year for an ACO entering the BASIC track’s glide path for an agreement period beginning July 1, 2019. Such an ACO would enter the BASIC track for its first performance year of July 1, 2019 through December 31, 2019, at its chosen level of the glide path. For performance year 2020, the ACO may remain in the same level of the BASIC track’s glide path that it entered for the performance year (or 6month performance period) beginning July 1, 2019. The ACO would be automatically advanced to the next level of the BASIC track’s glide path at the start of performance year 2021 and all subsequent performance years of the agreement period (see section II.A.7. of this final rule). We proposed that the participation options in the BASIC track’s glide path would depend on an ACO’s experience VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 with the Shared Savings Program, as described in section II.A.5.c. of this final rule. ACOs eligible for the BASIC track’s glide path that are new to the program would have the flexibility to enter the glide path at any one of the five levels. However, ACOs that previously participated in Track 1, or a new ACO identified as a re-entering ACO because more than 50 percent of its ACO participants have recent prior experience in a Track 1 ACO, would be ineligible to enter the glide path at Level A, thereby limiting their opportunity to participate in a one-sided model of the glide path. We also proposed ACOs would be automatically transitioned to progressively higher levels of risk and potential reward (if higher levels are available) within the remaining years of the agreement period. We proposed to allow ACOs in the BASIC track’s glide path to more rapidly transition to higher levels of risk and potential reward within the glide path during the agreement period. As described in section II.A.4.b. of this final rule, ACOs in the BASIC track may annually elect to take on higher risk and potential reward within their current agreement period, to more rapidly progress along the glide path. Second, we proposed the BASIC track’s highest level of risk and potential reward (Level E) may be elected for any performance year by ACOs that enter the BASIC track’s glide path, but it will be required no later than the ACO’s fifth performance year of the glide path (sixth performance year for eligible ACOs starting participation in Level A of the BASIC track on July 1, 2019). ACOs in the BASIC track’s glide path that previously participated in Track 1, or new ACOs identified as re-entering ACOs because more than 50 percent of their ACO participants have recent prior experience in a Track 1 ACO, would be eligible to begin in Level B, and therefore would be required to participate in Level E no later than the ACO’s fourth performance year of the glide path (fifth performance year for ACOs starting participation in the BASIC track on July 1, 2019). The level of risk/reward under Level E of the BASIC track is also required for low revenue ACOs eligible to enter an agreement period under the BASIC track that are determined to be experienced with performance-based risk Medicare ACO initiatives (discussed in section II.A.5. of this final rule). We explained that designing a glide path to performance-based risk that concludes with the level of risk and potential reward offered under the Track 1+ Model balances ACOs’ interest in remaining under lower-risk options PO 00000 Frm 00030 Fmt 4701 Sfmt 4700 with our goal of more rapidly transitioning ACOs to performancebased risk. The BASIC track’s glide path offers a pathway through which ACOs inexperienced with performance-based risk Medicare ACO initiatives can participate under a one-sided model before entering relatively low levels of risk and asymmetrical potential reward for several years, concluding with the lowest level of risk and potential reward available under a current Medicare ACO initiative. As we stated in the August 2018 proposed rule (83 FR 41804), we believe the opportunity for eligible ACOs to participate in a one-sided model for up to 2 years (3 performance years, in the case of an ACO entering at Level A of the BASIC track’s glide path on July 1, 2019) could offer new ACOs a chance to become experienced with the accountable care model and program requirements before taking on risk. The proposed approach also recognizes that ACOs that gained experience with the program’s requirements during prior participation under Track 1, would need less additional time under a one-sided model before making the transition to performance-based risk. However, we also stated that the glide path should provide strong incentives for ACOs to quickly move along the progression towards higher performance-based risk, and therefore preferred an approach that significantly limits the amount of potential shared savings in the onesided model years of the BASIC track’s glide path, while offering incrementally higher potential reward in relation to each level of higher risk. Under this approach ACOs would have reduced incentive to enter or remain in the onesided model of the BASIC track’s glide path if they are prepared to take on risk, and we would anticipate that these ACOs would seek to accept greater performance-based risk in exchange for the chance to earn greater reward. As described in detail in this section, we proposed a similar asymmetrical two-sided risk design for the BASIC track as is available under the Track 1+ Model, with key distinguishing features based on early lessons learned from the Track 1+ Model. Unless indicated otherwise, we proposed that savings would be calculated based on the same methodology used to determine shared savings under the program’s existing tracks (see § 425.604). The maximum amount of potential reward under the BASIC track would be the same as the upside of Track 1 and the Track 1+ Model. The methodology for determining shared losses would be a bifurcated approach similar to the approach used under the Track 1+ E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations Model, as discussed in more detail elsewhere in this section. In all years under performance-based risk, we proposed to apply asymmetrical levels of risk and reward, where the maximum potential reward would be greater than the maximum level of performancebased risk. For the BASIC track’s glide path, we proposed the phase-in schedule of levels of risk/reward by year would be as follows. This progression assumes an ACO enters the BASIC track’s glide path under a one-sided model for 2 years and follows the automatic progression of the glide path through each of the 5 years of its agreement period. • Level A and Level B: Eligible ACOs entering the BASIC track would have the option of being under a one-sided model for up to 2 consecutive performance years (3 consecutive performance years for ACOs that enter the BASIC track’s glide path on July 1, 2019). As described elsewhere in this final rule, ACOs that previously participated in Track 1, or new ACOs identified as re-entering ACOs because more than 50 percent of their ACO participants have recent prior experience in a Track 1 ACO, would be ineligible to enter the glide path under Level A, although they could enter under Level B. Under this proposed one-sided model, a final sharing rate not to exceed 25 percent based on quality performance would apply to first dollar shared savings for ACOs that meet or exceed their MSR. This sharing rate is one-half of the maximum sharing rate of 50 percent currently available under Track 1. Savings would be shared at this rate not to exceed 10 percent of the ACO’s updated benchmark, consistent with the current policy for Track 1. For subsequent years, ACOs that wished to continue participating in the Shared Savings Program would be required to participate under performance-based risk. • Level C risk/reward: ++ Shared Savings: A final sharing rate not to exceed 30 percent based on quality performance would apply to first dollar shared savings for ACOs that meet or exceed their MSR, not to exceed 10 percent of the ACO’s updated historical benchmark. ++ Shared Losses: A loss sharing rate of 30 percent regardless of the quality performance of the ACO would apply to first dollar shared losses for ACOs with losses meeting or exceeding their MLR, not to exceed 2 percent of total Medicare Parts A and B FFS revenue for ACO participants. If the loss sharing limit as a percentage of total Medicare Parts A and B FFS revenue for ACO participants exceeds the amount that is VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 1 percent of the ACO’s updated historical benchmark, then the loss sharing limit would be capped and set at 1 percent of the ACO’s updated historical benchmark for the applicable performance year. This level of risk is not sufficient to meet the generally applicable nominal amount standard for Advanced APMs under the Quality Payment Program specified in § 414.1415(c)(3)(i). • Level D risk/reward: ++ Shared Savings: A final sharing rate not to exceed 40 percent based on quality performance would apply to first dollar shared savings for ACOs that meet or exceed their MSR, not to exceed 10 percent of the ACO’s updated historical benchmark. ++ Shared Losses: A loss sharing rate of 30 percent regardless of the quality performance of the ACO would apply to first dollar shared losses for ACOs with losses meeting or exceeding their MLR, not to exceed 4 percent of total Medicare Parts A and B FFS revenue for ACO participants. If the loss sharing limit as a percentage of total Medicare Parts A and B FFS revenue for ACO participants exceeds the amount that is 2 percent of the ACO’s updated historical benchmark, then the loss sharing limit would be capped and set at 2 percent of the ACO’s updated historical benchmark for the applicable performance year. This level of risk is not sufficient to meet the generally applicable nominal amount standard for Advanced APMs under the Quality Payment Program specified in § 414.1415(c)(3)(i). • Level E risk/reward: The ACO would be under the highest level of risk and potential reward for this track, which is the same level of risk and potential reward being tested in the Track 1+ Model. Further, ACOs that are eligible to enter the BASIC track, but that are ineligible to enter the glide path (as discussed in section II.A.5. of this final rule) would enter and remain under Level E risk/reward for the duration of their BASIC track agreement period. ++ Shared Savings: A final sharing rate not to exceed 50 percent based on quality performance would apply to first dollar shared savings for ACOs that meet or exceed their MSR, not to exceed 10 percent of the ACO’s updated historical benchmark. This is the same level of potential reward currently available under Track 1 and the Track 1+ Model. ++ Shared Losses: A loss sharing rate of 30 percent regardless of the quality performance of the ACO would apply to first dollar shared losses for ACOs with losses meeting or exceeding their MLR. PO 00000 Frm 00031 Fmt 4701 Sfmt 4700 67845 The percentage of ACO participants’ total Medicare Parts A and B FFS revenue used to determine the revenuebased loss sharing limit would be set for each performance year consistent with the generally applicable nominal amount standard for an Advanced APM under § 414.1415(c)(3)(i)(A) to allow eligible clinicians participating in a BASIC track ACO subject to this level of risk the opportunity to earn the APM incentive payment and ultimately higher fee schedule updates starting in 2026, in the payment year corresponding to each performance year in which they attain QP status. For example, for performance years 2019 and 2020, this would be 8 percent. However, if the loss sharing limit, as a percentage of the ACO participants’ total Medicare Parts A and B FFS revenue exceeds the expenditure-based nominal amount standard, as a percentage of the ACO’s updated historical benchmark, then the loss sharing limit would be capped at 1 percentage point higher than the expenditure-based nominal amount standard specified under § 414.1415(c)(3)(i)(B), which is calculated as a percentage of the ACO’s updated historical benchmark. For example, for performance years 2019 and 2020, the expenditure-based nominal amount standard is 3 percent; therefore, the loss sharing limit for Level E of the BASIC track in these same years would be 4 percent of the ACO’s updated historical benchmark. The proposed BASIC track at Level E risk/ reward would meet all of the Advanced APM criteria and would be an Advanced APM. (See Table 3 and related notes for additional information and an overview of the Advanced APM criteria.) This approach initially maintains consistency between the level of risk and potential reward offered under Level E of the BASIC track and the popular Track 1+ Model. This proposed approach to determining the maximum amount of shared losses under Level E of the BASIC track strikes a balance between (1) placing ACOs under a higher level of risk to recognize the greater potential reward under this financial model and the additional tools and flexibilities available to BASIC track ACOs under performance-based risk and (2) establishing an approach to help ensure the maximum level of risk under the BASIC track remains moderate. Specifically, this proposed approach differentiates the level of risk and potential reward under Level E compared to Levels C and D of the BASIC track, by requiring greater risk in E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67846 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations exchange for the greatest potential reward under the BASIC track, while still offering more manageable levels of benchmark-based risk than currently offered under Track 2 (in which the loss sharing limit phase-in begins at 5 percent of the ACO’s updated benchmark) and Track 3 (15 percent of the ACO’s updated benchmark). Further, this approach recognizes that eligible ACOs in Level E have the opportunity to earn the greatest share of savings under the BASIC track, and should therefore be accountable for a higher level of losses, particularly in light of their access to tools for care coordination and beneficiary engagement, including the ability of participating physicians and practitioners to furnish telehealth services in accordance with 1899(l) of the Act, the SNF 3-day rule waiver (as discussed in section II.B. of this final rule), and the opportunity to implement a CMS-approved beneficiary incentive program (as discussed in section II.C. of this final rule). We proposed that ACOs entering the BASIC track’s glide path would be automatically advanced along the progression of risk/reward levels, at the start of each performance year over the course of the agreement period (except at the start of performance year 2020 for ACOs that start in the BASIC track on July 1, 2019), until they reach the track’s maximum level of risk and potential reward. As discussed in section II.A.4.b. of this final rule, BASIC track ACOs in the glide path would also be permitted to elect to advance more quickly to higher levels of risk and potential reward within their agreement period. The longest possible glide path would be 5 performance years for eligible new ACOs entering the BASIC track (6 performance years for ACOs beginning their participation in the BASIC track on July 1, 2019). The maximum allowed time in Levels A, B, C and D of the glide path would be one performance year (with the exception that ACOs beginning their participation in the BASIC track on July 1, 2019, would have the option to remain at their chosen level of risk and potential reward for their first 2 performance years in the BASIC track). Once the highest level of risk and potential reward is reached on the glide path (Level E), ACOs would be required to remain under the maximum level of risk/reward for all subsequent years of participation in the BASIC track, which includes all years of a subsequent agreement period under the BASIC track for eligible ACOs. Further, an ACO within the BASIC track’s glide path VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 could not elect to return to lower levels of risk and potential reward, or to the one-sided model, within an agreement period under the glide path. To participate under performancebased risk in the BASIC track, an ACO would be required to establish a repayment mechanism and select a MSR/MLR to be applicable for the years of the agreement period under a twosided model (as discussed in section II.A.6. of this final rule). We proposed that an ACO that is unable to meet the program requirements for accepting performance-based risk would not be eligible to enter into a two-sided model under the BASIC track. If an ACO enters the BASIC track’s glide path in a onesided model and is unable to meet the requirements to participate under performance-based risk prior to being automatically transitioned to a performance year under risk, CMS would terminate the ACO’s agreement under § 425.218. For example, if an ACO is participating in the glide path in Level B and is unable to establish an adequate repayment mechanism before the start of its performance year under Level C, the ACO would not be permitted to continue its participation in the program. In section II.A.5.c. of this final rule, we describe our proposed requirements for determining an ACO’s eligibility for participation options in the BASIC track and ENHANCED track based on a combination of factors: ACO participants’ Medicare FFS revenue (low revenue ACOs versus high revenue ACOs) and the experience of the ACO legal entity and its ACO participants with performance-based risk Medicare ACO initiatives. Tables 7 and 8 summarize the participation options available to ACOs under the BASIC track and ENHANCED track. As with current program policy, an ACO would apply to enter an agreement period under a specific track. If the ACO’s application is accepted, the ACO would remain under that track for the duration of its agreement period. We proposed to codify these policies in a new section of the Shared Savings Program regulations governing the BASIC track, at § 425.605. We sought comment on these proposals. Further, in section II.A.5.b.(3) of the August 2018 proposed rule (83 FR 41819 through 41820), we described and sought comment on several approaches to allowing for potentially greater access to shared savings for low revenue ACOs compared to high revenue ACOs. We explained that low revenue ACOs (identified as proposed using a threshold of 25 percent of Medicare Parts A and B FFS expenditures for PO 00000 Frm 00032 Fmt 4701 Sfmt 4700 assigned beneficiaries), which may tend to be small, physician-only and rural ACOs, are likely less capitalized organizations and may be relatively riskaverse. These ACOs may be encouraged to participate and remain in the program under performance-based risk based on the availability of additional incentives, such as the opportunity to earn a greater share of savings. Therefore, we considered allowing for a relatively higher final sharing rate under the first four levels of the BASIC track’s glide path for low revenue ACOs. For example, rather than the proposed approach under which the final sharing rate would phase in from a maximum of 25 percent in Level A to a maximum of 50 percent in Level E, we could allow a maximum 50 percent sharing rate based on quality performance to be available at all levels within the BASIC track’s glide path for low revenue ACOs. Comment: Generally, many commenters understood and agreed with the need to introduce the BASIC track’s five level glide path (with the two year limit in a one-sided model and automatic advancement to incremental risk each of the remaining 3 years) as an incremental approach to higher levels of risk and reward. A few commenters appreciated CMS’ effort to simplify the participation options and establish a clear streamlined glide path to riskbearing models. They agreed that 2017 Shared Savings Program results confirm that ACO performance improves with longer participation in the program, and encouraged CMS to provide accurate and timely reporting and carefully monitor these efforts to support their continued growth and improvement. Another noted that the proposed approach provided a clear and consistent pathway for participants and prospective enrollees to understand their journey to risk. One commenter noted that CMS’ redesign of the program and addition of the new BASIC track is an approach that factors in ACOs’ revenue and experience and will provide greater stability and predictability and help more health care providers benefit from qualifying as participating in Advanced APMs under the Quality Payment Program. One commenter was encouraged to see that through this rule, CMS is advancing opportunities in two-sided risk ACOs because it has seen firsthand the type of care transformation that is possible when organizations participate in performance-based risk to improve population health. The commenter was also pleased with CMS’ commitment to waiving and modifying certain burdensome program rules for E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations organizations that are engaged in increasing levels of financial risk. Another commenter generally agreed with CMS’ redesign proposal, noting that, although it may reduce the number of ACOs in the program, those that remain would be more likely to control expenditures for the Medicare program and make real efforts to improve care. The commenter added that the goal of the Shared Savings Program should be to create the conditions that will reward efficient ACOs that can create real value for the Medicare program, its beneficiaries, and the taxpayers, not to maximize the number of ACOs. Another commenter noted CMS likely moderated any concerns of ACOs leaving the program by incorporating other policy changes and flexibilities in the proposed rule, such as refining the benchmarking methodology, allowing for risk adjustment each performance year, adjusting patient attribution methodology, and establishing flexibility for low revenue ACOs. However, a majority of commenters were opposed to limiting the amount of time an ACO can participate under a one-sided model from six to two years (because, for example, it dramatically decreases the time in which an ACO can build capital reserves for a repayment mechanism) and provided suggestions for CMS to adopt a more gradual approach to risk. Many commenters did not want us to discontinue Track 1 (as detailed in section II.A.2 of this final rule) and would prefer that we provide for an upside-only track. Some commenters expressed that it makes sense to push hospital-led ACOs into risk, but stated that there is no compelling case that risk is necessary for physician-led ACOs. One commenter, a physician-led ACO, added that requiring it to automatically advance to performance-based risk would cause it to face the prospect of bankrupting its organization. We received numerous comments from rural ACOs to extend the allotted time period in which a rural ACO can participate in an upside-only arrangement in the BASIC track. Some of those commenters noted that certain ACO participants, such as FQHCs, RHCs, and CAHs, provide care to some of the most underserved communities and require additional time and investments to prepare for two-sided risk arrangements. Most commenters provided recommendations for CMS to extend the time any ACO can participate in a onesided model to three years, as opposed to two, stating that it takes longer than two participation years to implement meaningful changes in a healthcare VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 delivery model and among healthcare provider and patient populations. Other commenters believe that the progression to two-sided risk is far too aggressive and will deter participation. These commenters usually suggested allowing for 4 or 5 performance years (or a full agreement period) under a one-sided model. Some commenters suggested that rural ACOs should be allowed at least two, 5-year agreement periods under a one-sided model. Response: We appreciate the comments, but we continue to believe that the proposed transition to twosided risk under the design of the BASIC track’s glide path will promote a competitive and accountable marketplace, while improving the quality of care for Medicare beneficiaries. We disagree with commenters’ suggestions to allow all ACOs or select ACOs (for example, based on their geographic location, historical cost or provider composition) to remain under the one-sided model for an extended time or even indefinitely. We believe such a policy design would, at best, maintain the status quo of the program, and therefore continue a pattern where ACOs are allowed to remain under the one-sided model for a significant number of years without strong incentives to become accountable for the cost and quality of care for their assigned populations. As described in the Regulatory Impact Analysis (see section V of this final rule), our results have shown that ACOs in two-sided models perform better over time than one-sided model ACOs. At the same time, while some ACOs have taken on significant downside risk and shown significant savings to the Medicare program while advancing quality, a majority of ACOs—while having the ability to benefit from waivers of certain federal rules and requirements—have yet to move to any downside risk. Generally, these ACOs are increasing Medicare spending compared to their benchmarks, and the presence of an ‘‘upside-only’’ track may be encouraging consolidation in the marketplace, reducing competition and beneficiary choice. The combination of six years of upside-only risk and the ability to benefit from significant waivers available in the program may also be leading to the formation of one-sided ACOs that are not making serious efforts to improve quality and reduce spending, potentially crowding out formation of more effective ACOs. Thus, we continue to believe that Medicare FFS beneficiaries and the Trust Funds would be better protected by the progression of eligible ACOs from a one-sided model to PO 00000 Frm 00033 Fmt 4701 Sfmt 4700 67847 two-sided models within the span of a five-year agreement period under the BASIC track’s glide path. However, we understand that this requirement may pose an additional financial burden, particularly for rural or physician-led ACOs, many of which would be considered low revenue ACOs under the proposed rule. We also continue to believe that the move to two-sided risk will encourage low revenue ACOs, typically small, rural and physician-only ACOs, to more aggressively pursue the program’s goals of improving quality of care, and lowering growth in expenditures, for Medicare FFS beneficiaries. Therefore, as discussed in greater detail in section II.A.5.c of this final rule, we are finalizing an approach that will permit ACO legal entities without prior experience in the Shared Savings Program that are identified as low revenue ACOs and inexperienced with performance-based risk Medicare ACO initiatives to stay in a one-sided model of the BASIC track’s glide path for an additional performance year. Under this approach eligible ACOs will have the opportunity to participate for up to 3 performance years (or 4 performance years in the case of ACOs entering an agreement period beginning on July 1, 2019) under a one-sided model of the BASIC track’s glide path before automatically advancing to Level E of the BASIC track for the remaining performance years of their agreement period. We believe that this option, in part, addresses commenters’ concerns and suggestions for a relatively gentler glide path to two-sided risk for small, rural and physician-only ACOs that are likely to qualify as low revenue ACOs, and supports continued participation of these ACOs in the Shared Savings Program. For instance, we believe that this option provides an opportunity for new, low revenue ACOs to become more experienced with the Shared Savings Program’s requirements and the accountable care model, and to potentially realize savings, to support their participation in performance-based risk. In light of this additional flexibility that we are making available for new legal entities that qualify as low revenue ACOs inexperienced with performancebased risk Medicare ACO initiatives, we decline to adopt any other alternatives suggested by commenters that would allow for lower risk participation options for rural or physician-led ACOs. Comment: We received numerous comments concerning our proposal to set the final sharing rate for the onesided model not to exceed 25 percent based on quality performance that applies to first dollar shared savings for E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67848 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations ACOs that meet or exceed their MSR. One commenter stated that although a 25 percent sharing rate under Levels A and B of the BASIC track is not worth the ACO’s continued participation in the program, the commenter contended that it is the right thing to do in order to continue to innovate primary care in the medical community. Most commenters had concerns about reducing the shared savings rate from 50 percent (as currently available under Track 1) to 25 percent for ACOs in Levels A and B of the BASIC track, asserting that doing so would deter new entrants from applying to the Shared Savings Program and undermine the business case to join the Shared Savings Program. Some contended that, due to the sizeable investment that ACOs make (for example, one ACO reportedly spent almost $2 million a year, on average, including investments made in health information technology, population health management and ACO administration), it is imperative that the opportunity for return on investment is realistic enough for the business model to be attractive, retain current ACO participants, and bring in new ACOs. One commenter stated that the reduction in sharing rates would result in challenges with provider/supplier buy-in, which has been crucial to the success of the commenter’s ACOs. The commenter further contended that many physicians value the Shared Savings Program’s emphasis on quality of care as a result of collaborative efforts across practices. Another commenter stated that the impact of increased financial pressure will cause ACOs to inappropriately focus on reducing costs over achieving high-quality outcomes, and consequently put beneficiaries’ access to medical care at risk. One commenter contended there is a low likelihood that a newly formed ACO will achieve shared savings in the early years of its operations. Some commenters noted that clinicians and physician-led practices seeking to start or join an ACO must make significant practice changes and investments to position themselves for success in the program. One commenter noted that for independent physicians, the potential reward for making these changes must be high enough to justify initial infrastructure costs, as well as ongoing investments in staff and other resources needed for population health management and that the proposed 25 percent savings rate would deter these participants and ACOs from joining the Shared Savings Program. Some commenters explained a reduction in potential savings will greatly impact low revenue, physician-led ACOs, and VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 could end up forcing these ACOs from the program. Most commenters proposed an increased maximum shared savings rate under Levels A and B of the BASIC track ranging from 40 to 80 percent, with a majority requesting a 50 percent shared savings rate. One of these commenters also suggested an incremental upwards adjustment of the shared savings rate up to 10 percentage points (from 50 percent) based on quality to emphasize and reward above average quality performance or improvement. Some commenters recommended that CMS offer a higher sharing rate to support ACOs, especially physician-led and low revenue ACOs with more limited capital reserves. Some commenters suggested that CMS provide higher sharing rates for all levels of the BASIC track’s glide path, for instance beginning at 50 percent (Level A and B), progressing to 55 percent for Levels C and D, and reaching 60 percent in Level E. We also received numerous comments from rural ACOs stating that rural ACOs lack the resources to take on risk (including capital reserves necessary for required repayment mechanisms) and that the proposed 25 percent final sharing rate under Levels A and B of the BASIC track is not worth the risk of joining the program and will drive most of these ACOs from the program. Many noted that they operate on tight budgets and with limited human and capital resources while providing care for a sicker and older Medicare population than urban providers. Thus, they assert that CMS should create a glide path specifically for rural ACOs. One commenter noted that rural ACOs predominantly made up of Critical Access Hospitals (CAHs) are not in a position to take on downside risk given the inherent volatility in cost-based reimbursement, and the proposal would force these rural ACOs to exit the Shared Savings Program, resulting in these ACOs no longer having access to useful information such as beneficiarylevel claims data and reducing the value of significant investments these ACOs have made (to date) to redesign rural healthcare delivery. Thus, the commenter asserted that CMS’ proposal failed to provide a viable alternative for APM participation for rural ACOs. Instead, these commenters proposed several alternatives for CMS to provide an exception specifically for rural ACOs to receive an increased final sharing rate under the BASIC track. One commenter was generally supportive of the proposed BASIC track, but proposed that CMS provide a no-downside risk option for rural providers due to their PO 00000 Frm 00034 Fmt 4701 Sfmt 4700 cost of operations. Additionally, many commenters requested that CMS develop a third Track for rural ACOs. Similarly, another commenter believed that CMS should develop a more gradual pathway to increased levels of financial risk for low revenue ACOs, specifically those composed of FQHCs. Several commenters suggested that CMS should consider all rural ACOs to be low revenue ACOs and maintain the 50 percent shared savings rate for them each year under the BASIC track. Another commenter proposed that ACOs comprised solely of safety net providers should be allowed to participate in Level A of the BASIC track with 50 percent shared savings indefinitely as long as they improve quality and do not increase costs. One commenter, representing the perspective of a hospital-based ACO, explained it had grave concerns about allowing higher shared savings rates (such as 50 percent) for only low revenue ACOs for all years in the BASIC track (an approach we sought comment on in the August 2018 proposed rule), viewing this approach as giving low revenue ACOs a competitive advantage over high revenue ACOs. This commenter indicated that this approach would discourage high revenue ACOs, which the commenter argued are best situated to achieve savings for Medicare. Response: We appreciate the wide range of comments requesting or suggesting adjustments to specific policies so that an ACO could share in a higher level of savings than what was proposed for the BASIC track’s glide path: 25 percent sharing rate for Levels A and B, 30 percent sharing rate for Level C, 40 percent sharing rate for Level D, and 50 percent sharing rate for Level E. Initially, we decided to propose a 25 percent sharing rate under Levels A and B of the BASIC track because the 25 percent sharing rate is one-half of the maximum sharing rate of 50 percent currently available under Track 1. As an ACO transitioned to performance-based risk, and then continued to undertake greater risk by advancing through the glide path, the sharing rate would incrementally increase to 50 percent under Level E. However, generally, we are persuaded by the expressed views that the reward-to-risk ratio for participating in the program as proposed is generally unattractive to ACOs, and agree with commenters that an alternative policy featuring more generous sharing rates would attract and sustain broader participation in the Shared Savings Program. We believe that increasing the maximum sharing rates will strike a better balance between robust participation and incentivizing E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations the move to two-sided risk. We decided to increase the maximum sharing rate to 50 percent for Levels C through E of the BASIC track to correspond with the gradual increase in risk as the ACO advances on the glide path. We understand the commenters’ concerns that the reduction in the maximum sharing rate could pose a financial hardship for ACOs by reducing shared savings payments that could support operational costs, and thus, the policy could be a potential barrier to the formation of and continued success of ACOs. We agree that financial rewards must be sufficient to offset provider risks and startup-costs, particularly for low revenue ACOs (which tend to be small, rural and physician-only ACOs). We also agree with commenters that the same shared savings rates should apply consistently across ACOs participating in a particular level of the BASIC track’s glide path, rather than differentiating the shared savings rates based on the distinction between low revenue ACOs and high revenue ACOs. Therefore, we also decline to apply different shared savings rates to ACOs within the same Level of the BASIC track’s glide path, based on other factors, such as composition, as suggested by some commenters. Thus, we are modifying our proposal and finalizing higher maximum sharing rates for ACOs participating in the BASIC track as a means of encouraging participation in the program and potentially providing greater resources to ACOs to support their transition to performance-based risk. We are finalizing an approach to allow for a maximum shared savings rate of 40 percent for Levels A and B and 50 percent for Levels C, D, and E. Comment: We received a few comments opposing our proposal to automatically transition ACOs to progressively higher levels of risk and potential reward (if higher levels are available) within the remaining years of the agreement period under the BASIC track’s glide path. One commenter urged CMS to consider allowing high performing ACOs more than a year in limited risk tracks, such as Levels C and D of the BASIC track, and that CMS could outline parameters for successful ACOs to continue in a particular level prior to automatic advancing to another level, such as achieving shared savings or meeting quality goals. Response: As stated in the November 2011 final rule (76 FR 19534), we continue to believe that the Shared Savings Program should provide an entry point for all willing organizations that wish to move in a direction of providing value-driven healthcare. We VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 also continue to believe in the importance of encouraging ACOs to progress to greater performance-based risk to drive quality improvement and efficiency in care delivery. Doing otherwise could encourage ACOs to remain under a one-sided model, or under comparatively low levels of performance-based risk, without strong incentives to become accountable for the cost and quality of care for their assigned populations. We also note that some commenters (as summarized elsewhere in this final rule) agreed with CMS’ emphasis on the importance of two-sided risk as a driver of more meaningful change. For this reason, we decline the commenters’ suggestion to forgo the automatic advancement policy to progress eligible ACOs through the levels of risk and potential reward of the BASIC track’s glide path, or to create a policy where we evaluate and determine whether each individual ACO will be required to enter higher levels of performance-based risk. We are finalizing our proposed approach to require automatic advancement along the BASIC track’s glide path, although we note we are finalizing a modification to allow new legal entities that are low revenue ACOs and inexperienced with performance-based risk Medicare ACO initiatives the option to forgo automatic advancement to Level C to remain in Level B for an additional performance year, and then be automatically advanced to Level E. Comment: Generally, most commenters supported the design of Levels C and D of the BASIC track, stating that they would create new opportunities for ACOs to experiment with downside risk. One commenter believed that the creation of Levels C and D of the BASIC track would empower healthcare providers to move to risk and create a ladder for ACOs to becoming an Advanced APM. However, as previously summarized in this section of the final rule, several commenters expressed concern about the proposed 30 percent shared savings rate in Level C of the BASIC track and 40 percent shared savings rate in Level D of the BASIC track and offered a variety of alternative maximum shared savings rates that they believed would incentivize ACOs to remain in the program and take on risk. Other commenters suggested additional changes to the design of Levels C and D. For example, one commenter recommended that Levels C and D of the BASIC track should include a shared savings rate of 80 percent balanced by an increase in shared risk levels to meet Advanced APM criteria. Another PO 00000 Frm 00035 Fmt 4701 Sfmt 4700 67849 commenter suggested that advancement on the glide path should be optional, Levels C and D of the BASIC track could include a 50 percent shared savings rate, and if providers do not transition to greater risk within a set time period, the shared savings rate would decrease to 25 percent savings rate or lower. Response: As we previously discussed in this section of this final rule, after considering the commenters’ suggestions for adjusting the shared savings rates for ACOs participating in Levels A through D of the BASIC track, we are modifying our proposal to allow for first dollar savings at a rate of up to 50 percent based on quality performance, not to exceed 10 percent of updated benchmark, for all ACOs participating in Level C and Level D of the BASIC track. Therefore, we decline to adopt the commenters’ alternative suggestions. Namely, we decline to establish additional levels within the BASIC track’s glide path (other than Level E) that qualify as an Advanced APM. We believe that ACOs that are ready for higher levels of risk and reward should transition more rapidly to Level E of the BASIC track, or to the ENHANCED track, which qualify as Advanced APMs. Further, we decline to establish a policy that would allow ACOs to forgo the transition to higher levels of risk and potential reward in exchange for incrementally decreasing shared savings rates. We believe this could create a circumstance where poorly performing ACOs seek to continue their participation under relatively lower risk while taking advantage of other aspects of program participation. We believe that a policy to forgo the transition to higher levels of risk would effectively maintain the status quo of the program and would eliminate any incentive for many ACOs to transition to meaningful levels of performance-based risk. Comment: Many commenters supported the permanent inclusion of the Track 1+ Model equivalent, Level E of the BASIC track, in the Shared Savings Program. A commenter stated that it is an important option for ACOs assuming downside financial risk and allows loss sharing limits similar to those for Advanced APMs in the Quality Payment Program. A few commenters were concerned about the level of risk and shared savings rates associated with Level E of the BASIC track. Commenters recommended a variety of shared savings rates for Level E, ranging from 55 to 100 percent. For example, several commenters proposed that CMS change the final shared savings rate to 60 percent with a goal of 75 percent shared savings based on quality performance E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67850 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations and other program criteria. Another commenter recommended that CMS set the maximum shared savings rate at 100 percent, particularly as the Next Generation ACO Model sunsets. Response: We thank commenters for their support of the proposal to offer the level of risk and potential reward under the proposed Level E of the BASIC track, which is the same as level of risk and potential reward under the popular Track 1+ Model and would meet all of the Advanced APM criteria to be an Advanced APM under the Quality Payment Program. We believe there is sufficient reward in Level E as proposed, since in addition to the shared savings potential of this financial model, an ACO’s eligible clinicians may be eligible for incentive payments under the Quality Payment Program because of the ACO’s participation in an Advanced APM. Therefore, we decline to increase the 50 percent shared savings rate under Level E of the BASIC track based on commenters’ suggestions. We believe that allowing more manageable levels of risk and moderate levels of potential reward under Level E within the Shared Savings Program will be an important pathway for helping organizations gain experience with performance-based risk while participating in Advanced APMs for purposes of the Quality Payment Program. Comment: Several commenters suggested that the level of risk associated with Level E of the BASIC track should be the nominal risk standard under MACRA and consistent with Quality Payment Program standards. The commenters suggested that CMS decrease the benchmark-based level of risk under Level E to be the expenditure-based nominal amount standard rather than the proposal to set the level of maximum losses as 1 percentage point higher than the expenditure-based nominal amount standard. For example, to reduce the percentage from 4 percent of updated benchmark (proposed approach) to 3 percent. One commenter stated that setting the benchmark-based level of risk at 4 percent rather than 3 percent would disproportionately affect ACOs with hospital participants and subject them to additional risk. A few other commenters noted that CMS did not provide a rationale for setting the benchmark-based loss limit at the nominal standard plus one percentage point. One commenter suggested that aligning the loss sharing limit with the MACRA standard would create alignment between the Quality Payment Program and Shared Savings Program. Finally, one commenter noted that, to enable participation and set ACOs up VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 for success, CMS should rely on a revenue-based risk structure and that any expenditure-based nominal risk amount should be kept low to avoid placing physician-led and low revenue ACOs at a disadvantage. Response: After reviewing the commenter’s concerns, we decline to align the benchmark-based loss sharing limit for Level E with the expenditurebased nominal amount standard for APM models established under the Quality Payment Program. As we explained in the August 2018 proposed rule, our proposal maintains consistency between the level of risk and potential reward offered under Level E and the Track 1+ Model (83 FR 41805). We believe the level of risk and potential reward proposed in Level E, which would provide more limited downside risk than is currently present in Tracks 2 and 3, offers ACOs the opportunity to participate and gain experience with more limited performance-based risk. Our experience, with 55 ACOs choosing to participate the first year the Track 1+ Model was available, suggests that this approach will encourage ACOs, especially small, rural and physician-only ACOs, to advance to performance-based risk and provide a viable on-ramp for ACOs to assume greater amounts of risk in the future. Comment: A majority of commenters supported CMS’ proposal to use a revenue-based approach to calculate ACO loss sharing limits and the proposal to cap and set the loss sharing limits at a percentage of an ACO’s updated historical benchmark. One commenter commended CMS for recognizing that ACOs differ significantly in their ability to accept financial risk and for including limits on downside risk based on a percentage of the ACO participants’ revenue, not just as a percentage of Medicare spending. Response: We thank commenters for their support of the proposal to offer a relatively lower level of performancebased risk under the BASIC track, calculated as a percentage of ACO participants’ total Medicare Parts A and B FFS revenue not to exceed an amount that is a percentage of the ACO’s updated historical benchmark. Comment: Some commenters encouraged CMS to retain use of quality scores in the shared loss methodology calculation as a part of the BASIC track. These commenters believe that improved quality for Medicare beneficiaries has always been a cornerstone of the program and should continue to be a vital part of both shared savings and shared losses calculations. PO 00000 Frm 00036 Fmt 4701 Sfmt 4700 Another commenter was concerned that CMS’ decision not to apply quality measure performance to the loss rate under the BASIC track sends the wrong message to providers about the importance of quality measurement and performance. The commenter believes that CMS should apply a sliding scale quality measure adjustment to the loss rate to minimize the repayment by ACOs that are able to achieve highquality outcomes. Response: We are declining to include quality scoring in the loss calculation methodology for the two-sided models under the BASIC track. Under the Track 1+ Model, we established a fixed 30 percent loss sharing rate, which is lower than the loss sharing rate, based on quality performance, under Track 2 and the ENHANCED track, which is at least 40 percent. We designed the BASIC track’s glide path to gradually introduce ACOs to greater risk and reward and all ACOs are eventually expected to move to the ENHANCED track where the loss sharing rate will include adjustments for quality performance. Quality performance is important to the program and the design of the financial model is not meant in any way to compromise the goal of improving quality, which is integrally related to the potential upside in all levels of the BASIC track. We believe that the lower, fixed loss sharing rate provides a more manageable level of risk for ACOs transitioning to risk in the BASIC track. Final Action: After considering the comments we received, we are finalizing with modifications our proposal to codify policies in a new section of the Shared Savings Program regulations governing the BASIC track, at § 425.605. Specifically, we are finalizing the BASIC track’s glide path with five levels. For each PY starting after January 1, 2020, ACOs in the glide path will be automatically progressed to the next level of the glide path. ACOs eligible for the glide path that have not participated in the Shared Savings Program previously, and that are not regarded as re-entering ACOs related to the prior participation of their ACO participants, can enter the glide path at any Level. ACOs that previously participated in Track 1, or a new ACO identified as a re-entering ACO because more than 50 percent of its ACO participants have recent prior experience in a Track 1 ACO, would be ineligible to enter the glide path at Level A but would be eligible to begin in Level B. We are modifying our proposed maximum shared savings rates and are finalizing shared savings rates of 40 percent for Levels A and B and 50 E:\FR\FM\31DER2.SGM 31DER2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations percent for Levels C, D, and E of the BASIC track. We are finalizing as proposed the methodology for determining shared losses for Levels C, D, and E, as follows: khammond on DSK30JT082PROD with RULES2 • Level C: A loss sharing rate of 30 percent regardless of the quality performance of the ACO would apply to first dollar shared losses for ACOs with losses meeting or exceeding their MLR, not to exceed 2 percent of total Medicare Parts A and B FFS revenue for ACO participants. If the loss sharing limit as a percentage of total Medicare Parts A and B FFS revenue for ACO participants exceeds the amount that is 1 percent of the ACO’s updated historical benchmark, then the loss sharing limit would be capped and set at 1 percent of the ACO’s updated historical benchmark for the applicable performance year. This level of risk is not sufficient to meet the generally applicable nominal amount standard for Advanced APMs under the Quality Payment Program specified in § 414.1415(c)(3)(i). VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 • Level D: A loss sharing rate of 30 percent regardless of the quality performance of the ACO would apply to first dollar shared losses for ACOs with losses meeting or exceeding their MLR, not to exceed 4 percent of total Medicare Parts A and B FFS revenue for ACO participants. If the loss sharing limit as a percentage of total Medicare Parts A and B FFS revenue for ACO participants exceeds the amount that is 2 percent of the ACO’s updated historical benchmark, then the loss sharing limit would be capped and set at 2 percent of the ACO’s updated historical benchmark for the applicable performance year. This level of risk is not sufficient to meet the generally applicable nominal amount standard for Advanced APMs under the Quality Payment Program specified in § 414.1415(c)(3)(i). • Level E: A loss sharing rate of 30 percent regardless of the quality performance of the ACO would apply to first dollar shared losses for ACOs with losses meeting or exceeding their MLR. The percentage of ACO participants’ total Medicare Parts A and B PO 00000 Frm 00037 Fmt 4701 Sfmt 4700 67851 FFS revenue used to determine the revenuebased loss sharing limit would be set for each performance year consistent with the generally applicable nominal amount standard for an Advanced APM under § 414.1415(c)(3)(i)(A). The ACO’s revenuebased loss sharing limit would not exceed its benchmark-based loss sharing limit, but would be capped at that amount. Finally, if an ACO enters the BASIC track’s glide path in a one-sided model and is unable to meet the requirements to participate under performance-based risk prior to being automatically transitioned to a performance year under risk, CMS would terminate the ACO’s agreement under § 425.218. The financial model of the BASIC track is summarized in Table 3, which also includes a summary of the design of the ENHANCED track (for comparison). BILLING CODE 4120–01–P E:\FR\FM\31DER2.SGM 31DER2 67852 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations TABLE 3-COMPARISON OF RISK AND REWARD UNDER BASIC TRACK AND ENHANCED TRACK BASIC Track's Glide Path Level C (risk/reward) LevelD (risk/reward) 1st dollar savings at a rate of up to 50% based on quality tperformance, not o exceed 10% of !updated [benchmark 1st dollar losses at a 1st dollar losses at ate of 30%, not to a rate of 30%, not exceed 2% of ACO o exceed 4% of participant revenue V\CO participant evenue capped at capped at 1% of updated benchmark 2% ofupdated !benchmark 1st dollar savings at a rate of up to 50% based on quality performance, not to exceed 10% of updated benchmark Shared Losses (once MLR met or exceeded) khammond on DSK30JT082PROD with RULES2 Annual choice of beneficiary assignment methodology? (see section II.A.4.c. ofthis final rule) Annual election to enter higher risk? 3 (see section II.A.4.b. of this final rule, and section VerDate Sep<11>2014 Level E (risk/reward) No change. 1st dollar savings at a ate of up to 75% based on quality performance, not o exceed 20% of updated benchmark No change. 1st 1st dollar losses at a rate of 30%, not to dollar losses at a exceed the percentage ate of 1 minus of revenue specified in fmal sharing rate the revenue-based (between 40% nominal amount 75%), not to exceed 15% of standard under the Quality Payment updated Program (for example, benchmark 8%ofACO participant revenue in 2019 - 2020), capped at a percentage of updated benchmark that is 1 percentage point higher than the expenditure-based nominal amount standard (for example, 4% of updated benchmark in 2019 2020) Yes ~es 1st dollar savings at a rate of up to 50% based on quality performance, not to exceed 10% of updated benchmark Yes Yes ~es Yes Yes No; maximum level of fNo; ACO will automatically isk I reward under the ransition to Level aASIC track IE at the start of the !next performance 16:59 Dec 28, 2018 ENHANCED Track ( Track3) No; highest level of risk under Shared Savings Program ~ear Jkt 247001 PO 00000 Frm 00038 Fmt 4701 Sfmt 4725 E:\FR\FM\31DER2.SGM 31DER2 ER31DE18.003</GPH> Shared Savings (once MSR met or exceeded) Level A & Level B (one-sided model) 1st dollar savings at a rate of up to 40% based on quality performance; not to exceed 10% of updated benchmark N/A Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations khammond on DSK30JT082PROD with RULES2 (3) Calculation of Loss Sharing Limit As described in the August 2018 proposed rule, under the Track 1+ Model, either a revenue-based or a benchmark-based loss sharing limit is applied based on the Track 1+ Model ACO’s self-reported composition of ACO participants as identified by TINs and CCNs, and the ownership of and operational interests in those ACO participants. We noted our concerns about use of self-reported information for purposes of determining the loss sharing limit in the context of the permanent, national program. The purpose of capturing information on the types of entities that are Track 1+ Model ACO participants and the ownership and operational interests of those ACO participants, as reported by ACOs applying to or participating in the Track 1+ Model, is to differentiate between those ACOs that are eligible for the lower level of risk potentially available VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 under the revenue-based loss sharing limit and those that are subject to the benchmark-based loss sharing limit. For purposes of our proposal to establish the BASIC track in the permanent program, we reconsidered this method of identifying which ACOs are eligible for the revenue-based or benchmark-based loss sharing limits. One concern regarding the Track 1+ Model approach is the burden imposed on ACOs and CMS resulting from reliance on selfreported information. Under the Track 1+ Model, ACOs must collect information about their ACO participant composition and about ownership and operational interests from ACO participants, and potentially others in the TINs’ and CCNs’ ownership and operational chains, and assess this information to accurately answer questions as required by CMS.14 These 14 See Medicare Shared Savings Program, Medicare ACO Track 1+ Model, and SNF 3-Day Rule Waiver, 2018 Application Reference Manual, version #3, July 2017 (herein 2018 Application PO 00000 Frm 00039 Fmt 4701 Sfmt 4700 questions are complex and ACOs’ ability to respond accurately could vary. Self-reported information is also more complex for CMS to audit. As a result, the use of ACOs’ self-reported information in the permanent program could become burdensome for CMS to validate and monitor to ensure program integrity. We proposed that a simpler approach that achieves similar results to the use of self-reported information would be to consider the total Medicare Parts A and B FFS revenue of ACO participants (TINs and CCNs) based on claims data, without directly considering their ownership and operational interests (or those of related entities), based on our Reference Manual), available at https:// www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/sharedsavingsprogram/Downloads/MSSPReference-Table.pdf (see ‘‘Appendix F. Application Reference Table—For Medicare ACO Track 1+ Model Applicants’’, including definitions for institutional providers and ownership and operational interests for the purpose of the Track 1+ Model). E:\FR\FM\31DER2.SGM 31DER2 ER31DE18.004</GPH> BILLING CODE 4120–01–C 67853 khammond on DSK30JT082PROD with RULES2 67854 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations experience with the initial application cycle for the Track 1+ Model. As part of the application cycle for the 2018 performance year under the Track 1+ Model, CMS gained experience with calculating estimates of ACO participant revenue to compare with estimates of ACO benchmark expenditures, for purposes of determining the repayment mechanism amounts for the Track 1+ Model (as described in section II.A.6.c. of this final rule). The methodology for determining repayment mechanism amounts follows a similar bifurcated approach to the one used to determine the applicable loss sharing limit under the Track 1+ Model. Specifically, for ACOs eligible for a revenue-based loss sharing limit, when the specified percentage of estimated total Medicare Parts A and B FFS revenue for ACO participants exceeds a specified percentage of estimated historical benchmark expenditures, the benchmark-based methodology is applied to determine the ACO’s loss sharing limit, which serves to cap the revenue-based amount (see Track 1+ Model Fact Sheet for a brief description of the repayment mechanism estimation methodology). Based on our calculations of repayment mechanism amounts for Track 1+ Model ACOs, we observed a high correlation between the loss sharing limits determined using an ACO’s self-reported composition, and its ACO participants’ total Medicare Parts A and B FFS revenue. For ACOs that reported including an ACO participant that was an IPPS hospital, cancer center or rural hospital with more than 100 beds, or that was owned or operated by, in whole or in part, such a hospital or by an organization that owns or operates such a hospital, the estimated total Medicare Parts A and B FFS revenue for the ACO participants tended to exceed an estimate of the ACO’s historical benchmark expenditures for assigned beneficiaries. For ACOs that reported that they did not include an ACO participant that met these ownership and operational criteria, the estimated total Medicare Parts A and B FFS revenue for the ACO participants tended to be less than an estimate of the ACO’s historical benchmark expenditures. We recognized that this analysis was informed by the definitions for ownership and operational interests, and the definitions for IPPS hospital, VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 cancer center and rural hospital with 100 or more beds, used in the Track 1+ Model. However, we stated that these observations from the Track 1+ Model supported a more generalizable principle about the extent to which ACOs can control total Medicare Parts A and B FFS expenditures for their assigned beneficiaries, and therefore their readiness to take on lower or higher levels of performance-based risk. In the proposed rule and in this final rule, we use the phrases ‘‘ACO participants’ total Medicare Parts A and B FFS revenue’’ and ‘‘total Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries’’ in the discussion of certain proposed policies. For brevity, we sometimes use shorter phrases instead. For instance, we may refer to ACO participant Medicare FFS revenue, or expenditures for the ACO’s assigned beneficiaries. Based on our experience with the Track 1+ Model, we proposed an approach under which the loss sharing limit for BASIC track ACOs would be determined as a percentage of ACO participants’ total Medicare Parts A and B FFS revenue that is capped at a percentage of the ACO’s updated historical benchmark expenditures when the amount that is a certain percentage of ACO participant FFS revenue (depending on the BASIC track risk/reward level) exceeds the specified percentage of the ACO’s updated historical benchmark expenditures for the relevant BASIC track risk/reward level. Under our proposed approach, we would not directly consider the types of entities included as ACO participants or ownership and operational interests in ACO participants in determining the loss sharing limit that would apply to ACOs under Levels C, D, and E of the BASIC track. We stated our belief that ACOs whose ACO participants have greater total Medicare Parts A and B FFS revenue relative to the ACO’s benchmark are better financially prepared to move to greater levels of risk. Accordingly, this comparison of revenue to benchmark would provide a more accurate method for determining an ACO’s preparedness to take on additional risk than an ACO’s selfreported information regarding the composition of its ACO participants and any ownership and operational interests in those ACO participants. PO 00000 Frm 00040 Fmt 4701 Sfmt 4700 We explained that ACOs that include a hospital billing through an ACO participant TIN are generally more capable of accepting higher risk given their control over a generally larger amount of their assigned beneficiaries’ total Medicare Parts A and B FFS expenditures relative to their ACO participants’ total Medicare Parts A and B FFS revenue. As a result, our proposed approach would tend to place ACOs that include hospitals under a benchmark-based loss sharing limit because their ACO participants typically have higher total Medicare Parts A and B FFS revenue compared to the ACO’s benchmark. Less often, the ACO participants in an ACO that includes a hospital billing through an ACO participant TIN have low total Medicare Part A and B FFS revenue compared to the ACO’s benchmark. Under a claimsbased approach to determining the ACO’s loss sharing limit, ACOs with hospitals billing through ACO participant TINs and relatively low ACO participant FFS revenue would be under a revenue-based loss sharing limit. To illustrate, Table 4 compares two approaches to determining loss liability: A claims-based approach (proposed approach) and self-reported composition (approach used for the Track 1+ Model). The table summarizes information regarding ACO participant composition reported by the Track 1+ Model applicants for performance year 2018 and identifies the percentages of applicants whose self-reported composition would have placed the ACO under a revenue-based loss sharing limit or a benchmark-based loss sharing limit. The table then indicates the outcomes of a claims-based analysis applied to this same cohort of applicants. This analysis indicates the proposed claims-based method produces a comparable result to the selfreported composition method. Further, this analysis suggests that under a claims-based method, ACOs that include institutional providers with relatively low Medicare Parts A and B FFS revenue would be placed under a revenue-based loss sharing limit, which may be more consistent with their capacity to assume risk than an approach that considers only the inclusion of certain institutional providers among the ACO participants and their providers/suppliers (TINs and CCNs). E:\FR\FM\31DER2.SGM 31DER2 Using ACO participant Medicare FFS revenue to determine the ACO’s loss sharing limit balances several concerns. For one, it allows CMS to make a claims-based determination about the ACO’s loss limit instead of depending on self-reported information from ACOs. This approach would also alleviate the burden on ACOs of gathering information from ACO participants about their ownership and operational interests and reporting that information to CMS, and would address CMS’ concerns about the complexity of auditing the information reported by ACOs. We proposed to establish the revenuebased loss sharing limit as the default for ACOs in the BASIC track and to phase-in the percentage of ACO participants’ total Medicare Parts A and B FFS revenue. However, if the amount that is the applicable percentage of ACO participants’ total Medicare Parts A and B FFS revenue exceeds the amount that is the applicable percentage of the ACO’s updated benchmark based on the previously described phase-in schedule, then the ACO’s loss sharing limit would be capped and set at this percentage of the ACO’s updated historical benchmark. We sought comment on this proposal. We considered issues related to the generally applicable nominal amount standard for Advanced APMs in our development of the revenue-based loss sharing limit under Level E of the proposed BASIC track. Under § 414.1415(c)(3)(i)(A), the revenue-based nominal amount standard is set at 8 percent of the average estimated total Medicare Parts A and B revenue of all providers and suppliers in a participating APM Entity for QP Performance Periods 2017, 2018, 2019, and 2020. We proposed that, for the BASIC track, the percentage of ACO participants’ FFS revenue used to determine the revenue-based loss sharing limit for the highest level of risk VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 (Level E) would be set for each performance year consistent with the generally applicable nominal amount standard for an Advanced APM under § 414.1415(c)(3)(i)(A), to allow eligible clinicians participating in a BASIC track ACO subject to the revenue-based loss sharing limit the opportunity to earn the Advanced APM incentive payment when the ACO is participating under Level E. For example, for performance years 2019 and 2020, this would be 8 percent of ACO participants’ total Medicare Parts A and B FFS revenue that would be capped and set at 4 percent of the updated benchmark. As a result, the proposed BASIC track at Level E risk/reward would meet all of the criteria and be an Advanced APM. Further, in the CY 2018 Quality Payment Program final rule with comment period, we revised § 414.1415(c)(3)(i)(A) to more clearly indicate that the revenue-based nominal amount standard is determined as a percentage of the revenue of all providers and suppliers in the participating APM Entity (see 82 FR 53836 through 53838). Under the Shared Savings Program, ACOs are composed of one or more ACO participant TINs, which include all providers and suppliers that bill Medicare for items and services that are participating in the ACO. See definitions at § 425.20. In accordance with § 425.116(a)(3), ACO participants must agree to ensure that each provider/ supplier that bills through the TIN of the ACO participant agrees to participate in the Shared Savings Program and comply with all applicable requirements. Because all providers/ suppliers billing through an ACO participant TIN must agree to participate in the program, for purposes of calculating ACO revenue under the nominal amount standard for Shared Savings Program ACOs, the FFS revenue of the ACO participant TINs is equivalent to the FFS revenue for all PO 00000 Frm 00041 Fmt 4701 Sfmt 4700 67855 providers/suppliers participating in the ACO. Therefore, we intend to perform these revenue calculations at the ACO participant level. We proposed to calculate the loss sharing limit for BASIC track ACOs in generally the same manner that is used under the Track 1+ Model. However, as discussed elsewhere in this section, we would not rely on an ACO’s selfreported composition as used in the Track 1+ Model to determine if the ACO is subject to a revenue-based or benchmark-based loss sharing limit. Instead, we would calculate a revenuebased loss sharing limit for all BASIC track ACOs, and cap this amount as a percentage of the ACO’s updated historical benchmark. Generally, calculation of the loss sharing limit would include the following steps: • Determine ACO participants’ total Medicare FFS revenue, which includes total Parts A and B FFS revenue for all providers and suppliers that bill for items and services through the TIN, or a CCN enrolled in Medicare under the TIN, of each ACO participant in the ACO for the applicable performance year. • Apply the applicable percentage under the proposed phase-in schedule (described in section II.A.3.b.(2). of this final rule) to this total Medicare Parts A and B FFS revenue for ACO participants to derive the revenue-based loss sharing limit. • Use the applicable percentage of the ACO’s updated benchmark, instead of the revenue-based loss sharing limit, if the loss sharing limit as a percentage of total Medicare Parts A and B FFS revenue for ACO participants exceeds the amount that is the specified percentage of the ACO’s updated historical benchmark, based on the phase-in schedule. In that case, the loss sharing limit is capped and set at the applicable percentage of the ACO’s updated historical benchmark for the applicable performance year. To illustrate, Table 5 provides a hypothetical example of the calculation of the loss sharing limit for an ACO participating under Level E of the BASIC track. This example would be relevant, under the proposed policies, E:\FR\FM\31DER2.SGM 31DER2 ER31DE18.005</GPH> khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations for an ACO participating in Level E of the BASIC track for the performance years beginning on July 1, 2019, and January 1, 2020, based on the percentages of revenue and ACO benchmark expenditures specified in generally applicable nominal amount standards in the Quality Payment Program regulations. In this scenario, the ACO’s loss sharing limit would be set at $1,090,479 (8 percent of ACO participant revenue) because this amount is less than 4 percent of the ACO’s updated historical benchmark expenditures. If in this scenario the ACO’s revenue would have been greater, and the revenue-based loss sharing limit exceeded the benchmark-based loss sharing limit amount, the loss sharing limit would be capped and set at the benchmark-based loss sharing limit amount (in this example $3,736,453). More specifically, ACO participants’ total Medicare Parts A and B FFS revenue would be calculated as the sum of Medicare paid amounts on all nondenied claims associated with TINs on the ACO’s certified ACO participant list, or the CCNs enrolled under an ACO participant TIN as identified in the Provider Enrollment, Chain, and Ownership System (PECOS), for all claim types used in program expenditure calculations that have dates of service during the performance year, using 3 months of claims run out. ACO participant Medicare FFS revenue would not be limited to claims associated with the ACO’s assigned beneficiaries, and would instead be based on the claims for all Medicare FFS beneficiaries furnished services by the ACO participant. Further, in calculating ACO participant Medicare FFS revenue, we would not truncate a beneficiary’s total annual FFS expenditures or adjust to remove indirect medical education (IME), disproportionate share hospital (DSH), or uncompensated care payments or to add back in reductions made for sequestration. ACO participant Medicare FFS revenue would include any payment adjustments reflected in the claim payment amounts (for example, under MIPS or Hospital Value Based Purchasing Program) and would also include individually identifiable final payments made under a demonstration, pilot, or time-limited program, and would be determined using the same completion factor used for annual expenditure calculations. This approach to calculating ACO participant Medicare FFS revenue is different from our approach to calculating benchmark and performance year expenditures for assigned beneficiaries, which we truncate at the 99th percentile of national Medicare FFS expenditures for assignable beneficiaries, and from which we exclude IME, DSH and uncompensated care payments (see subpart G of the program’s regulations). We truncate expenditures to minimize variation from catastrophically large claims. We note that truncation occurs based on an assigned beneficiary’s total annual Parts A and B FFS expenditures, and is not apportioned based on services furnished by ACO participant TINs. See Medicare Shared Savings Program, Shared Savings and Losses and Assignment Methodology Specifications (May 2018, version 6) available at https:// www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/sharedsavings program/program-guidance-andspecifications.html (herein Shared Savings and Losses and Assignment Methodology Specifications, version 6). As discussed in earlier rulemaking, we exclude IME, DSH and uncompensated care payments from ACOs’ assigned beneficiary expenditure calculations because we do not wish to incentivize ACOs to avoid the types of providers that receive these payments, and for other reasons described in earlier rulemaking (see 76 FR 67919 through 67922, and 80 FR 32796 through 32799). But to accurately determine ACO participants’ revenue for purposes of determining a revenue-based loss sharing limit, we would include total revenue uncapped by truncation and to include IME, DSH and uncompensated care payments. These payments represent resources available to ACO participants to support their operations and offset their costs and potential shared losses, thereby increasing the ACO’s capacity to bear performance- based risk, which should be reflected in the ACO’s loss sharing limit. Excluding such payments could undercount revenue and also could be challenging to implement, particularly truncation, since it likely would require apportioning responsibility for large claims among the ACO participants and non-ACO participants from which the beneficiary may have received the services resulting in the large claims. Currently, for Track 2 and Track 3 ACOs, the loss sharing limit (as a percentage of the ACO’s updated benchmark) is determined each performance year, at the time of financial reconciliation. Consistent with this approach, we would determine the loss sharing limit for BASIC track ACOs annually, at the time of financial reconciliation for each performance year. Further, under the existing policies for the Shared Savings Program, we adjust the historical benchmark annually for changes in the ACO’s certified ACO participant list. See §§ 425.602(a)(8) and 425.603(b), (c)(8). See also the Shared Savings and Losses and Assignment Methodology Specifications, version 6. Similarly, the annual determination of a BASIC track ACO’s loss sharing limit would reflect changes in ACO composition based on changes to the ACO’s certified ACO participant list. We proposed to codify these policies in a new section of the Shared Savings Program regulations governing the BASIC track, at § 425.605. We sought comment on these proposals. Comment: A few commenters had suggestions as to whether certain payments or expenditures should be included in an ACO’s benchmark. One commenter recommended that CMS exclude payments from the CPC+ Model VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 PO 00000 Frm 00042 Fmt 4701 Sfmt 4700 E:\FR\FM\31DER2.SGM 31DER2 ER31DE18.006</GPH> khammond on DSK30JT082PROD with RULES2 67856 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations in their entirety from the benchmark and expenditures on both a retrospective and prospective basis. The commenter further recommended that CMS update the historical benchmark to remove CPC+ Model payments from the calculation of ACOs’ expenditures as non-claims based payments. Another commenter recommended that CMS exclude MIPS bonuses from the determination of ACO expenditures because MIPS bonuses are projected to rise in future program years, which may penalize ACOs in comparison to their historical benchmark, and result in lower shared savings or higher shared losses. The commenter questioned CMS’ treatment of these payments, stating that CMS currently excludes Advanced APM incentive payments from ACO expenditures and recommended that CMS do the same for MIPS expenditures. Response: First, section 1833(z)(1)(C) of the Act provides that incentive payments made to a Qualifying APM Participant (QP) should not be taken into account for purposes of determining actual expenditures under an alternative payment model and for purposes of determining or rebasing any benchmarks used under the alternative payment model. Thus, we will not include the Advanced APM incentive payments in calculation of the ACOs expenditures. Second, the total per capita expenditures for an ACO’s assigned beneficiary population reflect services that are furnished by ACO providers/suppliers and also by providers and suppliers outside the ACO. As a result, the ACO only supplies a fraction of the services represented in the total per capita expenditures for the ACO’s assigned beneficiaries. Therefore, the net effect of MIPS adjustments on ACO expenditures for the ACO’s assigned beneficiary population, would be variable and often small and would depend on the mix of adjustments affecting the amount of payment for services supplied to ACO assigned beneficiaries by all MIP eligible clinicians, not just services that were supplied by ACO providers/suppliers. Third, the Shared Savings Program regulations provide that individually beneficiary identifiable final payments made under a demonstration, pilot or time limited program will be included in the calculation of Medicare Part A and Part B expenditures for the ACO’s assigned beneficiary population for purposes of establishing the historical benchmark and determining performance year expenditures. CPC+ Model payments are individually beneficiary identifiable final payments VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 made under such a model, and therefore are included in the ACO’s expenditures for purposes of establishing the financial benchmark and calculating performance year expenditures. The CPC+ Model payments and other nonclaims based payments typically represent a small amount of expenditures for a small number of ACO assigned beneficiaries, so the impact of final non-claims based payments on an ACO’s historical benchmark or performance year expenditures is likely to be minimal. Comment: Several commenters expressed concern about the approach to calculating revenue used in determining the loss sharing limits under the BASIC track. These commenters explained that CMS proposed to include hospital add-on payments such as Indirect Medical Education (IME), Disproportionate Share Hospital (DSH), and uncompensated care payments when calculating an ACO’s ACO participant revenue for purposes of determining the loss sharing limit. These commenters pointed out that CMS will exclude these payments when calculating assigned beneficiary expenditures for determining benchmark and performance year expenditures. These commenters urged CMS to exclude addon payments in determining an ACO’s ACO participant revenue as well, suggesting that the proposed approach could penalize ACOs with ACO participants that treat vulnerable populations, including teaching hospitals and those that treat the uninsured population. Response: We discuss related considerations in our discussion of the determination of whether an ACO qualifies as a low revenue ACO or a high revenue ACO in section II.A.5.b. of this final rule. To accurately determine ACO participants’ revenue for purposes of determining a revenue-based loss sharing limit, we explain that it is important to include total revenue uncapped by truncation and to include IME, DSH and uncompensated care payments. As noted earlier in this section and discussed in greater detail in section II.A.5.b, this approach to calculating ACO participant Medicare FFS revenue is different from our approach to calculating benchmark and performance year expenditures for assigned beneficiaries, which we truncate at the 99th percentile of national Medicare FFS expenditures for assignable beneficiaries, and from which we exclude IME, DSH and uncompensated care payments (see subpart G of the program’s regulations). IME, DSH, uncompensated care PO 00000 Frm 00043 Fmt 4701 Sfmt 4700 67857 payments represent resources available to ACO participants to support their operations and offset their costs and potential shared losses, thereby increasing the ACO’s capacity to bear performance-based risk, which we believe should be reflected in the ACO’s loss sharing limit. Excluding such payments could undercount revenue and also could be challenging to implement, particularly truncation, since it likely would require apportioning responsibility for large claims among the ACO participants and non-ACO participants from which the beneficiary may have received the services resulting in the large claims. We therefore decline to modify our approach to determining ACO participant’s total Medicare Parts A and B FFS revenue to include IME, DSH and uncompensated care payments, or to cap claim payment amounts through truncation. For similar reasons, we also decline at this time to make other technical adjustments to calculations of revenue to exclude any other payment adjustments reflected in the claim payment amounts, such as payments under MIPS or the Hospital Value Based Purchasing Program. Final Action: We are finalizing the approach to calculating ACO participants’ Medicare FFS revenue used in the determination of the loss sharing limits under the BASIC track as proposed. 4. Permitting Annual Participation Elections a. Overview Background on our consideration of and stakeholders’ interest in allowing ACOs the flexibility to elect different participation options within their current agreement period is described in section II.A.1. of this final rule. In the August 2018 proposed rule (83 FR 41810 through 41813), we proposed policies to allow ACOs in the BASIC track’s glide path to annually elect to take on higher risk and to allow ACOs in the BASIC track and ENHANCED track to annually elect their choice of beneficiary assignment methodology (either preliminary prospective assignment with retrospective reconciliation or prospective assignment). b. Permitting Election of Differing Levels of Risk Within the BASIC Track’s Glide Path In the August 2018 proposed rule (83 FR 41810 through 41813), we proposed to incorporate additional flexibility in participation options by allowing ACOs E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67858 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations that enter an agreement period under the BASIC track’s glide path an annual opportunity to elect to enter higher levels of performance-based risk within the BASIC track within their agreement period. This flexibility would be important for ACOs entering the glide path under either the one-sided model (Level A or Level B) or the lowest level of risk (Level C) that may seek to transition more quickly to higher levels of risk and potential reward. (We note that an ACO entering the glide path at Level D would be automatically transitioned to Level E in the following year, and an ACO that enters the glide path at Level E must remain at this level for the duration of its agreement period and any subsequent agreement period under the BASIC track, if eligible.) In developing the proposed policy, we considered that an ACO under performance-based risk has the potential to induce more meaningful systematic change in providers’ and suppliers’ behavior. We also considered that an ACO’s readiness for greater performance-based risk may vary depending on a variety of factors, including the ACO’s experience with the program (for example, in relation to its elected beneficiary assignment methodology, composition of ACO participants, and benchmark value) and its ability to coordinate care and carry out other interventions to improve quality and financial performance. Lastly, we considered that an ACO may seek to more quickly take advantage of the features of higher levels of risk and potential reward within the BASIC track’s glide path, including: Potential for greater shared savings; increased ability for participating physicians and practitioners to furnish telehealth services as provided under section 1899(l) of the Act, use of a SNF 3-day rule waiver, and the opportunity to establish a CMS-approved beneficiary incentive program (described in sections II.B and II.C. of this final rule); and the opportunity to participate in an Advanced APM under the Quality Payment Program after progressing to Level E of the BASIC track’s glide path. We explained that restricting ACOs from moving from the BASIC track to the ENHANCED track within their current agreement period would protect the Trust Funds. This would guard against selective participation in a financial model with the highest potential level of reward while the ACO remains subject to a benchmark against which it is very confident of its ability to generate shared savings. However, under the proposal to eliminate the sitout period for re-entry into the program after termination (see discussion in VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 section II.A.5.c. of this final rule), an ACO (such as a BASIC track ACO) may terminate its participation agreement and quickly enter a new agreement period under a different track, if eligible (such as the ENHANCED track). We proposed to add a new section of the Shared Savings Program regulations at § 425.226 to govern annual participation elections. Specifically, we proposed to allow an ACO in the BASIC track’s glide path to annually elect to accept higher levels of performancebased risk, available within the glide path, within its current agreement period. We proposed that the annual election for a change in the ACO’s level of risk and potential reward must be made in the form and manner, and according to the timeframe, established by CMS. We also proposed that an ACO executive who has the authority to legally bind the ACO must certify the election to enter a higher level of risk and potential reward within the agreement period. We proposed that the ACO must meet all applicable requirements for the newly selected level of risk, which in the case of ACOs transitioning from a one-sided model to a two-sided model include establishing an adequate repayment mechanism and electing the MSR/MLR that will apply for the remainder of their agreement period under performance-based risk. (See section II.A.6. of this final rule for a detailed discussion of these requirements.) We proposed that the ACO must elect to change its participation option before the start of the performance year in which the ACO wishes to begin participating under a higher level of risk and potential reward. We envisioned that the timing of an ACO’s election would generally follow the timing of the Shared Savings Program’s application cycle. The ACO’s participation in the newly selected level of risk and potential reward, if approved, would be effective at the start of the next performance year. In subsequent years, the ACO may again choose to elect a still higher level of risk and potential reward (if a higher risk/ reward option is available within the glide path). Otherwise, the automatic transition to higher levels of risk and potential reward in subsequent years would continue to apply to the remaining years of the ACO’s agreement period in the glide path. We also proposed related changes to § 425.600 to reflect the opportunity for ACOs in the BASIC track’s glide path to transition to higher risk and potential reward during an agreement period. For example, if an eligible ACO enters the glide path in year 1 at Level A (onesided model) and elects to enter Level PO 00000 Frm 00044 Fmt 4701 Sfmt 4700 D (two-sided model) for year 2, the ACO would automatically transition to Level E (highest level of risk/reward under the BASIC track) for year 3, and would remain in Level E for year 4 and year 5 of the agreement period. We note that ACOs starting in the BASIC track’s glide path for an agreement period beginning on July 1, 2019, could elect to enter a higher level of risk/reward within the BASIC track in advance of the performance year beginning on January 1, 2020. In general, we wish to clarify that the proposal to allow ACOs to elect to transition to higher levels risk and potential reward within an agreement period in the BASIC track’s glide path would not alter the timing of benchmark rebasing under the proposed new section of the regulations at § 425.601. For example, if an ACO participating in the BASIC track’s glide path transitions to a higher level of risk and potential reward during its agreement period, the ACO’s historical benchmark would not be rebased as a result of this change. We would continue to assess the ACO’s financial performance using the historical benchmark established at the start of the ACO’s current agreement period, as adjusted and updated consistent with the benchmarking methodology under the proposed new provision at § 425.601. Comment: Overall, commenters supported CMS’ proposal to permit an annual opportunity to elect to enter higher levels of performance-based risk, if available, within the BASIC track within an ACO’s agreement period. One commenter suggested this is a good policy for CMS because it allows CMS to achieve its goal of shifting more ACOs into higher levels of risk. The commenter also suggested it is a good policy for ACOs because it gives them greater flexibility. Some commenters proposed allowing an ACO that elected to advance to a higher level early to remain at the higher level until it reaches the PY when it would have automatically advanced to the next successive level, absent the ACO’s election to advance more quickly than the glide path required. A few commenters supported the proposal to allow annual election of risk and skipping to higher levels, but encouraged CMS to allow ACOs to glide backward and select a lower level of risk if they jumped ahead and their losses exceeded their MLR for the level they skipped or if the ACO found that it was not ready to bear risk. Commenters suggested this added flexibility would encourage ACOs to experiment with risk as commenters suggested that CMS intended. E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations Response: We appreciate the commenters’ suggestions related to options for ACOs to elect varying levels of risk along the glide path. As we have discussed in this final rule, we believe there are incentives for increased efficiency when ACOs are in a twosided risk track. Our goal continues to be to advance ACOs to taking on higher levels of risk. Our experience with the Track 1+ Model has shown that ACOs are willing to accept the amount of risk in Level E of the BASIC track. ACOs should evaluate whether they are able to undertake greater risk before electing to move to a higher level of risk and ensure that the ACO has the operational capabilities in place to assume higher risk. Therefore, we decline to adopt these suggestions and are finalizing the glide path that transitions ACOs to higher levels of risk throughout the agreement period. Comment: Several commenters suggested that ACOs be allowed to move from the BASIC track to the ENHANCED track within their agreement period. One commenter proposed that CMS allow ACOs to jump BASIC levels to the ENHANCED track without an application process, asserting that this policy would create unnecessary administrative burden. Another commenter recommended removal of restrictions preventing ACOs that begin at the BASIC track’s Level E from moving up to the ENHANCED track without an interruption to their existing participation agreement or the redetermination of benchmarks. The commenter explained its preference that all levels of gainsharing and risk assumption be on a single platform to facilitate the continuous movement to higher levels of risk and potential reward. One commenter seemed to suggest an alternative approach to allow low revenue ACOs and high revenue ACOs to transition from the BASIC track to the ENHANCED track within a single agreement period, and then potentially return to the BASIC track if they discovered that they were unprepared to take on the higher level of risk. Response: As noted in the preamble, we continue to believe it is protective of the Trust funds to restrict ACOs from moving from the BASIC track to the ENHANCED track within the ACO’s current agreement period. This would guard against selective participation in a financial model with the highest potential level of reward while the ACO remains subject to a benchmark against which it is very confident of its ability to generate savings. We decline at this time to accept commenters’ suggestions to allow the flexibility for ACOs to move between the levels of risk and reward VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 under the ENHANCED track and the BASIC track within a single agreement period. ACOs seeking to make this transition could elect to terminate their participation agreement under the BASIC track and ‘‘renew early’’ to enter the ENHANCED (see discussion in section II.A.5.c of this final rule), for example, which would result in rebasing of the ACO’s historical benchmark. We did not receive any comments on our proposals requiring: (1) Annual election of the change in the ACO’s level of risk and potential reward in the form and manner, and according to the timeframe, established by CMS; (2) certification by an ACO executive who has the authority to legally bind the ACO of any election to enter a higher level of risk and potential reward within the agreement period; (3) the ACO to meet all applicable requirements for the newly selected level of risk, which in the case of ACOs transitioning from a one-sided model to a two-sided model include establishing an adequate repayment mechanism and electing the MSR/MLR that will apply for the remainder of the ACO’s agreement period under performance-based risk; or (4) the ACO to elect to change its participation option before the start of the performance year in which the ACO wishes to begin participating under a higher level of risk and potential reward, if available (generally following the timing of the Shared Savings Program’s application cycle). Final Action: After considering the comments concerning the annual election of differing levels of risk along the BASIC track’s glide path, we are finalizing the policies as proposed. Specifically, we are finalizing policies to allow an ACO in the BASIC track’s glide path to annually elect to accept higher levels of performance-based risk, available within the glide path, within its current agreement period. If an ACO decides to elect a higher level of performance-based risk during their agreement period, it will make the election in the form and manner specified by CMS. Additionally, we are finalizing the requirement that ACOs must meet all applicable requirements for the newly selected level of risk, which in the case of ACOs transitioning from a one-sided model to a two-sided model include establishing an adequate repayment mechanism and electing the MSR/MLR that will apply for the remainder of their agreement period under performance-based risk. Accordingly, we are finalizing as proposed the new § 425.226 and related changes at § 425.600. PO 00000 Frm 00045 Fmt 4701 Sfmt 4700 67859 c. Permitting Annual Election of Beneficiary Assignment Methodology Section 1899(c)(1) of the Act, as amended by section 50331 of the Bipartisan Budget Act, provides that the Secretary shall determine an appropriate method to assign Medicare FFS beneficiaries to an ACO based on utilization of primary care services furnished by physicians in the ACO and, in the case of performance years beginning on or after January 1, 2019, services provided by a FQHC or RHC. The provisions of section 1899(c) of the Act govern beneficiary assignment under all tracks of the Shared Savings Program. Although, to date, we have designated which beneficiary assignment methodology will apply for each track of the Shared Savings Program, section 1899(c) of the Act (including as amended by the Bipartisan Budget Act) does not expressly require that the beneficiary assignment methodology be determined by track. Under the Shared Savings Program regulations, we have established two claims-based beneficiary assignment methods (prospective assignment and preliminary prospective assignment with retrospective reconciliation) that currently apply to different program tracks, as well as a non-claims based process for voluntary alignment (discussed in section II.E.2. of the August 2018 proposed rule) that applies to all program tracks and is used to supplement claims-based assignment. The regulations governing the assignment methodology under the Shared Savings Program are in 42 CFR part 425, subpart E. In the November 2011 final rule, we adopted a claimsbased hybrid approach (called preliminary prospective assignment with retrospective reconciliation) for assigning beneficiaries to an ACO (76 FR 67851 through 67870), which is currently applicable to ACOs participating under Track 1 or Track 2 of the Shared Savings Program (except for Track 1 ACOs that are also participating in the Track 1+ Model for which we use a prospective assignment methodology in accordance with our authority under section 1115A of the Act). Under this approach, beneficiaries are preliminarily assigned to an ACO, based on a two-step assignment methodology, at the beginning of a performance year and quarterly thereafter during the performance year, but final beneficiary assignment is determined after the performance year based on where beneficiaries chose to receive the plurality of their primary care services during the performance year. Subsequently, in the June 2015 E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67860 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations final rule, we implemented an option for ACOs to participate in a new performance-based risk track, Track 3 (80 FR 32771 through 32781). Under Track 3, beneficiaries are prospectively assigned to an ACO at the beginning of the performance year using the same two-step methodology used in the preliminary prospective assignment approach, based on where the beneficiaries have chosen to receive the plurality of their primary care services during a 12-month assignment window offset from the calendar year that reflects the most recent 12 months for which data are available prior to the start of the performance year. The ACO is held accountable for beneficiaries who are prospectively assigned to it for the performance year. Under limited circumstances, a beneficiary may be excluded from the prospective assignment list, such as if the beneficiary enrolls in MA during the performance year or no longer lives in the United States or U.S. territories and possessions (as determined based on the most recent available data in our beneficiary records regarding residency at the end of the performance year). Finally, in the CY 2017 PFS final rule (81 FR 80501 through 80510), we augmented the claims-based beneficiary assignment methodology by finalizing a policy under which beneficiaries, beginning in 2017 for assignment for performance year 2018, may voluntarily align with an ACO by designating a ‘‘primary clinician’’ (referred to as a ‘‘main doctor’’ in the prior rulemaking) they believe is responsible for coordinating their overall care using MyMedicare.gov, a secure, online, patient portal. Notwithstanding the assignment methodology in § 425.402(b), beneficiaries who designate an ACO professional whose services are used in assignment as responsible for their overall care will be prospectively assigned to the ACO in which that ACO professional participates, provided the beneficiary meets the eligibility criteria established at § 425.401(a) and is not excluded from assignment by the criteria in § 425.401(b), and has had at least one primary care service during the assignment window with an ACO professional in the ACO who is a primary care physician or a physician with one of the primary specialty designations included in § 425.402(c). Such beneficiaries will be added prospectively to the ACO’s list of assigned beneficiaries for the subsequent performance year. See section V.B.2.b. of the November 2018 final rule for a discussion of the new VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 provisions regarding voluntary alignment added to section 1899(c) of the Act by section 50331 of the Bipartisan Budget Act, and our related proposed regulatory changes. Section 50331 of the Bipartisan Budget Act specifies that, for agreement periods entered into or renewed on or after January 1, 2020, ACOs in a track that provides for retrospective beneficiary assignment will have the opportunity to choose a prospective assignment methodology, rather than the retrospective assignment methodology, for the applicable agreement period. The Bipartisan Budget Act incorporates this requirement as a new provision at section 1899(c)(2)(A) of the Act. In the August 2018 proposed rule (83 FR 41811 through 41813), we proposed to implement this provision of the Bipartisan Budget Act to provide all ACOs with a choice of prospective assignment for agreement periods beginning on July 1, 2019, and in subsequent years. We also proposed to incorporate additional flexibility into the beneficiary assignment methodology consistent with the Secretary’s authority under section 1899(c)(1) of the Act to determine an appropriate beneficiary assignment methodology. We do not believe that section 1899(c) of the Act, as amended by the Bipartisan Budget Act, requires that we must continue to specify the applicable beneficiary assignment methodology for each track of the Shared Savings Program. Although section 1899(c)(2)(A) of the Act now provides that ACOs must be permitted to choose prospective assignment for each agreement period, we do not believe this requirement limits our discretion to allow ACOs the additional flexibility to change beneficiary assignment methodologies more frequently during an agreement period. As summarized in section II.A.1. of this final rule and as described in detail in earlier rulemaking, commenters have urged us to allow greater flexibility for ACOs to select their assignment methodology. Accordingly, we proposed an approach that separates the choice of beneficiary assignment methodology from the choice of participation track (financial model), and that allows ACOs to make an annual election of assignment methodology. Such an approach would afford greater flexibility for ACOs to choose between assignment methodologies for each year of the agreement period, without regard to their participation track. Consistent with the requirements of the Bipartisan Budget Act, we will offer all Shared Savings Program ACOs the opportunity PO 00000 Frm 00046 Fmt 4701 Sfmt 4700 to select their assignment methodology annually, starting with agreement periods beginning on July 1, 2019. As an approach to meeting the requirements of the Bipartisan Budget Act while building on them to offer greater flexibility, we proposed to offer ACOs entering agreement periods in the BASIC track or ENHANCED track, beginning on July 1, 2019 and in subsequent years, the option to choose either prospective assignment or preliminary prospective assignment with retrospective reconciliation, prior to the start of their agreement period (at the time of application). We also proposed to provide an opportunity for ACOs to switch their selection of beneficiary assignment methodology on an annual basis. As we explained in the August 2018 proposed rule, under this approach, in addition to the requirement under the Bipartisan Budget Act that ACOs be permitted to change from retrospective assignment to prospective assignment, an ACO would have the added flexibility to change from prospective assignment to preliminary prospective assignment with retrospective reconciliation. As an additional flexibility that further builds on the Bipartisan Budget Act, ACOs would be allowed to retain the same beneficiary assignment methodology for an entire agreement period or to change the methodology annually. An individual ACO’s preferred choice of beneficiary assignment methodology may vary depending on the ACO’s experience with the two assignment methodologies used under the Shared Savings Program. Therefore, this proposed approach implements the requirements of the Bipartisan Budget Act and will also be responsive to stakeholders’ suggestions that we allow additional flexibility around choice of beneficiary assignment methodology to facilitate ACOs’ transition to performance-based risk (as discussed earlier in this section). Further, allowing this additional flexibility for choice of beneficiary assignment methodology within the proposed BASIC track and ENHANCED track would enable ACOs to select a combination of participation options that would overlap with certain features of Track 2, and thus lessen the need to maintain Track 2 as a separate participation option. Accordingly, as discussed in section II.A.2. of this final rule, we proposed to discontinue Track 2. Finally, we believed it would be appropriate and reasonable to start offering the choice of beneficiary assignment to ACOs in the BASIC track or ENHANCED track for agreement periods beginning on July 1, 2019, and E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations in subsequent years, in order to align with the availability of these two tracks under the proposed redesign of the Shared Savings Program. In the August 2018 proposed rule, we proposed that, in addition to choosing the track to which it is applying, an ACO would choose the beneficiary assignment methodology at the time of application to enter or re-enter the Shared Savings Program or to renew its participation for another agreement period. If the ACO’s application is accepted, the ACO would remain under that beneficiary assignment methodology for the duration of its agreement period, unless the ACO chooses to change the beneficiary assignment methodology through the annual election process. We also proposed that the ACO must indicate its desire to change assignment methodology before the start of the performance year in which it wishes to begin participating under the alternative assignment methodology. The ACO’s selection of a different assignment methodology would be effective at the start of the next performance year, and for the remaining years of the agreement period, unless the ACO again chooses to change the beneficiary assignment methodology. For example, if an ACO selects preliminary prospective assignment with retrospective reconciliation at the time of its application to the program for an agreement period beginning on July 1, 2019, this methodology would apply in the ACO’s first performance year (6month performance year from July 1, 2019, through December 31, 2019) and all subsequent performance years of its agreement period, unless the ACO selects prospective assignment in advance of the start of performance year 2020, 2021, 2022, 2023, or 2024. To continue this example, during its first performance year, the ACO would have the option to select prospective assignment to be applicable beginning with performance year 2020. If selected, this assignment methodology would continue to apply unless the ACO again selects a different methodology. We proposed to incorporate the requirements governing the ACO’s initial selection of beneficiary assignment methodology and the annual opportunity for an ACO to notify CMS that it wishes to change its beneficiary assignment methodology within its current agreement period, in a new section of the Shared Savings Program regulations at § 425.226 along with the other annual elections described elsewhere in this final rule. We proposed that the initial selection of, and any annual selection for a change VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 in, beneficiary assignment methodology must be made in the form and manner, and according to the timeframe, established by CMS. We also proposed that an ACO executive who has the authority to legally bind the ACO must certify the selection of beneficiary assignment methodology for the ACO. We envision that the timing of this opportunity for an ACO to change assignment methodology would generally follow the Shared Savings Program’s application cycle. For consistency, we also proposed to make conforming changes to regulations that currently identify assignment methodologies according to program track. Specifically, we proposed to revise §§ 425.400 and 425.401 (assignment of beneficiaries), § 425.702 (aggregate reports) and § 425.704 (beneficiary-identifiable claims data) to reference either preliminary prospective assignment with retrospective reconciliation or prospective assignment instead of referencing the track to which a particular assignment methodology applies (currently Track 1 and Track 2, or Track 3, respectively). We clarified that this proposal would have no effect on the voluntary alignment process under § 425.402(e). Because beneficiaries may voluntarily align with an ACO through their designation of a ‘‘primary clinician,’’ and eligible beneficiaries will be prospectively assigned to that ACO regardless of the ACO’s track or claimsbased beneficiary assignment methodology, an ACO’s choice of claims-based assignment methodology under this proposal would not alter the voluntary alignment process. As part of the proposed approach to allow ACOs to elect to change their assignment methodology within their agreement period, we also proposed to adjust the ACO’s historical benchmark to reflect the ACO’s election of a different assignment methodology. Section 1899(d)(1)(B)(ii) of the Act addresses how ACO benchmarks are to be established. This provision specifies that the Secretary shall estimate a benchmark for each agreement period for each ACO using the most recent available 3 years of per beneficiary expenditures for Parts A and B services for Medicare FFS beneficiaries assigned to the ACO. Such benchmark shall be adjusted for beneficiary characteristics and such other factors as the Secretary determines appropriate. As we explained in earlier rulemaking, we currently use differing assignment windows to determine beneficiary assignment for the benchmark years and performance years, according to the ACO’s track and PO 00000 Frm 00047 Fmt 4701 Sfmt 4700 67861 the beneficiary assignment methodology used under that track. The assignment window for ACOs under prospective assignment is a 12-month period off-set from the calendar year, while for ACOs under preliminary prospective assignment with retrospective reconciliation, the assignment window is the 12-month period based on the calendar year (see 80 FR 32699, and 80 FR 32775 through 32776). However, for all ACOs, the claims used to determine the per capita expenditures for a benchmark or performance year are the claims for services furnished to assigned beneficiaries from January 1 through December 31 of the calendar year that corresponds to the applicable benchmark or performance year (see for example, 79 FR 72812 through 72813, see also 80 FR 32776 through 32777). We explained that this approach removes actuarial bias between the benchmarking and performance years for assignment and financial calculations, since the same method would be used to determine assignment and the financial calculations for each benchmark and performance year. Further, basing the financial calculations on the calendar year would be necessary to align with actuarial analyses with respect to risk score calculations and other data inputs based on national FFS expenditures used in program financial calculations, which are determined on a calendar year basis (79 FR 72813). To maintain symmetry between the benchmark and performance year calculations it would be necessary to adjust the benchmark for ACOs that change beneficiary assignment methodology within their current agreement period to reflect changes in beneficiary characteristics due to the change in beneficiary assignment methodology, as provided in section 1899(d)(1)(B)(ii) of the Act. For example, if an ACO were to elect to change its applicable beneficiary assignment methodology during its initial agreement period from preliminary prospective assignment with retrospective reconciliation to prospective assignment, we would adjust the ACO’s historical benchmark for the current agreement period to reflect the expenditures of beneficiaries that would have been assigned to the ACO during the benchmark period using the prospective assignment methodology, instead of the expenditures of the beneficiaries assigned under the preliminary prospective assignment methodology that were used to establish the benchmark at the start of the agreement period. Therefore, we proposed to E:\FR\FM\31DER2.SGM 31DER2 67862 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations khammond on DSK30JT082PROD with RULES2 specify in the proposed new section of the regulations at § 425.601 that would govern establishing, adjusting, and updating the benchmark for all agreement periods beginning on July 1, 2019, and in subsequent years, that we will adjust an ACO’s historical benchmark to reflect a change in the ACO’s beneficiary assignment methodology within an agreement period. However, any adjustment to the benchmark to account for a change in the ACO’s beneficiary assignment methodology would not alter the timing of benchmark rebasing under § 425.601; the historical benchmark would not be rebased as a result of a change in the ACO’s beneficiary assignment methodology. We sought comment on these proposals. Comment: Generally, commenters were supportive of the proposal implementing section 1899(c)(2)(A) of the Act, as added by the Bipartisan Budget Act, to allow all ACOs a choice of prospective assignment for agreement periods beginning on July 1, 2019, and in subsequent performance years. They also supported CMS’ proposal to exercise its discretion to separate the choice of assignment methodology from the choice of participation track (financial model) and provide ACOs with additional flexibility to change beneficiary assignment methodologies annually. Commenters praised these proposals and provided various rationale for their support, stating that the annual choice of assignment methodology for all ACOs: • Removes challenges caused by uncertainty of preliminary prospective beneficiary assignment with retrospective reconciliation, for ACOs that would be newly free to select prospective assignment. • Offers some much-needed stability and allows for the appropriate allocation of ACOs’ finite resources, for ACOs that would be newly free to select prospective assignment. • Assists ACOs in planning and designing care management strategies. • Assists ACOs that, for care-driven reasons, may find it difficult to adopt one methodology versus another. • Provides ACOs with more flexibility to manage their patient populations based on their unique circumstances, care model, and ability to taken on risk for the total cost of care. • Equals the playing field between different types of ACOs. • Serves to increase ACO entity interest and participation in the program. One commenter that generally supported the proposal additionally suggested that CMS should provide accurate and timely reporting (for example, year-to-year performance comparisons based on the selected assignment methodology) so ACOs can VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 analyze trends and results in a timely manner and be in a position to make an annual determination. A few commenters offered alternatives to CMS’ proposal. One commenter encouraged CMS to develop an approach that offers only preliminary prospective assignment with retrospective reconciliation so providers can target high-risk patients for care management throughout the program period. The commenter asserted that this would improve accuracy at the end of the year because ACOs would likely be held accountable for the patients they coordinated care for during the performance year. One ACO commenter supported the annual option of prospective or preliminary prospective assignment and requested that the option chosen have no effect on the shared savings rate for ENHANCED track ACOs (a maximum of 75 percent). One commenter recommended that the choice of assignment only be exercised once during the term of the participation agreement to prevent ongoing gaming of the system by switching attribution models based upon financial arbitrage rather than focusing on care redesign. Finally, a commenter was concerned about the effect of late reporting on the selection of assignment methodology. Response: CMS appreciates the enthusiasm of the commenters and the overwhelming support received. In this final rule, and consistent with Section 1899(c)(2)(a) of the Act, we are providing ACOs flexibility in their choice of beneficiary assignment methodology. We agree that timely reporting and data collection are crucial for ACOs to make an informed assignment selection; and under § 425.702, we provide ACOs with aggregate quarterly reports that identify prospective and preliminary prospective assigned beneficiaries as well as utilization and expenditure data. Under § 425.704, we provide ACOs with monthly claim and claim line feed files. We provide the aggregate reports and monthly claim and claim line feed files to provide ACOs with data to aid them in making informed decisions regarding their participation in the program. We believe this information will may help them determine the assignment methodology that best suits their ACO and ACO participants. We confirm that an ACO’s annual beneficiary assignment election has no effect on the maximum 75 percent shared savings rate for ENHANCED track ACOs. We disagree with one of the commenter’s assertion that the election should only occur once during the contract term to prevent PO 00000 Frm 00048 Fmt 4701 Sfmt 4700 gaming by switching attribution models based on financial arbitrage. We believe the flexibility will allow ACOs to determine the best assignment methodology for their unique organizational structure. We do not believe that allowing ACOs to change their assignment methodology on an annual basis provides a gaming opportunity; we will continue to determine assignment based upon where beneficiaries receive the plurality of their primary care services and whether beneficiaries have designated an ACO professional as their primary clinician, responsible for their overall care, and hold ACOs accountable for the resulting assigned beneficiary population. Although we recognize that, for some ACOs, there may be some financial impact, since the choice of assignment may change the ACO’s historical benchmark and subsequently impact expenditure calculations, we believe that the program-wide impact will be minimal. Thus, we are finalizing as proposed the opportunity for ACOs to select the applicable assignment methodology annually. Comment: Several commenters sought clarification on CMS’ proposal and recommended that CMS clarify the following: • What the process will be for assignment and what communications would be involved; • When would the ACOs election of beneficiary assignment methodology occur and the process for the election to be made (would this occur during the annual certification process or as a separate process); • Is the ACO required to make an election every year or would they continue in the same methodology unless they make a proactive selection each year; • How the preliminary prospective with retrospective reconciliation versus prospective methodology would impact shared savings and shared losses calculations; • Whether there will be full disclosure to beneficiaries upon assignment to an ACO and expectations as to the network of providers; • Whether assigned beneficiaries can receive care outside of an ACO at any given time; and • Process for beneficiaries to opt-out of assignment. Response: CMS plans to align the annual selection of an assignment methodology (preliminary prospective with retrospective reconciliation or prospective assignment) with the application cycle. During this period, an ACO may either retain or change its current assignment selection that would become effective at the beginning of the next performance year. We are planning on automating the assignment methodology selection and will provide E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations further clarification in sub-regulatory guidance on the assignment selection process. As proposed, ACOs may select the assignment methodology that CMS employs for assignment of beneficiaries, ACOs are not required to make an election each year. CMS is establishing a system and process so that we can quickly and accurately execute ACOs’ assignment methodology changes. We want to emphasize that 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 practitioners from whom they receive covered services, nor will the policy allowing ACOs to annually choose an assignment methodology have any effect on the voluntary alignment process under § 425.402(e). Concerning the impact of an ACO changing their assignment methodology during an agreement period, we note the program’s calculations for establishing historical benchmarks and performance year reconciliation are performed consistently across all ACOs participating in the Shared Savings Program. We do not modify our benchmark year or performance year calculations based upon the assignment methodology. In addition, as explained in section II.C.3.a, we are modifying our proposed revisions to the current beneficiary notice requirements at § 425.312 to require each ACO or its ACO participants to provide each beneficiary with a standardized written notice that explains that the ACO’s providers/ suppliers are participating in the Shared Savings Program. The ACO or its ACO participant would be required to provide this notice prior to or at the beneficiary’s first primary care visit of each performance year in the form and manner that we specify in subregulatory guidance. We anticipate that the template notice will explain what an ACO provider or supplier’s participation in an ACO means for the beneficiary’s care and that the beneficiary has the right to receive care from any provider or supplier that accepts Medicare. ACOs and ACO participants may also provide additional information that they have determined to be useful when notifying beneficiaries about their participation in an ACO, consistent with the marketing requirements at § 425.310. The Shared Savings Program voluntary alignment methodology (§ 425.402(e)) allows beneficiaries to designate their primary clinician on MyMedicare.gov. Under the revisions to VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 the voluntary alignment methodology that were finalized in the November 2018 final rule (83 FR 59960), if a beneficiary selects an ACO professional as their primary clinician, the beneficiary will be prospectively assigned to the ACO, unless the beneficiary has been aligned to an entity participating in a model tested or expanded under section 1115A of the Act under which claims-based assignment is based solely on claims for services other than primary care services and for which there has been a determination by the Secretary that waiver of the requirement in section 1899(c)(2)(B) of the Act is necessary solely for purposes of testing the model. If a beneficiary determines that he/she does not want to be assigned to an ACO, the beneficiary may log into MyMedicare.gov and designate a clinician that is not participating in an ACO as their primary clinician. Beneficiaries assigned to an ACO remain free to seek services wherever they choose, and assignment results only from a beneficiary’s exercise of that free choice by seeking and receiving services from ACO participants or by selecting a primary clinician who is participating in the ACO on MyMedicare.gov. Comment: One commenter agreed with CMS’ proposal for all agreement periods beginning on July 1, 2019, and in subsequent performance years, to adjust the ACO’s historical benchmark to reflect a change in the ACO’s beneficiary assignment methodology within the agreement period. However, the commenter sought further clarification on how an ACO would determine what impacts an assignment methodology change would have on its performance. Response: We note that under our proposed approach of allowing choice of beneficiary assignment methodology, the populations used to determine benchmark and performance year assignment would vary based on the ACO’s assignment methodology selection, however the benchmark calculations and calculations for determining savings and losses would be the same. Additionally, we provide ACOs with aggregate reports (see § 425.702) to help them trend their performance year over year. When looking at a similar length of time (for example, 12 months) ACOs can compare their performance from one year to the next. We believe there are other changes ACOs voluntarily make from year to year that may pose greater difficulty in terms of comparing ACO performance between performance years, such as PO 00000 Frm 00049 Fmt 4701 Sfmt 4700 67863 annual changes to the ACO participant list. Final Action: After considering the comments concerning our proposals to allow ACOs to annually elect their beneficiary assignment methodology, we are finalizing the proposal as proposed. Specifically, we will offer ACOs entering agreement periods in the BASIC track or ENHANCED track, beginning July 1, 2019 and in subsequent years, the option to choose either prospective assignment or preliminary prospective assignment with retrospective reconciliation, prior to the start of their agreement period (at the time of application). We will also provide an opportunity for ACOs to switch their selection of beneficiary assignment methodology on an annual basis. We are finalizing as proposed the new section at § 425.226. Additionally, we are finalizing as proposed the conforming changes at §§ 425.400 and 425.401 (assignment of beneficiaries), § 425.702 (aggregate reports) and § 425.704 (beneficiary-identifiable claims data) to reference either preliminary prospective assignment with retrospective reconciliation or prospective assignment instead of referencing the track to which a particular assignment methodology applies. 5. Determining Participation Options Based on Medicare FFS Revenue and Prior Participation a. Overview In the August 2018 proposed rule (83 FR 41813 through 41836), we described considerations related to, and proposed policies for, distinguishing among ACOs based on their degree of control over total Medicare Parts A and B FFS expenditures for their assigned beneficiaries by identifying low revenue ACOs versus high revenue ACOs, experience of the ACO’s legal entity and ACO participants with the Shared Savings Program and performance-based risk Medicare ACO initiatives, and prior performance in the Shared Savings Program. Based on operational experience and considerations related to our proposal to extend the length of an agreement period under the program from 3 to not less than 5 years for agreement periods beginning on July 1, 2019 and in subsequent years, we identified the following programmatic areas for further policy development. First, differentiating between ACOs based on their degree of control over total Medicare Parts A and B FFS expenditures for their assigned beneficiaries would allow us to transition high revenue ACOs more E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67864 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations quickly to higher levels of performancebased risk under the ENHANCED track, rather than remaining in a lower level of risk under the BASIC track. We stated our aim to drive more meaningful systematic change in high revenue ACOs which have greater potential to control total Medicare Parts A and B FFS expenditures for their assigned beneficiaries and in turn the potential to drive significant change in spending and coordination of care for assigned beneficiaries across care settings. We also aimed to encourage continued participation by low revenue ACOs, which control a smaller proportion of total Medicare Parts A and B FFS expenditures for their assigned beneficiaries, and thus may be encouraged to continue participation in the program by having additional time under the BASIC track’s revenue-based loss sharing limits (capped at a percentage of benchmark) before transitioning to the ENHANCED track. Second, differentiating between ACOs that are experienced and inexperienced with performance-based risk Medicare ACO initiatives to determine their eligibility for participation options would allow us to prevent experienced ACOs from taking advantage of options designed for inexperienced ACOs, namely lower levels of performancebased risk. Third, it would be timely to clarify the differences between ACOs applying to renew their participation agreements and ACOs applying to re-enter the program after a break in participation, and to identify new ACOs as re-entering ACOs if greater than 50 percent of their ACO participants have recent prior participation in the same ACO in order to hold these ACOs accountable for their ACO participants’ experience with the program. We stated our aim to provide a more consistent evaluation of these ACOs’ prior performance in the Shared Savings Program at the time of reapplication. We also aimed to update policies to identify the agreement period an ACO is entering into for purposes of benchmark calculations and quality performance requirements that phase-in as the ACO gains experience in the program, as appropriate for renewing ACOs, re-entering ACOs, and new program entrants. Fourth, and lastly, we believed it would be appropriate to modify the evaluation criteria for prior quality performance to be relevant to ACOs’ participation in longer agreement periods and introduce a monitoring approach for and evaluation criterion related to financial performance to prevent underperforming ACOs from remaining in the program. VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 b. Differentiating Between Low Revenue ACOs and High Revenue ACOs In section II.A.5.b of the August 2018 proposed rule (83 FR 41814 through 41820), we proposed to differentiate between the participation options available to low revenue ACOs and high revenue ACOs, through the following: (1) Proposals for defining ‘‘low revenue ACO’’ and ‘‘high revenue ACO’’ relative to a threshold of ACO participants’ total Medicare Parts A and B FFS revenue compared to total Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries for the same 12 month period; and (2) proposals for establishing distinct participation options for low revenue ACOs and high revenue ACOs, with the availability of multiple agreement periods under the BASIC track as the primary distinction. We also considered approaches to allow greater potential for reward for low revenue ACOs, such as by reducing the MSR ACOs must meet to share in savings during one-sided model years of the BASIC track’s glide path, or allowing higher sharing rates based on quality performance during the first 4 years in the glide path. In this section of this final rule we summarize and respond to comments on the proposed approach to differentiating between low revenue ACOs and high revenue ACOs. We summarize and respond to comments on the proposed MSR for ACOs in one-sided model years of the BASIC track’s glide path in section II.A.6.b of this final rule, including comments on our consideration of applying a different MSR to low revenue ACOs. We summarize and respond to comments on the sharing rate based on quality performance in the BASIC track’s glide path in section II.A.3. of this final rule, including comments on our consideration of applying a different sharing rate to low revenue ACOs. (1) Identifying Low Revenue ACOs and High Revenue ACOs As discussed in the August 2018 proposed rule (83 FR 41814 through 41817), to define low revenue ACOs and high revenue ACOs for purposes of determining ACO participation options, we considered the relationship between an ACO’s degree of control over the Medicare Parts A and B FFS expenditures for its assigned beneficiaries and its readiness to accept higher or lower degrees of performancebased risk. We explained that an ACO’s ability to control the expenditures of its assigned beneficiary population can be gauged by comparing the total Medicare Parts A and B FFS revenue of its ACO PO 00000 Frm 00050 Fmt 4701 Sfmt 4700 participants to total Medicare Parts A and B FFS expenditures of its assigned beneficiary population. Thus, high revenue ACOs, which typically include a hospital billing through an ACO participant TIN, are generally more capable of accepting higher risk, given their control over a generally larger amount of their assigned beneficiaries’ total Medicare Parts A and B FFS expenditures. In contrast, lower risk options could be more suitable for low revenue ACOs, which have control over a smaller amount of their assigned beneficiaries’ total Medicare Parts A and B FFS expenditures. In the Regulatory Impact Analysis of the August 2018 proposed rule (see 83 FR 41917), we described an approach for differentiating low revenue ACOs versus high revenue ACOs that reflects the amount of control ACOs have over total Medicare Parts A and B FFS expenditures for their assigned beneficiaries. Under this analysis, an ACO was identified as low revenue if its ACO participants’ total Medicare Parts A and B FFS revenue for assigned beneficiaries was less than 10 percent of the ACO’s assigned beneficiary population’s total Medicare Parts A and B FFS expenditures. In contrast, an ACO was identified as high revenue if its ACO participants’ total Medicare Parts A and B FFS revenue for assigned beneficiaries was at least 10 percent of the ACO’s assigned beneficiary population’s total Medicare Parts A and B FFS expenditures. As further explained in the Regulatory Impact Analysis of the August 2018 proposed rule (83 FR 41917), nationally, evaluation and management spending accounts for about 10 percent of total Parts A and B per capita spending. Because beneficiary assignment principally is based on allowed charges for primary care services, which are highly correlated with evaluation and management spending, we concluded that identifying low revenue ACOs by applying a 10 percent limit on the ACO participants’ Medicare FFS revenue for assigned beneficiaries in relation to total Medicare Parts A and B expenditures for these beneficiaries would be likely to capture all ACOs that were solely comprised of ACO providers/suppliers billing for Medicare PFS services, and generally exclude ACOs with ACO providers/suppliers that bill for inpatient or other institutional services for their assigned beneficiaries. We considered this approach as an option for distinguishing between low revenue ACOs and high revenue ACOs. However, we explained our concern that this approach does not sufficiently account for ACO participants’ total E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations Medicare Parts A and B FFS revenue (as opposed to their revenue for assigned beneficiaries), and therefore could misrepresent the ACO’s overall risk bearing potential, which would diverge from other aspects of the proposed design of the BASIC track. We believed it would be important to consider ACO participants’ total Medicare Parts A and B FFS revenue for all FFS beneficiaries, not just assigned beneficiaries, as a factor in assessing an ACO’s readiness to accept performance-based risk. The total Medicare Parts A and B FFS revenue of the ACO participants could be indicative of whether the ACO participants, and therefore potentially the ACO, are more or less capitalized. For example, ACO participants with high levels of total Medicare Parts A and B FFS revenue are presumed to be better capitalized, and may be better positioned to contribute to repayment of any shared losses owed by the ACO. Further, the proposed methodologies for determining the loss sharing limit under the BASIC track (see section II.A.3. of the August 2018 proposed rule (83 FR 41801 through 41810)) and the estimated repayment mechanism values for BASIC track ACOs (see section II.A.6.c. of the August 2018 proposed rule (83 FR 41840 through 41842)), included a comparison of a specified percentage of ACO participants’ total Medicare Parts A and B FFS revenue for all Medicare FFS beneficiaries to a percentage of the ACO’s updated historical benchmark expenditures for its assigned beneficiary population. Accordingly, we proposed that if ACO participants’ total Medicare Parts A and B FFS revenue exceeds a specified threshold of total Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries, the ACO would be considered a high revenue ACO, while ACOs with a percentage less than the threshold amount would be considered a low revenue ACO. In determining the appropriate threshold, we considered our claims-based analysis comparing estimated revenue and benchmark values for Track 1+ Model applicants (see 83 FR 41807 through 41808). We believed setting the threshold at 25 percent would tend to categorize ACOs that include institutional providers as ACO participants or as ACO providers/ suppliers billing through the TIN of an ACO participant, as high revenue because their ACO participants’ total Medicare Parts A and B FFS revenue would likely significantly exceed 25 percent of total Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries. Among Track 1+ VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 Model ACOs that self-reported as eligible for the Model’s benchmarkbased loss sharing limit because of the presence of an ownership or operational interest by an IPPS hospital, cancer center or rural hospital with more than 100 beds among their ACO participants, we compared estimated total Medicare Parts A and B FFS revenue for ACO participants to estimated total Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries. We found that self-reported composition and high revenue determinations made using the 25 percent threshold were in agreement for 96 percent of ACOs. For two ACOs, the proposed approach would have categorized the ACOs as low revenue ACOs and therefore allowed for a potentially lower loss sharing limit than the self-reported method. We believed small, physician-only and rural ACOs would tend to be categorized as low revenue ACOs because their ACO participants’ total Medicare Parts A and B FFS revenue would likely be significantly less than total Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries. Among Track 1+ Model ACOs that self-reported to be eligible for the Model’s revenue-based loss sharing limit because of the absence of an ownership or operational interest by the previously described institutional providers among their ACO participants, we compared estimated total Medicare Parts A and B FFS revenue for ACO participants to estimated total Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries. We found the self-reported composition and low revenue determinations made using the 25 percent threshold were in agreement for 88 percent of ACOs. The proposed approach would move ACOs with higher revenue to a higher loss sharing limit, while continuing to categorize low revenue ACOs, which are often composed of small physician practices, rural providers, and those serving underserved areas, as eligible for potentially lower loss sharing limits. Further, based on initial modeling with performance year 2016 program data, ACOs for which the total Medicare Parts A and B FFS revenue of their ACO participants was less than 25 percent of the total Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries tended to have either no or almost no inpatient revenue and generally showed stronger than average financial results compared to higher revenue ACOs. We believed these observations were generalizable and suggested our proposal to use ACO participants’ total PO 00000 Frm 00051 Fmt 4701 Sfmt 4700 67865 Medicare Parts A and B FFS revenue to classify ACOs would serve as a proxy for ACO participant composition. The proposed approach generally would categorize ACOs that include hospitals, health systems or other providers and suppliers that furnish Part A services as ACO participants or ACO providers/ suppliers as high revenue ACOs, while categorizing ACOs with ACO participants and ACO providers/ suppliers that mostly furnish Part B services as low revenue ACOs. Accordingly, we proposed to use a 25 percent threshold to determine low revenue ACOs versus high revenue ACOs by comparing total Medicare Parts A and B FFS revenue of ACO participants to the total Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries. Consistent with this proposal, we also proposed to add new definitions at § 425.20 for ‘‘low revenue ACO,’’ and ‘‘high revenue ACO.’’ We proposed to define ‘‘high revenue ACO’’ to mean an ACO whose total Medicare Parts A and B FFS revenue of its ACO participants based on revenue for the most recent calendar year for which 12 months of data are available, is at least 25 percent of the total Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries based on expenditures for the most recent calendar year for which 12 months of data are available. We proposed to define ‘‘low revenue ACO’’ to mean an ACO whose total Medicare Parts A and B FFS revenue of its ACO participants based on revenue for the most recent calendar year for which 12 months of data are available, is less than 25 percent of the total Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries based on expenditures for the most recent calendar year for which 12 months of data are available. We also considered using a lower or higher percentage as the threshold for determining low revenue ACOs and high revenue ACOs. Specifically, we considered instead setting the threshold for ACO participant revenue lower, for example at 15 percent or 20 percent of total Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries. However, we were concerned a lower threshold could categorize ACOs with more moderate revenue as high revenue ACOs, for example because of the presence of multi-specialty physician practices or certain rural or safety net providers (such as CAHs, FQHCs and RHCs). Categorizing these moderate revenue ACOs as high revenue ACOs, could require ACOs that have a smaller degree E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67866 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations of control over the expenditures of their assigned beneficiaries, and ACOs that are not as adequately capitalized, to participate in a level of performancebased risk that the ACO would not be prepared to manage. We also considered setting the threshold higher, for example at 30 percent. We noted our concern that a higher threshold could inappropriately categorize ACOs as low revenue when their ACO participants have substantial total Medicare Parts A and B FFS revenue and therefore an increased ability to influence expenditures for their assigned beneficiaries and also greater access to capital to support participation under higher levels of performance-based risk. We sought comment on these alternative thresholds for defining ‘‘low revenue ACO’’ and ‘‘high revenue ACO.’’ The proposed 12-month comparison period for determining whether an ACO is a low revenue ACO or high revenue ACO was consistent with the proposed 12 month period for determining repayment mechanism amounts (as described in section II.A.6.c. of the August 2018 proposed rule (83 FR 41840 through 41842)). We explained that this approach could allow us to use the same sources of revenue and expenditure data during the program’s annual application cycle to estimate the ACO’s repayment mechanism amount and to determine the ACO’s participation options according to whether the ACO is categorized as a low revenue ACO or high revenue ACO. Additionally, for ACOs with a participant agreement start date of July 1, 2019, we also proposed to determine whether the ACO is a low revenue ACO or high revenue ACO using expenditure data from the most recent calendar year for which 12 months of data are available. We noted that under this proposed approach to using claims data to determine participation options, it would be difficult for ACOs to determine at the time of application submission whether they would be identified as a low revenue ACO or high revenue ACO. We explained that after an ACO’s application is submitted and before the ACO would be required to execute a participation agreement, we would determine how the ACO participants’ total Medicare Parts A and B FFS revenue for the applicable calendar year compare to total Medicare Parts A and B FFS expenditures for the ACO’s assigned Medicare beneficiaries in the same calendar year, provide feedback and then notify the applicant of our determination of its status as a low revenue ACO or high revenue ACO. VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 We also considered using a longer look back period, for example, using multiple years of revenue and expenditure data to identify low revenue ACOs and high revenue ACOs. For example, instead of using a single year of data, we considered instead using 2 years of data (such as the 2 most recent calendar years for which 12 months of data are available). In evaluating ACOs applying to enter a new agreement period in the Shared Savings Program, the 2 most recent calendar years for which 12 months of data are available would align with the ACOs’ first and second benchmark years. While this approach could allow us to take into account changes in the ACO’s composition over multiple years, it could also make the policy more complex because it could require determinations for each of the 2 calendar years and procedures to decide how to categorize ACOs if there were different determinations for each year, for example, as a result of changes in ACO participants. We sought comment on the alternative of using multiple years of data in determining whether an ACO is a low revenue ACO or a high revenue ACO. ACO participant list changes during the agreement period could affect the categorization of ACOs, particularly for ACOs close to the threshold percentage. We considered that an ACO may change its composition of ACO participants each performance year, as well as experience changes in the providers/ suppliers billing through ACO participants, during the course of its agreement period. Any approach under which we would apply different policies to ACOs based on a determination of ACO participant revenue would need to recognize the potential for an ACO to add or remove ACO participants, and for the providers/ suppliers billing through ACO participants to change, which could affect whether an ACO meets the definition of a low revenue ACO or high revenue ACO. We explained our concern about the possibility that an ACO may be eligible to continue for a second agreement period in the BASIC track because of a determination that it is a low revenue ACO at the time of application, and then quickly thereafter seek to add higher-revenue ACO participants, thereby avoiding the requirement under our proposed participation options to participate under the ENHANCED track. To protect against these circumstances, we proposed to monitor low revenue ACOs experienced with performance-based risk Medicare ACO initiatives participating in the BASIC PO 00000 Frm 00052 Fmt 4701 Sfmt 4700 track, to determine if they continue to meet the definition of low revenue ACO. This is because high revenue ACOs experienced with performance-based risk Medicare ACO initiatives are restricted to participation in the ENHANCED track only. We proposed to monitor these low revenue ACOs for changes in the revenue of ACO participants and assigned beneficiary expenditures that would cause an ACO to be considered a high revenue ACO and ineligible for participation in the BASIC track. We are less concerned about the circumstance where an ACO inexperienced with performance-based risk Medicare ACO initiatives enters an agreement period under the BASIC track and becomes a high revenue ACO during the course of its agreement because inexperienced, high revenue ACOs are also eligible for a single agreement period of participation in the BASIC track. We proposed the following approach to ensuring continued compliance of ACOs with the proposed eligibility requirements for participation in the BASIC track, for an ACO that was accepted into the BASIC track’s Level E because the ACO was experienced with performance-based risk Medicare ACO initiatives and determined to be low revenue at the time of application. If, during the agreement period, the ACO meets the definition of a high revenue ACO, we proposed that the ACO would be permitted to complete the remainder of its current performance year under the BASIC track, but would be ineligible to continue participation in the BASIC track after the end of that performance year unless it takes corrective action, for example by changing its ACO participant list. We proposed to take compliance action, up to and including termination of the participation agreement, as specified in §§ 425.216 and 425.218, to ensure the ACO does not continue in the BASIC track for subsequent performance years of the agreement period. For example, we may take pre-termination actions as specified in § 425.216, such as issuing a warning notice or requesting a corrective action plan. To remain in the BASIC track, the ACO would be required to remedy the issue. For example, if the ACO participants’ total Medicare Parts A and B FFS revenue has increased in relation to total Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries, the ACO could remove an ACO participant from its ACO participant list, so that the ACO can meet the definition of low revenue ACO. If corrective action is not taken, CMS would terminate the ACO’s E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations participation under § 425.218. We proposed to revise § 425.600 to include these requirements to account for changes in ACO participant revenue during an agreement period. We also considered two alternatives to the proposed claims-based approach to differentiating low revenue ACOs versus high revenue ACOs, which, as discussed, can also serve as a proxy for ACO participant composition. One alternative would be to differentiate ACOs based directly on ACO participant composition using Medicare provider enrollment data and certain other data. Under this option we could define ‘‘physician-led ACO’’ and ‘‘hospitalbased ACO’’ based on an ACO’s composition of ACO participant TINs, including any CCNs identified as billing through an ACO participant TIN, as determined using Medicare enrollment data and cost report data for rural hospitals. A second alternative to the claims-based approach to distinguishing between ACOs based on their revenue would be to differentiate between ACOs based on the size of their assigned population (that is, small versus large ACOs). First, we considered differentiating between physician-led and hospital-based ACOs by ACO composition, determined based on the presence or absence of certain institutional providers as ACO participants. We considered an approach that deviates from the Track 1+ Model design to determining ACO composition for the purposes of identifying whether the ACO is eligible to participate under a benchmark-based or a revenue-based loss sharing limit by using Medicare enrollment data and certain other data to determine ACO composition rather than relying on ACOs’ self-reported information, and by using a different approach to identifying institutional providers than applies under the Track 1+ Model. Under this alternative approach, we could define a hospital-based ACO as an ACO that includes a hospital or cancer center, but excluding an ACO whose only hospital ACO participants are rural hospitals. As used in this definition, a hospital could be defined according to § 425.20. As defined under § 425.20, ‘‘hospital’’ means a hospital as defined in section 1886(d)(1)(B) of the Act. A cancer center could be defined as a prospective payment system-exempt cancer hospital as defined under section 1886(d)(1)(B)(v) of the Act (see CMS website on PPS-exempt cancer hospitals, available at https:// www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/ AcuteInpatientPPS/PPS_Exc_Cancer_ Hospasp.html). Rural hospital could be VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 a hospital defined according to § 425.20 that meets both of the following requirements: (1) The hospital is classified as being in a rural area for purposes of the CMS area wage index (as determined in accordance with section 1886(d)(2)(d) or section 1886(d)(8)(E) of the Act); and (2) The hospital reports total revenue of less than $30 million a year. We could determine total revenue based on the most recently available hospital 2552– 10 cost report form or any successor form. In contrast, we could define physician-led ACO as an ACO that does not include a hospital or cancer center, except for a hospital that is a rural hospital (as we previously described). Physician-led ACOs therefore could also include certain hospitals that are not cancer centers, such as CAHs. Under this alternative approach to differentiating between ACOs we would identify hospitals and cancer centers in our Medicare provider enrollment files based on their Medicare enrolled TINs and/or CCNs. We would include any CCNs identified as billing through an ACO participant TIN, as determined using PECOS enrollment data and claims data. We believe this alternative approach would provide increased transparency to ACOs because ACOs could work with their ACO participants to identify all facilities enrolled under their TINs to tentatively determine the composition of their ACO, and thus, the available participation options under the Shared Savings Program. However, this alternative approach to categorizing ACOs deviates from the proposed claims-based approaches to determining loss sharing limits and the repayment mechanism estimate amounts for ACOs in the BASIC track using ACO participant Medicare FFS revenue and expenditures for the ACO’s assigned beneficiaries. Second, we also considered differentiating between ACOs based on the size of their assigned beneficiary population, as small versus large ACOs. Under this approach, we could determine an ACO’s participation options based on the size of its assigned population. We recognize that an approach that distinguishes between ACOs based on population size would require that we set a threshold for determining small versus large ACOs as well as to determine the assignment data to use in making this determination (such as the assignment data used in determining an ACO’s eligibility to participate in the program under the requirement that the ACO have at least 5,000 assigned beneficiaries under § 425.110). For instance, we considered whether an ACO with fewer than 10,000 PO 00000 Frm 00053 Fmt 4701 Sfmt 4700 67867 assigned beneficiaries could be defined as a small ACO whereas an ACO with 10,000 or more assigned beneficiaries could be defined as a large ACO. However, we currently have low revenue ACOs participating in the program that have well over 10,000 assigned beneficiaries, as well as high revenue ACOs that have fewer than 10,000 assigned beneficiaries. We believed a revenue-based approach would be a more accurate means to measure the degree of control that ACOs have over total Medicare Parts A and B FFS expenditures for their assigned beneficiaries compared to an approach that only considers the size of the ACO’s assigned population. We sought comment on the proposed definitions of ‘‘low revenue ACO’’ and ‘‘high revenue ACO’’. We also sought comment on the alternatives considered. Specifically, we sought comment on the alternative of defining hospital-based ACO and physician-led ACO based on an ACO’s composition of ACO participant TINs, including any CCNs identified as billing through an ACO participant TIN, as determined using Medicare enrollment data and cost report data for rural hospitals. In addition, we sought comment on the second alternative of differentiating between ACOs based on the size of their assigned population (that is, small versus large ACOs). Comment: A few commenters generally supported the proposed use of a distinction between low revenue ACOs and high revenue ACOs for determining ACO participation options. One commenter explained its belief that small ACOs in rural areas face challenges that large health systems do not. A few commenters supported the distinction between low and high revenue ACOs for determining ACO participation options but suggested alternative approaches to implementing this policy as further described in this section of this final rule. One commenter explained that there is intuitive logic in the idea that risk tolerance should be commensurate with organization size or financial wherewithal. Response: We appreciate the support of the commenters who generally favored the proposed approach and our related considerations. Comment: Many commenters expressed concerns about the proposed approach to identifying low revenue ACOs versus high revenue ACOs. A few commenters requested that CMS not finalize the distinction to avoid creating new blunt tools to define and categorize ACOs. Another commenter explained that the proposed rule states that the E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67868 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations low revenue ACO versus high revenue ACO distinction is intended to measure differences in the ability of the ACO to control total spending, but the commenter believed the discussion suggested that the real goal is to identify which ACO participants have more financial resources and are less likely to be bankrupted by repaying losses to CMS. Response: We thank commenters for their careful consideration of the proposed approach to identifying ACOs as low revenue ACOs versus high revenue ACOs, and the related considerations discussed in section II.A.5.b.(2) of this final rule for distinguishing participation options of ACOs (in part) based on this determination. We continue to believe that the total Medicare Parts A and B FFS revenue of the ACO participants could be indicative of whether the ACO participants, and therefore potentially the ACO, are more or less capitalized and thus able to accept higher levels of performance based risk. We also believe that these higher levels of performancebased risk for these organizations can act as a stronger catalyst for them to redesign care, in conjunction with the new tools and flexibilities for risk based ACOs and achieve program goals more quickly. For example, ACO participants with high levels of total Medicare Parts A and B FFS revenue are presumed to be better capitalized, and may be better positioned to contribute to repayment of any shared losses owed by the ACO. To this extent we agree with the commenter that indicated that one goal of the proposed approach is to place better capitalized ACOs under participation options that are commensurate with their ability to take on greater risk because they have the capacity to repay losses (if owed). We disagree with commenters’ suggestions that we remain neutral to whether an ACO has low revenue or high revenue in determining program participation options. We continue to believe that all ACOs should eventually participate under the program’s highest level of risk and potential reward, in the ENHANCED track, which could drive ACOs to more aggressively pursue the program’s goals of improving quality of care and lowering growth in FFS expenditures for their assigned beneficiary populations. For the reasons we have previously described in the August 2018 proposed rule and as restated in this final rule, we also continue to believe that low revenue ACOs should be allowed additional time to prepare to take on the higher levels of performance-based risk VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 required under the ENHANCED track. Therefore we continue to believe it is necessary to distinguish participation options based on ACO participants’ Medicare FFS revenue (among other factors as described elsewhere in this final rule). Comment: Some commenters, including MedPAC, viewed favoring low revenue ACOs over high revenue ACOs (or physician-only ACOs over ACOs that include hospitals) as unnecessary. MedPAC pointed out that the maximum risk under two-sided models of the proposed BASIC track already accounts for the ACO participants’ revenue, with low revenue or small ACOs having relatively limited maximum risk in some cases compared to high revenue ACOs. MedPAC explained that the automatic transition to two-sided risk in the glide path will ensure that high revenue ACOs transition to performance-based risk to prevent them from further increasing spending and that low revenue ACOs that expect to achieve savings should be willing to move into Level E in the glide path, which has minimal risk and potentially greater reward. Response: We agree with MedPAC that under the BASIC track’s two-sided models, where we determine the maximum loss liability based on the higher of a percentage of ACO participants’ Medicare FFS revenue or a percentage of the ACO’s updated benchmark, high revenue ACOs will be at proportionally greater risk than low revenue ACOs. We disagree, however, with commenters’ suggestions that the same participation options and therefore the same progression to higher levels of performance-based risk should be made available to all ACOs. We continue to believe that low revenue ACOs should be allowed additional time to prepare to take on the higher levels of performance-based risk required under the ENHANCED track and that high revenue ACOs should be given stronger incentives over time to continue to transform care. Therefore, we continue to believe it is necessary to distinguish participation options based on ACO participants’ Medicare FFS revenue (among other factors, as described elsewhere in this final rule), and disagree with commenters who argued that identifying ACOs as low revenue ACOs versus high revenue ACOs is unnecessary. Comment: Some commenters viewed the distinction between low revenue ACOs and high revenue ACOs as arbitrary or unfounded. Some commenters did not accept CMS’ position that a greater level of control over assigned beneficiaries’ total Part A PO 00000 Frm 00054 Fmt 4701 Sfmt 4700 and Part B spending (‘‘low revenue ACOs’’ versus ‘‘high revenue ACOs’’) necessarily should lead to better performance or readiness to accept performance-based risk. Several commenters described the concept that high revenue ACOs have a higher degree of control over Part A and B expenditures and that they have more control over the full continuum as a ‘‘fallacy’’ and ‘‘fundamentally flawed’’. MedPAC explained that physicianonly ACOs have, in effect, a larger incentive to reduce hospital-provided services than ACOs in which hospitals are also participating, because reduced expenditures for costly hospital services represent forgone revenue for the hospital. Similarly, another commenter explained that physician-led or physician-dominated ACOs, particularly those led or dominated by primary care physicians, can succeed in an ACO by providing more services themselves, and thereby enhancing their own FFS revenue along the way, and then cutting back on referrals, admissions, testing, and other services that result in expenditures and correspondingly involve revenues to some entity that is not part of the ACO. On the other hand, an ACO led by a hospital or created as part of an integrated system must cut its own FFS revenues at multiple levels to succeed. According to this commenter, in principle, the latter type of ACO has more ‘‘control’’ over total spending, but ‘‘control’’ means intentionally cutting back on Medicare volumes and revenues within its own network of providers and suppliers. One commenter explained that the larger the organization, the more time and effort it takes to gain collaboration and navigate various systems, to achieve consensus and implement changes. One commenter pointed to the discussion in the proposed rule to suggest the opposite point, that the ACOs that have been relatively more successful so far have been the smaller, physician-led ACOs that have demonstrated strong financial performance despite having relatively less ‘‘control’’ over total Part A and Part B spending (83 FR 41819). Another commenter disagreed with CMS that hospitals can innately influence Medicare FFS costs, and instead expressed that only experienced ACO entities can exert this level of control because they will have already developed preferred post-acute care networks, educated them on cost and readmissions reduction, and included them as ACO participants in order to exert meaningful control over total beneficiary cost of care. Response: We do not believe the proposed approach to distinguishing E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations low revenue ACOs versus high revenue ACOs is arbitrary or unfounded, and it is informed by our early experience with the Track 1+ Model as a means to differentiate the ability of ACOs to bear higher degrees of performance-based risk. More specifically as we explained in the August 2018 proposed rule and reiterate in this final rule, our experience with the Track 1+ Model demonstrates that ACO participants’ Medicare FFS revenue can serve as a proxy for self-reported composition. In particular, higher Medicare FFS revenue among ACO participants in relation to the ACO’s benchmark expenditures tends to be indicative of the presence of institutional providers in the ACO. We continue to believe in the validity of the proposed approach as a means to identify ACOs that are likely prepared to participate in greater levels of risk after gaining experience with more modest levels of risk and to mitigate the burden on ACOs (as compared to the Track 1+ Model) by not requiring ACOs to self-report data about the ownership and operational interests of their ACO participants, which, in addition, is difficult for CMS to independently validate. We disagree with commenters who suggest that ACO providers/suppliers that bill for and receive payment for a proportionally greater amount of the ACO’s assigned beneficiaries’ Part A and B Medicare FFS expenditures and that have agreed to become accountable for the total cost and quality of care they provide these beneficiaries, are unable to effectively manage these costs in proportion to their control over a relatively larger or smaller proportion of assigned beneficiaries’ expenditures. Commenters provided examples of approaches ACOs may use to lower FFS expenditures for their assigned beneficiaries, such as coordinating postacute care to avoid unnecessary readmissions, or focusing on the provision of primary care services to avoid the need for more costly specialty and facility-based services. We note that primary care providers have a central role in the Shared Savings Program, for instance as evidenced by the use of primary care services provided by ACO participants as the basis for beneficiary assignment. In focusing on primary care, ACOs may seek to reduce avoidable services by and consequently payments to acute-care facilities (for example) under FFS Medicare. We also acknowledge that ACOs are composed differently and take a variety of organizational forms, as is permitted under section 1899(b)(1) of the Act and through the program’s regulations, at § 425.102, describing the ACO VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 participants or combinations of ACO participants eligible to form an ACO. Based on our observations, successful ACOs typically achieve lower growth in expenditures across all claim types. We also acknowledge that the ability of an ACO to succeed may be specific to its composition, governance and leadership, factors specific to its market circumstances and the populations it serves, as well as the ACO’s individualized approach to meeting the program’s goals. Further, we note the following in response to the commenter’s suggestion that there is an inconsistency between our belief that low revenue ACOs have less control over assigned beneficiaries expenditures, and therefore may be less capable of taking on higher levels of two-sided-risk, and our findings based on program performance results that low revenue ACOs have been relatively more successful so far compared to high revenue ACOs. The levels of risk and reward for each track of the Shared Savings Program ultimately are set based on the ACO’s benchmark. However, a comparison of the ACO’s benchmark-based risk and reward in relation to the total Medicare Parts A and B FFS revenue of the ACO participants highlights that ACOs with lower ACO participant total Medicare Parts A and B FFS revenue have the potential to incur both losses and savings that are a greater percentage of such revenue than ACOs that are higher revenue. For example, consider a low revenue ACO that has ACO participant total Medicare Parts A and B FFS revenue of $2,000,000 and benchmark expenditures of $100,000,000, so the total Medicare Parts A and B FFS revenue of the ACO participants would be 2 percent of the ACO’s benchmark expenditures. If this low-revenue ACO then achieved savings of 3 percent of its benchmark ($3,000,000), and shared at a rate of 50 percent, the ACO would earn $1,500,000 in shared savings. This shared savings amount would represent 75 percent of the total Medicare Parts A and B FFS revenues of the ACO participants, providing a large incentive for this ACO to continue to improve the quality of care and control costs for beneficiaries. Next, consider a high revenue ACO that has ACO participant total Medicare Parts A and B FFS revenue of $200,000,000 but has the same benchmark as the low revenue ACO of $100,000,000. The total Medicare Parts A and B FFS revenue of the ACO participants in the ACO would be 200 percent of the ACO’s benchmark expenditures. If this high revenue ACO then achieved the same savings of 3 PO 00000 Frm 00055 Fmt 4701 Sfmt 4700 67869 percent of its benchmark ($3,000,000), and shared at a rate of 50 percent, the ACO would earn the same $1,500,000 in shared savings. This shared savings amount would only represent 0.75 percent of the total Medicare Parts A and B FFS revenues of the ACO participants, providing a much smaller incentive for this ACO to improve care and control costs for beneficiaries. We therefore believe that identifying ACOs as high revenue ACOs and low revenue ACOs is an appropriate method to identify which ACOs are more likely to demonstrate improved performance under greater levels of risk and reward. Our historical results show that these relatively greater incentives (for lower revenue ACOs, as shown in the first example) may have influenced and supported the better performance of low revenue ACOs compared to high revenue ACOs. Comment: A few commenters offered an alternative suggestion for making adjustments in financial rewards and penalties that would directly measure the degree of control that ACOs have over total Medicare Parts A and B FFS expenditures for their assigned beneficiaries, instead of using proxies that the commenters viewed as problematic, such as the proportion of ACO participant revenues to expenditures for assigned beneficiaries. These commenters suggested this could be done by dividing services or spending into several categories reflecting the relative levels of control that ACO participants would be expected to have over services, and then assigning different levels of reward potential (and risk) to each. These categories could include spending for: Services delivered by ACO participants; services ordered by ACO participants; services resulting from potentially avoidable complications of services delivered or ordered by ACO participants; and all other services. One commenter suggested that CMS also distinguish between health systems that are for-profit and not-for-profit, because not-for-profit entities on average provide more uncompensated care than for-profit entities. Response: We prefer our proposed approach to distinguishing ACOs based on a comparison of estimated total Medicare Parts A and B FFS revenue for ACO participants to estimated total Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries because it is simpler, allows for greater transparency, and is easier to validate. We decline to adopt the alternative methodologies suggested by commenters. For instance, we decline to increase the complexity of the E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67870 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations approach to distinguishing the degree of control ACO participants have over expenditures of the ACO’s assigned beneficiaries by dividing services or spending into several categories (such as services delivered by ACO participants, services ordered by ACO participants, services resulting from potentially avoidable complications of services delivered or ordered by ACO participants, and all other services), and then assigning different levels of reward potential (and risk) to each because the Shared Savings Program is a populationbased model and ACOs are accountable for the total cost of care rather than more segmented expenditure components as currently exist under other parts of the Medicare FFS program. We also decline to adopt an approach that only considers the ACO’s tax status, or corporate structure, such as based on whether the ACO is forprofit, or not-for-profit, since ACOs must be governed by their ACO participants (according to § 425.106(c)(3)) and the ACO legal entity may have a different tax or corporate structure than its ACO participants, and tax status or corporate structure is not indicative of an organization’s ability to take on risk. Comment: One commenter suggested that the proposed approach may not take into account recent, major changes to the program’s benchmarking methodology that could drastically alter the current discrepancy in performance between low revenue ACOs and high revenue ACOs. This commenter suggested that CMS should not rush with multiple major changes to the program simultaneously and should instead wait to see if adjustments to benchmarking, risk adjustment, and other design elements help to address other discrepancies, including the pattern of high revenue ACOs not performing as well as low revenue ACOs. Response: We disagree with the commenter’s suggestion that we delay implementing the proposed changes to the program’s design to allow for additional experience with the program. We believe the proposed changes, which were based on program results and our experience in implementing program policies and the Track 1+ Model, are necessary to drive Medicare FFS providers and suppliers towards a system of value-based payment instead of volume-based payment and that these policies work in combination to help transition health care providers more quickly, but still incrementally, to value-based care. As we explained in the August 2018 proposed rule (83 FR 41787), and have reiterated in this final VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 rule, while we understand that systems need time to adjust, Medicare cannot afford to continue with models that are not producing desired results. We also note that many ACOs currently participating in Track 1 are near the end of their second agreement period and thus have had 5 or 6 years of experience in the program entirely under the onesided model, and should be capable and ready to transition to performance-based risk. Further, we do not have reason to believe that the benchmarking changes that we are adopting in this final rule (discussed in section II.D. of this final rule) would necessarily lead to improved performance for high revenue ACOs versus low revenue ACOs, and therefore we do not anticipate that these changes alone would eliminate or reduce the differential performance patterns we have seen in the past. Comment: A few commenters suggested that CMS should create a level competitive playing field and let those that perform best succeed most, and find approaches that are not based on an ACO’s composition to eliminate poor performers. One commenter suggested that CMS ensure that its methodology rewards ACOs that do a better job of controlling spending instead of emphasizing revenue. Several commenters suggested (as an alternative to distinguishing low revenue ACOs and high revenue ACOs) that CMS improve the program’s methodology to accurately reward performance for improving quality and reducing costs, and offer resources and assistance to all ACOs. One commenter stated that the program should be about raising the bar for everyone and not disadvantaging one provider group over another with respect to their ACO participation. One commenter recommended that CMS should focus on addressing a smaller group of ACOs with poor performance rather than implementing the broader proposed changes to differentiate participation options for all ACOs. The commenter stated that in the performance year 2017 program data, eight ACOs with costs exceeding benchmarks by more than $20 million were responsible for $251 million of the losses under the Shared Savings Program. According to the commenter, 5 percent of Shared Savings Program ACOs were responsible for 42 percent of the negative impact on the program. Response: We believe that the program’s design already includes significant financial incentives for ACOs, ACO participants, and ACO providers/suppliers, to enter the program and continue their participation in the program, as well as to meet the program’s goals of lowering PO 00000 Frm 00056 Fmt 4701 Sfmt 4700 growth in Medicare FFS expenditures and improving quality of care for their assigned Medicare FFS beneficiaries so that ACOs may share in savings with Medicare. We believe that the level of participation and interest in the program are evidence of the value healthcare providers see in forming ACOs and participating in the Shared Savings Program. Further, we disagree with commenters suggesting that participation option requirements should be focused on select, poorly performing ACOs, such as ACOs with proportionally large shared losses. We believe such an option would be too narrow to adequately incentivize the majority of ACOs, and we continue to believe that a broader redesign of program participation options is warranted, and greater gains in improving quality and reducing costs would be seen from our proposed participation options, as opposed to maintaining the status quo or creating policies targeted at only a few ACOs in the program. We also believe these revised program policies should be applied program-wide, to further drive improved performance for all participating ACOs. As discussed in section II.A.5.d of this final rule, we are finalizing our proposal to monitor ACO financial performance and to potentially terminate ACOs demonstrating significant losses (negative outside corridor) for two performance years. We believe that this policy will identify ACOs that are repeatedly large outliers in terms of financial losses, which may be unable to meet program goals and objectives. Comment: Several commenters expressed that the proposed approach overlooks the original intention of the Shared Savings Program to foster collaboration between providers (specifically between physicians and hospitals) and would prove detrimental to program goals. A few commenters stated that healthcare transformation can only successfully occur when there is coordination across the continuum of care. Some commenters argued that the proposed approach would set up a system that disadvantages hospitalbased ACOs and could therefore limit the types of innovations needed to build a high performing healthcare system for the range of communities across the nation. These commenters tended to suggest that the best way to drive high quality care for patients is to create incentives that drive all the providers in a system to collaborate, to innovate and deliver high quality, cost effective healthcare. E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations One commenter, discussing the proposal to make the Shared Savings Program more accessible to low revenue and inexperienced ACOs, suggested that CMS consider policies that generate more accessible opportunities for practices and organizations to begin moving along the path to outcome-based payment. The commenter cautioned that a narrow program that accelerates progress for some, but leaves many behind, will not meet our national ambitions to transform to a high-value, outcome-based healthcare delivery system. One commenter explained that new incentives to work harder through greater financial risk in two-sided risk models are also incentives to leave the program and revert back to FFS payment, a consideration echoed in other comments. Response: We believe that the proposed approach to redesigning the program’s participation options, and the approach as finalized in this final rule, will further the fulfillment of the program’s goals of improving quality of care and lowering growth in Medicare FFS expenditures for beneficiaries. We believe that rapid transition to the new participation options will drive more meaningful systematic change in ACOs, which have the potential to control their assigned beneficiaries’ Medicare Parts A and B FFS expenditures by coordinating care across care settings, and thus to achieve significant change in spending. We also believe that these policies will promote free-market principles which may lead to further innovation within markets and potentially greater success in achieving the program’s goals. The new tools and flexibilities afforded to ACOs participating under performancebased risk, such as the expanded ability of their clinicians to furnish covered telehealth services under section 1899(l) of the Act and to strengthen beneficiary engagement through new beneficiary incentive programs, in conjunction with revised benchmarking and risk adjustment policies, will enable these ACOs to be successful. We also note that based on our observations, successful ACOs typically achieve lower growth in expenditures across all claim types, and we believe this is a reflection of the collaborative relationships that exist within ACOs (between ACO providers/suppliers), and collaborations between ACOs and nonACO providers and suppliers and other entities. We believe that hospitals will remain essential ACO participants in many cases, and non-ACO participant partners in others, as they are key collaborators in meeting the program’s goals of lowering growth in Medicare VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 Parts A and B FFS expenditures, and improving the quality of care, for the ACO’s assigned beneficiary population. The Shared Savings Program was established as, and remains, a voluntary program for providers and suppliers to become accountable for the quality and cost of care for an assigned population of Medicare FFS beneficiaries. We have aligned incentives between the Shared Savings Program and other CMS initiatives to provide beneficiaries value-based care. For example, program participation has taken on greater significance since the establishment of the Quality Payment Program. Our continued alignment with the Quality Payment Program provides a low burden way for clinicians to participate in both programs, including allowing eligible clinicians in ACOs that are participating in a track of the Shared Savings Program that is an Advanced Alternative Payment Model (APM) to qualify for APM incentive payments. We acknowledge that Medicare is only one payer, but effective collaborations between providers and suppliers are necessary to provide high-quality, value-based care across the healthcare system, and the APM track of the Quality Payment Program will account for participation in both Advanced APMs and in Other Payer Advanced APMs with payers other than Medicare through the All-Payer Combination Option beginning in performance year 2019. Comment: One commenter explained that the disproportionate emphasis on ACOs reducing costs overshadows the equally important goal of quality improvement, which benefits patients and the Medicare program generally. Response: In response to the concern that the proposed redesign of the program is disproportionately focused on lowering growth in expenditures, and not sufficiently focused on quality of care, we note that improved quality of care for patients was one of the five principles guiding our proposed redesign of the Shared Savings Program, and we disagree with the commenters’ assertion that this goal has been overshadowed by a focus on lowering growth in expenditures. We also note that we recently finalized policies in the November 2018 final rule to make the quality measure set more outcome oriented, while also reducing reporting burden on ACOs and their participating ACO providers/suppliers. Comment: One commenter pointed out the added complexity proposed for determining participation options for ACOs under the program redesign, with CMS evaluating whether ACOs are new, renewing or re-entering, experienced or PO 00000 Frm 00057 Fmt 4701 Sfmt 4700 67871 inexperienced with performance-based risk, and high revenue or low revenue. The commenter suggested that eliminating the high revenue ACO versus low revenue ACO distinction would help minimize some of the complexity and would remove a significant amount of work required by CMS and ACOs to model, predict, and determine if the ACO would be a high revenue ACO or a low revenue ACO. Some commenters opposed to the concept of distinguishing between ACOs according to the proposed low revenue ACO and high revenue ACO definitions viewed the distinction as confusing. Response: We believe that ACOs should be able to surmise if they are likely to be determined low revenue ACOs or high revenue ACOs, based on their composition. ACOs with a large hospital or other institutional provider will likely be determined to be high revenue ACOs. We plan to provide feedback to ACOs during the application process, and as part of program monitoring of low revenue ACOs experienced with performancebased risk Medicare ACO initiatives that are in an agreement period under Level E of the BASIC track (discussed elsewhere in this section of this final rule) regarding their status as a low revenue ACO or high revenue ACO. More generally, we anticipate providing information annually to ACOs within their agreement period, particularly as part of the ACO participant list change request review cycles, about their ACO participants’ Medicare FFS revenue so they will have information about the composition of their ACO and the Medicare FFS revenue of their ACO participants to support their ongoing participation in the program. As discussed in greater detail elsewhere in this preamble, we believe that considering whether an ACO is a low revenue ACO or high revenue ACO is an important and necessary policy for determining ACO participation options within the program redesign. Comment: A few commenters supported CMS’ proposed definitions for low revenue ACO and high revenue ACO. A few commenters indicated their preference for the proposed use of Medicare claims data to make the low revenue ACO versus high revenue ACO determination, rather than the alternative sources of data discussed in the proposed rule. For instance, one commenter explained that a claimsbased approach would provide a more accurate method for determining an ACO’s preparedness to take on additional risk rather than an ACO’s self-reported information regarding the E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67872 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations composition of its ACO participants and any ownership and operational interests in those ACO participants. Another commenter shared CMS’ belief that a revenue-based approach would be a more accurate means to measure the degree of control that ACOs have over total Medicare Parts A and B FFS expenditures for their assigned beneficiaries compared to approaches that consider the size of the ACO’s assigned population or the inclusion of a hospital or cancer center in the ACO. However, other commenters suggested a variety of alternatives. Some commenters suggested alternative approaches to identifying low revenue ACOs and high revenue ACOs using alternative sources of data instead of or in addition to ACO participant Medicare Parts A and B FFS revenue. More generally, some commenters believe the proposed approach could result in ACOs gaming the revenue determinations by manipulating their ACO participant lists. For instance, a high revenue ACO could be encouraged to selectively redefine its component TINs to meet the definition of a low revenue ACO, such as by restructuring to exclude acute care facilities. Other commenters suggested low revenue, or physician-led ACOs may avoid including these facilities as ACO participants. Several commenters indicated that use of FFS revenue as a proxy for composition could lead to ACOs appearing to be low revenue when in fact they have hospitals or health systems in their ownership and operational chain, and suggested CMS use other data to make these determinations. One commenter explained that the proposed approach could lead an ACO to split its network of physicians, which it considers a suboptimal outcome and counter to the organization’s long-standing collaborative approach. This commenter also noted that there are non-trivial costs to setting up a new physician network and ACO entity. A few commenters suggested that CMS apply the Track 1+ Model policy requiring ACO attestation regarding the ownership interests of and in its ACO participants in determining participation options under the Shared Savings Program. One commenter preferred the Track 1+ Model approach to the proposed distinction between low revenue ACOs and high revenue ACOs. Another commenter suggested we apply the Track 1+ Model approach in addition to the proposed approach to determining low revenue ACOs and high revenue ACOs. However, several commenters preferred CMS forgo self- VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 reporting requirements as exist, for example, under the Track 1+ Model. One commenter suggested that CMS use additional data on full organizational structure (such as such as IRS filings and PECOS data) to determine organization-wide revenue for physician groups responsible for the bulk of the ACO’s assigned population. Under this alternative, the commenter suggested that CMS consider ACOs with physician groups that are part of a large health system, or large physician groups with market power (such as those that are very specialty-heavy or have substantial market share) to be high revenue ACOs. This commenter also expressed concern that the proposed approach to determining low revenue ACOs and high revenue ACOs could discourage partnerships between physician groups and hospitals through means other than mergers and acquisitions. To address this circumstance, the commenter suggested that ACOs should be regarded as low revenue if their ACO participant lists include independent physician groups and hospitals, to avoid disrupting these partnerships. This commenter argued that under this alternative approach, consolidation in provider markets would be discouraged because it would lead to more downside risk in available Shared Savings Program participation options, while partnerships or preferred networks that can support competition and do not cause commercial mark-ups would not be discouraged. However, somewhat contrary to this suggestion, a few commenters explained their belief that it is valuable for physician-led ACOs to be able to recruit and include specialty physicians to further redesign health care delivery. According to these commenters, simply because a physician-led ACO contracts with specialty practices does not ensure the ACO is more capable of taking on ENHANCED track level of risk. One commenter seemed to suggest we go further than the Track 1+ Model approach, which requires ACOs to report to CMS certain ownership and operational interests in ACO participants, by counting revenue received by entities that have ownership and operational interests in ACO participants and not just revenue received by providers and suppliers that bill through the TINs included on the ACO’s participant list. This commenter explained that failing to count revenue earned by entities with an ownership or operational relationship to ACO participants would allow many ACOs that are affiliated with a hospital to access participation options that are intended for physician-only ACOs PO 00000 Frm 00058 Fmt 4701 Sfmt 4700 through manipulation of their ACO participant list. However, seemingly contrary to this suggestion, another commenter explained that some ACOs have shareholders that are large hospital systems but own only a small portion of the ACO and do not provide a substantial amount of funding to the ACO. This commenter (an ACO), explained that it would have to close its doors if all income for the other entities with ownership interests in ACO participants (such as a large hospital system) was considered when setting the ACO’s amount of loss liability. Several commenters suggested that we consider ACO participant composition in making the low revenue ACO versus high revenue ACO determination. One commenter suggested that CMS identify ACOs that include hospitals as ACO participants, and designate those ACOs as ‘‘high revenue’’. Some commenters suggested that rural ACOs be considered low revenue ACOs. In particular, some commenters suggested rural ACOs that meet ACO Investment Model (AIM) eligibility criteria should be considered low revenue ACOs. One commenter recommended that CMS consider more than two revenue definitions or categories, suggesting that the proposed distinction may be too stark. The commenter suggested that CMS use multiple criteria, such as using self-reported composition, ACO composition as determined by CMS according to the alternative approach considered for distinguishing hospitalbased and physician-led ACOs, and size of an ACO’s assigned beneficiary population, in differentiating low revenue ACOs and high revenue ACOs. A few commenters stated that CMS is unable to truly identify whether an ACO is well capitalized and should not create distinctions based on assumptions about capital, indicating that CMS is unable to identify if an ACO is well capitalized through sources outside of Medicare revenue (such as insurer- or investorbacked ACOs). A few commenters explained, for example, the proposed approach would not capture private investments in ACOs, noting that insurers and venture capital funds have invested heavily in some ACOs, often physician-led ACOs. One commenter encouraged CMS to leverage public use data to calculate an ACO’s revenue in an effort to make the ACO’s revenue determination transparent, citing as an example the ‘‘Medicare Provider Utilization and Payment’’ data available through https://data.cms.gov. Response: We appreciate the support of some commenters for CMS’ proposed definitions for low revenue ACO and E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations high revenue ACO, and commenters’ careful consideration of the options we considered, as well as their alternative suggestions. We note that commenters offered opposing positions on some of the suggested alternative approaches. For instance, comments reflect differing views on the approach used under the Track 1+ Model to determine whether ACOs are under a revenue-based or benchmark-based loss sharing limit, with some supporting and others opposing the Track 1+ Model approach. One commenter seemed to mistakenly believe that under the Track 1+ Model, we consider the revenue earned by health care providers with an ownership or operational interest in an ACO participant. However, to clarify, under the design of the Track 1+ Model, ACOs are required to collect, assess, and report to CMS information on the ownership and operational interests of their ACO participants, which in turn is used to determine the ACO’s participation options under the Track 1+ Model. As we described in the August 2018 proposed rule, we believe this approach adds complexity for ACOs and is also more complex for CMS to validate and audit. As a result, we explained that the use of ACOs’ selfreported information in the permanent program could become burdensome for CMS to validate and monitor to ensure program integrity (83 FR 41807). Therefore, we agree with commenters that we should forgo use of similar selfreporting requirements in determining low revenue ACOs and high revenue ACOs under the Shared Savings Program. We continue to believe, based on our experience with the Track 1+ Model, that ACO participants’ Medicare Part A and B FFS revenue serves as an effective and accurate proxy for self-reported composition. Based on our experience with the initial application cycle for the Track 1+ Model, we believe a simpler approach that achieves similar results to the use of self-reported information would be to consider the total Medicare Parts A and B FFS revenue of ACO participants (TINs and CCNs) based on claims data, without directly considering their ownership and operational interests (or those of related entities). We believe that the use of Medicare Parts A and B FFS claims data for ACO participants provides an accurate estimate of their Medicare revenue and potential ability to cover losses that are proportional to their Medicare revenue. It also avoids additional burden for ACOs to collect and submit revenue data to CMS and for VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 CMS to establish additional collection and validation processes. Further, we continue to believe that ACOs whose ACO participants have greater total Medicare Parts A and B FFS revenue relative to the ACO’s benchmark are better financially prepared to move to greater levels of risk (83 FR 41807). Accordingly, this comparison of revenue to benchmark would provide a more accurate method for determining an ACO’s preparedness to take on additional risk than an ACO’s self-reported information regarding the composition of its ACO participants and any ownership and operational interests in those ACO participants. Commenters also offered differing perspectives on use of ACO participant composition to determine ACO participation options. However, as we explained in the August 2018 proposed rule, we continue to believe that a claims-based approach to determining low revenue ACOs and high revenue ACOs would better align with the claims-based approaches to determining loss sharing limits (discussed in section II.A.3 of this final rule) and the repayment mechanism estimate amounts for ACOs (as discussed in section II.A.6 of this final rule) providing more consistent feedback and program transparency and reducing complexity from multiple but slightly different calculations. We also decline to adopt commenters’ alternative suggestions to use multiple sources of data to determine participation options, which could add further complexity to our approach. Some comments indicated concerns that under the proposed approach CMS would not be able to effectively identify well capitalized ACOs. However, we believe that ACO participant revenue coupled with establishing a repayment mechanism to cover potential losses provide sufficient assurances and proxies for demonstrating capitalization and ability to invest in care coordination and cover potential losses. We believe it would place additional burden on ACOs and add complexity to the approach to consider how well capitalized ACOs are through their composition or private investments, for example. We have not routinely required that ACOs disclose statements about their financial status, or the financial status of their ACO participants or ACO providers/ suppliers, in determining their eligibility to enter or continue their participation in the program, or a particular participation option in the program. Further, with respect to the comment suggesting that we base participation PO 00000 Frm 00059 Fmt 4701 Sfmt 4700 67873 options on ACO organizational formations or provider/supplier relationships that the commenter considered beneficial to health care markets, we believe our approach to defining low revenue ACOs and high revenue ACOs, and to determining participation options based on the distinction between these two categories of ACOs, promotes innovative arrangements between physicians and hospitals while providing an alternative for physicians to stay independent and work collaboratively with other providers and suppliers. We also decline to use the publicly available sources of revenue data described by one commenter. We believe use of existing sources of program data for the revenue calculations will allow for greater consistency across the program’s calculations, and timely feedback to ACOs, including through information shared during the application cycle and through program reports. Lastly, we appreciate commenters’ concerns about the possibility that existing ACOs may bifurcate their ACO participant lists to form new ACOs that may satisfy the definition of a low revenue ACO and therefore be eligible to participate under potentially lower levels of performance-based risk. We note that ACOs are accountable for total Medicare Parts A and B FFS expenditures for their assigned beneficiaries. To the extent that ACOs modify their ACO participant lists to remove higher-revenue providers and suppliers, such as institutional providers, the ACO remains accountable for the total cost of care received by its assigned beneficiaries, including services received from non-ACO providers and suppliers. The requirement that ACOs agree to be accountable for the quality and cost of all care furnished to their assigned beneficiaries, including services furnished by providers and suppliers that are not participating in the ACO, reduces our concern about ACOs manipulating their ACO participant lists to take advantage of potentially lowerrisk participation options. As one commenter points out, there could be costs associated with setting up a new legal entity and new Medicare-enrolled TINs, and this could be a deterrent to engaging in these practices to avoid the intended applicability of program requirements. We also believe several other policies we are finalizing in this final rule will help protect against ACOs gaming determinations for program participation options through modifications to their ACO participant E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67874 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations lists, specifically: (1) The approach we are finalizing to monitor for changes in revenue that cause ACOs identified as low revenue, and experienced with performance-based risk Medicare ACO initiatives to become considered high revenue and therefore no longer be eligible for participation in the BASIC track, as described elsewhere in this section of this final rule; and (2) the approach we are finalizing to identify re-entering ACOs, based on the prior participation of their ACO participants, as described in section II.A.5.c. of this final rule, will help ensure that ACOs are held accountable for their ACO participants’ prior program experience. Comment: One commenter suggested that CMS should provide ACOs with the ability to select only the highest performing providers and suppliers by allowing ACOs to select their participants by NPI rather than solely at the TIN level. The commenter explained that this approach could help enable ACOs to have greater control over managing costs for their assigned beneficiaries. According to this commenter, under this approach to allowing participation by individual NPIs, rather than the all NPIs that reassigned their billings rights to the ACO participant TIN (as currently required), ACOs would have the flexibility to build a high performing network of providers who will deliver the most efficient and highest quality care. In turn, the commenter stated that these high performing networks would incentivize providers that want to join or remain in an ACO to focus more on reducing unnecessary costs and maintaining high quality, and incentivize ACOs to more closely evaluate providers in their network based on sophisticated data analytics. Response: In the August 2018 proposed rule, we did not contemplate changes to the current definition of ‘‘ACO participant’’ under § 425.20 which 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 § 425.118. We also did not contemplate changes to the underlying methodology used to assign beneficiaries to ACOs based on ACO participant TINs. We continue to believe that ACOs have the potential to transform the quality and cost of care more broadly for the Medicare FFS beneficiaries who receive care from ACO participants. We believe that defining ACO participants to include all NPIs that have reassigned VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 their billing rights to the TIN is a means to allowing the ACO’s redesigned care processes to more broadly reach all Medicare FFS beneficiaries that may receive care from ACO participants, including those that may not meet the program’s assignment criteria, and provides incentives for lower performing providers within an ACO participant TIN to improve. We also have concerns about ACOs selecting only the highest performing providers within a practice to be part of the ACO while less efficient and effective providers are not part of the ACO, because this structure could have negative implications for patients seen by the ACO participant and for the Medicare Trust Funds. Moreover, an approach allowing for participation by individual NPIs, rather than all NPIs that reassigned their billings rights to ACO participant TINs, could further opportunities for ACOs to game participation determinations by including only the most efficient and effective clinicians in the ACO, while less efficient and effective clinicians are excluded from the ACO. Therefore, we believe that maintaining the definition of ACO participant at the TIN level continues to be an effective approach in achieving the program’s goals of improved care, and reduced expenditures, for Medicare FFS beneficiaries more broadly. Comment: Some commenters addressed the threshold percentage to differentiate low revenue ACO and high revenue ACO, proposed at 25 percent. Commenters offered a variety of alternative suggestions for the threshold percentage. A few commenters argued that the proposed 25 percent threshold, and the alternative consideration for a 30 percent threshold, would incorrectly deem moderate revenue ACOs, especially rural ACOs or urban ACOs that serve surrounding rural areas, to be high revenue ACOs. These commenters suggested that CMS either exempt rural ACOs from the revenue designation or raise the threshold for determining low revenue ACOs such as to 60 percent. One commenter explained their belief that rural and small providers do not fit squarely within the low revenue ACO category. The commenter asserted that a revenue-based distinction could ultimately lead to rural providers, small providers, and many ACOs with mixed FFS and cost-based revenue (including both urban and rural provider/ suppliers) being categorized as high revenue ACOs contrary to the intended purpose of the policy. Another commenter questioned how a rural ACO with 25 small rural hospitals PO 00000 Frm 00060 Fmt 4701 Sfmt 4700 would be classified under this approach, but did not offer details that would inform how this composition might affect ACO participants’ Medicare FFS Parts A and B revenue, or total Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries. One commenter recommended that CMS begin with a 30 percent threshold to account for ACOs with physician groups with a comparatively larger number of specialists as ACO participants, in addition to considering other metrics in distinguishing low revenue ACOs and high revenue ACOs, and/or develop more granular methods than the two proposed revenue-based categories to ascertain ACO risk tolerance. Another commenter generally urged CMS to establish pathways for specialists to meaningfully engage in the Shared Savings Program. One commenter recommended that CMS increase the threshold of ACO participant revenue as a percentage of benchmark from 25 percent to 40 percent or greater for this and any future standards in which CMS seeks to distinguish small and large health systems. One commenter disagreed that the proposed 25 percent threshold corresponds to the ACO’s ability to control costs, since it does not account for a number of factors beyond the control of ACOs that could artificially inflate this number. This concern was reflected in other comments. For example, a few commenters expressed concern generally over the ability of ACOs to control costs and provide value in the Medicare FFS environment, pointing to factors including beneficiaries’ freedom of choice of providers under FFS Medicare, and the absence of protection from the cost of Part B drugs and/or new technologies, and CAH costs as examples. One commenter suggested CMS use a lower threshold, as a means to deter gaming, such as 15 percent. This commenter pointed to the use of a 10 percent threshold approach as described in the Regulatory Impact Analysis of the August 2018 proposed rule (83 FR 41917). Response: We agree with commenters’ concerns that ACOs that include small, rural hospitals may not be identified as low revenue ACOs under the proposed 25 percent threshold, and we agree with commenters suggesting that the threshold be raised to allow additional ACOs with small hospitals and clinics, including small rural hospitals, as ACO participants to qualify as low revenue ACOs. Therefore, to help ensure more ACOs under these circumstances may E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations be considered low revenue ACOs, we believe it would be appropriate to increase the threshold used in determining low revenue ACOs and high revenue ACOs to 35 percent. ACOs with small hospitals as ACO participants, including small rural hospitals, may not control a large enough portion of assigned beneficiary expenditures or be financially prepared to take on greater risk. Increasing the threshold used to determine low revenue ACOs versus high revenue ACOs would provide these ACOs with the opportunity to remain under the BASIC track at lower levels of performance-based risk, for a longer period of time. This would allow such ACOs to gain experience in a lower level of risk in the program before being required to move to the ENHANCED track. Based on modeling using the most recently available expenditure and revenue data and ACO assignment data, we are increasing the threshold from 25 percent to 35 percent. Modeling shows increasing the threshold would allow more ACOs with small hospitals as ACO participants, including small rural hospitals, to be considered low revenue ACOs, while continuing to ensure that ACOs with large institutional providers are considered high revenue ACOs. The increased threshold would increase the number of low revenue ACOs by 31 ACOs, a 13 percent increase from the number of ACOs that would be included in the 25 percent threshold, based on our modeling with data used for performance year 2018. A 35 percent threshold balances concerns by recognizing additional ACOs with small institutional providers or clinics as low revenue ACOs, while helping to ensure ACOs with higher revenue continue to have the strongest incentives to improve quality of care for Medicare FFS beneficiaries and reduce expenditure growth to protect the Trust Funds. We decline the commenter’s suggestion to use a much lower threshold in identifying low revenue ACOs, such as 15 percent. The commenter pointed to the use of a 10 percent threshold in distinguishing low revenue ACOs from high revenue ACOs in the August 2018 proposed rule’s Regulatory Impact Analysis. As we explained in the August 2018 proposed rule (83 FR 41814) and reiterated in this section of this final rule, under this analysis, an ACO was identified as low revenue if its ACO participants’ total Medicare Parts A and B FFS revenue for assigned beneficiaries was less than 10 percent of the ACO’s assigned beneficiary population’s total Medicare Parts A and B FFS expenditures. We VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 continue to have concerns that this approach does not sufficiently account for ACO participants’ total Medicare Parts A and B FFS revenue (as opposed to their revenue for assigned beneficiaries), and therefore could misrepresent the ACO’s overall risk bearing potential, which would diverge from other aspects of the design of the BASIC track as finalized (see section II.A.3 of this final rule). Comment: Several commenters expressed concern about the approach to calculating revenue used in the definitions of low revenue ACOs and high revenue ACOs. These commenters explain that CMS proposes to include hospital add-on payments such as Indirect Medical Education (IME), Disproportionate Share Hospital (DSH), and uncompensated care payments when calculating an ACO’s revenue. These commenters point out that CMS will exclude these payments when calculating assigned beneficiary expenditures for determining benchmark and performance year expenditures. These commenters urged CMS to exclude add-on payments in determining an ACO’s revenue, suggesting that this approach could penalize ACOs that treat vulnerable populations, including teaching hospitals or those that treat the uninsured population. One commenter requested that CMS modify the proposed approach to identifying high revenue ACOs to ensure ACOs that are appropriately engaging, and incentivizing hospital engagement, in value-based care delivery are not penalized for their success. Response: We discuss related considerations in our discussion of the calculation of ACO participants’ total Medicare Parts A and B FFS revenue for determining the loss sharing limits under the BASIC track in the August 2018 proposed rule (83 FR 41809 through 41810) and in section II.A.3 of this final rule. To accurately determine ACO participants’ revenue for purposes of determining a revenue-based loss sharing limit, we explain our belief that it is important to include total revenue uncapped by truncation and to include IME, DSH and uncompensated care payments. We noted that this approach to calculating ACO participant Medicare FFS revenue is different from our approach to calculating benchmark and performance year expenditures for assigned beneficiaries, which we truncate at the 99th percentile of national Medicare FFS expenditures for assignable beneficiaries, and from which we exclude IME, DSH and uncompensated care payments (see PO 00000 Frm 00061 Fmt 4701 Sfmt 4700 67875 subpart G of the program’s regulations). We explained that IME, DSH, uncompensated care payments represent resources available to ACO participants to support their operations and offset their costs and potential shared losses, thereby increasing the ACO’s capacity to bear performancebased risk, which we believe should be reflected in the ACO’s loss sharing limit. Excluding such payments could undercount revenue and also could be challenging to implement, particularly truncation, since it likely would require apportioning responsibility for large claims among the ACO participants and non-ACO participants from which the beneficiary may have received the services resulting in the large claims. We therefore decline to modify our approach to determining ACO participant’s total Medicare Parts A and B FFS revenue to include IME, DSH and uncompensated care payments, or to cap claim payment amounts through truncation. For similar reasons, we also decline at this time to make other technical adjustments to calculations of revenue to exclude any other payment adjustments reflected in the claim payment amounts, such as payments under MIPS or the Hospital Value Based Purchasing Program. Comment: Several commenters suggested that CMS should take into consideration the impact of extreme and uncontrollable circumstances when determining participation options based on Medicare FFS revenue. Response: At this time, we decline to modify our approach to determining ACO participants’ total Medicare Parts A and B FFS revenue, and will not exclude Medicare Parts A and B FFS revenue earned during a disaster period, nor will we make other adjustments to the calculation of ACO participants’ Medicare Parts A and B FFS revenue to address extreme and uncontrollable circumstances because we do not have a reliable means for estimating what the ACO participants’ Medicare Parts A and B FFS revenues would have been in the absence of the event. We will continue to monitor the impact of extreme and uncontrollable circumstances on ACOs, particularly as we gain experience with the disasterrelief policies we have finalized for performance year 2017 and subsequent performance years. As part of this monitoring, we will consider whether any changes to our policy for determining low revenue ACOs and high revenue ACOs may be necessary to account for the effects of extreme and uncontrollable circumstances. Any such E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67876 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations changes would be made through notice and comment rulemaking. Comment: A few commenters explained that rural hospitals and physician practices have demonstrably smaller net operating profit margins than urban hospitals, and commenters suggested that the proposed approach to differentiating participation options based on ACO participants’ Medicare FFS revenue should consider ACO participants’ fixed costs and operating margins. Response: We currently do not consider operating costs in program calculations for benchmark and performance year expenditures since we determine benchmark and performance year expenditures based on Medicare Parts A and B FFS expenditures, according to the statutory requirements for the Shared Savings Program under section 1899(d)(1)(B) of the Act. We decline to consider operating costs in determining whether an ACO qualifies as a low revenue ACO or high revenue ACO. We believe that doing so would add a degree of variability and also unpredictably to the revenue calculations. We also believe it would be burdensome for ACOs to track operating costs of individual ACO participants, report this information to CMS, and for CMS to validate the data for use in calculations. Comment: One commenter requested that CMS provide clarification around the data that will be used for the ACO participant revenue calculations. The commenter noted that the proposed rule states that the most recently available 12 months of data will be used, but it is unclear what time period that would be. This commenter also responded to the discussion in the proposed rule on CMS’ consideration of an alternative approach where we would use multiple years of data to make the determination of whether an ACO is a low revenue ACO or high revenue ACO. This commenter preferred the proposed approach, to have the calculations based on one year of data, and did not consider use of multiple years of data in the revenue determination to be beneficial. Response: We appreciate the commenter’s support for the proposed look back period in the definition of low revenue ACO and high revenue ACO. To clarify, we proposed that we would make the determination based on ACO participant Medicare Parts A and B FFS revenue and total Medicare Parts A and B FFS expenditures for the most recent calendar year for which 12 months of data are available. As an example, the annual application cycle for a January 1st agreement period start date typically VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 spans the Summer–Fall of the prior calendar year. For example, for ACOs applying for the agreement start date of January 1, 2020, we would anticipate the application cycle to occur during CY 2019. Therefore, we would make the low revenue ACO versus high revenue ACO determination for ACOs applying for a new agreement period beginning January 1, 2020 based on the 12 months of data from January 1, 2018, through December 31, 2018. We also proposed that for ACOs applying for an agreement start date of July 1, 2019, we would determine whether the ACO is a low revenue ACO or high revenue ACO using data from the most recent calendar year for which 12 months of data are available. We anticipate the application cycle for the July 1, 2019 agreement start date to occur in Winter–Spring of 2019. Therefore, for ACOs applying for the agreement start date of July 1, 2019, we would make the low revenue ACO and high revenue ACO determination based on the 12 months of data from January 1, 2018, through December 31, 2018. Comment: Several commenters addressed CMS’ proposal to monitor low revenue ACOs experienced with performance-based risk Medicare ACO initiatives participating in the BASIC track to determine if they continue to meet the definition of low revenue ACO, and to take compliance action if the ACO meets the definition of a high revenue ACO during the agreement period. Under the proposed approach, high revenue ACOs experienced with performance-based risk Medicare ACO initiatives would be restricted to participation under the ENHANCED track. One commenter expressed significant reservations about the proposal to annually monitor low revenue ACOs to determine if, during the course of the performance year, the ACO became a high revenue ACO, and in turn requiring an ACO that becomes high revenue to move to the ENHANCED track. The commenter encouraged CMS not to finalize this approach as proposed. This commenter stated that many low revenue ACOs may be looking to partner with high revenue entities, such as IPPS hospitals, in order to have greater control over total Medicare Parts A and B FFS expenditures for their assigned beneficiaries. The commenter disagreed that this partnership automatically makes the low revenue ACO’s experience commensurate to that of a high revenue ACO, experienced with performance-based risk Medicare ACO initiatives. The commenter explained that entities with significant Medicare PO 00000 Frm 00062 Fmt 4701 Sfmt 4700 FFS revenues that are inexperienced with Medicare performance-based risk ACO initiatives may seek out experienced, low revenue ACOs to join as an ACO participant, to capitalize upon the ACO entity’s experience with success in performance-based risk. The commenter argued that an experienced, low revenue ACO with a newly added, inexperienced ACO participant, is not equivalent to a high revenue ACO that is experienced with performance-based risk Medicare ACO initiatives, even if the addition of the ACO participant causes the ACO to meet the proposed definition of a high revenue ACO, and therefore should not be aggressively accelerated to program’s maximum downside risk under the ENHANCED track. Instead, the commenter encouraged CMS to allow these ACOs to continue their BASIC track participation until the end of their participation agreement. One commenter described that CMS would have to consistently monitor to ensure ACO participant changes did not alter an ACO’s status as a low revenue ACO or high revenue ACO and for those that did, CMS would have to issue correction notices and require corrective action plans. The commenter described this as operationally difficult and creating more unnecessary complication and burden on both ACOs and CMS. A few commenters explained that an ACO’s qualification as a low revenue ACO or high revenue ACO would also change over time as ACO participant composition changes, adding more complexity and making long-term planning very difficult. These commenters were concerned that uncertainty would be further compounded by the timing of our determination of whether ACOs qualify as a low revenue ACO or high revenue ACO. Response: We considered commenters’ suggestions that we not require ACOs that transition from low revenue ACO to high revenue ACO status during the course of an ACO’s agreement period in Level E of the BASIC track to transition to the ENHANCED track. We also considered commenters’ concerns (described elsewhere in this section of this final rule) that the proposed approach to distinguishing participation options for low revenue ACOs and high revenue ACOs could result in ACOs gaming the revenue determinations by manipulating their ACO participant lists. We remain concerned about the possibility that an ACO identified as experienced with performance-based risk Medicare ACO initiatives, and participating in an agreement period E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations under Level E of the BASIC track because it is also determined to be a low revenue ACO at the start of its agreement period, could become a high revenue ACO during the course of its agreement period. We believe that absent a structured approach to monitoring and addressing changes in composition, ACOs entering the BASIC track initially appearing to be low revenue ACOs could dramatically change their composition to take advantage of this lower-risk participation option in a manner that the program redesign does not contemplate. At this time, we believe it would be appropriate to finalize the proposal to monitor for revenue changes in ACOs that entered an agreement period under Level E of the BASIC track because they are low revenue and experienced with performance-based risk Medicare ACO initiatives, for example as a result of changes in ACO participant composition. Further, under this approach, such an ACO that becomes high revenue during its agreement period under Level E of the BASIC track would be required to take corrective action to remedy the issue, such as removing an ACO participant from its ACO participant list, so that the ACO could meet the definition of low revenue ACO. If corrective action is not taken, CMS would terminate the ACO’s participation agreement under § 425.218. If an ACO is required to terminate its participation, it may apply to enter a new agreement period under the ENHANCED track. As a consequence of entering a new agreement period, the ACO’s benchmark will be calculated based on the 3 most recent years prior to the ACO’s agreement start date, using the ACO participant list the ACO finalizes as being applicable for the new agreement period. We note that ACOs participating in the program may submit change requests in accordance with program procedures to indicate additions, updates, and deletions to their existing ACO participant lists. As part of the ACO participant change request process, we anticipate providing ACOs with information so that they are informed about the potential impact of ACO participant list changes on their compliance with program requirements, including how these changes may affect whether the ACO is considered a low revenue ACO or high revenue ACO, under the criteria for determining ACO participation options we are establishing with this final rule. Although we are finalizing the proposal, we do find the commenters’ VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 concerns about the possible effects of applying this policy to be compelling. In particular, after further consideration, we believe that the low revenue ACO/ high revenue ACO determination could be affected by changes in the ACO participant list for the ACO, or changes in ACO providers/suppliers, that are made in the course of program participation, where the changes are not motivated by the ACO’s desire to avoid program requirements regarding participation options. For example, any addition or removal of an ACO participant, or change in ACO providers/suppliers, could affect the basis for the low revenue ACO/high revenue ACO determination: ACO participants’ total Medicare Parts A and B FFS revenue, and total Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries for the relevant period. In particular, ACOs close to the threshold percentage that are initially identified as low revenue ACOs could, during the course of their agreement period, become high revenue ACOs due to only a slight increase in ACO participant revenue. We note that under our proposed approach, which we are finalizing, we may be required to terminate ACOs from an agreement period in the BASIC track because of changes in ACO participants’ total Medicare Parts A and B FFS revenue, and/or total Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries, that result in small percentage changes that put the ACO over the threshold for the definition of high revenue ACO, and which could not be easily remedied by the ACO. Therefore, we plan to closely monitor the effects of this policy. In particular we plan to monitor the magnitude by which ACOs exceed the 35 percent threshold to become a high revenue ACO during an agreement period, and the ease or difficulty with which ACOs can remedy these circumstances to return to being low revenue ACOs (if desired by the ACO). If this policy results in ACOs being required to transition to the ENHANCED track, we will monitor to determine if these ACOs elect to renew early (to avoid a break in program participation), or terminate their participation, and if so whether they apply to re-enter the program later. We may revisit this policy in future rulemaking based on our lessons learned. Comment: A few commenters indicated that ACOs may be challenged to anticipate CMS’ determination of whether they are low revenue ACOs or high revenue ACOs, and will depend on these determinations to make business decisions on program participation. One PO 00000 Frm 00063 Fmt 4701 Sfmt 4700 67877 commenter explained that ACOs may not have the data necessary to determine whether they are low revenue ACOs or high revenue ACOs without receiving additional data from CMS. A few commenters pointed to the need for CMS to provide revenue determinations early in the application process, so that ACOs know in advance what category they fall into. Several commenters suggested that CMS provide ample time for ACOs to make participation decisions based on its determination of whether an ACO is a low revenue ACO or high revenue ACO, including to allow ACOs to make any changes and execute a coordinated transition into their desired participation option (if a choice is available). A few commenters suggested that CMS provide more detailed processes and timelines governing its assessment of and determination of ACOs as low revenue ACOs or high revenue ACOs (including how it will monitor ACOs) which it believes will help to protect against the potential for ACO gaming whereby ACOs use creative business organization strategies to ensure that they are able to remain in the low revenue ACO designation. A few commenters urged that CMS keep the process simple, straightforward, and transparent. One commenter suggested that CMS announce to ACOs a date by which it will complete its assessment of all ACOs regarding their categorization as a low revenue ACO or high revenue ACO. One commenter suggested the following approach for a typical application cycle, in advance of a January 1 start date: CMS should provide an option for an ACO to file a request by May for a determination of low revenue ACO/high revenue ACO status with receipt of the determination no later than June. Thus, when the ACO files its application in July, the ACO will be fully aware of its status and to be ready to meet the necessary requirements. Response: We appreciate the commenters’ concern and we anticipate providing timely feedback to ACOs throughout program application cycles, on whether the ACO is likely to be determined to be a low revenue ACO or high revenue ACO (among other factors), in order to ensure ACOs have the information they need to make decisions about program participation and to take action to align with program requirements. We announce application cycle dates in advance, through the Shared Savings Program website, and through various other methods available, including webinars, FAQs and a weekly newsletter. The program’s application cycle typically includes E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67878 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations multiple opportunities for CMS to review the ACO’s application, and provide the applicant feedback and the opportunity to correct deficiencies. We encourage ACOs and the public to monitor the Shared Savings Program website for related announcements. We decline commenter’s suggestions to make final determination of whether an ACO is a low revenue ACO or high revenue ACO in advance of the application submission date. ACOs submit their ACO participant list as part of the application submission process, and have opportunities to make changes or corrections to their ACO participant list during the application review period. As a result, the determination of whether an ACO is a low revenue ACO or high revenue ACO could change. Final Action: After consideration of the public comments received, we are finalizing, with modifications, the proposed approach to identifying low revenue ACOs and high revenues ACOs for the purposes of determining ACO participation options in the Shared Savings Program. We are finalizing the addition of new definitions at § 425.20 for ‘‘low revenue ACO,’’ and ‘‘high revenue ACO.’’ We define ‘‘high revenue ACO’’ to mean an ACO whose total Medicare Parts A and B FFS revenue of its ACO participants based on revenue for the most recent calendar year for which 12 months of data are available, is at least 35 percent of the total Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries based on expenditures for the most recent calendar year for which 12 months of data are available. We define ‘‘low revenue ACO’’ to mean an ACO whose total Medicare Parts A and B FFS revenue of its ACO participants based on revenue for the most recent calendar year for which 12 months of data are available, is less than 35 percent of the total Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries based on expenditures for the most recent calendar year for which 12 months of data are available. In § 425.600(e) we are finalizing our approach to ensuring continued compliance of ACOs with the eligibility requirements for participation in the BASIC track, for an ACO that is accepted into the BASIC track’s Level E because the ACO was experienced with performance-based risk Medicare ACO initiatives and determined to be low revenue at the time of application. If, during the agreement period, the ACO meets the definition of a high revenue ACO, the ACO will be permitted to complete the remainder of its current VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 performance year under the BASIC track, but will be ineligible to continue participation in the BASIC track after the end of that performance year unless it takes corrective action, for example by changing its ACO participant list. We will take compliance action, up to and including termination of the participation agreement, as specified in §§ 425.216 and 425.218, to ensure the ACO does not continue in the BASIC track for subsequent performance years of the agreement period. For example, we may take pre-termination actions as specified in § 425.216, such as issuing a warning notice or requesting a corrective action plan. To remain in the BASIC track, the ACO will be required to remedy the issue. For example, if the ACO participants’ total Medicare Parts A and B FFS revenue has increased in relation to total Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries, the ACO could remove an ACO participant from its ACO participant list, so that the ACO can meet the definition of low revenue ACO. If corrective action is not taken, CMS will terminate the ACO’s participation under § 425.218. (2) Restricting ACOs’ Participation in the BASIC Track Prior To Transitioning to Participation in the ENHANCED Track As discussed in section II.A.5.c. of the August 2018 proposed rule (83 FR 41820 through 41836), we proposed to use factors based on ACOs’ experience with performance-based risk to determine their eligibility for the BASIC track’s glide path, or to limit their participation options to either the highest level of risk and potential reward under the BASIC track (Level E) or the ENHANCED track. As discussed in section II.A.5.b.(2) of the August 2018 proposed rule (83 FR 41817 through 41819), we also proposed to differentiate between low revenue ACOs and high revenue ACOs with respect to the continued availability of the BASIC track as a participation option. This approach would allow low revenue ACOs, new to performance-based risk arrangements, additional time under the BASIC track’s revenue-based loss sharing limits, while requiring high revenue ACOs to more rapidly transition to the ENHANCED track under which they would assume relatively higher, benchmark-based risk. We explained our belief that all ACOs should ultimately transition to the ENHANCED track, the highest level of risk and potential reward under the program, which could drive ACOs to more aggressively pursue the program’s goals of improving quality of care and PO 00000 Frm 00064 Fmt 4701 Sfmt 4700 lowering growth in FFS expenditures for their assigned beneficiary populations. We considered that some low revenue ACOs may need additional time to prepare to take on the higher levels of performance-based risk required under the ENHANCED track. Low revenue ACOs, which could include small, physician-only and rural ACOs, may be encouraged to enter and remain in the program based on the availability of lower-risk options. For example, small, physician-only and rural ACOs may have limited experience submitting quality measures or managing patient care under two-sided risk arrangements, which could deter their participation in higher-risk options. ACOs and other program stakeholders have suggested that the relatively lower levels of risk available under the Track 1+ Model (an equivalent level of risk and potential reward to the payment model available under Level E of the BASIC track) encourages transition to risk by providing a more manageable level of two-sided risk for small, physician-only, and rural ACOs, compared to the levels of risk and potential reward currently available under Track 2 and Track 3, and that would be offered under the proposed ENHANCED track. We also considered that, without limiting high revenue ACOs to a single agreement period under the BASIC track, they could seek to remain under a relatively low level of performancebased risk for a longer period of time, and thereby curtail their incentive to drive more meaningful and systematic changes to improve quality of care and lower growth in FFS expenditures for their assigned beneficiary populations. Further, high revenue ACOs, whose composition likely includes institutional providers, particularly hospitals and health systems, are expected generally to have greater opportunity to coordinate care for assigned beneficiaries across care settings among their ACO participants than low revenue ACOs. One approach to ensure high revenue ACOs accept a level of risk commensurate with their degree of control over total Medicare Parts A and B FFS expenditures for their assigned beneficiaries, and to further encourage these ACOs to more aggressively pursue the program’s goals, is to require these ACOs to transition to higher levels of risk and potential reward. We proposed to limit high revenue ACOs to, at most, a single agreement period under the BASIC track prior to transitioning to participation under the ENHANCED track. We explained our belief that an approach that allows high E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations revenue ACOs that are inexperienced with the accountable care model the opportunity to become experienced with program participation within the BASIC track’s glide path prior to undertaking the higher levels of risk and potential reward in the ENHANCED track offers an appropriate balance between allowing ACOs time to become experienced with performance-based risk and protecting the Medicare Trust Funds. This approach recognizes that high revenue ACOs control a relatively large share of assigned beneficiaries’ total Medicare Parts A and B FFS expenditures and generally are positioned to coordinate care for beneficiaries across care settings, and is protective of the Medicare Trust Funds by requiring high revenue ACOs to more quickly transition to higher levels of performance-based risk. In contrast, we proposed to limit low revenue ACOs to, at most, two agreement periods under the BASIC track. These agreement periods would not be required to be sequential, which would allow low revenue ACOs that transition to the ENHANCED track after a single agreement period under the BASIC track the opportunity to return to the BASIC track if the ENHANCED track initially proves too high of risk. An experienced ACO may also seek to participate in a lower level of risk if, for example, it makes changes to its composition to include ACO providers/ suppliers that are less experienced with the accountable care model and the program’s requirements. Once an ACO has participated under the BASIC track’s glide path (if eligible), a subsequent agreement period under the BASIC track would be required to be at the highest level of risk and potential reward (Level E), according to the proposed approach to identifying ACOs experienced with performance-based Medicare ACO initiatives (see section II.A.5.c. of this final rule). Therefore, we proposed that in order for an ACO to be eligible to participate in the BASIC track for a second agreement period, the ACO must meet the requirements for participation in the BASIC track as described in this final rule (as determined based on whether an ACO is a low revenue ACO versus high revenue ACO and inexperienced with performance-based risk Medicare ACO initiatives versus experienced with performance-based risk Medicare ACO initiatives) and either of the following: (1) The ACO is the same legal entity as a current or previous ACO that previously entered into a participation agreement for participation in the BASIC track only one time; or (2) for a new ACO identified as a re-entering VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 ACO because at least 50 percent of its ACO participants have recent prior participation in the same ACO, the ACO in which the majority of the new ACO’s participants were participating previously entered into a participation agreement for participation in the BASIC track only one time. Several examples illustrate this proposed approach. First, for an ACO legal entity with previous participation in the program, we would consider the ACO’s current and prior participation in the program. For example, if a low revenue ACO enters the program in the BASIC track’s glide path, and remains an eligible, low revenue ACO, it would be permitted to renew in Level E of the BASIC track for a second agreement period. Continuing this example, for the ACO to continue its participation in the program for a third or subsequent agreement period, it would need to renew its participation agreement under the ENHANCED track. As another example, a low revenue ACO that enters the program in the BASIC track’s glide path could participate for a second agreement under the ENHANCED track, and enter a third agreement period under Level E of the BASIC track before being required to participate in the ENHANCED track for its fourth and any subsequent agreement period. Second, for ACOs identified as reentering ACOs because greater than 50 percent of their ACO participants have recent prior participation in the same ACO, we would determine the eligibility of the ACO to participate in the BASIC track based on the prior participation of this other entity. For example, if ACO A is identified as a reentering ACO because more than 50 percent of its ACO participants previously participated in ACO B during the relevant look back period, we would consider ACO B’s prior participation in the BASIC track in determining the eligibility of ACO A to enter a new participation agreement in the program under the BASIC track. For example, if ACO B had previously participated in two different agreement periods under the BASIC track, regardless of whether ACO B completed these agreement periods, ACO A would be ineligible to enter the program for a new agreement period under the BASIC track and would be limited to participating in the ENHANCED track. Changing the circumstances of this example, if ACO B had previously participated under the BASIC track during a single agreement period, ACO A may be eligible to participate in the BASIC track under Level E, the track’s highest level of risk and potential reward, but would be ineligible to enter PO 00000 Frm 00065 Fmt 4701 Sfmt 4700 67879 the BASIC track’s glide path because ACO A would have been identified as experienced with performance-based risk Medicare ACO initiatives (as proposed). We recognized that the difference in the level of risk and potential reward under the BASIC track, Level E compared to the payment model under the ENHANCED track could be substantial for low revenue ACOs. Therefore, we also considered and sought comment on an approach that would allow low revenue ACOs to gradually transition from the BASIC track’s Level E up to the level of risk and potential reward under the ENHANCED track. For example, we sought comment on whether it would be helpful to devise a glide path that would be available to low revenue ACOs entering the ENHANCED track. We also considered, and sought comment on, whether such a glide path under the ENHANCED track should be available to all ACOs. As another alternative, we considered allowing low revenue ACOs to continue to participate in the BASIC track under Level E for longer periods of time, such as a third or subsequent agreement period. However, we indicated our concern that without a time limitation on participation in the BASIC track, ACOs may not prepare to take on the highest level of risk that could drive the most meaningful change in providers’ and suppliers’ behavior toward achieving the program’s goals. As an alternative to the proposed approach for allowing low revenue ACOs to participate in the BASIC track in any two agreement periods (nonsequentially), we sought comment on an approach that would require participation in the BASIC track to occur over two consecutive agreement periods before the ACO enters the ENHANCED track. This approach would prevent low revenue ACOs that entered the ENHANCED track from participating in a subsequent agreement period under the BASIC track. That is, it would prevent an ACO from moving from a higher level of risk to a lower level of risk. However, given changes in ACO composition, among other potential factors, we indicated our belief that it is important to offer low revenue ACOs some flexibility in their choice of level of risk from one agreement period to the next. We proposed to specify these proposed requirements for low revenue ACOs and high revenue ACOs in revisions to § 425.600, along with other proposed requirements for determining participation options based on the experience of the ACO and its ACO participants, as discussed in section E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67880 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations II.A.5.c. of this final rule. We proposed to use our determination of whether an ACO is a low revenue ACO or high revenue ACO in combination with our determination of whether the ACO is experienced or inexperienced with performance-based risk (which we proposed to determine based on the experience of both the ACO legal entity and the ACO participant TINs with performance-based risk), in determining the participation options available to the ACO. We sought comment on these proposals. More generally, we noted that the proposed approach to redesigning the program’s participation options maintains flexibility for ACOs to elect to enter higher levels of risk and potential reward more quickly than is required under the proposed participation options. Any ACO may choose to apply to enter the program under or renew its participation in the ENHANCED track. Further, ACOs eligible to enter the BASIC track’s glide path may choose to enter at the highest level of risk and potential reward under the BASIC track (Level E), or advance to that level more quickly than is provided for under the automatic advancement along the glide path. Comment: A few commenters agreed with the proposed approach to allow low revenue (typically physician-led) ACOs up to two agreement periods under the BASIC, while requiring high revenue ACOs (the typically betterresourced, hospital-based entities) to move more quickly to the ENHANCED track. Another commenter explained that the required move to downside risk is appropriate for urban health care systems that have the scale and resources to absorb a bad year. Several commenters favored the proposed approach for requiring more rapid transition to higher risk by high revenue ACOs. A few commenters urged CMS to encourage more low revenue ACO participation, and to increase financial alignment with value for high revenue ACOs. More generally, a few commenters supported the overall framework for the proposed redesign of the Shared Savings Program, including the proposed transition from one-sided to two-sided models. Many commenters expressed concerns about the proposed approach to restricting the amount of time ACOs may participate in the BASIC track prior to participation in the ENHANCED track. Some commenters suggested that all ACOs should be allowed to remain in the BASIC track in Level E, or a track that meets the nominal risk requirements under the Quality Payment Program, finding the level of VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 risk offered under the ENHANCED track to be unbearable. One commenter, MedPAC, suggested CMS consider allowing all ACOs to operate in the BASIC track for two agreement periods, suggesting that it has enough downside risk to encourage ACOs to control costs, and the modest level of risk in the model may be more palatable to a wider range of ACOs. However, we note that MedPAC also suggested that because the ENHANCED track has stronger incentives for cost control, an argument can be made that all ACOs should move to the ENHANCED track after one 5-year agreement period in the BASIC track. Some commenters specifically opposed limiting high revenue ACOs to one agreement period in the BASIC track. Given that high revenue ACOs are responsible for a greater share of healthcare spending than low revenue ACOs, one commenter agreed that it is reasonable to ask high revenue ACOs to assume greater levels of risk and/or at a faster pace than low revenue ACOs. But this commenter also suggested that CMS should also take into account that larger systems must invest in change across a much broader delivery ‘‘footprint’’ and so may require additional investments over multiple years to make transformative system changes, and also need a longer time to recoup investments (such as in the form of shared savings). This commenter suggested that high revenue ACOs be allowed to remain in Level E of the BASIC track for a second agreement period. Some commenters suggested alternatives for distinguishing ACOs: • One commenter suggested that instead of distinguishing low revenue ACOs and high revenue ACOs for purposes of determining the ACO’s participation option by track, that the distinction be used to determine the sharing rate or MSR applied to the ACO within the BASIC track’s glide path. This commenter supported the alternative consideration to provide low revenue ACOs (particularly small, rural and physician-led ACOs) either a lower MSR or higher shared savings rate. • One commenter suggested that CMS consider a combination of other program policies to drive ACO performance, rather than the proposed approach to transition ACOs to performance-based risk, which could include: (1) Dropping ACOs from the program if they have not achieved savings after several years; (2) Reducing shared savings payments to ACOs that incur large losses before generating savings; and (3) Allowing ACOs to take accountability for the specific types of spending they are capable of controlling, rather than total Medicare spending. • One commenter suggests that the potential to share in savings is a sufficient PO 00000 Frm 00066 Fmt 4701 Sfmt 4700 motivation for ACOs, as opposed to performance-based risk. • Several commenters believe that both CMS and other researchers have significantly overstated the degree to which the performance of hospital-based ACOs differs from that of physician-led ACOs. These commenters urged CMS not move forward with the proposed approach, and to instead seek ways to support these ACOs, rather than make it harder for them to achieve savings. Response: We appreciate commenters’ support for the proposed approach to limiting ACOs’ participation in the BASIC track, and requiring all ACOs to eventually transition to the ENHANCED track. Specifically, we appreciate commenters’ support for the proposed approach to limiting high revenue ACOs to a single agreement period in the BASIC track (if eligible based on a determination that they are inexperienced with performance-based risk Medicare ACO initiatives), while limiting low revenue ACOs to a maximum of two agreement periods in the BASIC track (with ACOs inexperienced with performance-based risk Medicare ACO initiatives being eligible to participate under a single agreement period in the BASIC track’s glide path and a single agreement period in Level E of the BASIC track). We recognize that many commenters expressed concern about this approach, although at this time we decline to adopt commenters’ suggestions that we allow some or all ACOs additional agreement periods under the BASIC track compared to the proposed approach, or to not require that ACOs ultimately transition to the ENHANCED track. As supported by some commenters, we continue to believe that requiring ACOs to transition to the ENHANCED track, with the highest level of risk and potential reward under the program, could drive ACOs to more aggressively pursue the program’s goals of improving quality of care and lowering growth in FFS expenditures for their assigned beneficiary populations. We also note that under the longer, 5-year agreement periods we are finalizing in this final rule (see section II.A.2), the timeline for entering higher levels of benchmark-based risk remains relatively consistent with the program’s current requirements. Under the program’s current requirements, ACOs must transition to a two-sided model by the start of their third 3-year agreement period, allowing for not more than 6 performance years under a one-sided model before being required to enter either Track 2 or Track 3. A gentler pathway between the existing Track 1 and the levels of risk and reward under E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations the program’s current two-sided models has been a long standing request from ACOs and other program stakeholders, as described in section II.A.1 of this final rule and as reflected in some comments on the proposed program redesign. The proposed approach allows a gentler progression to two-sided risk, including a progression over a 5-year agreement period for all ACOs inexperienced with performance-based risk Medicare ACO initiatives, and a progression over two, 5-year agreement periods for low revenue ACOs. We note that this timeline is further extended for ACOs entering an agreement period beginning on July 1, 2019, since this mid-year start includes an additional 6month performance year, resulting in an agreement period of 5.5 years. We also note also that early entrants into the Shared Savings Program have been able to participate under a onesided model for up to 6 performance years, and we anticipate that eligible ACOs will continue their participation in the BASIC track’s glide path to extend their transition to benchmarkbased risk under the ENHANCED track for at least another 5 years. We also believe the proposed approach offers the right combination of a slower transition to the ENHANCED track for low revenue ACOs, and more rapid progression for high revenue ACOs. We therefore decline the commenter’s suggestion that we require all ACOs to transition to the ENHANCED track after one 5-year agreement period in the BASIC track. We also decline to accept the commenters’ alternative suggestions. We are not adopting an approach to distinguish the sharing rates or the MSR applied to ACOs within the BASIC track’s glide path, as described in sections II.A.3 and II.A.6. of this final rule, since ACOs may elect their MSR and MLR under performance-based risk. Therefore we decline to use the low revenue ACO and high revenue ACO distinctions to determine the financial model features applied to ACOs within the BASIC track’s glide path. This approach would also not achieve our goal of requiring ACOs to progress to the ENHANCED track over time. Some suggested alternative approaches, to distinguish ACOs based on their financial performance, were beyond the scope of the proposed rule, such as reducing ACOs’ shared savings payments if they incurred large losses in prior years, or allowing ACOs to become accountable for specific types of spending instead of total Medicare spending. We believe the latter approach, to segment accountability for beneficiaries’ healthcare costs, would VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 not achieve a key aim of the program, which is for ACOs to become accountable for total Medicare Parts A and B FFS expenditures for their assigned beneficiaries, and could reinforce existing incentives that lead to fragmented care. Further, we appreciated the suggestion that we remove ACOs with poor financial performance, which seems similar to our proposed approach to monitoring and termination for poor financial performance as discussed in section II.A.5.d of this final rule. We also disagree with the commenter’s suggestion that shared savings potential alone is a sufficient motivator for ACOs to drive the most meaningful systematic change in the healthcare system. We believe that greater risk with the possibility of greater reward under two-sided models is a pathway for ACOs to transform their care delivery by lowering growth in expenditures while ensuring they provide coordinated, high quality care for their Medicare FFS populations. For this reason we also decline commenters’ suggestions that we forgo the proposed approach and instead seek other ways to support high revenue ACOs’ achievement of the program’s goals. Comment: A few commenters explained that the challenge of being forced into risk is of great importance to ACOs of all sizes, composition, and ownership. Some commenters warned that requiring ACOs to take on high levels of risk before they are ready will result in program attrition. One commenter explained that regardless of structure, significant investments are needed in population health platforms and care process changes for ACOs to bear risk. Several commenters point to a variety of factors, other than ACO composition, related to an ACO’s readiness to take on performance-based risk. One commenter explained that the financial position and backing of a particular ACO as well as the ability to assume risk depends on a variety of factors, such as local market dynamics, culture, leadership, financial status, previous program success, and the resources required to address social determinants of health that influence care and outcomes for patients. Another commenter described an organization’s ability to bear risk as having many inputs, including payer mix. Another commenter explained that each ACO is unique and faces different circumstances that determine its ability to take on higher levels of risk. Response: As we have previously described in responding to comments in this section of this final rule, the current structure of the Shared Savings Program PO 00000 Frm 00067 Fmt 4701 Sfmt 4700 67881 requires ACO’s eventual transition to performance-based risk while also affording ACOs and their provider/ suppliers the flexibility to redesign care to address the unique needs of their population and community. While we appreciate that the circumstance of each ACO may be unique, as commenters point out, we also believe that the program’s requirements are clear about the expectation that ACOs enter performance-based risk over the course of their participation in the program, should they choose to continue their participation over of multiple agreement periods. We believe the proposed approach, including a glide path within the BASIC track from a one-sided model through progressively higher levels of performance-based risk offers a gentler and more manageable approach for ACOs to become experienced with twosided models before undertaking more significant levels of risk and potential reward. Comment: Commenters described a variety of reasons why high revenue ACOs would benefit from additional time under lower-risk participation options. As echoed in other comments, one commenter explained that the proposed rule would force hospitalcentric ACOs to take on additional risk too quickly, when these ACOs need additional time to adjust their cost structures and change operating models. Another commenter described its concerns that, in the current environment, if CMS pushes to drive losses more quickly to hospitals, it will be increasingly difficult for hospital systems to invest dollars back into population health management activities, which is necessary for long term success of ACO to meet the aims of the Shared Savings Program. A few commenters explained that hospital-based, high revenue ACOs, face greater challenges in taking on performance-based risk because they tend to be less cohesive groups, which have invested heavily in developing the infrastructure in both technology platforms and care management to help their ACOs eventually succeed. However, another commenter explained that hospitals and health systems are best equipped to lead other providers in moving toward downside risk because they have provided—and continue to provide—significant infrastructure support related to health information technology, regulatory compliance and other administrative functions that are key to successful APM implementation. A few commenters explained that larger systems often already operate at greater efficiency before entering the E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67882 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations program, and as a result may often have less spending to trim, which is a commonly cited concern regarding historical benchmarks. Requiring transition to higher levels of performance-based risk may limit participation by these providers in the program. Response: We appreciate the commenters’ explanations of the challenges some high revenue ACOs may face in taking on performancebased risk under the proposed redesign of the Shared Savings Program. We are not persuaded, however, by the suggested reasons to permit high revenue ACOs additional time under the BASIC track, when we believe they have the capacity to drive more meaningful, systematic change in achieving the program’s goals by participating under higher levels of performance-based risk. As we have described elsewhere in this final rule, we have observed that low revenue ACOs, which include small, physician-only and rural ACOs, show better average results compared to high revenue ACOs, which typically include hospitals (see section V of this final rule). Given the potential for high revenue ACOs to lower growth in Medicare Parts A and B FFS expenditures, we believe it is critical to ensure they remain accountable for the quality of care, and expenditures, for their assigned beneficiaries. We believe that an outcome of this approach to program redesign may be new, innovative and more aggressive approaches to reaching the program’s goals of improving quality of care and lowering growth in Medicare FFS expenditures for beneficiaries. Regarding the commenter’s concern about the participation of already efficient high revenue ACOs, we note that (as described in section II.D. of this final rule) we are finalizing additional modifications to the program’s methodology for establishing, updating and adjusting the ACO’s historical benchmark to improve incentives and to increase the accuracy of the benchmark by incorporating regional factors in an ACO’s first agreement period and better capturing changes in beneficiary health status. The BASIC track’s glide path, coupled with longer agreement periods and benchmark improvements, including regional adjustments for efficiency starting in the first agreement period, as well as new risk adjustment coding intensity adjustments, should help ACOs transition to performancebased risk. Comment: Some commenters stated that requiring hospital-based ACOs to take on more risk sooner will cause VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 these ACOs to cease participation, or discourage ACO formation. A few commenters expressed concern that the proposed approach would make participation more challenging for ACOs that would be high volume, such as those with hospital participants, and would thereby marginalize these participants and result in reduced participation by hospital-based ACOs. These commenters explained that this could lead to their departure and would squander the significant investments they have made in care coordination and data-sharing before they were able to pay off for the Medicare program and its beneficiaries. Several commenters explained that keeping hospitals in the Shared Savings Program is critical to reducing total cost of care. One commenter suggested the high revenue ACO distinction would discourage participation by the ACOs that can best coordinate acute and ambulatory care and are more likely to generate substantial savings to the Medicare program over the long-term. A few commenters stated that the proposed approach would disadvantage ACOs that treat complex patients that have higher expenditures, while other commenters indicated that the proposed approach would penalize high revenue ACOs for the size of their patient populations and their volume of services. Response: We believe a combination of the policy changes being established with this final rule can help ACOs transform care and mitigate to some extent commenters’ concerns around the populations served by high revenue ACOs and other challenges faced by these organizations. For example, as discussed in section II.D. of this final rule, the potentially smaller regional adjustments for ACOs caring for complex patients (where the ACOs’ expenditures may be higher than expenditures in the ACO’s regional service area) will provide more time for these ACOs to bring their costs in line with their region. In addition, these ACOs will benefit from the modified approach to risk adjustment using full CMS–HCC scores with a 3 percent cap on growth for the agreement period, which may more accurately capture the conditions of their patients and account for the health status changes in an ACO’s performance year assigned beneficiary population. Further, eligible ACOs will have new tools to support care coordination, such as through expanded coverage of telehealth services and a SNF 3-day rule waiver (see section II.B. of this final rule), and beneficiary engagement such as through the opportunity for eligible ACOs to PO 00000 Frm 00068 Fmt 4701 Sfmt 4700 implement Beneficiary Incentive Programs (see section II.C. of this final rule). Eligible clinicians in high revenue ACOs may also be eligible to receive QP status and benefit from incentive payments under the Quality Payment Program for participation in an Advanced APM under the ENHANCED track or Level E of the BASIC track (if eligible). High revenue ACOs (and ACOs more generally) could find their participation in a financial model that is an Advanced APM to be a factor to their advantage in attracting and retaining participation of ACO participants and ACO providers/suppliers. The longer agreement periods will provide more time for ACOs to become successful and transform care and benefit from their success, which we believe will be especially important to high revenue ACOs (including most hospital-based ACOs), which we expect generally will have more potential savings to achieve. We also note that while only a small number of ACOs have owed shared losses, we have observed that one high revenue ACO that incurred shared losses, which was a hospital-based ACO, continues to participate and work toward transforming care. This suggests that even ACOs that have incurred shared losses still can provide a catalyst for making health systems and provider networks more efficient and effective. Comment: One commenter disagreed with the need to push high revenue ACOs to accept greater amounts of risk, pointing to the relative newness of the Shared Savings Program and the other Medicare payment reforms that have occurred in recent years. According to this commenter, these initiatives are straining already limited resources in hospitals and making it more challenging to keep up with the extremely rapid pace of payment reforms being pursued by CMS. Response: As we explained in the August 2018 proposed rule, our proposed redesign of the Shared Savings Program was informed by our initial years of experience with the program, including performance results. However, we do not agree with the commenter’s suggestion that we potentially delay changes to further the achievement of the program’s goals in light of other payment reforms implemented by the agency. Hospitals have been at the forefront of value-based purchasing and we believe the principles and lessons learned from quality improvement and efficiency measures can help inform their success under larger population-based, valuebased programs. Comment: Some commenters urged CMS to allow even greater flexibility to E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations small, rural, or physician-only ACOs, low revenue ACOs, and ACOs that include safety net providers, to prepare for the transition to performance-based risk. Commenters explained that these ACOs face challenges in that they lack the financial reserves or the financial backing to move into performance-based risk. One commenter explained: Small and rural ACOs have achieved excellent clinical quality scores above national averages even as they beat their spending benchmarks, however, the natural year-to-year variation in performance and risk of paying back shared losses even in a single year is too much uncertainty for providers that live on the margins. Several commenters described the level of risk in the ENHANCED track as being too high for low revenue ACOs. One commenter described the distance in risk and downside loss between the BASIC track’s Level E and the ENHANCED track as ‘‘abysmal,’’ and undertaking this level of performance-based risk may be ‘‘financially suicidal’’ for a low revenue ACO. Response: We appreciate commenters’ concerns about the obstacles low revenue ACOs face in transitioning to performance-based risk given their potentially more limited financial reserves, particularly the challenges faced by small, rural and physician-only ACOs, and especially ACOs new to the Shared Savings Program and the accountable care model. We believe these concerns further support our proposed approach to providing low revenue ACOs additional time to prepare to take on the higher levels of performance-based risk required under the ENHANCED track, by allowing eligible low revenue ACOs up to two, 5-year agreement periods for a total of 10 years under the BASIC track (or 10.5 years in the case of an ACO with an agreement period beginning on July 1, 2019). We also believe that a combination of policy modifications reflected in our final policies within this final rule address commenters’ concerns and suggestions for a relatively gentler glide path to two-sided risk for small, rural and physician-only ACOs, and support continued participation of these ACOs in the Shared Savings Program. For one, as discussed in section II.A.5.b.(1) of this final rule, we are finalizing our proposed definitions of low revenue ACOs and high revenue ACOs with a modification to increase the threshold percentage used in making these determinations (from 25 percent to 35 percent) so that more ACOs would be considered low revenue ACOs. Second, we are finalizing higher sharing rates VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 under BASIC track (as described in section II.A.3 of this final rule) which we believe will allow ACOs eligible for shared savings access to additional financial resources to support their operational costs and their participation in performance-based risk (such as supporting these ACOs in establishing their repayment mechanism arrangements). Third, as described in section II.A.5.c of this final rule, we are finalizing a policy modification to allow additional flexibility for new legal entities, that are low revenue ACOs and inexperienced with performance-based risk Medicare ACO initiatives, to participate for up to 3 performance years (or 4 performance years in the case of ACOs entering an agreement period beginning on July 1, 2019) under a onesided model of the BASIC track’s glide path before transitioning to Level E (the highest level of risk and potential reward under the BASIC track). Fourth, and lastly, as described in section II.A.6.c of this final rule, we are modifying our proposed approach for determining repayment mechanism arrangement amounts to reduce the burden of these arrangements on all ACOs participating in the ENHANCED track. Under the modified approach, the repayment mechanism amount for such ACOs must be equal to the lesser of the following: 1 percent of the total per capita Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries, based on expenditures for the most recent calendar year for which 12 months of data are available; or 2 percent of the total Medicare Parts A and B FFS revenue of its ACO participants, based on revenue for the most recent calendar year for which 12 months of data are available. We decline commenters’ suggestions that certain ACOs be exempt from transitioning to performance-based risk (generally) or higher levels of risk and potential reward. As we explain elsewhere in this section of this final rule, we believe the progression to performance-based risk is critical to driving the most meaningful change in providers’ and suppliers’ behavior toward achieving the program’s goals, and that participation in two-sided models, and ultimately the ENHANCED track, should be the goal for all Shared Savings Program ACOs. Therefore, at this time, we also decline to establish a separate track with alternative participation options targeted specifically at particular subsets of ACOs, including those that typically may be low revenue ACOs. Comment: A few commenters supported the ability of low revenue ACOs to transition from the BASIC track PO 00000 Frm 00069 Fmt 4701 Sfmt 4700 67883 to the ENHANCED track after a single agreement period under the BASIC track, while retaining the opportunity to return to the BASIC track. One commenter explained its belief that this approach creates a ‘‘safety net’’ that will encourage ACOs that believe they are ready to bear a significant amount of risk to test their capabilities in the ENHANCED track as opposed to taking advantage of both agreement periods in the BASIC track (sequentially). Response: We appreciate commenters’ support for our proposal to allow low revenue ACOs to participate in the BASIC track in any two agreement periods (including non-sequentially). Final Action: After considering the comments we received, we are finalizing our proposed policies for restricting ACOs’ participation in the BASIC track prior to transitioning to participation in the ENHANCED track. High revenue ACOs will be limited to, at most, a single agreement period under the BASIC track prior to transitioning to participation under the ENHANCED track. Low revenue ACOs will be limited to, at most, two agreement periods for a total of 10 years under the BASIC track (or 10.5 years in the case of an ACO that participates in an agreement period that begins on July 1, 2019, which spans a total of 5.5 years). These agreement periods do not need to be sequential. We are specifying these requirements for low revenue ACOs and high revenue ACOs in revisions to § 425.600, along with other requirements we are finalizing for determining participation options based on the experience of the ACO and its ACO participants with performancebased risk Medicare ACO initiatives, as discussed in section II.A.5.c. of this final rule. c. Determining Participation Options Based on Prior Participation of ACO Legal Entity and ACO Participants (1) Overview In this section of the final rule we describe policies for determining ACO participation options based on prior participation of the ACO legal entity and ACO participants. In section II.A.5.c of the August 2018 proposed rule (83 FR 41820 through 41834), we proposed modifications to the regulations to address the following: • Allowing flexibility for ACOs currently within a 3-year agreement period under the Shared Savings Program to transition quickly to a new agreement period that is not less than 5 years under the BASIC track or ENHANCED track. • Establishing definitions to more clearly differentiate ACOs applying to renew for a second or subsequent agreement period and E:\FR\FM\31DER2.SGM 31DER2 67884 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations ACOs applying to re-enter the program after their previous Shared Savings Program participation agreement expired or was terminated resulting in a break in participation, and to identify new ACOs as re-entering ACOs if greater than 50 percent of their ACO participants have recent prior participation in the same ACO in order to hold these ACO accountable for their ACO participants’ experience with the program. • Revising the criteria for evaluating an ACO’s prior participation in the Shared Savings Program to determine the eligibility of ACOs seeking to renew its participation in the program for a subsequent agreement period, ACOs applying to re-enter the program after termination or expiration, and ACOs that are identified as re-entering ACOs based on their ACO participants’ recent experience with the program. • Establishing criteria for determining the participation options available to an ACO based on its experience with performancebased risk Medicare ACO initiatives (and that of its ACO participants) and on whether the ACO is a low revenue ACO or high revenue ACO. • Establishing policies that more clearly differentiate the participation options, and the applicability of program requirements that phase-in over time based on the ACO’s and ACO participants’ prior experience in the Shared Savings Program or with other Medicare ACO initiatives. khammond on DSK30JT082PROD with RULES2 We summarized the regulatory background for the proposed policies, which included multiple sections of the program’s regulations, as developed over several rulemaking cycles. (2) Background on Re-Entry Into the Program After Termination In the initial rulemaking for the program, we specified criteria for terminated ACOs seeking to re-enter the program in § 425.222 (see 76 FR 67960 through 67961). In the June 2015 final rule, we revised this section to address eligibility for continued participation in Track 1 by previously terminated ACOs (80 FR 32767 through 32769). Currently, this section prohibits ACOs re-entering the program after termination from participating in the one-sided model beyond a second agreement period and from moving back to the one-sided model after participating in a two-sided model. This section also specifies that terminated ACOs may not re-enter the program until after the date on which their original agreement period would have ended if the ACO had not been terminated (the ‘‘sit-out’’ period). This policy was designed to restrict re-entry into the program by ACOs that voluntarily terminate their participation agreement, or have been terminated for failing to meet program integrity or other requirements (see 76 FR 67960 and 67961). Under the current regulations, we only consider whether an ACO applying to the program is the VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 same legal entity as a previously terminated ACO, as identified by TIN (see definition of ACO under § 425.20), for purposes of determining whether the appropriate ‘‘sit-out’’ period of § 425.222(a) has been observed and the ACO’s eligibility to participate under the one-sided model. Section 425.222 also provides criteria to determine the applicable agreement period when a previously terminated ACO re-enters the program. We explained the rationale for these policies in prior rulemaking and refer readers to the November 2011 and June 2015 final rules for more detailed discussions. Additionally, under § 425.204(b), the ACO must disclose to CMS whether the ACO or any of its ACO participants or ACO providers/suppliers have participated in the Shared Savings Program under the same or a different name, or are related to or have an affiliation with another Shared Savings Program ACO. The ACO must specify whether the related participation agreement is currently active or has been terminated. If it has been terminated, the ACO must specify whether the termination was voluntary or involuntary. If the ACO, ACO participant, or ACO provider/supplier was previously terminated from the Shared Savings Program, the ACO must identify the cause of termination and what safeguards are now in place to enable the ACO, ACO participant, or ACO provider/supplier to participate in the program for the full term of the participation agreement (§ 425.204(b)(3)). The agreement period in which an ACO is placed upon re-entry into the program has ramifications not only for its risk track participation options, but also for the benchmarking methodology that is applied and the quality performance standard against which the ACO will be assessed. ACOs in a second or subsequent agreement period receive a rebased benchmark as currently specified under § 425.603. For ACOs that renew for a second or subsequent agreement period beginning in 2017 and subsequent years, the rebased benchmark incorporates regional expenditure factors, including a regional adjustment. The weight applied in calculating the regional adjustment depends in part on the agreement period for which the benchmark is being determined (see § 425.603(c)), with relatively higher weights applied over time. Further, for an ACO’s first agreement period, the benchmark expenditures are weighted 10 percent in benchmark year 1, 30 percent in benchmark year 2, and 60 percent in benchmark year 3 (see § 425.602(a)(7)). PO 00000 Frm 00070 Fmt 4701 Sfmt 4700 In contrast, for an ACO’s second or subsequent agreement period we equally weight each year of the benchmark (§ 425.603). With respect to quality performance, the quality performance standard for ACOs in the first performance year of their first agreement period is set at the level of complete and accurate reporting of all quality measures. Pay-for-performance is phased in over the remaining years of the first agreement period, and continues to apply in all subsequent performance years (see § 425.502(a)). We explained our belief that the regulations as currently written create flexibilities that allow more experienced ACOs to take advantage of the opportunity to re-form and re-enter the program under Track 1 or to re-enter the program sooner or in a different agreement period than otherwise permissible. In particular, terminated ACOs may re-form as a different legal entity and apply to enter the program as a new organization to extend their time in Track 1 or enter Track 1 after participating in a two-sided model. These ACOs would effectively circumvent the requisite ‘‘sit-out’’ period (the remainder of the term of an ACO’s previous agreement period), benchmark rebasing, including the application of equal weights to the benchmark years and the higher weighted regional adjustment that applies in later agreement periods, or the pay-for-performance quality performance standard that is phased in over an ACO’s first agreement period in the program. (3) Background on Renewal for Uninterrupted Program Participation In the June 2015 final rule, we established criteria in § 425.224 applicable to ACOs seeking to renew their agreements, including requirements for renewal application procedures and factors CMS uses to determine whether to renew a participation agreement (see 80 FR 32729 through 32730). Under our current policies, we consider a renewing ACO to be an organization that continues its participation in the program for a consecutive agreement period, without interruption resulting from termination of the participation agreement by CMS or by the ACO (see §§ 425.218 and 425.220). Therefore, to be considered for timely renewal, an ACO within its third performance year of an agreement period is required to meet the application requirements, including submission of a renewal application, by the deadline specified by CMS, during the program’s typical annual application process. If the ACO’s E:\FR\FM\31DER2.SGM 31DER2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations khammond on DSK30JT082PROD with RULES2 renewal application is approved by CMS, the ACO would have the opportunity to enter into a new participation agreement with CMS for the agreement period beginning on the first day of the next performance year (typically January 1 of the following year), and thereby to continue its participation in the program without interruption. In evaluating the application of a renewing ACO, CMS considers the ACO’s history of compliance with program requirements generally, whether the ACO has established that it is in compliance with the eligibility and other requirements of the Shared Savings Program, including the ability to repay shared losses, if applicable, and whether it has a history of meeting the quality performance standard in its previous agreement period, as well as whether the ACO satisfies the criteria for operating under the selected risk track, including whether the ACO has repaid shared losses generated during the prior agreement period. Under § 425.600(c), an ACO experiencing a net loss during a previous agreement period may reapply to participate under the conditions in § 425.202(a), except the ACO must also identify in its application the cause(s) for the net loss and specify what safeguards are in place to enable the ACO to potentially achieve savings in its next agreement period. In the initial rulemaking establishing the Shared Savings Program, we proposed, but did not finalize, a requirement that would prevent an ACO from reapplying to participate in the Shared Savings Program if it previously experienced a net loss during its first agreement period. We explained that this proposed policy would ensure that underperforming organizations would not get a second chance (see 76 FR 19562, 19623). However, we were persuaded by commenters’ suggestions that barring ACOs that demonstrate a net loss from continuing in the program could serve as a disincentive for ACO formation, given the anticipated high startup and operational costs of ACOs (see 76 FR 67908 and 67909). We finalized the provision at § 425.600(c) that would allow for continued participation by ACOs despite their experience of a net loss. (4) Streamlining Regulations As described in the August 2018 proposed rule (83 FR 41821 through 41825), we proposed to modify the requirements for ACOs applying to renew their participation in the program (§ 425.224) and re-enter the program after termination (§ 425.222) or VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 expiration of their participation agreement by both eliminating regulations that would restrict our ability to ensure that ACOs quickly migrate to the redesigned tracks of the program and strengthening our policies for determining the eligibility of ACOs to renew their participation in the program (to promote consecutive and uninterrupted participation in the program) or to re-enter the program after a break in participation. We also sought to establish criteria to identify as reentering ACOs new ACOs for which greater than 50 percent of ACO participants have recent prior participation in the same ACO, and to hold these ACO accountable for their ACO participants’ experience in the program. (a) Defining Renewing and Re-Entering ACOs We proposed to define a renewing ACO and an ACO re-entering after termination or expiration of its participation agreement (83 FR 41821 through 41823). Under the program’s regulations, there is currently no definition of a renewing ACO, and based on our operational experience, this has caused some confusion among applicants. For example, there is confusion as to whether an ACO that has terminated from the program would be considered a first time applicant into the program or a renewing ACO. The definition of these terms is also important for identifying the agreement period that an ACO is applying to enter, which is relevant to determining the applicability of certain factors used in calculating the ACO’s benchmark that phase-in over the span of multiple agreement periods as well as the phasein of pay-for-performance under the program’s quality performance standards. We explained that having definitions that clearly distinguish renewing ACOs from ACOs that are applying to re-enter the program after a termination, or other break in participation will help us more easily differentiate between these organizations in our regulations and other programmatic material. We proposed to define renewing ACO and re-entering ACO in new definitions in § 425.20. We proposed to define renewing ACO to mean an ACO that continues its participation in the program for a consecutive agreement period, without a break in participation, because it is either: (1) An ACO whose participation agreement expired and that immediately enters a new agreement period to continue its participation in the program; or (2) an ACO that terminated PO 00000 Frm 00071 Fmt 4701 Sfmt 4700 67885 its current participation agreement under § 425.220 and immediately enters a new agreement period to continue its participation in the program. This proposed definition is consistent with current program policies for ACOs applying to timely renew their agreement under § 425.224 to continue participation following the expiration of their participation agreement. This proposed definition would include a new policy that would consider an ACO to be renewing in the circumstance where the ACO voluntarily terminates its current participation agreement and enters a new agreement period under the BASIC track or ENHANCED track, beginning immediately after the termination date of its previous agreement period thereby avoiding an interruption in participation. We would consider these ACOs to have effectively renewed their participation early. This part of the definition is consistent with the proposal to discontinue use of the ‘‘sit-out’’ period after termination under § 425.222(a). We considered two possible scenarios in which an ACO might seek to re-enter the program. In one case, a re-entering ACO would be a previously participating ACO, identified by a TIN (see definition of ACO under § 425.20), that applies to re-enter the program after its prior participation agreement expired without having been renewed, or after the ACO was terminated under § 425.218 or § 425.220 and did not immediately enter a new agreement period (that is, an ACO with prior participation in the program that does not meet the proposed definition of renewing ACO). In this case, it is clear that the ACO is a previous participant in the program. In the other scenario, an entity applies under a TIN that is not previously associated with a Shared Savings Program ACO, but the entity is composed of ACO participants that previously participated together in the same Shared Savings Program ACO in a previous performance year. Under the current regulations, there is no mechanism in place to prevent a terminated ACO from re-forming under a different TIN and applying to re-enter the program, or for a new legal entity to be formed from ACO participants in a currently participating ACO. Doing so could allow an ACO to avoid accountability for the experience and prior participation of its ACO participants, and to avoid the application of policies that phase-in over time (the application of equal weights to the benchmark years and the higher weighted regional adjustment that applies in later agreement periods, E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67886 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations or the pay-for-performance quality performance standard that is phased in over an ACO’s first agreement period in the program). We explained our concern that, under the current regulations, Track 1 ACOs would be able to re-form to take advantage of the BASIC track’s glide path, which, as proposed, would allow for 2 years under a one-sided model for new ACOs only (2.5 performance years in the case of an agreement period starting July 1, 2019). We therefore described our interest in adopting an approach to better identify prior participation and to specify participation options and program requirements applicable to re-entering ACOs. We proposed to define ‘‘re-entering ACO’’ to mean an ACO that does not meet the definition of a ‘‘renewing ACO’’ and meets either of the following conditions: (1) Is the same legal entity as an ACO, identified by TIN according to the definition of ACO in § 425.20, that previously participated in the program and is applying to participate in the program after a break in participation, because it is either: (a) An ACO whose participation agreement expired without having been renewed; or (b) an ACO whose participation agreement was terminated under § 425.218 or § 425.220. (2) Is a new legal entity that has never participated in the Shared Savings Program and is applying to participate in the program and more than 50 percent of its ACO participants were included on the ACO participant list under § 425.118, of the same ACO in any of the 5 most recent performance years prior to the agreement start date. We noted that a number of proposed policies depend on the prior participation of an ACO or the experience of its ACO participants, including: (1) Using the ACO’s and its ACO participants’ experience or inexperience with performance-based risk Medicare ACO initiatives to determine the participation options available to the ACO (proposed in § 425.600(d)); (2) identifying ACOs experienced with Track 1 to determine the amount of time an ACO may participate under a one-sided model of the BASIC track’s glide path (proposed in § 425.600(d)); (3) determining how many agreement periods an ACO has participated under the BASIC track as eligible ACOs are allowed a maximum of two agreement periods under the BASIC track (proposed in § 425.600(d)); (4) assessing the eligibility of the ACO to participate in the program (proposed revisions to § 425.224); and (5) determining the applicability of VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 program requirements that phase-in over multiple agreement periods (proposed in § 425.600(f)). The proposed revisions to the regulations to establish these requirements would apply directly to an ACO that is the same legal entity as a previously participating ACO. We also discuss throughout the preamble how these requirements would apply to new ACOs that are identified as reentering ACOs because greater than 50 percent of their ACO participants have recent prior participation in the same ACO. Several examples illustrate the application of the proposed definition of re-entering ACO. For example, if ACO A is applying to the program for an agreement period beginning on July 1, 2019, and ACO A is the same legal entity as an ACO whose previous participation agreement expired without having been renewed (that is, ACO A has the same TIN as the previously participating ACO) we would treat ACO A as the previously participating ACO, regardless of what share of ACO A’s ACO participants previously participated in the ACO. As another example, if ACO A, applying for a July 1, 2019 start date, were a different legal entity (identified by a different TIN) from any ACO that previously participated in the Shared Savings Program, we would also treat ACO A as if it were an ACO that previously participated in the program (ACO B) if more than 50 percent of ACO A’s ACO participants participated in ACO B in any of the 5 most recent performance years (that is, performance year 2015, 2016, 2017, 2018, or the 6-month performance year from January 1, 2019 through June 30, 2019), even though ACO A and ACO B are not the same legal entity. We explained that looking at the experience of the ACO participants, in addition to the ACO legal entity, would be a more robust check on prior participation. It would also help to ensure that ACOs re-entering the program are treated comparably regardless of whether they are returning as the same legal entity or have reformed as a new entity. With ACOs allowed to make changes to their certified ACO participant list for each performance year, we have observed that many ACOs make changes to their ACO participants over time. For example, among ACOs that participated in the Shared Savings Program as the same legal entity in both PY 2014 and PY 2017, only around 60 percent of PY 2017 ACO participants had also participated in the same ACO in PY 2014, on average. For this reason, the ACO legal entity alone does not always PO 00000 Frm 00072 Fmt 4701 Sfmt 4700 capture the ACO’s experience in the program and therefore it is also important to look at the experience of ACO participants. We chose to propose a 5 performance year look back period for determining prior participation by ACO participants as it would align with the look back period for determining whether an ACO is experienced or inexperienced with performance-based risk Medicare ACO initiatives as discussed elsewhere in this section of this final rule. We clarified that the threshold for prior participation by ACO participants is not cumulative when determining whether an ACO is a re-entering ACO. For example, assume 22 percent of applicant ACO A’s ACO participants participated in ACO C in the prior 5 performance years, 30 percent participated in ACO D, and the remaining 48 percent did not participate in any ACO during this period. ACO A would not be considered a re-entering ACO (assuming that ACO A is a new legal entity), because more than 50 percent of its ACO participants did not participate in the same ACO during the 5-year look back period. Although unlikely, we recognized the possibility that an ACO could quickly re-form multiple times and therefore more than 50 percent of its ACO participants may have been included on the ACO participant list of more than one ACO in the 5 performance year look back period. In these cases, the most recent experience of the ACO participants in the new ACO would be most relevant to determining the applicability of policies to the re-entering ACO. We therefore proposed that the ACO in which more than 50 percent of the ACO participants most recently participated would be used in identifying the participation options available to the new ACO. We opted to propose a threshold of greater than 50 percent because it would identify ACOs with significant participant overlap and would allow us to more clearly identify a single, Shared Savings Program ACO in which at least the majority of ACO participants recently participated. We also considered whether to use a higher or lower percentage threshold. A lower threshold, such as 20, 30 or 40 percent, would further complicate the analysis for identifying the ACO or ACOs in which the ACO participants previously participated, and the ACO whose prior performance should be evaluated in determining the eligibility of the applicant ACO. On the other hand, using a higher percentage for the threshold would identify fewer ACOs that significantly resemble ACOs with E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations experience participating in the Shared Savings Program. We considered alternate approaches to identifying prior participation other than the overall percentage of ACO participants that previously participated in the same ACO, including using the percentage of ACO participants weighted by the paid claim amounts, the percentage of individual practitioners (NPIs) that had reassigned their billing rights to ACO participants, or the percentage of assigned beneficiaries the new legal entity has in common with the assigned beneficiaries of a previously participating ACO. While these alternative approaches have merit, we concluded that they would be less transparent to ACOs than using a straight percentage of TINs, as well as more operationally complex to compute. We sought comment on these proposed definitions and on the alternatives considered. Comment: Some commenters expressed concern that the distinctions for determining participation options, including evaluating whether ACOs are new, renewing, or re-entering, add complexity to the program. A few commenters opposed the approach to identifying re-entering ACOs, and suggested CMS forgo the policy. Response: We acknowledge that the approach to identifying re-entering ACOs and renewing ACOs will add some complexity to program policies and certain operational processes, such that it requires (for example) that we establish procedures to identify new legal entities that are re-entering ACOs because more than 50 percent of their ACO participants were included on the ACO participant list of the same ACO in any of the 5 most recent performance years prior to the agreement start date, as well as to process requests for ACOs seeking to renew early. However, we believe these definitions for ‘‘renewing ACO’’ and ‘‘re-entering ACO’’ are timely with the redesign of the program’s participation options and provide needed clarification to the program’s regulations, as well as an opportunity to more consistently evaluate eligibility for program participation by ACOs whose legal entity, or a significant portion of the ACO participants, has previous experience in the Shared Savings Program. We believe that the proposed definitions for renewing ACOs and reentering ACOs, and related changes to the program’s regulations for identifying participation options for these organizations, bolster program integrity. As we discussed in the August 2018 proposed rule (see for example, 83 FR 41822) and as we reiterated in this VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 section of this final rule, we believe that the program’s regulations as currently written create flexibilities that allow more experienced ACOs to potentially re-form and re-enter the program under participation options they find advantageous, such as avoiding the transition to performance-based risk, or avoiding the application of policies that phase-in over time (the application of equal weights to the benchmark years and the higher weighted regional adjustment that applies in later agreement periods, or the pay-forperformance quality performance standard that is phased in over an ACO’s first agreement period in the program). We also explained that establishing definitions for ‘‘renewing ACO’’ and ‘‘re-entering ACO’’ will help us more easily differentiate between these organizations in our regulations and other programmatic material (83 FR 41821). Further, the removal of the sitout period after termination and the allowance for an early renewal option under the definition of ‘‘renewing ACO’’ allows an important flexibility for ACOs to more readily move to new participation options under the program redesign without a break in their program participation. Comment: We received few comments on the proposed definition of ‘‘renewing ACO.’’ Several commenters specifically supported the proposed definition of renewing ACO. Several commenters expressed support for the early renewal policy. However, a few comments indicated some confusion over the early renewal policies. Response: We thank the commenters for their support of the proposed definition of ‘‘renewing ACO’’. We are finalizing this definition as proposed. We respond further in this section and in section II.A.7 of this final rule to those commenters who expressed confusion regarding the early renewal policy. Comment: One commenter stated that it is unclear that the opportunity to terminate early and begin a new 5-year agreement is open to all ACOs, and pointed out that reference is made to Track 2 ACOs having this opportunity (83 FR 41800). This commenter requested that CMS clarify in the final rule that all ACOs regardless of their agreement period start year are offered the opportunity to transition to the BASIC track or ENHANCED track. Response: To clarify, the proposed definition of renewing ACO, in combination with our proposal to discontinue use of the ‘‘sit-out’’ period after termination under § 425.222(a), would create the flexibility for any ACO within an agreement period to PO 00000 Frm 00073 Fmt 4701 Sfmt 4700 67887 voluntarily terminate its current participation agreement and (if eligible) enter a new agreement period under the BASIC track or ENHANCED track, beginning at the start of the next performance year after the termination date of its previous agreement period, as early as July 1, 2019, thereby avoiding an interruption in participation. We would consider these ACOs to have effectively renewed their participation early. We note that we would assess the eligibility of the ACO to renew early under the revised evaluation criteria we are finalizing under amendments to § 425.224 as described in section II.A.5.c.(5). of this final rule. Comment: One commenter, an existing ACO, expressed support for the early renewal option, and requested the opportunity to early renew as quickly as possible and with as little disruption as possible. This commenter seemed to favor benchmark rebasing at the start of the ACO’s new agreement period. The commenter specifically suggested that CMS account for non-claims based payments consistently across benchmark and performance year expenditures. This commenter recommended that CMS provide an exception to enable Track 2 and Track 3 ACOs with physicians participating in the CPC+ Model to enter a new agreement period under the ENHANCED track as soon as is practicable to enable rebasing of the benchmark, ideally on July 1, 2019. Response: We are finalizing policies in this final rule to allow for a July 1, 2019 agreement start date as the next available start date in the Shared Savings Program. We are also finalizing our proposed approach to remove the ‘‘sit-out’’ period after termination and the proposed definition of ‘‘renewing ACO’’ to include the early renewal option. As we previously explained in responding to comments in this section of this final rule, early renewal would be an option for all ACOs within a current agreement period within the Shared Savings Program. Therefore, the first opportunity for ACOs to renew early will be available for ACOs that start a 12-month performance year on January 1, 2019. These ACOs may terminate their participation agreements with an effective date of termination of June 30, 2019, and enter a new agreement period beginning on July 1, 2019. We also explained in the August 2018 proposed rule (83 FR 41831) that early renewal results in rebasing of the ACO’s historical benchmark. In section II.D. of this final rule we finalize the methodology for establishing, adjusting and updating the ACO’s historical E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67888 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations benchmark for agreement periods beginning on July 1, 2019 and in subsequent years, and specify these policies in a new section of the regulations at § 425.601. We note that under this methodology, in calculating benchmark year expenditures we include individually beneficiary identifiable final payments made under a demonstration, pilot or time limited program. Similarly, under the methodology for calculating performance year expenditures, we also take into consideration individually beneficiary identifiable final payments made under a demonstration, pilot or time limited program. (See § 425.605(a)(5)(ii) on the calculation of shared savings and losses under the BASIC track, § 425.610(a)(6)(ii)(B) on calculation of shared savings and losses under the ENHANCED track.) We note that these expenditures are included in the calculations for the relevant year they are made. The CPC+ Model began in 2017. Final CPC+ Model payments were included in expenditures for ACOs’ assigned beneficiaries for performance year and benchmark year 2017, and similarly will be included in expenditures for subsequent years the model is available. If an ACO seeks to early renew for a new agreement period beginning on July 1, 2019, the historical benchmark years for the ACO’s new agreement period will be 2016, 2017 and 2018. Therefore, if applicable, final CPC+ Model payments would be included in benchmark year expenditures for 2017 and 2018, and would be included in expenditures for each of the performance years in which they are made during the agreement period. Comment: A few commenters supported the proposed approach to identifying re-entering ACOs including the proposal to identify new legal entities as re-entering ACOs if more than 50 percent of its ACO participants were included on the ACO participant list of the same ACO in any of the 5 most recent performance years prior to the agreement start date. One commenter supporting the proposed approach, recognized the opportunity for ACOs to reorganize or otherwise terminate and re-enter to secure participation in the Shared Savings Program under better terms as program rules or market conditions change. Some commenters generally supported a policy for determining whether an ACO is a re-entering ACO, but suggested alternative approaches. One commenter explained that the policy for identifying re-entering ACOs would be especially important if CMS finalized the proposed program redesign, as the commenter VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 expected that the redesigned program would experience considerable churn or turnover in ACO participation, and the commenter suggested that CMS ensure that ACOs not be precluded from reentering the program with ACO participants that previously had participated in a different ACO. Several commenters suggested alternative approaches to identifying reentering ACOs. One commenter suggested that CMS weight ACO participant TINs by their number of years in the program, to ensure that ACO participants with limited experience in the Shared Savings Program do not tip the scales for a new legal entity to be identified as a reentering ACO. One commenter expressed concern that the approach could ultimately limit participation by ACOs that are high revenue and new legal entities but composed of previous ACO participants in a Track 1 ACO. The commenter explained the proposed approach could expose newly formed ACO entities to a more aggressive glide path and drive very inexperienced ACOs, particularly high revenue ACOs, to accept higher levels of risk more quickly than they are actually prepared to handle. The commenter alternatively seemed to recommend that CMS identify reentering ACOs based on whether both criteria (instead of either criterion) included in the proposed definition are met: (1) The ACO is the same legal entity as an ACO that previously participated in the program, and (2) more than 50 percent of its ACO participants were included on the ACO participant list of the same ACO in any of the 5 most recent performance years prior to the agreement start date. Some commenters suggested that CMS should monitor the impact of the policies for identifying re-entering ACOs and ACOs that are experienced with performance-based risk Medicare ACO initiatives, as well as to create an appeals process for these determinations. They recommended using a threshold of 50 percent for both of these determinations (rather than using the proposed 40 percent threshold for determining ACOs experienced with performance-based risk Medicare ACO initiatives) and also setting an additional criterion that would allow an ACO determined to be a re-entering ACO or experienced performance-based risk Medicare ACO initiatives to appeal the determination if less than 30 percent of the ACO participants in the ACO were previously part of the same legal entity. Response: We appreciate commenters’ support of the proposed definition of re- PO 00000 Frm 00074 Fmt 4701 Sfmt 4700 entering ACO. In response to the commenter’s suggestion that ACOs not be precluded from re-entering the program with ACO participants that previously had participated in a different ACO, we note that the proposed definition of a re-entering ACO would allow us to hold ACOs accountable for the experience of their legal entity and ACO participants, and ensure they are participating in the program under participation options and program policies that are reflective of this experience. We decline to adopt the commenter’s alternative suggestion to weight ACO participants by their number of years in the program, when identifying new legal entities as re-entering ACOs based on the prior participation in the Shared Savings Program by their ACO participants. We believe this approach may make it more challenging for applicants to anticipate whether their composition could result in a determination by CMS that they are a reentering ACO. We are also concerned that such a weighting approach, which would allow ACOs to avoid being considered re-entering ACOs based on the duration of prior participation by ACO participants, could further encourage ACOs that are re-forming and re-entering the Shared Savings Program to manipulate their ACO participant lists to avoid accountability for their experience with the program. Under the proposed definition of a reentering ACO and under our proposals for determining participation options, which we are finalizing as discussed in section II.A.5.c.(5) of this final rule, new legal entities identified as re-entering ACOs that are high revenue ACOs, and inexperienced with performance-based risk Medicare ACO initiatives, would be eligible for participation under the BASIC track’s glide path. However, as noted by the commenter, if the reentering ACO is identified as having previously participated in Track 1, the ACO would be restricted to entering the glide path at Level B, therefore having relatively less time under a one-sided model compared to new legal entities that are eligible to enter the glide path at Level A. We believe that holding ACOs accountable for the previous experience of the ACO legal entity and its ACO participants in the Shared Savings Program, and Medicare ACO initiatives more broadly, and protecting the Trust Funds from ACOs that terminate from the program and re-enter the program in an effort to take advantage of program policies designed for ACOs inexperienced with accountable care models in FFS Medicare, outweigh the commenter’s E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations concern that this approach could expose a new legal entity to higher levels of risk and potential reward than the ACO can manage. We would identify the ACO’s participation options at the time of its application to the program, and the applicant would have the opportunity to determine whether to enter an agreement period in the Shared Savings Program under a participation option for which it is eligible. We decline to adopt an approach that would only recognize ACOs as reentering if they are identified as both the same legal entity as a former program participant, and if a majority of ACO participants previously participated in the same legal entity. We believe this approach would be too narrow and not identify some reentering ACOs that are the same legal entity as an ACO whose participation agreement was terminated or whose participation agreement expired without having been renewed. These ACO legal entities would have previous experience with the Shared Savings Program and should not be allowed to take advantage of policies aimed at organizations new to the program’s requirements or the accountable care model more generally. We believe that some commenters recommending modifications to the process for determining re-entering ACOs and ACOs that are experienced with performance-based risk may have had confusion around our proposed policies. (We respond to the commenters’ suggestions about the alternative approach to identifying ACOs experienced with performancebased risk Medicare ACO initiatives elsewhere in this section of this final rule.) We would like to clarify that the policy that we proposed, and are finalizing in this final rule, for determining new legal entities to be reentering ACOs requires that more than 50 percent of an applicant’s ACO participants have participated together as part of the same legal entity in any of the 5 most recent performance years prior to the agreement start date. Thus, all ACOs determined to be a re-entering ACO under this policy would automatically exceed the commenters’ recommended secondary threshold of 30 percent to trigger eligibility for an appeal process. By contrast, the approach that we have proposed and are finalizing for determining ACOs experienced with performance-based risk Medicare ACO initiatives requires that, cumulatively, at least 40 percent of an applicant’s ACO participants have participated in a performance-based risk Medicare ACO initiative in any of the 5 most recent performance years prior to the agreement start date, and does not VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 require the ACO participants to have to participated together in the same legal entity. That being said, we decline to adopt an approach for determining reentering ACOs such as recommended by the commenters that would require a multi-step process. That is, an initial determination for whether an ACO is a re-entering ACO, a secondary test to identify whether the ACO is eligible to request an appeal, and finally an appeal process for the final determination. We believe such an approach would add complexity as well as uncertainty as ACOs would need to request an appeal and await a final determination. Additionally, we currently have an established process for ACOs to request reconsiderations, as specified in subpart I of the program’s regulations. We also decline to adopt a lower percentage threshold as part of identifying new legal entities as reentering ACOs, for the reasons we previously described in the August 2018 proposed rule and reiterated in this final rule. In particular, using a lower threshold for determining re-entering ACOs would further complicate the analysis for identifying the ACO or ACOs in which the ACO participants previously participated, and the ACO whose prior performance should be evaluated in determining the eligibility of the applicant ACO and for determining the applicability of program policies that phase-in over time. More generally, we agree with commenters suggesting that we evaluate and monitor the policy once implemented. Comment: One commenter supported a 5-year look back period in the definition of re-entering ACO, particularly in light of the proposal to allow for agreement periods of at least 5 years. The commenter also supported the clarification that the 50 percent threshold would not be cumulative based on experience in any ACO over the past five years, but rather, based on 50 percent or more participants most recently participating in the same ACO. The commenter agreed this would serve CMS’ goal of identifying ACOs with significant participant overlap (as described in the August 2018 proposed rule) while minimizing complexity that could easily arise from using other methods and therefore improve transparency. Response: We thank the commenters for their support of the proposed 5-year look back period in the definition of ‘‘reentering ACO’’, and support for an approach under which the threshold for PO 00000 Frm 00075 Fmt 4701 Sfmt 4700 67889 prior participation by ACO participants is not cumulative. Comment: One commenter disagreed with the idea that ACOs would invest substantial upfront start-up costs and undergo a major organizational shift or undergo the burdensome process of dissolving and re-forming under a different legal entity, much less voluntarily subject itself to shared losses, simply to ‘‘game’’ the system. The commenter asserted that the number of ACOs that drop out of the program after sustaining losses proves that waivers for certain service billing requirements or fraud and abuse restrictions are not enough to warrant continued participation in the program without the prospect of earning shared savings. Response: We disagree with the commenter and continue to believe that there is clear value in program participation for ACOs that are not earning shared savings, as evidenced by the continued participation of ACOs that have not shared in the savings (such as ACOs that generate savings below their MSR), or ACOs that remain in the program despite generating the equivalent of losses, or even after sharing in losses. ACOs can be the catalyst for changing a health care system or provider network, and can provide a vehicle for transforming care in a community. However, we have concerns about the motivation of ACOs that continue their participation in the program despite poor performance. Under the program’s current requirements, ACOs may continue their participation in the program despite poor financial performance, and we believe that the choice of many to do so indicates they may be able to take advantage of other program features, such as the ability to benefit from waivers of certain federal requirements in connection with their participation in the Shared Savings Program, and lack a genuine motivation to achieve the program’s goals. With the more rapid transition to performance-based risk under the redesign of the program’s participation options we are finalizing in this final rule, we believe that it is increasingly important for program integrity purposes that we protect against ACOs seeking to game program participation options including by reforming and re-entering the program in an effort to take advantage of the BASIC track’s glide path. Final Action: After consideration of public comments, we are finalizing as proposed to define renewing ACO and re-entering ACO in new definitions in § 425.20. E:\FR\FM\31DER2.SGM 31DER2 67890 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations khammond on DSK30JT082PROD with RULES2 We are finalizing our proposal to define renewing ACO to mean an ACO that continues its participation in the program for a consecutive agreement period, without a break in participation, because it is either: (1) An ACO whose participation agreement expired and that immediately enters a new agreement period to continue its participation in the program; or (2) an ACO that terminated its current participation agreement under § 425.220 and immediately enters a new agreement period to continue its participation in the program. We are finalizing our proposal to define ‘‘re-entering ACO’’ to mean an ACO that does not meet the definition of a ‘‘renewing ACO’’ and meets either of the following conditions: (1) Is the same legal entity as an ACO, identified by TIN according to the definition of ACO in § 425.20, that previously participated in the program and is applying to participate in the program after a break in participation, because it is either: (a) An ACO whose participation agreement expired without having been renewed; or (b) an ACO whose participation agreement was terminated under § 425.218 or § 425.220. (2) Is a new legal entity that has never participated in the Shared Savings Program and is applying to participate in the program and more than 50 percent of its ACO participants were included on the ACO participant list under § 425.118, of the same ACO in any of the 5 most recent performance years prior to the agreement start date. (b) Eligibility Requirements and Application Procedures for Renewing and Re-Entering ACOs In the August 2018 proposed rule (83 FR 41823), we proposed to revise our regulations to clearly set forth the eligibility requirements and application procedures for renewing ACOs and reentering ACOs. Therefore, we proposed to revise § 425.222 to address limitations on the ability of re-entering ACOs to participate in the Shared Savings Program for agreement periods beginning before July 1, 2019. In addition, we proposed to revise § 425.224 to address general application requirements and procedures for all reentering ACOs and all renewing ACOs. In revising § 425.222 (which consists of paragraphs (a) through (c)), we considered that removing the required ‘‘sit-out’’ period for terminated ACOs under § 425.222(a) would facilitate transition of ACOs within current 3-year agreement periods to new agreements under the participation options in the proposed rule. As discussed elsewhere VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 in this section, we proposed to retain policies similar to those under § 425.222(b) for evaluating the eligibility of ACOs to participate in the program after termination. Further, instead of the approach used for determining participation options for ACOs that reenter the program after termination described in § 425.222(c), our proposed approach to making these determinations is described in detail in section II.A.5.c.(5). of this final rule. The ‘‘sit-out’’ period policy restricts the ability of ACOs in current agreement periods to transition to the proposed participation options under new agreements. For example, if left unchanged, the ‘‘sit-out’’ period would prevent existing, eligible Track 1 ACOs from quickly entering an agreement period under the proposed BASIC track and existing Track 2 ACOs from quickly entering a new agreement period under either the BASIC track at the highest level of risk (Level E), if available to the ACO, or the ENHANCED track. Participating under Levels C, D, or E of the BASIC track or under the ENHANCED track could allow eligible physicians and practitioners billing under ACO participant TINs in these ACOs to provide telehealth services under section 1899(l) of the Act (discussed in section II.B.2.b. of this final rule), the ACO could apply for a SNF 3-day rule waiver (as proposed in section II.B.2.a. of this final rule), and the ACO could elect to offer incentive payments to beneficiaries under a CMSapproved beneficiary incentive program (as proposed in section II.C.2. of this final rule). The ‘‘sit-out’’ period also applies to ACOs that deferred renewal in a second agreement period under performancebased risk as specified in § 425.200(e)(2)(ii), a participation option we proposed to discontinue (as described in section II.A.2. of this final rule). Therefore, by eliminating the ‘‘sitout’’ period, ACOs that deferred renewal may more quickly transition to the BASIC track (Level E), if available to the ACO, or the ENHANCED track. An ACO that deferred renewal and is currently participating in Track 2 or Track 3 may terminate its current agreement to enter a new agreement period under the BASIC track (Level E), if eligible, or the ENHANCED track. Similarly, an ACO that deferred renewal and is currently participating in Track 1 for a fourth performance year may terminate its current agreement and the participation agreement for its second agreement period under Track 2 or Track 3 that it deferred for 1 year. In either case, the ACO may immediately apply to re-enter the BASIC track (Level E), if eligible, or PO 00000 Frm 00076 Fmt 4701 Sfmt 4700 the ENHANCED track without having to wait until the date on which the term of its second agreement would have expired if the ACO had not terminated. We noted that, to avoid interruption in program participation, an ACO that seeks to terminate its current agreement and enter a new agreement in the BASIC track or ENHANCED track beginning the next performance year should ensure that there is no gap in time between when it concludes its current agreement period and when it begins the new agreement period so that all related program requirements and policies would continue to apply. For an ACO that is completing a 12 month performance year and is applying to enter a new agreement period beginning January 1 of the following year, the effective termination date of its current agreement should be the last calendar day of its current performance year, to avoid an interruption in the ACO’s program participation. For instance, for a 2018 starter ACO applying to enter a new agreement beginning on January 1, 2020, the effective termination date of its current agreement should be December 31, 2019. For an ACO that starts a 12-month performance year on January 1, 2019, that is applying to enter a new agreement period beginning on July 1, 2019 (as discussed in section II.A.7. of this final rule), the effective termination date of its current agreement should be June 30, 2019. We proposed to amend § 425.224 to make certain policies applicable to both renewing ACOs and re-entering ACOs and to incorporate certain other technical changes, as follows: (1) Revisions to refer to the ACO’s ‘‘application’’ more generally, instead of specifically referring to a ‘‘renewal request,’’ so that the requirements would apply to both renewing ACOs and re-entering ACOs. (2) Addition of a requirement, consistent with the current provision at § 425.222(c)(3), for ACOs previously in a two-sided model to reapply to participate in a two-sided model. We further proposed that a renewing or reentering ACO that was previously under a one-sided model of the BASIC track’s glide path may only reapply for participation in a two-sided model for consistency with our proposal to include the BASIC track within the definition of a performance-based risk Medicare ACO initiative. As proposed, this included a new ACO identified as a re-entering ACO because greater than 50 percent of its ACO participants have recent prior participation in the same ACO that was previously under a twosided model or a one-sided model of the E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations BASIC track’s glide path (Level A or Level B). (3) Revision to § 425.224(b)(1)(iv) (as redesignated from § 425.224(b)(1)(iii)) to cross reference the requirement that an ACO establish an adequate repayment mechanism under § 425.204(f), to clarify our intended meaning with respect to the current requirement that an ACO demonstrate its ability to repay losses. (4) Modifications to the evaluation criteria specified in § 425.224(b) for determining whether an ACO is eligible for continued participation in the program in order to permit them to be used in evaluating both renewing ACOs and re-entering ACOs, to adapt some of these requirements to longer agreement periods (under the proposed approach allowing for agreement periods of at least 5 years rather than 3-year agreements), and to prevent ACOs with a history of poor performance from participating in the program. As described in detail, as follows, we addressed: (1) Whether the ACO has a history of compliance with the program’s quality performance standard; (2) whether an ACO under a two-sided model repaid shared losses owed to the program; (3) the ACO’s history of financial performance; and (4) whether the ACO has demonstrated in its application that it has corrected the deficiencies that caused it to perform poorly or to be terminated. First, we proposed modifications to the criterion governing our evaluation of whether the ACO has a history of compliance with the program’s quality performance standard. We proposed to revise the existing provision at § 425.224(b)(1)(iv), which specifies that we evaluate whether the ACO met the quality performance standard during at least 1 of the first 2 years of the previous agreement period, to clarify that this criterion is used in evaluating ACOs that entered into a participation agreement for a 3-year period. We proposed to add criteria for evaluating ACOs that entered into a participation agreement for a period longer than 3 years by considering whether the ACO was terminated under § 425.316(c)(2) for failing to meet the quality performance standard or whether the ACO failed to meet the quality performance standard for 2 or more performance years of the previous agreement period, regardless of whether the years were consecutive. In proposing this approach, we considered that the current policy is specified for ACOs with 3-year agreements. With the proposal to shift to agreement periods of not less than 5 years, additional years of performance data would be available at the time of an ACO’s application to renew its VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 agreement, and may also be available for evaluating ACOs re-entering after termination (depending on the timing of their termination) or the expiration of their prior agreement, as well as being available to evaluate new ACOs identified as re-entering ACOs because greater than 50 percent of their ACO participants have recent prior participation in the same ACO. Further, under the program’s monitoring requirements at § 425.316(c), ACOs with 2 consecutive years of failure to meet the program’s quality performance standard will be terminated. However, we noted our concern about a circumstance where an ACO that fails to meet the quality performance standard for multiple, nonconsecutive years may remain in the program by seeking to renew its participation for a subsequent agreement period, seeking to re-enter the program after termination or expiration of its prior agreement, or by re-forming to enter under a new legal entity (identified as a re-entering ACO based on the experience of its ACO participants). Second, we proposed to revise the criterion governing the evaluation of whether an ACO under a two-sided model repaid shared losses owed to the program that were generated during the first 2 years of the previous agreement period (§ 425.224(b)(1)(v)), to instead consider whether the ACO failed to repay shared losses in full within 90 days in accordance with subpart G of the regulations for any performance year of the ACO’s previous agreement period. As described in section II.A.7. of this final rule, CY 2019 will include two, 6month performance years. In the November 2018 final rule (83 FR 59942 through 59946) we finalized the option for ACOs that started a first or second agreement period on January 1, 2016, to elect an extension of their agreement period by 6 months from January 1, 2019 through June 30, 2019. In this final rule we are finalizing an agreement period start date of July 1, 2019, which includes a 6-month first performance year from July 1, 2019, through December 31, 2019. We will reconcile these ACOs, and ACOs that start a 12month performance year on January 1, 2019, and terminate their participation agreement with an effective date of termination of June 30, 2019, and enter a new agreement period beginning on July 1, 2019, separately for the 6-month periods from January 1, 2019, through June 30, 2019, and from July 1, 2019, through December 31, 2019, as described in section II.A.7. of this final rule. In evaluating this proposed criterion on repayment of losses, we PO 00000 Frm 00077 Fmt 4701 Sfmt 4700 67891 would consider whether the ACO timely repaid any shared losses for these 6month performance years, or the 6month performance period for ACOs that elect to voluntarily terminate their existing participation agreement, effective June 30, 2019, and enter a new agreement period starting on July 1, 2019, which we will determine according to the methodology specified under a new section of the regulations at § 425.609. The current policy regarding repayment of shared losses is specified for ACOs with 3-year agreements. With the proposal to shift to agreement periods of at least 5 years, we considered it would be appropriate to broaden our evaluation of the ACO’s timely repayment of shared losses beyond the first 2 years of the ACO’s prior agreement period. For instance, without modification, this criterion could have little relevance when evaluating the eligibility of ACOs in the proposed BASIC track’s glide path that elect to participate under a one-sided model for their first 2 performance years (or 3 performance years for ACOs that start an agreement period in the proposed BASIC track’s glide path on July 1, 2019). We noted that timely repayment of shared losses is required under subpart G of the regulations (§§ 425.606(h)(3) and 425.610(h)(3)), and non-compliance with this requirement may be the basis for pre-termination actions or termination under §§ 425.216 and 425.218. We explained that a provision that permits us to consider more broadly whether an ACO failed to timely repay shared losses for any performance year in the previous agreement period would be relevant to all renewing and reentering ACOs that may have unpaid shared losses, as well as all re-entering ACOs that may have been terminated for non-compliance with the repayment requirement. This includes ACOs that have participated under Track 2, Track 3, and ACOs that would participate under the BASIC track or ENHANCED track for a new agreement period. For ACOs that have participated in twosided models authorized under section 1115A of the Act, including the Track 1+ Model, we also proposed to consider whether an ACO failed to repay shared losses for any performance year under the terms of the ACO’s participation agreement for such model. Third, we proposed to add a financial performance review criterion to § 425.224(b) to allow us to evaluate whether the ACO generated losses that were negative outside corridor for 2 performance years of the ACO’s previous agreement period. We E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67892 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations proposed to use this criterion to evaluate the eligibility of ACOs to enter agreement periods beginning on July 1, 2019 and in subsequent years. For purposes of this proposal, an ACO is negative outside corridor when its benchmark minus performance year expenditures are less than or equal to the negative MSR for ACOs in a onesided model, or the MLR for ACOs in a two-sided model. This proposed approach relates to our proposal to monitor for financial performance as described in section II.A.5.d. of this final rule. Lastly, we proposed to add a review criterion to § 425.224(b), which would allow us to consider whether the ACO has demonstrated in its application that it has corrected the deficiencies that caused it to fail to meet the quality performance standard for 2 or more years, fail to timely repay shared losses, or to generate losses outside its negative corridor for 2 years, or any other factors that may have caused the ACO to be terminated from the Shared Savings Program. We proposed to require that the ACO also demonstrate it has processes in place to ensure that it will remain in compliance with the terms of the new participation agreement. We proposed to discontinue use of the requirement at § 425.600(c), under which an ACO with net losses during a previous agreement period must identify in its application the causes for the net loss and specify what safeguards are in place to enable it to potentially achieve savings in its next agreement period. We believe the proposed financial performance review criterion would be more effective in identifying ACOs with a pattern of poor financial performance. An approach that accounts for financial performance year after year allows ACOs to understand if their performance is triggering a compliance concern and take action to remedy their performance during the remainder of their agreement period. Further, an approach that only considers net losses across performance years may not identify as problematic an ACO that generates losses in multiple years which in aggregate are canceled out by a single year with large savings. Although uncommon, such a pattern of performance, where an ACO’s results change rapidly and dramatically, is concerning and warrants consideration in evaluating the ACO’s suitability to continue its participation in the program. This proposed requirement is similar to the current provision at § 425.222(b), which specifies that a previously terminated ACO must demonstrate that it has corrected deficiencies that caused VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 it to be terminated from the program and has processes in place to ensure that it will remain in compliance with the terms of its new participation agreement. We proposed to discontinue use of § 425.222. We explained that adding a similar requirement to § 425.224 would allow us to more consistently apply policies to renewing and re-entering ACOs. Further, applying this requirement to both re-entering and renewing ACOs would safeguard the program against organizations that have not met the program’s goals or complied with program requirements and that may not be qualified to participate in the program, and therefore this approach would be protective of the program, the Trust Funds, and Medicare FFS beneficiaries. For ACOs identified as re-entering ACOs because greater than 50 percent of their ACO participants have recent prior participation in the same ACO, we would determine the eligibility of the ACO to participate in the program based on the past performance of this other entity. For example, if ACO A is identified as a re-entering ACO because more than 50 percent of its ACO participants previously participated in ACO B during the relevant look back period, we would consider ACO B’s financial performance, quality performance, and compliance with other program requirements in determining the eligibility of ACO A to enter a new participation agreement in the program. Comment: We received few comments directly addressing the proposal to remove the ‘‘sit-out’’ period after termination. Generally, the comments we received were supportive of the proposal to modify current restrictions that prevent an ACO from terminating its participation agreement and reentering the program before the existing agreement period would have ended. Commenters explained that this ‘‘sitout’’ period is unnecessary and shuts healthcare providers out of participating in an essential CMS value-based program. Commenters also supported eliminating this restriction to allow the flexibility for an ACO in a current 3-year agreement period to terminate its participation agreement and then enter a new 5-year agreement period under one of the proposed redesigned participation options. One commenter explained that maintaining the sit-out period after termination could diminish participation in the program and restrict the ability of ACOs in current agreement periods to transition to the proposed participation options under new agreements. PO 00000 Frm 00078 Fmt 4701 Sfmt 4700 Response: We appreciate commenters’ support of the proposal to remove the required ‘‘sit-out’’ period for terminated ACOs under § 425.222(a). In particular, we appreciate commenters’ support of this approach which will facilitate transition of ACOs to new agreements under the participation options established in this final rule, including the transition of ACOs currently in 3year agreement periods to new agreement periods of at least 5-years through the early renewal process described in section II.A.5.c.(4).(a). of this final rule. Comment: One commenter recommended that CMS take into account the impact of extreme and uncontrollable circumstances on ACOs when applying the prior participation criteria. Response: We appreciate the commenter’s suggestion that we take into account the impact of extreme and uncontrollable circumstances when evaluating the eligibility of ACOs to renew their participation in or re-enter the Shared Savings Program. We note that, under our proposed evaluation criteria, we would also consider whether the ACO has demonstrated in its application that it has corrected the deficiencies that caused it to perform poorly or to be terminated. We believe that this provides a means for ACOs to explain the particular circumstances that affected their results during their prior participation, including the impact of extreme and uncontrollable circumstances, and for CMS to consider this information in evaluating the eligibility of ACOs to renew their participation in or re-enter the Shared Savings Program. We will also continue to monitor the impact of extreme and uncontrollable circumstances on ACOs, particularly as we gain experience with the disaster-relief policies we have finalized for performance year 2017 and subsequent performance years, including adjusting quality performance scores for affected ACOs, and mitigating shared losses for ACOs under two-sided models, and will consider whether any changes to our eligibility criteria may be necessary to account for the effects of extreme and uncontrollable circumstances. Any such changes would be made through notice and comment rulemaking. Comment: Another commenter suggested we streamline the renewal process for ACOs that have demonstrated positive performance results, such as requiring that they complete a brief form with minimal information required. Response: In the CY 2018 PFS final rule (82 FR 53217 through 53222), we E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations modified the program’s application to reduce burden on all applicants. These changes included revisions to § 425.204 to remove the requirements for ACOs to submit certain documents and narratives as part of its Shared Savings Program application. We believe these requirements have streamlined the application process. As described in section II.A.5.c.(5).(d) of this final rule, we are discontinuing use of condensed Shared Savings Program applications by former Physician Group Practice (PGP) demonstration sites and former Pioneer ACOs. We explain our belief that it is no longer necessary to permit these entities to use condensed application forms. For similar reasons, we therefore also decline to allow alternative applications for other categories of ACOs. Comment: One commenter suggested that CMS revisit the evaluation criterion for prior quality performance relevant to ACOs’ participation in longer agreement periods in future rulemaking as it becomes implemented and applicable to ACOs over time. Response: We appreciate the commenter’s suggestion to consider our experience with the evaluation criterion for poor quality performance in light of longer agreement periods (not less than 5-years) finalized in this final rule. As with other program policies, we may revisit this approach based on lessons learned, in future rulemaking. Final Action: After consideration of public comments, we are finalizing as proposed to revise § 425.222 to remove the required ‘‘sit-out’’ period for terminated ACOs under § 425.222(a) to facilitate transition of ACOs to new agreements under the participation options established in this final rule. We are retaining policies similar to those under § 425.222(b) for evaluating the eligibility of ACOs to participate in the program after termination in modifications to § 425.224. Instead of the approach used for determining participation options for ACOs that reenter the program after termination described in § 425.222(c), we will make these determinations consistent with our final policies described in section II.A.5.c.(5) of this final rule. We received no comments directly addressing the proposals to revise § 425.224 to make certain policies applicable to both renewing ACOs and re-entering ACOs and to incorporate certain other technical changes, as described in this section of this final rule. We are finalizing as proposed amendments to § 425.224 to include the following changes: • Revisions to refer to the ACO’s ‘‘application’’ more generally, instead of VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 specifically referring to a ‘‘renewal request,’’ so that the requirements would apply to both renewing ACOs and re-entering ACOs. • Addition of a requirement, consistent with the current provision at § 425.222(c)(3), for ACOs previously in a two-sided model to reapply to participate in a two-sided model. We are finalizing an approach for determining participation options under which a renewing or re-entering ACO that was previously under a one-sided model of the BASIC track’s glide path may only reapply for participation in a two-sided model for consistency with our final policy to include the BASIC track within the definition of a performance-based risk Medicare ACO initiative (described in section II.A.5.c.(5) of this final rule). This includes a new ACO identified as a reentering ACO because greater than 50 percent of its ACO participants have recent prior participation in the same ACO that was previously under a two-sided model or a onesided model of the BASIC track’s glide path (Level A or Level B). • Revision to § 425.224(b)(1)(iv) (as redesignated from § 425.224(b)(1)(iii)) to cross reference the requirement that an ACO establish an adequate repayment mechanism under § 425.204(f), to clarify our intended meaning with respect to the current requirement that an ACO demonstrate its ability to repay losses. • Modifications to the evaluation criteria specified in § 425.224(b) for determining whether an ACO is eligible for continued participation in the program in order to permit them to be used in evaluating both renewing ACOs and re-entering ACOs, to adapt some of these requirements to longer agreement periods (under the proposed approach allowing for agreement periods of at least 5 years rather than 3-year agreements), and to prevent ACOs with a history of poor performance from participating in the program. The criteria include: (1) Whether the ACO has a history of compliance with the program’s quality performance standard; (2) the ACO’s history of financial performance; (3) whether an ACO under a two-sided model repaid shared losses owed to the program; and (4) whether the ACO has demonstrated in its application that it has corrected the deficiencies that caused it to perform poorly or to be terminated. In light of these other final policies, we are also finalizing our proposal to discontinue use of the requirement at § 425.600(c), under which an ACO with net losses during a previous agreement period must identify in its application the causes for the net loss and specify what safeguards are in place to enable it to potentially achieve savings in its next agreement period. (5) Proposed Evaluation Criteria for Determining Participation Options (a) Background As we explained in section II.A.5.c.(5) of the August 2018 proposed rule (83 FR 41825 through 41834), we have a number of concerns about the PO 00000 Frm 00079 Fmt 4701 Sfmt 4700 67893 vulnerability of certain program policies to gaming by ACOs seeking to continue in the program under the BASIC track’s glide path, as well as the need to ensure that an ACO’s participation options are commensurate with the experience of the organization and its ACO participants with the Shared Savings Program and other performance-based risk Medicare ACO initiatives. First, as the program matures and ACOs become more prevalent throughout the country, and as an increasing number of ACO participants become experienced in different Medicare ACO initiatives with differing levels of risk, the regulations as currently written create flexibilities that would allow more experienced ACOs to take advantage of the opportunity to participate under the proposed BASIC track’s glide path. There are many Medicare ACO initiatives in which organizations may gain experience, specifically: Shared Savings Program Track 1, Track 2 and Track 3, as well as the proposed BASIC track and ENHANCED track, and the Track 1+ Model, Pioneer ACO Model, Next Generation ACO Model, and the Comprehensive End-Stage Renal Disease (ESRD) Care (CEC) Model. All but Shared Savings Program Track 1 ACOs and non-Large Dialysis Organization (LDO) End-Stage Renal Disease Care Organizations (ESCOs) participating in the one-sided model track of the CEC Model participate in a degree of performance-based risk within an ACO’s agreement period in the applicable program or model. We proposed to discontinue application of the policies in § 425.222(a). As a result of this change, we would allow ACOs currently participating in Track 1, Track 2, Track 3, or the Track 1+ Model, to choose whether to finish their current agreement or to terminate and apply to immediately enter a new agreement period through an early renewal. We explained our concern that removing the existing safeguard under § 425.222(a) without putting in place other policies that assess an ACO’s experience with performance-based risk would enable ACOs to participate in the BASIC track’s glide path in Level A and Level B, under a one-sided model, terminate, and enter a one-sided model of the glide path again. We also stated our concern that existing and former Track 1 ACOs would have the opportunity to gain additional time under a one-sided model of the BASIC track’s glide path before accepting performance-based risk. Under the current regulations, Track 1 ACOs are limited to two E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67894 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations agreement periods under a one-sided model before transitioning to a twosided model beginning with their third agreement period (see § 425.600(b)). Without some restriction, Track 1 ACOs that would otherwise be required to assume performance-based risk at the start of their third agreement period in the program could end up continuing to participate under a one-sided model (BASIC track’s Levels A and B) for 2 additional performance years, or 3 additional performance years in the case of ACOs that enter the BASIC track’s glide path for an agreement period of 5 years and 6 months beginning July 1, 2019, under the participation options as proposed. We explained our belief that the performance-based risk models within the BASIC track’s glide path would offer former Track 1 ACOs an opportunity to continue participation within the program under relatively low levels of two-sided risk and that these ACOs have sufficient experience with the program to begin the gradual transition to performance-based risk. Therefore some restriction would be needed to prevent all current and previously participating Track 1 ACOs from taking advantage of additional time under a one-sided model in the BASIC track’s glide path and instead to encourage their more rapid progression to performance-based risk. For similar reasons we also believed it would be important to prevent new ACOs identified as re-entering ACOs because greater than 50 percent of their ACO participants have recent prior participation in a Track 1 ACO from also taking advantage of additional time under a one-sided model in the BASIC track’s glide path. This restriction would help to ensure that ACOs do not re-form as new legal entities to maximize the time allowed under a onesided model. We also considered that currently § 425.202(b) of the program’s regulations addresses application requirements for organizations that were previous participants in the PGP demonstration, which concluded in December 2012 with the completion of the PGP Transition Demonstration, and the Pioneer ACO Model, which concluded in December 2016, as described elsewhere in this section. We proposed to eliminate these provisions, while at the same time proposing criteria for identifying ACOs and ACO participants with previous experience in Medicare ACO initiatives as part of a broader approach to determining available participation options for applicants. Second, using prior participation by ACO participant TINs in Medicare ACO initiatives along with the prior VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 participation of the ACO legal entity would allow us to gauge the ACO’s experience, given the observed churn in ACO participants over time and our experience with determining eligibility to participate in the Track 1+ Model. ACOs are allowed to make changes to their certified ACO participant list for each performance year, and we have observed that, each year, about 80 percent of ACOs make ACO participant list changes. We also considered CMS’ recent experience with determining the eligibility of ACOs to participate in the Track 1+ Model. The Track 1+ Model is designed to encourage more group practices, especially small practices, to advance to performance-based risk. As such, it does not allow participation by current or former Shared Savings Program Track 2 or Track 3 ACOs, Pioneer ACOs, or Next Generation ACOs. As outlined in the Track 1+ Model Fact Sheet, the same legal entity that participated in any of these performance-based risk ACO initiatives cannot participate in the Track 1+ Model. Furthermore, an ACO would not be eligible to participate in the Track 1+ Model if 40 percent or more of its ACO participants had participation agreements with an ACO that was participating in one of these performance-based risk ACO initiatives in the most recent prior performance year. Third, any approach to determining participation options relative to the experience of ACOs and ACO participants must also factor in the differentiation between low revenue ACOs and high revenue ACOs, as previously discussed in this section. Fourth, and lastly, we explained that the experience of ACOs and their ACO participants in Medicare ACO initiatives should be considered in determining which track (BASIC track or ENHANCED track) the ACO is eligible to enter as well as the applicability of policies that phase-in over time, namely the equal weighting of benchmark year expenditures, the policy of adjusting the benchmark based on regional FFS expenditures (which, for example, applies different weights in calculating the regional adjustment depending upon the ACO’s agreement period in the program) and the phase-in of pay-forperformance under the program’s quality performance standards. Although § 425.222(c) specifies whether a former one-sided model ACO can be considered to be entering its first or second agreement period under Track 1 if it is re-entering the program after termination, the current regulations do not otherwise address how we should determine the applicable agreement PO 00000 Frm 00080 Fmt 4701 Sfmt 4700 period for a previously participating ACO after termination or expiration of its previous participation agreement. (b) Approach to Determining ACOs’ Participation Options In the August 2018 proposed rule we stated our preference for an approach that would help to ensure that ACOs, whether they are initial applicants to the program, renewing ACOs or reentering ACOs, would be treated comparably (83 FR 41826). Any approach should also ensure eligibility for participation options reflects the ACO’s and ACO participants’ experience with the program and other Medicare ACO initiatives and be transparent. Therefore, we proposed to identify the available participation options for an ACO (regardless of whether it is applying to enter, re-enter, or renew its participation in the program) by considering all of the following factors: (1) Whether the ACO is a low revenue ACO or a high revenue ACO; and (2) the level of risk with which the ACO or its ACO participants has experience based on participation in Medicare ACO initiatives in recent years. As a factor in determining an ACO’s participation options, we proposed to establish requirements for evaluating whether an ACO is inexperienced with performance-based risk Medicare ACO initiatives such that the ACO would be eligible to enter into an agreement period under the BASIC track’s glide path or whether the ACO is experienced with performance-based risk Medicare ACO initiatives and therefore limited to participating under the higher-risk tracks of the Shared Savings Program (either an agreement period under the maximum level of risk and potential reward for the BASIC track (Level E), or the ENHANCED track). To determine whether an ACO is inexperienced with performance-based risk Medicare ACO initiatives, we proposed that both of the following requirements would need to be met: (1) The ACO legal entity has not participated in any performance-based risk Medicare ACO initiative (for example, the ACO is a new legal entity identified as an initial applicant or the same legal entity as a current or previously participating Track 1 ACO); and (2) CMS determines that less than 40 percent of the ACO’s ACO participants participated in a performance-based risk Medicare ACO initiative in each of the 5 most recent performance years prior to the agreement start date. We proposed that CMS would determine that an ACO is experienced E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations with performance-based risk Medicare ACO initiatives if either of the following criteria are met: (1) The ACO is the same legal entity as a current or previous participant in a performance-based risk Medicare ACO initiative; or (2) CMS determines that 40 percent or more of the ACO’s ACO participants participated in a performance-based risk Medicare ACO initiative in any of the 5 most recent performance years prior to the agreement start date. We proposed to specify these requirements in a new provision at § 425.600(d). This provision would be used to evaluate eligibility for specific participation options for any ACO that is applying to enter the Shared Savings Program for the first time or to re-enter after termination or expiration of its previous participation agreement, or any ACO that is renewing its participation. As specified in the proposed definition of re-entering ACO, we also proposed to apply the provisions at § 425.600(d) to new ACOs identified as re-entering ACOs because greater than 50 percent of their ACO participants have recent prior participation in the same ACO. Thus, the proposed provision at § 425.600(d) would also apply in determining eligibility for these ACOs to enter the BASIC track’s glide path for agreement periods beginning on July 1, 2019, and in subsequent years. Because the 40 percent threshold that we proposed to use to identify ACOs as experienced or inexperienced with performance-based risk on the basis of their ACO participants’ prior participation in certain Medicare ACO initiatives is lower than the 50 percent threshold that would be used to identify new legal entities as re-entering ACOs based on the prior participation of their ACO participants in the same ACO, this proposed policy would automatically capture new legal entities identified as re-entering ACOs that have experience with performance-based risk based on the experience of their ACO participants. We also proposed to add new definitions at § 425.20 for ‘‘Experienced with performance-based risk Medicare ACO initiatives’’, ‘‘Inexperienced with performance-based risk Medicare ACO initiatives’’ and ‘‘Performance-based risk Medicare ACO initiative’’. We proposed to define ‘‘performancebased risk Medicare ACO initiative’’ to mean an initiative implemented by CMS that requires an ACO to participate under a two-sided model during its agreement period. We proposed this would include Track 2, Track 3 or the ENHANCED track, and the proposed BASIC track (including Level A through Level E) of the Shared Savings Program. VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 We also proposed this would include the following Innovation Center ACO Models involving two-sided risk: The Pioneer ACO Model, Next Generation ACO Model, the performance-based risk tracks of the CEC Model (including the two-sided risk tracks for LDO ESCOs and non-LDO ESCOs), and the Track 1+ Model. The proposed definition also included such other Medicare ACO initiatives involving two-sided risk as may be specified by CMS. We proposed to define ‘‘experienced with performance-based risk Medicare ACO initiatives’’ to mean an ACO that CMS determines meets either of the following criteria: • The ACO is the same legal entity as a current or previous ACO that is participating in, or has participated in, a performancebased risk Medicare ACO initiative as defined under § 425.20, or that deferred its entry into a second Shared Savings Program agreement period under Track 2 or Track 3 in accordance with § 425.200(e). • 40 percent or more of the ACO’s ACO participants participated in a performancebased risk Medicare ACO initiative as defined under § 425.20, or in an ACO that deferred its entry into a second Shared Savings Program agreement period under Track 2 or Track 3 in accordance with § 425.200(e), in any of the 5 most recent performance years prior to the agreement start date. As we previously discussed, we proposed to discontinue use of the ‘‘sitout’’ period under § 425.222(a) as well as the related ‘‘sit-out’’ period for ACOs that deferred renewal under § 425.200(e). Thus, we proposed to identify all Track 1 ACOs that deferred renewal as being experienced with performance-based risk Medicare ACO initiatives. This would include ACOs that are within a fourth and final year of their first agreement period under Track 1 because they were approved to defer entry into a second agreement period under Track 2 or Track 3, and ACOs that have already entered their second agreement period under a twosided model after a one year deferral. Under § 425.200(e)(2), in the event that a Track 1 ACO that has deferred its renewal terminates its participation agreement before the start of the first performance year of its second agreement period under a two-sided model, the ACO is considered to have terminated its participation agreement for its second agreement period under § 425.220. In this case, when the ACO seeks to re-enter the program after termination, it would need to apply for a two-sided model. Our proposal to consider ACOs that deferred renewal to be experienced with performance-based risk Medicare ACO initiatives and therefore eligible for either the BASIC PO 00000 Frm 00081 Fmt 4701 Sfmt 4700 67895 track’s Level E (if a low revenue ACO and certain other requirements are met) or the ENHANCED track, would ensure that ACOs that deferred renewal continue to be required to participate under a two-sided model in all future agreement periods under the program consistent with our current policy under § 425.200(e)(2). We proposed to define ‘‘inexperienced with performance-based risk Medicare ACO initiatives’’ to mean an ACO that CMS determines meets all of the following requirements: • The ACO is a legal entity that has not participated in any performance-based risk Medicare ACO initiative as defined under § 425.20, and has not deferred its entry into a second Shared Savings Program agreement period under Track 2 or Track 3 in accordance with § 425.200(e); and • Less than 40 percent of the ACO’s ACO participants participated in a performancebased risk Medicare ACO initiative as defined under § 425.20, or in an ACO that deferred its entry into a second Shared Savings Program agreement period under Track 2 or Track 3 in accordance with § 425.200(e), in each of the 5 most recent performance years prior to the agreement start date. Under our proposed approach, for an ACO to be eligible to enter an agreement period under the BASIC track’s glide path, less than 40 percent of its ACO participants can have participated in a performance-based risk Medicare ACO initiative in each of the five prior performance years. This proposed requirement was modeled after the threshold currently used in the Track 1+ Model (see Track 1+ Model Fact Sheet), although with a longer look back period. Based on experience with the Track 1+ Model during the 2018 application cycle, we did not believe that the proposed parameters would be excessively restrictive. We considered the following issues in developing our proposed approach: (1) Whether to consider participation of ACO participants in a particular ACO, or cumulatively across multiple ACOs, during the 5-year look back period; (2) whether to use a shorter or longer look back period; and (3) whether to use a threshold amount lower than 40 percent. We proposed that in applying this threshold, we would not limit our consideration to ACO participants that participated in the same ACO or the same performance-based risk Medicare ACO initiative during the look back period. Rather, we would determine, cumulatively, what percentage of ACO participants were in any performancebased risk Medicare ACO initiative in each of the 5 most recent performance years prior to the agreement start date. E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67896 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations We provided the following illustrations help to clarify the use of the proposed threshold for determining ACO participants’ experience with performance-based risk Medicare ACO initiatives. For applicants applying to enter the BASIC track for an agreement period beginning on July 1, 2019, for example, we proposed that we would consider what percentage of the ACO participants participated in any of the following during 2019 (January–June), 2018, 2017, 2016, and 2015: Track 2 or Track 3 of the Shared Savings Program, the Track 1+ Model, the Pioneer ACO Model, the Next Generation ACO Model, or the performance-based risk tracks of the CEC Model. In future years (in determining eligibility for participation options for agreement periods starting in 2020 and subsequent years), we would also consider prior participation in the BASIC track and ENHANCED track (which we proposed would become available for agreement periods beginning on July 1, 2019 and in subsequent years). An ACO would be ineligible for the BASIC track’s glide path if, for example, in the performance year prior to the start of the agreement period, 20 percent of its ACO participants participated in a Track 3 ACO and 20 percent of its ACO participants participated in a Next Generation ACO, even if the ACO did not meet or exceed the 40 percent threshold in any of the remaining 4 performance years of the 5-year look back period. We considered a number of alternatives for the length of the look back period for determining an ACO’s experience or inexperience with performance-based risk Medicare ACO initiatives. For example, we considered using a single performance year look back period, as used under the Track 1+ Model. We also considered using a longer look back period, for example of greater than 5 performance years, or a shorter look back period that would be greater than 1 performance year, but less than 5 performance years, such as a 3 performance year look back period. A number of considerations informed our proposal to use a 5 performance year look back period. For one, a longer look back period would help to guard against a circumstance where an ACO enters the BASIC track’s glide path, terminates its agreement after one or 2 performance years under a one-sided model and seeks to enter the program under the one-sided model of the glide path. Whether or not the ACO applies to enter the program as the same legal entity or a new legal entity, the proposed eligibility criteria would VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 identify this ACO as experienced with performance-based risk Medicare ACO initiatives if its ACO participant list remains relatively unchanged. Second, a longer look back period may reduce the incentive for organizations to wait out the period in an effort to re-form as a new legal entity with the same or very similar composition of ACO participants for purposes of gaming program policies. Third, a longer look back period also recognizes that new ACOs composed of ACO participants that were in performance-based risk Medicare ACO initiatives many years ago (for instance more than 5 performance years prior to the ACO’s agreement start date) may benefit from gaining experience with the program’s current requirements under the glide path, prior to transitioning to higher levels of risk and reward. Fourth, and lastly, in using the 5 most recent performance years prior to the start date of an ACO’s agreement period, for ACOs applying to enter an agreement period beginning on July 1, 2019, we proposed to consider the participation of ACO participants during the first 6 months of 2019. This would allow us to capture the ACO participants’ most recent prior participation in considering an ACO’s eligibility for participation options for an agreement period beginning July 1, 2019. An alternative approach that bases the look back period on prior calendar years would overlook this partial year of participation in 2019. We also considered using a threshold amount lower than 40 percent. Based on checks performed during the 2018 application cycle, for the average Track 1+ Model applicant, less than 2 percent of ACO participants had participated under performance-based risk in the prior year. The maximum percentage observed was 30 percent. In light of these findings, we considered whether to propose a lower threshold for eligibility to participate in the BASIC track’s glide path. However, our goal was not to be overly restrictive, but rather to ensure that ACOs with significant experience with performance-based risk are appropriately placed. While we indicated our preference for 40 percent for its consistency with the Track 1+ Model requirement, we also sought comment on other numeric thresholds. As previously discussed in this section, some restriction would be needed to prevent all current and previously participating Track 1 ACOs, and new ACOs identified as re-entering ACOs because of their ACO participants’ prior participation in a Track 1 ACO, from taking advantage of additional time under a one-sided PO 00000 Frm 00082 Fmt 4701 Sfmt 4700 model in the BASIC track’s glide path. We explained that an approach that restricts the amount of time a former Track 1 ACO or a new ACO, identified as a re-entering ACO because of its ACO participants’ prior participation in a Track 1 ACO, may participate in the one-sided models of the BASIC track’s glide path (Level A and Level B) would balance several concerns. Allowing Track 1 ACOs and eligible re-entering ACOs some opportunity to continue participation in a one-sided model within the BASIC track’s glide path could smooth their transition to performance-based risk. For example, it would provide these ACOs a limited time under a one-sided model in a new agreement period under the BASIC track, during which they could gain experience with their rebased historical benchmark, and prepare for the requirements of participation in a twosided model (such as establishing a repayment mechanism arrangement). Limiting time in the one-sided models of the BASIC track’s glide path for former Track 1 ACOs and new ACOs that are identified as re-entering ACOs because of their ACO participants’ recent prior participation in the same Track 1 ACO would also allow these ACOs to progress more rapidly to performance-based risk, and therefore further encourage accomplishment of the program’s goals. After weighing these considerations, we proposed that ACOs that previously participated in Track 1 of the Shared Savings Program or new ACOs, for which the majority of their ACO participants previously participated in the same Track 1 ACO, that are eligible to enter the BASIC track’s glide path, may enter a new agreement period under either Level B, C, D or E. Former Track 1 ACOs and new ACOs identified as re-entering ACOs because of their ACO participants’ prior participation in a Track 1 ACO would not be eligible to participate under Level A of the glide path. Therefore, if an ACO enters the glide path at Level B and is automatically transitioned through the levels of the glide path, the ACO would participate in Level E for the final 2 performance years of its agreement period. For a former Track 1 ACO or a new ACO identified as a re-entering ACO because of its ACO participants’ prior participation in a Track 1 ACO that enters an agreement period in the BASIC track’s glide path beginning on July 1, 2019, the ACO could participate under Level B for a 6-month performance year from July 1, 2019 through December 31, 2019 and the 12 month performance year 2020 (as E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations discussed in section II.A.7.c. of this final rule). A former Track 1 ACO or a new ACO identified as a re-entering ACO because of its ACO participants’ prior participation in a Track 1 ACO that begins an agreement period in the BASIC track’s glide path in any subsequent year (2020 and onward) could participate in Level B for 1 performance year before advancing to a two-sided model within the glide path. We also considered a more aggressive approach to transitioning ACOs with experience in Track 1 to performancebased risk. Specifically, we considered whether the one-sided models of the BASIC track’s glide path should be unavailable to current or previously participating Track 1 ACOs and new ACOs identified as re-entering ACOs because of their ACO participants’ prior participation in a Track 1 ACO. Under this alternative, ACOs that are experienced with Track 1, would be required to enter the BASIC track’s glide path under performance-based risk at Level C, D or E. This alternative would more aggressively transition ACOs along the glide path. This approach would recognize that some of these ACOs may have already had the opportunity to participate under a one-sided model for 6 performance years (or 7 performance years for ACOs that elect to extend their agreement period for the 6-month performance year from January 1, 2019 through June 30, 2019), and should already have been taking steps to prepare to enter performance-based risk to continue their participation in the program under the current requirements, and therefore should not be allowed to take advantage of additional time under a one-sided model. For ACOs that have participated in a single agreement period in Track 1, an approach that requires transition to performance-based risk at the start of their next agreement period would be more consistent with the proposed redesign of participation options, under which ACOs would be allowed only 2 years, or 2 years and 6 months in the case of July 1, 2019 starters, under the one-sided models of the BASIC track’s glide path. We sought comment on this alternative approach. We proposed to specify these requirements in revisions to the regulations under § 425.600, which would be applicable for determining participation options for agreement periods beginning on July 1, 2019, and in subsequent years. We sought comment on these proposals for determining an ACO’s participation options by evaluating the ACO legal entity’s and ACO participants’ experience or inexperience with VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 performance-based risk Medicare ACO initiatives. In particular, we welcomed commenters’ input on our proposal to assess ACO participants’ experience with performance-based risk Medicare ACO initiatives using a 40 percent threshold, and the alternative of employing a threshold other than 40 percent, for example, 30 percent. We welcomed comments on the proposed 5 performance year look back period for determining whether an ACO is experienced or inexperienced with performance-based risk Medicare ACO initiatives, and our consideration of a shorter look back period, such as 3 performance years. We also welcomed comments on our proposal to limit former Track 1 ACOs and new ACOs identified as re-entering ACOs because more than 50 percent of their ACO participants have recent prior experience in a Track 1 ACO to a single performance year under the one-sided models of the BASIC track’s glide path (two performance years, in the case of an ACO starting its agreement period under the BASIC track on July 1, 2019), and the alternative approach that would preclude such ACOs from participating in one-sided models of the BASIC track’s glide path. Comment: Some commenters supported the proposed approach to differentiating participation options based on the experience or inexperience of the ACO legal entity or its ACO participants. Some commenters expressed concern that the proposed approach to identifying ACOs experienced with performance-based risk Medicare ACO initiatives was too broad. One commenter explained that the approach assumes transferability of experience across population and geography. Another commenter asserts that the determination of experience based on ACO participants rather than the ACO legal entity puts new ACOs at a substantial disadvantage, particularly in markets where most providers have been in an ACO. This commenter believes that experience of the ACO participants does not necessarily equate to the ACO being experienced. Several commenters expressed concern that a 40 percent threshold leaves a majority of participants who would have no prior experience with the accountable care model, and which need more time to familiarize themselves with program requirements and the type of system reforms inherent to participating in a population-based APM. Some commenters expressed concern that the distinctions for determining participation options, including between ACOs experienced with PO 00000 Frm 00083 Fmt 4701 Sfmt 4700 67897 performance-based risk Medicare ACO initiatives or inexperienced with performance-based risk Medicare ACO initiatives add complexity to the program. Several commenters expressed concern that ACOs would have difficulty anticipating these determinations. One commenter explained that the proposed complexities for determining ACO participation options could make it hard for some groups to understand which track/level to participate in and how long to remain in such track/level. Furthermore, these complexities could disincentivize healthcare providers from participating in the Shared Savings Program. Several commenters recommended that CMS provide additional guidance on the different participation parameters and options so that healthcare providers have more information for their planning process. For example this commenter suggested that CMS provide ACOs with detailed descriptions of each definition used in determining participation options (low revenue ACO/high revenue ACO, and experienced with performance-based risk Medicare ACO initiatives/ inexperienced with performance-based risk Medicare ACO initiatives) well in advance of any decision deadline. One commenter recommended using a policy that allows ACOs to easily understand their options for participation ahead of time. One commenter recommended CMS clarify the timelines and detailed processes for how it will monitor, review and communicate to ACOs each ACO’s status with respect to their categorization. One commenter suggested that the distinction between experienced versus inexperienced with performance-based risk Medicare ACO initiatives should only be applied to determining whether and for how long an ACO entity may participate in a one-sided model. This commenter did not support ACO entities being required to participate in the ENHANCED track due to experience with performance-based risk Medicare ACO initiatives, preferring instead that all ACO entities be allowed to participate in Level E of the BASIC track. Commenters suggested a variety of alternative approaches including the following: • One commenter suggested that CMS consider the experience of both the ACO participant TINs and NPIs in making the determination whether the ACO is experienced with performance-based risk Medicare ACO initiatives. This commenter explained that a straight percentage of TINs is more straightforward, however, the E:\FR\FM\31DER2.SGM 31DER2 67898 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations khammond on DSK30JT082PROD with RULES2 commenter expressed that it could be unnecessarily limiting to ACOs comprised of large, single TIN entities. This commenter suggested that CMS should consider allowing ACOs to use a calculation based on TINs or NPIs as appropriate for their composition. • One commenter suggested that CMS consider whether the ACO previously managed a majority of the same beneficiary population. • One commenter suggested that we allow greater flexibility in choice of participation options to ‘‘high performing’’ ACOs, and requiring ‘‘low performers’’ to either quickly demonstrate success or be terminated. • A few commenters suggested CMS consider an ACO to be experienced with performance-based risk Medicare ACO initiatives if the ACO completes an entire agreement period under a performance-based risk Medicare ACO initiative, explaining their concern about cases where an ACO could be considered experienced with performance-based risk models after only one year of participation in a performance-based risk initiative. • One commenter suggested that CMS restrict the definition of an experienced ACO to those with prior experience in the Shared Savings Program. The commenter explained that the rules of every individual APM are complex and can vary significantly from model to model, so the definition of an ‘‘experienced’’ ACO in this model should be limited to experience in the Shared Savings Program. Response: We appreciate commenters’ support for the proposal to determine participation options for ACOs, including consideration of whether an ACO is experienced or inexperienced with performance-based risk Medicare ACO initiatives in combination with determining whether the ACO is a low revenue ACO or high revenue ACO (as discussed in section II.A.5.b. of this final rule). We acknowledge that the approach to identifying participation options for ACOs based on a combination of factors, including whether an ACO is experienced or inexperienced with performance-based risk Medicare ACO initiatives, and whether an ACO is low revenue ACO versus high revenue ACO, will add some complexity to program policies and certain operational processes. However, we believe these policies provide necessary safeguards to ensure that the amount of time an ACO is allowed under one-sided models and lower levels of risk in the BASIC track’s glide path are not susceptible to gaming and to ensure ACOs participate in financial models that are commensurate with their level of experience in the Shared Savings Program and other Medicare ACO initiatives. We believe it is important to hold ACOs and ACO participants accountable for their prior experience in which they become familiar with the accountable care VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 models generally, as well as with the Shared Savings Program requirements. On the point raised by the commenter that the proposed approach assumes transferability of experience across populations and geography, we note there are commonalities and synergies between the Shared Savings Program and other Medicare ACO initiatives, which include their overall aims to improve quality of care and lower growth in expenditures for a population of assigned Medicare FFS beneficiaries. Given the similarity in the fundamental goals of Medicare ACO initiatives, and including the Shared Savings Program and other value-based initiatives, we believe there is a degree of transferability of experience by ACO participants across these initiatives and to ACOs from providers and suppliers experienced with other value-based payment arrangements. We disagree with the commenter’s suggestion that new legal entities are disadvantaged by the experience of their ACO participants, which under the proposed approach is used to determine ACO participation options. We believe ACOs make strategic decisions about which ACO participants to recruit to maximize their potential gain from program participation. We also note that under the program’s shared governance requirements at § 425.106(c)(3), at least 75 percent control of the ACO’s governing body must be held by ACO participants. We believe that new legal entities that meet the 40 percent threshold for experienced with performance-based risk Medicare ACO initiatives (based on the recent prior experience of their ACO participants) will be significantly informed by their ACO participants’ experience. Considering these factors, we continue to believe that ACOs that include a significant number of ACO participants with recent prior experience with Shared Savings Program requirements, or similar requirements of other performance-based risk Medicare ACO initiatives, should be placed in participation options that are reflective of the sophistication of their organization. The approach to distinguishing ACOs based on their experience or inexperience with performance-based risk Medicare ACO initiatives is intended to achieve the commenter’s suggestion to differentiate which ACOs may be able to participate under a onesided model or lower levels of performance-based risk within the BASIC track’s glide path. However, as we explained in response to comments in section II.A.5.b of this final rule, we decline to allow ACOs to remain in PO 00000 Frm 00084 Fmt 4701 Sfmt 4700 Level E of the BASIC track indefinitely, and we are finalizing an approach (more generally) that would limit the amount of time ACOs may remain in the BASIC track prior to participating in the ENHANCED track. We decline to adopt the commenters’ suggestions for alternative approaches to distinguishing participation options based on the ACO’s and ACO participants’ level of experience with performance-based risk Medicare ACO initiatives. We believe that considering the prior participation of ACO providers/suppliers would add a level of complexity to the determination, and would also be inconsistent with our use of ACO participant TINs in program operations. Also, as we previously explained, ACOs’ assigned populations vary year to year. We therefore decline the commenter’s suggestion to determine an ACO’s experience with the program based on whether the ACO managed the same beneficiary population in the past. We decline to determine an ACO’s track of participation based on their prior financial or quality performance in the program, as we believe that ACOs that project performing well in the program are more likely to self-select to more aggressively pursue participation under higher levels of risk and potential reward. We also decline to exclude ACOs that did not complete an entire agreement period during which the ACO was under a performance-based risk Medicare ACO initiative, including certain terminated ACOs and ACO participants with a single year of participation, from the definition of experienced with performance-based risk Medicare ACO initiatives. We believe this approach would leave the program vulnerable to gaming through short-term participation, termination and re-entry, which we believe could be potentially destabilizing and disruptive to ACOs and healthcare markets and the care delivered to Medicare FFS beneficiaries. In particular, this would create a circumstance we are trying to protect against where ACOs could participate under the BASIC track’s glide path, terminate prior to the conclusion of their 5-year agreement period and enter a new agreement period under the glide path. We also decline to narrow the proposed definitions for inexperienced and experienced with performance-based risk Medicare ACO initiatives to focus only on participation in the Shared Savings Program, as we believe ACOs’ and ACO participants’ experience in other Medicare ACO initiatives (including models with similar E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations requirements for accountability for the quality and cost of care for Medicare FFS beneficiaries, and in some cases higher levels of risk and potential reward) should be considered. Further, we believe we have set forth clear rules on the approach we will use to determine participation options under the redesign of the Shared Savings Program based on a combination of factors. We proposed and are finalizing (in this final rule) definitions of the term ‘‘low revenue ACO’’ and ‘‘high revenue ACO,’’ ‘‘inexperienced with performance-based risk Medicare ACO initiatives’’ and ‘‘experienced with performance-based risk Medicare ACO initiatives,’’ and ‘‘performance-based risk Medicare ACO initiative’’. We will consider the commenters’ suggestion to include detailed descriptions of these terms, and how these concepts will be used in determining participation options, in material we provide to ACOs informing them of our determination of the ACO’s status with respect to each of these criteria. As we indicated in our response to comments requesting timely feedback on CMS’ determination of low revenue ACO versus high revenue ACO status, in section II.A.5.b of this final rule, we note that we anticipate providing timely feedback to ACOs throughout program application cycles on whether the ACO is likely to be determined to be inexperienced with performance-based risk Medicare ACO initiatives or experienced with performance-based risk Medicare ACO initiatives, and a low revenue ACO or high revenue ACO (among other factors), in order to ensure ACOs have the information they need to make decisions about program participation and to take action to align with program requirements. Comment: One commenter suggested that CMS should consider some flexibility for ACOs identified as experienced with performance-based risk Medicare ACO initiatives with small assigned populations (less than 5,000) to permit their initial participation to include Levels C or D of the BASIC track at the option of the ACO, rather than limiting their participation options to either Level E of the BASIC track or the ENHANCED track. Response: Section 1899(b)(2)(D) of the Act requires ACOs to have a minimum of 5,000 assigned beneficiaries in order to be eligible to participate in Shared Savings Program. Consistent with this requirement, the program’s regulations provide that ACOs with fewer than 5,000 assigned beneficiaries are ineligible for program participation VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 (§ 425.110(a)). As we discuss in section II.A.6.b.(3). of this final rule, we are modifying our policies on determining the MSR/MLR for ACOs participating in two-sided models that have elected a fixed MSR/MLR whose populations fall below 5,000 assigned beneficiaries for performance years beginning on July 1, 2019 and in subsequent years. Under these final policies, we will apply a variable MSR/MLR based on the size of the ACO’s assigned population, instead of the fixed MSR/MLR elected by the ACO prior to entering performancebased risk. This will result in a relatively higher MSR/MLR (greater than 3.9 percent), and therefore a higher threshold for the ACO to exceed to be eligible for shared savings, and relatively higher threshold to protect the ACO from liability for shared losses, which could result from random variation. We also decline to create a lower risk participation option for ACOs with small populations, as suggested by the commenter. As discussed in section II.A.5.b of this final rule, we are finalizing an approach to distinguish participation options for ACOs (in part) using a claims-based approach to identifying low revenue ACOs versus high revenue ACOs as opposed to the alternatives we considered including distinguishing ACOs based on the size of their assigned populations. Comment: A few commenters suggested using a higher threshold for determining whether an ACO is experienced with performance-based risk Medicare ACO initiatives based on the experience of its ACO participants, so that more ACOs would meet the definition of inexperienced with performance-based risk Medicare ACO initiatives; such as a threshold of 50 percent or 60 percent instead of 40 percent as proposed. Some commenters suggested increasing the threshold from 40 percent to 50 percent to align with the threshold proposed in the definition of re-entering ACO, for identifying new ACOs composed of ACO participants with previous experience in the same Shared Savings Program ACO in recent years. One commenter explained that it is confusing to use different percentages for determining ACO participants’ experience with performance-based risk Medicare ACO initiatives (40 percent) and ACO participants with prior experience in the same Shared Savings Program ACO under the proposed definition of re-entering ACO (50 percent). One commenter recommended CMS define an ‘‘experienced’’ ACO as one in which at least the majority of ACO PO 00000 Frm 00085 Fmt 4701 Sfmt 4700 67899 participants participated in a the same performance-based risk Medicare ACO initiative, or in an ACO that deferred its entry into a second Shared Savings Program agreement period under a twosided model, in any of the five most recent performance years prior to the agreement start date. The commenter stated that experience and performance of an ACO in one location has little bearing on how the ACO might perform in another location, explaining that market factors contribute significantly to ACO performance. ACOs performing identically could achieve savings in one market but not another. As previously described in section II.A.5.c.4.(a) of this final rule, some commenters suggested that CMS should monitor the impact of the policies for identifying re-entering ACOs and ACOs that are experienced with performancebased risk Medicare ACO initiatives, as well as to create an appeals process for these determinations. They recommended using a threshold of 50 percent for both of these determinations (rather than using the proposed 40 percent threshold for determining ACOs experienced with performance-based risk Medicare ACO initiatives) and also setting an additional criterion that would allow an ACO determined to be a re-entering ACO or experienced performance-based risk Medicare ACO initiatives to appeal the determination if less than 30 percent of its ACO participants were previously part of the same legal entity. Response: We continue to believe a threshold of 40 percent, for assessing ACO participants’ experience with performance-based risk Medicare ACO initiatives is the appropriate percentage. For one, it is consistent with the percentage threshold used in determining whether an ACO was sufficiently inexperienced with performance-based risk to participate under the Track 1+ Model. Further, we believe that a threshold of 40 percent will capture ACOs significantly composed of ACO participants experienced with performance-based risk Medicare ACO initiatives. We believe increasing the threshold would allow experienced ACOs to participate under relatively lower-risk options when in fact their composition suggests their readiness for higher levels for risk and potential reward. Further, we believe it is necessary to apply a higher percentage in the definition of reentering ACOs, since we are identifying the majority (greater than 50 percent) of ACO participants that participated in the same Shared Savings Program ACO within the look back period (see section II.A.5.c.(4).(a). of this final rule). The E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67900 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations purpose of the higher percentage threshold in the definition of re-entering ACO is to identify a single ACO in which the majority of a new legal entity’s ACO participants previously participated in the Shared Savings Program, for the purposes of identifying the agreement period the re-entering ACO should be considered participating under for program policies that phasein over time. In contrast, the definition of experienced with performance-based risk Medicare ACO initiatives identifies ACOs that include a significant proportion of ACO participants that have recent prior experience in twosided risk accountable care models, as part of an approach for identifying whether the ACO is prepared to participate under relatively higher levels of performance-based risk. Therefore we decline the commenters’ suggestions to use a higher threshold in the definitions of inexperienced with performance-based risk Medicare ACO initiatives and experienced with performance-based risk Medicare ACO initiatives. We continue to prefer our proposed approach to consider participation of ACO participants cumulatively across multiple ACOs, rather than in a particular ACO, during the 5-year lookback period, because it would allow us to potentially identify more ACOs that may be experienced with risk compared to the narrower options suggested by the commenters. We therefore decline the commenters’ suggestion that we identify experienced ACOs as those in which at least the majority of ACO participants participated in the same Medicare ACO (which would include Innovation Center models). We also decline the commenters’ suggestion that we limit the determination of experienced ACOs based on participation of ACO participants in the same Shared Savings Program ACO (such as for consistency with the definition of re-entering ACO). We believe these approaches would allow some ACOs with a significant proportion of ACO participants experienced with performance-based risk in different Medicare ACO initiatives to participate under options that are designed for ACOs inexperienced with Medicare’s accountable care models. We decline to adopt the commenters’ recommendations to modify the process for initially determining ACOs that are experienced with performance-based risk Medicare ACO initiatives (as well as the determination of re-entering ACOs as previously responded to in section II.A.5.c.4.(a) of this final rule), to include an initial determination for VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 whether an ACO is experienced with performance-based risk Medicare ACO initiatives, a secondary test to identify whether the ACO is eligible to request an appeal, and finally an appeal process for the final determination. We previously explained that we believe such an approach would add complexity as well as uncertainty as ACOs would need to request an appeal and await a final determination. Additionally, we currently have an established process for ACOs to request reconsiderations, as specified in subpart I of the program’s regulations. More generally, we agree with commenters suggesting that we evaluate and monitor the policy once implemented. Although we did not specifically address this issue in the discussion in the August 2018 proposed rule regarding monitoring for changes during the agreement period, we are concerned about the possibility that ACOs will enter the BASIC track’s glide path because they are determined to be inexperienced with performance-based risk Medicare ACO initiatives, and over the course of their agreement period, dramatically change their composition to take advantage of this lower-risk option when their new composition suggests that they are prepared to take on more significant performance-based risk. We intend to closely monitor ACO participant list change requests for this issue. Comment: One commenter suggested that the look back period for determining threshold should be shortened from 5 years, but did not indicate an alternative for how long of a look back period should be used by CMS. Response: We continue to believe a look back period of 5 performance years is an appropriate length to ensure we identify ACOs with recent prior experience with performance-based risk Medicare ACO initiatives. We described a number of considerations that led to our proposal of a 5 performance year look back period in the definitions of inexperienced with performance-based risk Medicare ACO initiatives and experienced with performance-based risk Medicare ACO initiatives in the August 2018 proposed rule (83 FR 41828), as restated in this section of this final rule, including that a 5 performance year look back period could reduce the incentive for organizations to wait out the period in an effort to re-form as a new legal entity with the same or very similar composition of ACO participants for purposes of gaming program policies. Comment: Some commenters expressed concerns about requiring PO 00000 Frm 00086 Fmt 4701 Sfmt 4700 ACOs experienced with performancebased risk to take on higher levels of two-sided risk under the proposed redesigned participation options. As summarized in section II.A.5.b of this final rule, many commenters suggested additional flexibility to allow high revenue ACOs experienced with performance-based risk Medicare ACO initiatives to continue participation under lower levels of risk rather than be limited to participation under the ENHANCED track. For example, commenters suggested that ACOs should be permitted to remain in the BASIC track’s Level E (or an equivalent level of risk as the Track 1+ Model) indefinitely without being forced to progress to the ENHANCED track. One commenter suggested that former Track 3 ACOs should be given the option to participate in the BASIC track as all other ACOs, among other flexibilities in their participation options, since these ACOs voluntarily entered the highest level of risk and reward in the Shared Savings Program. As an alternative, one commenter suggested that ACOs experienced with performance-based risk Medicare ACO initiatives should be allowed the option of entering an agreement period under either Level D or Level E of the BASIC track. This is contrary to the proposed approach that would limit ACOs experienced with performance-based risk Medicare ACO initiatives to either an agreement period under Level E of the BASIC track (if a low revenue ACO), or the ENHANCED track. Response: We continue to believe in the importance of progressing ACOs to the highest level of risk and potential reward in the program to drive the most meaningful change in providers’ and suppliers’ behavior toward achieving the program’s goals. Further, we continue to believe that it is necessary to establish policies to safeguard against experienced ACOs taking advantage of participation options under the BASIC track’s glide path intended for ACOs inexperienced with the accountable care model in Medicare. Therefore we continue to believe in the necessity of the proposed approach to require ACOs identified as experienced with performance-based risk Medicare ACO initiatives to participate under the higher levels of risk and potential reward that we are finalizing with this final rule, specifically Level E of the BASIC track (if eligible) or the ENHANCED track. Further we note that under the policies we are finalizing with this final rule, an ACO that is identified as a low revenue ACO and experienced with performance-based risk Medicare ACO E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations initiatives will be eligible to participate for up to two agreement periods in Level E of the BASIC track. In response to the commenter’s concerns, we note that this policy applies to low revenue ACOs identified as experienced with performance-based because of their prior participation in Track 3 of the Shared Savings Program, as it would also similarly apply to ACOs identified as experienced with performance-based risk Medicare ACO initiatives because of their participation in the other twosided models specified in the definition of performance-based risk Medicare ACO initiatives. Comment: Some commenters point to concerns related to the inclusion of the Track 1+ Model in the definition of performance-based risk Medicare ACO initiative. Some commenters expressed concern that under the proposed approach, high revenue ACOs that transitioned to the Track 1+ Model within their current agreement period would be required to renew under the ENHANCED track, whereas their counterparts that remained under Track 1 would be eligible to enter a one-sided model of the BASIC track’s glide path. Some commenters view this approach as disadvantageous or unreasonable to ACOs that voluntarily elected to accelerate their transition to risk and switched to the Track 1+ Model. Commenters explained that these Track 1+ Model ACOs would be required to make a significant jump from the Track 1+ Model level of risk and reward to the ENHANCED track level of risk and reward with only minimal experience with in performance-based risk. Some commenters pointed out that ACOs entering the Track 1+ Model for their third performance year, performance year 2018, will not know the final results of this year until after their new agreement period begins under the proposed approach for a July 1, 2019 start date. This is a significant concern since performance year 2018 is the first year of two-sided risk for these ACOs, which are required to continue participation in two-sided risk for their next agreement period. Commenters addressing this issue typically recommended that all current Track 1+ Model ACOs, independent of whether they are identified by CMS as high revenue ACOs or low revenue ACOs, should be permitted to continue their participation in the Shared Savings Program under Level E of the BASIC track for an agreement period of at least 5 years, to gain experience with performance-based risk. One commenter, indicating confusion over the applicability of the proposed policies in determining participation VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 options, asked if ACOs currently in the Track 1+ Model would be eligible to participate in the BASIC track’s glide path including being allowed one year of participation under a one-sided model. Response: We are persuaded by commenters’ concerns that the proposed policies could disrupt the progressive transition to risk by Track 1 ACOs that took an initial and important step by entering the Track 1+ Model within their current agreement period, with an expectation that they might be able to continue in a similar level of risk and reward for a second 3-year agreement period. Therefore, we are finalizing a limited exception to allow ACOs that transitioned to the Track 1+ Model within their current agreement period (therefore ACOs with a first or second agreement period start date in 2016 or 2017 that entered the Track 1+ Model in 2018), which are considered high revenue ACOs, a one-time option to renew for a consecutive agreement period of at least 5 years under Level E of the BASIC track. We are specifying this participation option in a provision of the regulations text at § 425.600(d)(1)(ii)(B). We note that low revenue ACOs identified as experienced with performance-based risk Medicare ACO initiatives would have an opportunity to participate for up to two agreement periods under Level E of the BASIC track. To clarify in response to the commenter’s confusion, we note that former Track 1+ Model ACOs are ineligible for the BASIC track’s glide path because they would be identified as experienced with performance-based risk Medicare ACO initiatives. We do not believe it is necessary to extend this same exception to ACOs that entered or renewed for a 3-year agreement period under the Track 1+ Model with an agreement start date of January 1, 2018. Under the original design of the Track 1+ Model, we would have allowed entry into the model for an agreement period start date of 2018, 2019 and 2020 (as discussed in section II.F of this final rule). ACOs would not have been able to renew their participation under the Model for a second 3-year agreement period beginning January 1, 2021. Instead, under the terms of the Track 1+ Model Participation Agreement and the current Shared Savings Program regulations, these ACOs would have had the option to continue their participation in the Shared Savings Program in an agreement period under either Track 2 or Track 3. With the changes to the program’s participation options we are finalizing with this final rule, ACOs that entered the Track 1+ Model for first or PO 00000 Frm 00087 Fmt 4701 Sfmt 4700 67901 second agreement period beginning on January 1, 2018 will have the following options: Low revenue ACOs would be eligible to participate in Level E of the BASIC track for up to two agreement periods; high revenue ACO would be limited to participating in the ENHANCED track. Comment: We received a few comments specifically addressing the proposal to limit an ACO eligible for the BASIC track’s glide path to enter under Level B if the ACO has previous participation in Track 1. Several commenters supported CMS’ proposal to allow ACOs that previously participated in Track 1 of the Shared Savings Program or new ACOs, for which the majority of their ACO participants previously participated in the same Track 1 ACO, that are eligible to enter the BASIC track’s glide path, to enter a new agreement period under either Level B, C, D or E. Several commenters indicated the importance of allowing these ACOs an opportunity to participate for at least one performance year under a one-sided model before transitioning to performance-based risk. One commenter explained that this approach would give ACOs with experience in the program but without experience in performance-based risk a reasonable amount of time in the redesigned program structure before being required to move to performancebased risk. The commenter preferred the proposed approach to the potentially more aggressive approach CMS considered in which ACOs with experience in Track 1 would be required to start at Level C of the BASIC track or higher. Several commenters suggested that all ACOs should be allowed to start at Level A of the BASIC track. One commenter stated that early adopters should not be penalized by forcing them into performance-based risk while other new ACO entrants are allowed to remain in one-sided models for several more years. One commenter seemed to suggest that the proposed approach may differentiate whether ACOs may enter Level A or Level B of the BASIC track’s glide path depending on the length of time they previously participated in Track 1. Response: We are finalizing as proposed the approach for glide path entry for former Track 1 ACOs and new ACOs that are identified as re-entering ACOs because of their ACO participants’ recent prior participation in the same Track 1 ACO. These ACOs, if eligible to enter the BASIC track’s glide path, will be restricted to a single year of participation under a one-sided model (Level B) before being E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67902 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations automatically transitioned to risk and reward under the glide path (except for ACOs with an agreement period starting July 1, 2019, which would be permitted to continue in Level B for a second performance year starting January 1, 2020). We appreciate commenters’ support for this proposed approach which recognizes that ACOs with prior experience in Track 1 may need additional time under a one-sided model to prepare for performance-based risk, but are likely better prepared to more rapidly progress to performancebased risk because of their experience in the Shared Savings Program. Therefore, we decline the commenter’s suggestion that these ACOs be allowed to enter the BASIC track’s glide path at Level A. Further, we believe the comments reflect the need to clarify that this policy restricting entry into the BASIC track’s glide path to Level B applies consistently to any former Track 1 ACO and new ACO that is identified as a reentering ACO because of its ACO participants’ recent prior participation in the same Track 1 ACO, regardless of how many performance years or agreement periods the ACO participated under Track 1. Comment: As described and addressed elsewhere in our summary of comments in section II.A. of this final rule, many commenters expressed concerns about the pace of transitioning ACOs to performance-based risk under the proposed designed participation options. Some commenters specifically expressed concern about the design of the BASIC track that allows new, inexperienced ACOs only two performance years under a one-sided model before requiring ACOs to enter performance-based risk. One commenter explained that new ACOs need time to adjust to the program requirements. One commenter encouraged CMS to prioritize the entrance of new participants, and especially low revenue ACOs and ACOs inexperienced with performance-based risk Medicare ACO initiatives, into the Shared Savings Program as it implements the redesign of the participation options. Some commenters expressed concern that the proposed approach may require too quick of a progression to higher levels of performance-based risk by small, rural and physician-only ACOs. One commenter expressed concern that ACOs that have actually achieved savings but do not have the financial resources to go to risk would be forced out of the program. More generally, some commenters stated a critical component of performance improvement lies in the ACO’s ability to analyze the VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 performance data being provided to the ACO and make targeted improvements based on this information. Under CMS’ current proposal, ACOs would have only one year of performance data before being required to move to a performance-based risk model. One commenter explained that the timing of benchmark notification, data receipt and shared savings determinations under the program render such a short period of time effectively useless to determine if the ACO’s care coordination and other redesigns are having the intended effect. The commenter explained further that ACOs do not receive a preliminary benchmark or historical data until after the performance year has begun. They also do not receive a final shared savings determination until seven or eight months after the conclusion of the performance year. As a result, the commenter stated, ACOs are functionally blind to their financial performance for the entire length of a performance year and into the following year, which makes it difficult for ACOs to determine how to invest any returns or how to alter their care delivery to achieve savings and improve quality. The commenter believes the proposed progression to performance-based risk within the BASIC track’s glide path forces ACOs to take on performancebased risk without much-needed information, setting many ACOs up for failure. To address these concerns, several commenters recommended that CMS allow new, inexperienced ACOs three performance years in a one-sided model, rather than two performance years, before requiring them to take on performance-based risk. Several commenters recommended that CMS allow new ACOs at least four performance years in a one-sided model to provide the ACOs with two to three years of performance data, to identify trends and opportunities for transformation and improvement before they are moved to a two-sided model. This commenter suggested, for example, CMS could implement a policy allowing all new ACOs to remain in Level A of the BASIC track for two performance years and Level B of the BASIC track for an additional two performance years before requiring the ACO to move to Level C in the fifth and final performance year of their 5-year agreement. Alternatively, commenters suggest that CMS could allow new ACOs to remain in a one-sided model for the duration of their first 5-year agreement period, and then permit the ACO to begin their second 5-year agreement period at Level C or Level D of the BASIC track where they would PO 00000 Frm 00088 Fmt 4701 Sfmt 4700 participate for three performance years and progress to Level E for the remaining two performance years. Several commenters suggesting these alternative approaches to allowing inexperienced ACOs additional time under a one-sided model of the BASIC track’s glide path recommended that CMS maintain the opportunity for ACOs to elect to more rapidly enter higher levels of risk and reward, as proposed (see section II.A.4.b. of this final rule). Response: We are persuaded by commenters that ACOs new to the Shared Savings Program that are inexperienced with performance-based risk Medicare ACO initiatives may need additional time under a one-sided model to gain experience with program participation and to prepare for the transition to performance-based risk. We believe the need for this additional time in a one-sided model is particularly acute among low revenue ACOs. As described in comments summarized elsewhere in this final rule, for example, small, rural and physician-only ACOs, which are more likely to be low revenue ACOs, may lack the financial reserves needed to support establishment of a repayment mechanism arrangement. These ACOs may be able to better accrue the needed financial resources through earned shared savings in their initial years of program participation (if they are eligible to share in these savings). Therefore we are finalizing a modification to our proposals to allow an additional participation option in the BASIC track’s glide path for ACO legal entities without prior experience in the Shared Savings Program (that is, new legal entities that are not identified as a re-entering ACOs) that are identified as low revenue ACOs. To be eligible for the BASIC track’s glide path, these ACOs would have been determined to be inexperienced with performance-based risk Medicare ACO initiatives based on an evaluation of their ACO legal entity and also ACO participants (according to the 40 percent threshold). We will allow these ACOs to participate under a onesided model for up to three performance years (or four performance years for ACOs entering an agreement period beginning July 1, 2019). However, in exchange for this additional year under a one-sided model, these ACOs would forfeit their progression along the glide path to Level C and Level D and therefore automatically advance to Level E for the remaining performance years of their agreement period. We note that this alternative participation option will not be available to new ACOs that are identified as re-entering ACOs because E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations of their ACO participants’ recent prior participation in the same Track 1 ACO. With this alternative, we are allowing for an additional participation option that more closely resembles the current opportunity for ACOs to participate for a 3-year agreement period in a one-sided model, and then transition to Level E of the BASIC track, with the level of risk and potential reward currently available under the popular Track 1+ Model. Therefore, we believe this policy (under which ACOs forgo participation in Level C and Level D of the BASIC track’s glide path) is responsive to some commenters’ suggestions for such alternatives, and also supported by our early experience with the Track 1+ Model. Among ACOs renewing for a second agreement period beginning January 1, 2018, we observed that 5 Track 1 ACOs renewed under the Track 1+ Model. However, as discussed elsewhere in this section of this final rule, we strongly believe that ACOs need to make the transition to two-sided risk within their 5-year agreement period of the BASIC track’s glide path, an approach which some commenters also supported. Nevertheless, we are sensitive to commenters’ concern about the need for ACOs to have more performance information before transitioning to higher levels of performance-based risk. Considering these factors, in combination, we believe it would be an attractive alternative that meets the objectives of our program’s redesign to offer the option for certain ACOs to elect to remain under a one-sided model of the BASIC track’s glide path for an additional performance year prior to transitioning to Level E of the BASIC track for the remaining years of their agreement period. As discussed in the Regulatory Impact Analysis (section V of this final rule), we believe this alternative would be protective of the Trust Funds because it could encourage program entry by the types of organizations that have tended to be higher-performing (small, physicianonly and rural ACOs), and also encourage these ACOs to more aggressively pursue the program’s goals by moving to higher risk (under Level E) faster. We note also that we are finalizing the option for eligible ACOs without previous experience in the Shared Savings Program to participate under the BASIC track’s glide path, where they enter at Level A and are automatically advanced through the remaining four levels of the glide path, concluding at Level E. Therefore, this will remain a participation option for organizations that prefer a more VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 incremental progression to increasing levels of two-sided risk. In the new provision of the regulations at § 425.600(a)(4) we are specifying an exception to the policy that ACOs participating in the BASIC track’s glide path are automatically advanced to the next level of the glide path at the start of each subsequent performance year of the agreement period. This exception, applicable to an ACO legal entity without prior experience in the Shared Savings Program (that is, a new legal entity that is not identified as a re-entering ACO) that is identified as a low revenue ACO (participating in the BASIC track’s glide path and therefore inexperienced with performance-based risk Medicare ACO initiatives), allows for the following: (1) The ACO elects to enter the BASIC track’s glide path at Level A, and is automatically advanced to Level B for performance year 2 (or performance year 3 in the case of ACOs entering an agreement period beginning on July 1, 2019); (2) prior to the automatic advancement of the ACO to Level C, the ACO may elect to remain in Level B for performance year 3 (performance year 4 in the case of ACOs entering an agreement period beginning on July 1, 2019); (3) in the case of an ACO that elects to remain in Level B for an additional performance year, the ACO forgoes participation in Level C and Level D of the glide path and is automatically advanced to Level E at the start of performance year 4 (or performance year 5 in the case of ACOs entering an agreement period beginning on July 1, 2019). We are making certain modifications to § 425.600 (such as to incorporate section headers) for clarity. We are also specifying a provision related to this participation option in the regulations text at § 425.605(b)(2)(ii), on the timing of the ACO’s selection of its MSR/MLR before entering a twosided model of the BASIC track’s glide path. To determine if an ACO is eligible to make this election to remain in Level B for another performance year, we would re-evaluate the ACO to determine if it continues to meet the definition of a low revenue ACO and the definition of an ACO that is inexperienced with performance-based risk Medicare ACO initiatives. Further, we believe this policy, to allow additional flexibility for new legal entities, that are low revenue ACOs, and inexperienced with performance-based risk Medicare ACO initiatives, to participate for up to 3 performance years under a one-sided model of the BASIC track’s glide path before transitioning to Level E of the BASIC PO 00000 Frm 00089 Fmt 4701 Sfmt 4700 67903 track, in combination with other final policies within this final rule address commenters’ concerns and suggestions for a relatively gentler glide path to twosided risk for small, rural and physician-only ACOs (or generally low revenue ACOs), and support continued participation of these ACOs in the Shared Savings Program. We summarized these other factors in section II.A.5.b.(2) of this final rule, and in brief these include the following: (1) Increasing the threshold of ACO participant revenue as a percentage of benchmark used in identifying low revenue ACOs; (2) allowing for higher sharing rates in the BASIC track’s glide path; and (3) modifications to the approach for determining repayment mechanism arrangement amounts to potentially reduce the burden of these arrangements on lower-revenue ACOs participating in the ENHANCED track. Under our final policies we will determine low revenue ACOs based on a higher threshold percentage, 35 percent instead of 25 percent as proposed (see section II.A.5.b of this final rule). Therefore, a potentially greater number of ACOs may be eligible for this alternative participation option. We decline commenters’ suggestions that certain ACOs be exempt from transitioning to performance-based risk or higher levels of risk and potential reward. As we explain elsewhere in this section of this final rule, we believe the progression to performance-based risk is critical to driving the most meaningful change in providers’ and suppliers’ behavior toward achieving the program’s goals, and that participation in two-sided models, and ultimately the ENHANCED track, should be the goal for all Shared Savings Program ACOs. More generally we believe the previously described policy modifications will help ensure program entry and continued participation by relatively risk-averse ACOs. Comment: One commenter stated that the definition of deferred renewal as described in the August 2018 proposed rule is not sufficiently clear. The commenter suggested that CMS clarify the definition of a ‘‘deferred ACO’’ so that it could be easily determined by an ACO to avoid confusion. Response: As described in section II.A.2 of this final rule we are discontinuing the deferred renewal participation option, which was made available to ACOs that participated under Track 1 for a first agreement period beginning on either January 1, 2014 or January 1, 2015. Under this policy, specified in § 425.200(e), at the time of renewal for a second agreement period, the ACO elected to extended its E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67904 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations initial agreement period under Track 1 for an additional year for a total of 4 performance years, and thereby deferred entering in a second agreement period under either Track 2 or Track 3. As we previously described in section II.A.2 of this final rule, few ACO selected the deferred renewal option. Comment: Some commenters addressed generally the concern about gaming participation options. One commenter stated support for CMS to closely monitor ‘‘gaming’’ behavior and to take action when specific gaming behavior is identified. One commenter explained that shortening the time an ACO may remain in a one-sided model and extending the agreement period to five years (which affects how often benchmarks are rebased), increases the incentives to participate in ‘‘gaming’’. The commenter suggested that certain, well-defined precautionary measures may be warranted. One commenter in general encouraged CMS to explore the ways bad actors may use current or new structures to take advantage of programmatic rules or beneficiaries. Response: We appreciate commenters’ concerns about the possibility that ACOs may attempt to game program requirements to yield more favorable participation options for their organization. We continue to believe that the combination of policies we are establishing with this final rule to ensure program integrity are protective of the Trust Funds, as well as protective of beneficiaries by ensuring ACOs are held accountable for their financial and quality performance. This includes: Limiting more experienced ACOs to higher-risk participation options; more rigorously screening for good standing among ACOs seeking to renew their participation in the program or re-enter the program after termination or expiration of their previous agreement; identifying ACOs re-forming under new legal entities as re-entering ACOs if greater than 50 percent of their ACO participants have recent prior participation in the same ACO in order to hold these ACO accountable for their ACO participants’ experience with the program; and holding ACOs in twosided models accountable for partialyear losses if either the ACO or CMS terminates the agreement before the end of the performance year (discussed in section II.A.6.d.(3) of this final rule). Final Action: After consideration of public comments, we are finalizing our proposal to specify requirements for evaluating an ACO’s eligibility for specific participation options for agreement periods beginning on July 1, VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 2019, and in subsequent years, in a new provision at § 425.600(d), with the following modifications as discussed in this section of this final rule: (1) Allow the option for an ACO legal entity without prior experience in the Shared Savings Program (a new legal entity that is not identified as a re-entering ACO) that is identified as a low revenue ACO participating in the BASIC track’s glide path to elect an additional year of participation under a one-sided model in exchange for transitioning more rapidly to Level E for the remaining years of their agreement period; and (2) ensuring ACOs that entered the Track 1+ Model within their current agreement period have the opportunity to renew for a subsequent agreement period under Level E of the BASIC track. We are finalizing our proposal to add new definitions at § 425.20 for ‘‘Experienced with performance-based risk Medicare ACO initiatives’’, ‘‘Inexperienced with performance-based risk Medicare ACO initiatives’’ and ‘‘Performance-based risk Medicare ACO initiative’’ without modification. We define ‘‘performance-based risk Medicare ACO initiative’’ to mean an initiative implemented by CMS that requires an ACO to participate under a two-sided model during its agreement period. This includes Track 2, Track 3 or the ENHANCED track, and the proposed BASIC track (including Level A through Level E) of the Shared Savings Program. This also included the following Innovation Center ACO Models involving two-sided risk: The Pioneer ACO Model, Next Generation ACO Model, the performance-based risk tracks of the CEC Model (including the two-sided risk tracks for LDO ESCOs and non-LDO ESCOs), and the Track 1+ Model. This definition also includes such other Medicare ACO initiatives involving two-sided risk as may be specified by CMS. We define ‘‘experienced with performance-based risk Medicare ACO initiatives’’ to mean an ACO that CMS determines meets either of the following criteria: (1) The ACO is the same legal entity as a current or previous ACO that is participating in, or has participated in, a performance-based risk Medicare ACO initiative as defined under 425.20, or that deferred its entry into a second Shared Savings Program agreement period under Track 2 or Track 3 in accordance with § 425.200(e). (2) 40 percent or more of the ACO’s ACO participants participated in a performance-based risk Medicare ACO initiative as defined under § 425.20, or in an ACO that deferred its entry into a PO 00000 Frm 00090 Fmt 4701 Sfmt 4700 second Shared Savings Program agreement period under Track 2 or Track 3 in accordance with § 425.200(e), in any of the 5 most recent performance years prior to the agreement start date. We define ‘‘inexperienced with performance-based risk Medicare ACO initiatives’’ to mean an ACO that CMS determines meets all of the following requirements: (1) The ACO is a legal entity that has not participated in any performancebased risk Medicare ACO initiative as defined under § 425.20, and has not deferred its entry into a second Shared Savings Program agreement period under Track 2 or Track 3 in accordance with § 425.200(e); and (2) Less than 40 percent of the ACO’s ACO participants participated in a performance-based risk Medicare ACO initiative as defined under § 425.20, or in an ACO that deferred its entry into a second Shared Savings Program agreement period under Track 2 or Track 3 in accordance with § 425.200(e), in each of the 5 most recent performance years prior to the agreement start date. In summary, in combination with determining an whether ACOs are low revenue ACOs versus high revenue ACOs as described in section II.A.5.b of this final rule, we are finalizing the addition of a new paragraph (d) under § 425.600, to provide that CMS will identify ACOs as inexperienced or experienced with performance-based risk Medicare ACO initiatives for purposes of determining an ACO’s eligibility for certain participation options, as follows (with certain exceptions, as noted): • If an ACO is identified as a high revenue ACO, the following options would apply: ++ If we determine the ACO is inexperienced with performance-based risk Medicare ACO initiatives, the ACO may enter the BASIC track’s glide path, or the ENHANCED track. With the exception of ACOs that previously participated in Track 1 and new ACOs identified as re-entering ACOs because of their ACO participants’ prior participation in a Track 1 ACO, an ACO may enter the BASIC track’s glide path at any level (Level A through Level E). Therefore, eligible ACOs that are new to the program, identified as initial applicants and not as reentering ACOs, would have the flexibility to enter the glide path at any one of the five levels. An ACO that previously participated in Track 1 or a new ACO identified as a reentering ACO because more than 50 percent of its ACO participants have recent prior experience in the same Track 1 ACO may enter the glide path under either Level B, C, D or E. ++ If we determine the ACO is experienced with performance-based risk Medicare ACO initiatives, the ACO may only enter the ENHANCED track. However, an E:\FR\FM\31DER2.SGM 31DER2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations khammond on DSK30JT082PROD with RULES2 ACO in a first or second agreement period beginning in 2016 or 2017 identified as experienced with performance-based risk Medicare ACO initiatives based on participation in the Track 1+ Model may renew for a consecutive agreement period beginning on July 1, 2019, or January 1, 2020 (respectively), either under Level E of the BASIC track, or the ENHANCED track. • If an ACO is identified as a low revenue ACO, the following options would apply: ++ If we determine the ACO is inexperienced with performance-based risk Medicare ACO initiatives, the ACO may enter the BASIC track’s glide path, or the ENHANCED track. An ACO may enter the BASIC track’s glide path at any level (Level A through Level E). The following exceptions apply: —An ACO that previously participated in Track 1 or a new ACO identified as a reentering ACO because more than 50 percent of its ACO participants have recent prior experience in the same Track 1 ACO may enter the glide path under either Level B, C, D or E. —An eligible new legal entity (not identified as a re-entering ACO), identified as a low revenue ACO and inexperienced with performance-based risk Medicare ACO initiatives elects to enter the BASIC track’s glide path at Level A, and is automatically advanced to Level B for performance year 2 (or performance year 3 in the case of ACOs entering an agreement period beginning on July 1, 2019). Prior to the automatic advancement of the ACO to Level C, the ACO may elect to remain in Level B for performance year 3 (performance year 4 in the case of ACOs entering an agreement period beginning on July 1, 2019). In the case of an ACO that elects to remain in Level B for an additional performance year, the ACO is automatically advanced to Level E at the start of performance year 4 (or performance year 5 in the case of ACOs entering an agreement period beginning on July 1, 2019). ++ If we determine the ACO is experienced with performance-based risk Medicare ACO initiatives, the ACO may enter Level E of the BASIC track (highest level of risk and potential reward) or the ENHANCED track. As discussed in section II.A.5.b. of this final rule, low revenue ACOs are limited to two agreement periods of participation under the BASIC track. (c) Applicability of Policies That PhaseIn In the August 2018 proposed rule (83 FR 41829 through 41832), we explained that we would consider an ACO’s experience with the program or other performance-based risk Medicare ACO initiatives in determining which agreement period an ACO should be considered to be entering for purposes of applying policies that phase-in over the course of the ACO’s first agreement period and subsequent agreement periods: (1) The weights applied to benchmark year expenditures (equal weighting in second or subsequent agreement periods instead of weighting VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 the 3 benchmark years (BYs) at 10 percent (BY1), 30 percent (BY2), and 60 percent (BY3)); (2) the weights used in calculating the regional adjustment to an ACO’s historical benchmark, which phase in over multiple agreement periods; and (3) the quality performance standard, which phases in from complete and accurate reporting of all quality measures in the first performance year of an ACO’s first agreement period to pay-forperformance over the remaining years of the ACO’s first agreement period, and ACOs continue to be assessed on performance in all subsequent performance years under the program (including subsequent agreement periods). We noted that for purposes of this discussion, we considered agreement periods to be sequential and consecutive. For instance, after an ACO participates in its first agreement period, the ACO would enter a second agreement period, followed by a third agreement period, and so on. We proposed to specify under § 425.600(f)(1) that an ACO entering the program for the first time (an initial entrant) would be considered to be entering a first agreement period in the Shared Savings Program for purposes of applying program requirements that phase-in over time, regardless of its experience with performance-based risk Medicare ACO initiatives. Under this approach, in determining the ACO’s historical benchmark, we would weight the benchmark year expenditures as follows: 10 Percent (BY1), 30 percent (BY2), and 60 percent (BY3). We explained that under the proposed approach to applying factors based on regional FFS expenditures beginning with an ACO’s first agreement period, we would apply a weight of either 25 percent or 35 percent in determining the regional adjustment amount depending on whether the ACO is higher or lower spending compared to its regional service area. (As described in section II.D. of this final rule, we are modifying our proposed phase-in of the weights used in calculating the regional adjustment. Under the policies we are adopting in this final rule, we would apply a weight of either 15 percent or 35 percent in determining the regional adjustment amount for an ACO in its first agreement period.) Further, under § 425.502, an initial entrant would be required to completely and accurately report all quality measures to meet the quality performance standard (referred to as pay-for-reporting) in the first performance year of its first agreement period, and for subsequent years of the ACO’s first agreement period the pay- PO 00000 Frm 00091 Fmt 4701 Sfmt 4700 67905 for-performance quality performance standard would phase-in. We proposed to divide re-entering ACOs into three categories in order to determine which agreement period an ACO will be considered to be entering for purposes of applying program requirements that phase-in over time, and to specify this policy at § 425.600(f)(2). For an ACO whose participation agreement expired without having been renewed, we proposed the ACO would re-enter the program under the next consecutive agreement period. For example, if an ACO completed its first agreement period and did not renew, upon re-entering the program, the ACO would participate in its second agreement period. For an ACO whose participation agreement was terminated under § 425.218 or § 425.220, we proposed the ACO re-entering the program would be treated as if it is starting over in the same agreement period in which it was participating at the time of termination, beginning with the first performance year of the new agreement period. For instance, if an ACO terminated at any time during its second agreement period, the ACO would be considered participating in a second agreement period upon re-entering the program, beginning with the first performance year of their new agreement period. Alternatively, we considered determining which performance year a terminated ACO should re-enter within the new agreement period, in relation to the amount of time the ACO participated during its most recent prior agreement period. For example, under this approach, an ACO that terminated its participation in the program in the third performance year of an agreement period would be treated as re-entering the program in performance year three of the new agreement period. However, we noted that this alternative approach could be complicated given the proposed transition from 3-year agreements to agreement periods of at least 5 years. For a new ACO identified as a reentering ACO because greater than 50 percent of its ACO participants have recent prior participation in the same ACO, we would consider the prior participation of the ACO in which the majority of the ACO participants in the new ACO were participating in order to determine the agreement period in which the new ACO would be considered to be entering the program. That is, we would determine the applicability of program policies to the new ACO based on the number of agreement periods the other entity participated in the program. If the E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67906 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations participation agreement of the other ACO was terminated or expired, the previously described rules for reentering ACOs would also apply. For example, if ACO A is identified as a reentering ACO because more than 50 percent of its ACO participants previously participated in ACO B during the relevant look back period, we would consider ACO B’s prior participation in the program. For instance, if ACO B terminated during its second agreement period in the program, we would consider ACO A to be entering a second agreement period in the program, beginning with the first performance year of that agreement period. However, if the other ACO is currently participating in the program, the new ACO would be considered to be entering into the same agreement period in which this other ACO is currently participating, beginning with the first performance year of that agreement period. For example, if ACO A is identified as a re-entering ACO because more than 50 percent of its ACO participants previously participated in ACO C during the relevant look back period, and ACO C is actively participating in its third agreement period in the program, ACO A would be considered to be participating in a third agreement period, beginning with the first performance year of that agreement period. We proposed to specify at § 425.600(f)(3) that renewing ACOs would be considered to be entering the next consecutive agreement period for purposes of applying program requirements that phase-in over time. This proposed approach would be consistent with current program policies for ACOs whose participation agreements expire and that immediately enter a new agreement period to continue their participation in the program. For example, an ACO that entered its first participation agreement on January 1, 2017, and concludes this participation agreement on December 31, 2019, would renew to enter its second agreement period beginning on January 1, 2020. Further, under the proposed definition of ‘‘Renewing ACO’’, an ACO that terminates its current participation agreement under § 425.220 and immediately enters a new agreement period to continue its participation in the program would also be considered to be entering the next consecutive agreement period. For example, an ACO that entered its first participation agreement on January 1, 2018, and terminates its agreement effective June 30, 2019, to enter a new participation agreement beginning on VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 July 1, 2019, would be considered to be a renewing ACO that is renewing early to enter its second agreement period beginning on July 1, 2019. This approach would ensure that an ACO that terminates from a first agreement period and immediately enters a new agreement period in the program could not take advantage of program flexibilities aimed at ACOs that are completely new to the Shared Savings Program, such as the pay-for-reporting quality performance standard available to ACOs in their first performance year of their first agreement period under the program. We would therefore apply a consistent approach among renewing ACOs by placing these ACOs in the next agreement period in sequential order. This proposed approach would replace the current approach to determining which agreement period an ACO would be considered to be entering into, for a subset of ACOs, as specified in the provision at § 425.222(c), which we proposed to discontinue using. This proposed approach would ensure that ACOs that are experienced with the program or with performance-based risk Medicare ACO initiatives are not participating under policies designed for ACOs inexperienced with the program’s requirements or similar requirements under other Medicare ACO initiatives, and also would help to preserve the intended phase-in of requirements over time by taking into account ACOs’ prior participation in the program. The proposed approach would help to ensure that ACOs that are new to the program are distinguished from renewing ACOs and ACOs that are reentering the program, and would also ensure that program requirements are applied in a manner that reflects ACOs’ prior participation in the program, which would limit the opportunity for more experienced ACOs to seek to take advantage of program policies. These policies protect against ACOs terminating or discontinuing their participation, and potentially re-forming as a new legal entity, simply to be able to apply to re-enter the program in a way that could allow for the applicability of lower weights used in calculating the regional adjustment to the benchmark or to avoid moving to performance-based risk more quickly on the BASIC track’s glide path or under the ENHANCED track. The proposed approach to determining ACO participation options and the proposal to limit access the BASIC track’s glide path to ACOs that are inexperienced with performancebased risk, in combination with the rebasing of ACO benchmarks at the start PO 00000 Frm 00092 Fmt 4701 Sfmt 4700 of each new agreement period, mitigated our concerns regarding ACO gaming. We explained our belief that the requirement that ACOs’ benchmarks are rebased at the start of each new agreement period, in combination with the proposed new requirements governing ACO participation options, would be sufficiently protective of the Trust Funds to guard against undesirable ACO gaming behavior. Under our proposed policies for identifying ACOs that are experienced with performance-based risk Medicare ACO initiatives, ACOs that terminate from the BASIC track’s glide path (for example) and seek to re-enter the program, and renewing ACOs (including ACOs renewing early for a new agreement period beginning July 1, 2019) that are identified as experienced with performance-based risk Medicare ACO initiatives could only renew under Level E of the BASIC track (if an otherwise eligible low revenue ACO) or the ENHANCED track. This mitigated our concerns about ACOs re-forming and re-entering the program, or serially terminating and immediately participating again as a renewing ACO, since there would be consequences for the ACO’s ability to continue participation under lower-risk options that may help to deter these practices. We acknowledge that under our proposals regarding early renewals (that is, our proposal that ACOs that terminate their current agreement period and immediately enter a new agreement period without interruption qualify as renewing ACOs), it would be possible for ACOs to serially enter a participation agreement, terminate from it and enter a new agreement period, to be considered entering the next consecutive agreement period in order to more quickly take advantage of the higher weights used in calculating the regional adjustment to the benchmark. However, we noted that these ACOs’ benchmarks would be rebased, which would help to mitigate this concern. We sought comment on possible approaches that would prevent ACOs from taking advantage of participation options to delay or hasten the phase-in of higher weights used in calculating the regional adjustment to the historical benchmark, while still maintaining the flexibility for existing ACOs to quickly move from a current 3-year agreement period to a new agreement period under either the BASIC track or ENHANCED track. Final Action: We received no comments on this proposal and therefore are finalizing as proposed to specify the following policies in § 425.600(f). For agreement periods beginning on July 1, 2019, and in E:\FR\FM\31DER2.SGM 31DER2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations khammond on DSK30JT082PROD with RULES2 subsequent years, CMS determines the agreement period an ACO is entering for purposes of applying the following program requirements that phase-in over multiple agreement periods: (i) The quality performance standard as described in § 425.502(a); (ii) the weight used in calculating the regional adjustment to the ACO’s historical benchmark as described in § 425.601(f); and (iii) the use of equal weights to weight each benchmark year as specified in § 425.601(e). An ACO entering an initial agreement period is considered to be entering a first agreement period in the Shared Savings Program. A renewing ACO is considered to be entering the next consecutive agreement period in the Shared Savings Program. A re-entering ACO is considered to be entering a new agreement period in the Shared Savings Program as follows: (i) An ACO whose participation agreement expired without having been renewed re-enters the program under the next consecutive agreement period in the Shared Savings Program; (ii) an ACO whose participation agreement was VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 terminated under § 425.218 or § 425.220 re-enters the program at the start of the same agreement period in which it was participating at the time of termination from the Shared Savings Program, beginning with the first performance year of that agreement period; or (iii) a new ACO identified as a re-entering ACO enters the program in an agreement period that is determined based on the prior participation of the ACO in which the majority of the new ACO’s participants were participating. Regarding this third category of ACOs, if the participation agreement of the other ACO was terminated or expired, the previously described rules for reentering ACOs would also apply. However, if the other ACO is currently participating in the program, the new ACO would be considered to be entering into the same agreement period in which this other ACO is currently participating, beginning with the first performance year of that agreement period. As discussed in section II.D. of this final rule, we are maintaining a phasein for the regional adjustment weights PO 00000 Frm 00093 Fmt 4701 Sfmt 4700 67907 for ACOs with start dates in the program before July 1, 2019, according to the structure similar to that established in the June 2016 final rule (for example, we will continue to use regional factors for the first time in resetting benchmarks for the third agreement period for 2012 and 2013 starters); however, we are making modifications to the weights used in these calculations and the length of time over which the maximum weight is phased in. Table 6 includes examples of the phase-in of the modified regional adjustment weights based on agreement start date and applicant type (initial entrant, renewing ACO, or re-entering ACO). This table illustrates the weights that would be used in determining the regional adjustment to the ACO’s historical benchmark under this final rule to differentiate initial entrants, renewing ACOs (including ACOs that renew early), and re-entering ACOs for purposes of policies that phase-in over time. BILLING CODE 4120–01–P E:\FR\FM\31DER2.SGM 31DER2 67908 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations TABLE 6-EXAMPLES OF PHASE-IN OF MODIFIED REGIONAL ADJUSTMENT WEIGHTS BASED ON AGREEMENT START DATE AND APPLICANT TYPE First time regional adjustment used: 35 percent or 15 percent (if spending above region) Applicable to first agreement period starting on July 1, 2019 Second time regional adjustment used: 50 percent or 25 percent (if spending above region) Applicable to second agreement period starting in 2025 Renewing ACO for agreement period starting on July 1, 2019, with initial start date in 2012, 2013, or 2016 Applicable to third (2012/2013) or second (20 16) agreement period starting on July 1, 2019 Applicable to fourth (2012/2013) or third (2016) agreement period starting in 2025 Early renewal for agreement period starting on July 1, 2019, ACO with initial start date in 2014 that terminates effective June 30, 2019 Currently applies to second agreement period starting in 201 7 as follows: 35 percent or 25 percent (if spending above region) Applicable to third agreement period starting on July 1, 2019 khammond on DSK30JT082PROD with RULES2 New entrant with start date on July 1,2019 VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 PO 00000 Frm 00094 Fmt 4701 Sfmt 4725 Third time regional adjustment used: 50 percent or 35 percent (if spending above region) Applicable to third agreement period starting in 2030 Fourth and subsequent ~ime regional adjustment used: 50 percent weight Applicable to -fourth agreement period starting n 2035 and all subsequent agreement periods Applicable to Applicable to fifth (2012/2013) sixth or fourth (20 16) (2012/2013) or agreement period fifth (20 16) starting in 2030 agreement period starting n 2035 and all subsequent agreement periods Applicable to Applicable to fourth agreement -'ifth agreement period starting in period starting 2025 n 2030 and all subsequent agreement periods E:\FR\FM\31DER2.SGM 31DER2 ER31DE18.007</GPH> Applicant Type BILLING CODE 4120–01–C khammond on DSK30JT082PROD with RULES2 (d) Condensed Shared Savings Program Application In developing the proposals to redesign the Shared Savings Program’s participation options, we also revisited our current policy that allows certain organizations with experience in Medicare ACO initiatives to use a condensed application form to apply to the Shared Savings Program (83 FR 41832 through 41833). Under § 425.202(b), we allow for use of a condensed Shared Savings Program application form by organizations that participated in the PGP demonstration. Former Pioneer Model ACOs may also use a condensed application form if specified criteria are met (including that the applicant is the same legal entity as the Pioneer ACO and the ACO is not applying to participate in the one-sided model). For the background on this policy, we refer readers to discussions in earlier rulemaking. (See 76 FR 67833 VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 through 67834, and 80 FR 32725 through 32728.) The PGP demonstration ran for 5 years from April 2005 through March 2010, and the PGP transition demonstration began in January 2011 and concluded in December 2012.15 The Pioneer ACO Model began in 2012 and concluded in December 2016.16 Many former PGP demonstration sites and Pioneer ACOs have already transitioned to other Medicare ACO initiatives including the Shared Savings Program and the Next Generation ACO Model. Accordingly, we believed would no longer be necessary to maintain the provision permitting these entities to use condensed application forms. First, since establishing this policy, we have 15 See Fact Sheet on Physician Group Practice Transition Demonstration (August 2012), available at https://innovation.cms.gov/Files/MigratedMedicare-Demonstration-x/PGP_TD_Fact_ Sheet.pdf. 16 See Pioneer ACO Model web page, available at https://innovation.cms.gov/initiatives/Pioneer-acomodel/. PO 00000 Frm 00095 Fmt 4701 Sfmt 4700 67909 modified the program’s application to reduce burden on all applicants. See 82 FR 53217 through 53222. Second, our proposed approach for identifying ACOs experienced with performance-based risk Medicare ACO initiatives for purposes of determining an ACO’s participation options would require former Pioneer Model ACOs to participate under the higher levels of risk: Either the highest level of risk and potential reward in the BASIC track (Level E), or the ENHANCED track. This includes, for example, a former Pioneer ACO that applies to the Shared Savings Program using the same legal entity, or if 40 percent or more of the ACO participants in the ACO are determined to be experienced with the Pioneer ACO Model or other two-sided model Medicare ACO initiatives within the 5 performance year look back period prior to the start date of the ACO’s agreement period in the Shared Savings Program. Under the proposed approach to determining participation options, we E:\FR\FM\31DER2.SGM 31DER2 ER31DE18.008</GPH> Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations 67910 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations khammond on DSK30JT082PROD with RULES2 would identify these experienced, former Pioneer Model ACOs entering the program for the first time as participating in a first agreement period for purposes of the applicability of the program policies that phase-in over time. On the other hand, if an ACO terminated its participation in the Shared Savings Program, entered the Next Generation ACO Model, and then re-enters the Shared Savings Program, under the proposed approach we would consider the ACO to be entering either: (1) Its next consecutive agreement period in the Shared Savings Program, if the ACO had completed an agreement period in the program before terminating its prior participation; or (2) the same agreement period in which it was participating at the time of program termination. We noted that commenters in earlier rulemaking suggested we apply the benchmark rebasing methodology that incorporates factors based on regional FFS expenditures to former Pioneer ACOs and Next Generation ACOs entering their first agreement period under the Shared VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 Savings Program (see 81 FR 37990). We believed that our proposal to apply factors based on regional FFS expenditures to ACOs’ benchmarks in their first agreement periods (see discussion in section II.D. of this final rule) would address these stakeholder concerns. However, we also considered an alternative approach that would allow ACOs formerly participating in these Medicare ACO models to be considered to be entering a second agreement period for the purpose of applying policies that phase-in over time. We declined to propose this approach at this time, because ACOs entering the Shared Savings Program after participation in another Medicare ACO initiative may need time to gain experience with program’s policies. Therefore, we preferred the proposed approach that would allow ACOs new to the Shared Savings Program to gain experience with the program’s requirements, by entering the program in a first agreement period. PO 00000 Frm 00096 Fmt 4701 Sfmt 4700 Therefore, we proposed to amend § 425.202(b) to discontinue the option for certain applicants to use a condensed application when applying to participate in the Shared Savings Program for agreement periods beginning on July 1, 2019 and in subsequent years. We sought comment on the proposals described in this section and the alternatives considered. Final Action: We received no comments on this proposal and therefore are finalizing as proposed to amend § 425.202(b) to discontinue the option for certain applicants to use a condensed application when applying to participate in the Shared Savings Program for agreement periods beginning on July 1, 2019 and in subsequent years. More generally, the participation options available to ACOs based on the policies finalized in this section are summarized in Table 7 (low revenue ACOs) and Table 8 (high revenue ACOs). BILLING CODE 4120–01–P E:\FR\FM\31DER2.SGM 31DER2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations 67911 TABLE 7-PARTICIPATION OPTIONS FOR LOW REVENUE ACOs BASED ON APPLICANT TYPE AND EXPERIENCE WITH RISK ACO experienced or inexperienced with performancebased risk Medicare ACO initiatives Participation Options BASIC track's BASIC track's Level E (track's glide path (option for incremental highest level of transition from one- risk I reward sided to two-sided applies to all models during performance agreement period) years during agreement period) New legal entity Inexperienced Yes - glide path Levels A through E; new legal entities (not re-entering ACOs) that are low revenue A COs may elect to enter in Level A, transition to Level B, and remain in Level B for an additional performance year prior to being automatically advanced to Level E for the remaining performance years of their agreement period. Yes ENHANCED track (program's highest level of risk I reward applies to all performance years during agreement period) Yes New legal entity Re-entering ACO Experienced Inexperienced former Track 1 ACOsornew A COs identified as re-entering ACOs because more than 50 percent of their ACO participants have recent prior experience in a Track 1 ACO No Yes - glide path Levels B through E Yes Yes Yes Yes VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 PO 00000 Frm 00097 Fmt 4701 Sfmt 4725 1 E:\FR\FM\31DER2.SGM Agreement period for policies that phase-in over time (benchmarking methodology and quality performance) First agreement period First agreement period Either: ( 1) the next consecutive agreement period if the ACO's prior agreement expired; (2) the same agreement period in which the ACO was participating at the time of termination; or (3) applicable agreement period2 for new ACO identified as reentering because of ACO participants' experience in the same ACO 31DER2 ER31DE18.009</GPH> khammond on DSK30JT082PROD with RULES2 Applicant type 67912 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations Applicant type Re-entering ACO ACO experienced or inexperienced with performancebased risk Medicare ACO initiatives Participation Options BASIC track's BASIC track's glide path (option Level E (track's for incremental highest level of transition from one- risk I reward sided to two-sided applies to all models during performance agreement period) years during agreement period) Experienced including former Track 1 ACOs that deferred renewal under a two-sided model No Yes 1 ENHANCED track (program's highest level of risk I reward applies to all performance years during agreement period) Yes Either: (1) the next consecutive agreement period if the ACO's prior agreement expired; (2) the same agreement period in which the ACO was participating at the time of termination; or (3) applicable agreement period2 for new ACO identified as reentering because of ACO participants' experience in the same ACO Subsequent consecutive agreement period Subsequent consecutive agreement period VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 PO 00000 Frm 00098 Fmt 4701 Sfmt 4725 E:\FR\FM\31DER2.SGM 31DER2 ER31DE18.010</GPH> InexperiencedYes - glide path Yes Yes former Track 1 Levels B through E A COs Experienced Renewing ACO No Yes Yes including former Track 1 ACOs that deferred renewal under a two-sided model Notes: I Low revenue ACOs may operate under the BASIC track for a maximum of two agreement penods. 2 We consider the participation of the ACOin which a majority of the new ACO's participants were participating: (1) If the participation agreement of the other ACO was terminated, then the new ACO re-enters the program at the start of the same agreement period in which the other ACO was participating at the time of termination from the Shared Savings Program, beginning with the first performance year of that agreement period. (2) If the participation agreement of the other ACO expired without having been renewed, then the new ACO re-enters the program under the other ACO's next consecutive agreement period in the Shared Savings Program. (3) If the other ACO is currently participating in the program, the new ACO would be considered to be entering into the same agreement period in which this other ACO is currently participating, beginning with the first performance year of that agreement period. khammond on DSK30JT082PROD with RULES2 Renewing ACO Agreement period for policies that phase-in over time (benchmarking methodology and quality performance) Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations 67913 TABLE 8-PARTICIPATION OPTIONS FOR HIGH REVENUE ACOs BASED ON APPLICANT TYPE AND EXPERIENCE WITH RISK Participation Options 1 BASIC track's BASIC track's glide path (option Level E (track's for incremental highest level of transition from one- risk I reward sided to two-sided applies to all models during performance agreement period) years during agreement period) New legal entity Inexperienced New legal entity Re-entering ACO Experienced Inexperienced former Track 1 ACOs or new A COs identified as re-entering A COs because more than 50 percent of their ACO participants have recent prior experience in a Track 1 ACO Yes - glide path Levels A through E No Yes - glide path Levels B through E Re-entering ACO Experienced including former Track 1 A COs that deferred renewal under a two-sided model Renewing ACO Inexperienced former Track 1 A COs khammond on DSK30JT082PROD with RULES2 VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 Yes ENHANCED track (program's highest level of risk I reward applies to all performance years during agreement period) Yes No Yes Yes Yes No No Yes Yes - glide path Levels B through E Yes Yes PO 00000 Frm 00099 Fmt 4701 Sfmt 4725 E:\FR\FM\31DER2.SGM Agreement period for policies that phase-in over time (benchmarking methodology and quality performance) First agreement period First agreement period Either: (1) the next consecutive agreement period if the ACO's prior agreement expired; (2) the same agreement period in which the ACO was participating at the time of termination; or (3) applicable agreement period2 for new ACO identified as re-entering because of ACO participants' experience in the same ACO Either: (1) the next consecutive agreement period if the ACO's prior agreement expired; (2) the same agreement period in which the ACO was participating at the time of termination; or (3) applicable agreement period2 for new ACO identified as re-entering because of ACO participants' experience in the same ACO Subsequent consecutive agreement period 31DER2 ER31DE18.011</GPH> ACO experienced or inexperienced with performancebased risk Medicare ACO initiatives Applicant type Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations BILLING CODE 4120–01–C d. Monitoring for Financial Performance khammond on DSK30JT082PROD with RULES2 (1) Background We provided background on our proposals for monitoring financial performance in section II.A.5.d.(1) of the August 2018 proposed rule (83 FR 41834 through 41835). We explained that the program regulations at § 425.316 enable us to monitor the performance of ACOs. In particular, § 425.316 authorizes monitoring for performance related to two statutory provisions regarding ACO performance: Avoidance of at-risk beneficiaries (section 1899(d)(3) of the Act) and failure to meet the quality performance standard (section 1899(d)(4) of the Act). If we discover that an ACO has engaged in the avoidance of at-risk beneficiaries or has failed to meet the quality performance standard, we can impose remedial action or terminate the ACO (see § 425.316(b) and (c)). In monitoring the performance of ACOs, we can analyze certain financial data (see § 425.316(a)(2)(i)), but the regulations do not specifically authorize VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 termination or remedial action for poor financial performance. Similarly, there are no provisions that specifically authorize non-renewal of a participation agreement for poor financial performance, although we had proposed issuing such provisions in prior rules. In the December 2014 proposed rule (79 FR 72802 through 72806), we proposed to allow Track 1 ACOs to renew their participation in the program for a second agreement period in Track 1 if in at least one of the first 2 performance years of the previous agreement period they did not generate losses in excess of their negative MSR, among other criteria. We refer readers to the June 2015 final rule for a detailed discussion of the proposal and related comments (80 FR 32764 through 32767). Ultimately, we did not adopt a financial performance criterion to determine the eligibility of ACOs to continue in Track 1 in the June 2015 final rule. Although some commenters supported an approach for evaluating an ACO’s financial performance for determining its eligibility to remain in a one-sided model, many commenters expressed PO 00000 Frm 00100 Fmt 4701 Sfmt 4700 opposition, citing concerns that this approach could be premature and could disadvantage ACOs that need more time to implement their care management strategies, and could discourage participation. At the time of the June 2015 final rule, we were persuaded by commenters’ concerns that application of the additional proposed financial performance criterion for continued participation in Track 1 was premature for ACOs that initially struggled to demonstrate cost savings in their first years in the program. Instead, we explained our belief that our authority to monitor ACOs (§ 425.316) allows us to take action to address ACOs that are outliers on financial performance by placing poorly performing ACOs on a special monitoring plan. Furthermore, if our monitoring reveals that an ACO is out of compliance with any of the requirements of the Shared Savings Program, we may request a corrective action plan and, if the required corrective action plan is not submitted or is not satisfactorily implemented, we may terminate the ACO’s participation in the program (80 FR 32765). E:\FR\FM\31DER2.SGM 31DER2 ER31DE18.012</GPH> 67914 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations In the August 2018 proposed rule, we explained that based on our additional experience with monitoring ACO financial performance, the current regulations are insufficient to address recurrent poor financial performance, particularly for ACOs that may be otherwise in compliance with program requirements. Consequently, some ACOs may not have sufficient incentive to remain accountable for the expenditures of their assigned beneficiaries. This may leave the program, the Trust Funds, and Medicare FFS beneficiaries vulnerable to organizations that may be participating in the program for reasons other than meeting the program’s goals. As we stated in the August 2018 proposed rule, we believe that a financial performance requirement is necessary to ensure that the program promotes accountability for the cost of the care furnished to an ACO’s assigned patient population, as contemplated by section 1899(b)(2)(A) of the Act. We explained that there is an inherent financial performance requirement that is embedded within the third component of the program’s three-part aim: (1) Better care for individuals; (2) better health for populations; and (3) lower growth in Medicare Parts A and B expenditures. Therefore, just as poor quality performance can subject an ACO to remedial action or termination, an ACO’s failure to lower growth in Medicare FFS expenditures should be the basis for CMS to take pretermination actions under § 425.216, including a request for corrective action by the ACO, or termination of the ACO’s participation agreement under § 425.218. khammond on DSK30JT082PROD with RULES2 (2) Proposed Revisions We proposed to modify § 425.316 to add a provision for monitoring ACO financial performance. Specifically, we proposed to monitor for whether the expenditures for the ACO’s assigned beneficiary population are ‘‘negative outside corridor,’’ meaning that the expenditures for assigned beneficiaries exceed the ACO’s updated benchmark by an amount equal to or exceeding either the ACO’s negative MSR under a one-sided model, or the ACO’s MLR under a two-sided model.17 If the ACO 17 For purposes of the August 2018 proposed rule and this final rule, an ACO is considered to have generated shared savings when its benchmark minus performance year expenditures are greater than or equal to the MSR. An ACO is ‘‘positive within corridor’’ when its benchmark minus performance year expenditures are greater than zero, but less than the MSR. An ACO is ‘‘negative within corridor’’ when its benchmark minus performance year expenditures are less than zero, but greater than the negative MSR for ACOs in a VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 is negative outside corridor for a performance year, we proposed that we may take any of the pre-termination actions set forth in § 425.216. If the ACO is negative outside corridor for another performance year of the ACO’s agreement period, we proposed that we may immediately or with advance notice terminate the ACO’s participation agreement under § 425.218. We proposed that financial performance monitoring would be applicable for performance years beginning in 2019 and subsequent years. Specifically, we would apply this proposed approach for monitoring financial performance results for performance years beginning on January 1, 2019, and July 1, 2019, and for subsequent performance years. We explained that financial and quality performance results are typically made available to ACOs in the summer following the conclusion of the calendar year performance year. For example, we stated that the financial performance results for performance years beginning on January 1, 2019 and July 1, 2019, would likely be available for CMS review in the summer of 2020 and would be made available to ACOs when that review is complete. The one-sided model monitoring (relative to the ACO’s negative MSR) would apply to ACOs in Track 1 or the first 2 years of the BASIC track’s glide path, and the two-sided model monitoring (relative to the ACO’s MLR) would apply to ACOs under performance-based risk in the BASIC track (including the glide path) and the ENHANCED track, as well as Track 2. Generally, based on our experience, ACOs in two-sided models tend to terminate their participation after sharing in losses for a single year in Track 2 or Track 3. We have observed that a small, but not insignificant, number of Track 1 ACOs are negative outside corridor in their first 2 performance years in the program. Among 194 Track 1 ACOs that renewed for a second agreement period under Track 1, 19 were negative outside corridor in their first 2 performance years in their first agreement period. This includes 14 of 127 Track 1 ACOs that started their first agreement period in either 2012 or 2013 and renewed for a second agreement period in Track 1 beginning January 1, 2016, as well as 5 of 67 Track 1 ACOs that started their first agreement period in 2014 and renewed for a second agreement period one-sided model or the MLR for ACOs in a twosided model. An ACO is ‘‘negative outside corridor’’ when its benchmark minus performance year expenditures are less than or equal to the negative MSR for ACOs in a one-sided model or the MLR for ACOs in a two-sided model. PO 00000 Frm 00101 Fmt 4701 Sfmt 4700 67915 in Track 1 beginning January 1, 2017. Moreover, the majority of these organizations have thus far failed to achieve shared savings in subsequent performance years. For example, of the 14 2012/2013 starters in Track 1 that were negative outside corridor for the first 2 consecutive performance years in their first agreement period, only 2 ACOs achieved shared savings in their third performance year, while 10 were still negative outside corridor and 2 were negative within corridor. All 14 ACOs entered a second agreement period in Track 1 starting on January 1, 2016: In performance year 2016, 5 generated shared savings, 4 were positive within corridor, 4 were negative within corridor, and 1 was negative outside corridor. While some of these ACOs appeared to show improvement, this could be due to the rebasing of the ACOs’ historical benchmarks that occurred in 2016. Because the benchmark years for the second agreement period correspond to the performance years of the first agreement period, ACOs that had losses in their initial years are likely to receive a higher rebased benchmark than those that shared savings. We observed similar trends following the first 2 performance years for ACOs that started their first agreement period in 2014 and 2015. Therefore, we explained that our experience does not suggest that a large share of ACOs would be affected. Alternatively, we considered an approach under which we would monitor ACOs for generating any losses, beginning with first dollar losses, including monitoring for ACOs that are negative inside corridor and negative outside corridor. However, we preferred the proposed approach because the corridor (MLR threshold above the benchmark) protects ACOs against sharing losses that result from random variation. In the August 2018 proposed rule, and as reiterated in this final rule, we explained that ACOs that continue in the program despite poor financial performance may provide little benefit to the Medicare program while taking advantage of the potential benefits of program participation, such as receipt of program data and the opportunity to enter into certain contracting arrangements with ACO participants and ACO providers/suppliers. The redesign of the program includes a number of features that may encourage continued participation by poor performing ACOs under performancebased risk: The relatively lower levels of risk under the BASIC track, the additional features available to eligible ACOs under performance-based risk E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67916 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations (the opportunity for physicians and other practitioners participating in eligible two-sided model ACOs to furnish telehealth services under section 1899(l) of the Act, availability of a SNF 3-day rule waiver, and the ability to offer incentive payments to beneficiaries under a CMS-approved beneficiary incentive program), and the opportunity to participate in an Advanced APM for purposes of the Quality Payment Program. Further we explained our concern that ACOs may seek to obtain reinsurance to help offset their liability for shared losses as a way of enabling their continued program participation while undermining the program’s goals. Although we considered prohibiting ACOs from obtaining reinsurance to mitigate their performance-based risk, we believed that such a requirement could be overly restrictive and that the proposed financial monitoring approach would be effective in removing from the program ACOs with a history of poor financial performance. We sought comment on this issue, and on ACOs’ use of reinsurance, including their ability to obtain viable reinsurance products covering a Medicare FFS population. We sought comment on these proposals and related considerations. Comment: Generally, a few commenters supported the concept of removing from the program ACOs with poor performance results. Many commenters expressed concerns about and opposed the proposal to monitor ACOs for poor financial performance and potentially terminate ACOs with 2 performance years of significant losses (negative outside corridor). Response: We appreciate commenters’ support for the need to monitor ACOs for patterns of poor financial performance and to permit CMS to impose remedial action and possibly terminate an ACO for poor financial performance. We summarize and address below the specific concerns of commenters who opposed our proposal. Comment: Some commenters explained that these provisions, if implemented, would provide CMS with too much discretion to terminate ACO participation in the program, and could further discourage ACOs participating in the Shared Savings Program as this would create additional uncertainty for participants and would also make it difficult to establish agreements with other organizations. Several commenters stated that the resulting loss of participation by ACOs could be disruptive to beneficiaries and providers. One commenter suggested that these disruptions would be harmful because termination of ACOs from the VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 Shared Savings Program would limit the reach of ACO improvements in savings and quality and potentially slow progress in transitioning to value-based care. Response: In response to commenters’ concerns about our potential use of this new policy in an overly broad way, we note that we would carefully consider the need to terminate an ACO for poor financial performance given the potential consequences of this action for the Shared Savings Program, the ACO, its ACO participants, ACO providers/ suppliers and beneficiaries, among others. Elsewhere in this section we describe additional factors we may take into consideration in making this determination, which we believe is responsive to the specific concerns that commenters raised, which we describe elsewhere in this section. Nonetheless, we believe the approach we proposed, and are finalizing, offers CMS a means to address ACOs that may continue in the program despite poor financial performance and as a result may provide little or no benefit to the Medicare program while taking advantage of the potential benefits of program participation, such as the ability to benefit from waivers of certain federal rules and requirements, receipt of program data and the opportunity to enter into certain contracting arrangements with ACO participants and ACO providers/suppliers, as well as the opportunity for eligible clinicians in the ACO to qualify for incentive payments under the Quality Payment Program as QPs. This behavior is not protective of the Trust Funds and also suggests that an ACO’s approach may be ineffective at meeting the program’s goals. We agree that termination of an ACO’s participation from the Shared Savings Program can be potentially disruptive to ACO participants and ACO providers/ suppliers, and Medicare FFS beneficiaries. Under the program’s regulations, we require terminated ACOs to complete certain close-out procedures, as specified in § 425.221(a), which include requirements that may mitigate the effects of termination on ACO participants, ACO providers/ suppliers, and Medicare beneficiaries. Under the program’s regulations, we require terminating ACOs to implement close-out procedures in the form and manner and by a deadline specified by CMS related to the following: (i) Notifying ACO participants of termination; (ii) complying with the program’s record retention requirements; (iii) retention or destruction of CMS data according to federal requirements; (iv) meeting PO 00000 Frm 00102 Fmt 4701 Sfmt 4700 Shared Savings Program quality reporting requirements for a completed performance year which has implications for ensuring that eligible clinicians meet the MIPS requirements under the Quality Payment Program; and (v) directing beneficiaries to contact their primary care providers if, for example, termination of the ACO will result in discontinuation of certain care processes. We also note that Medicare FFS beneficiaries always retain their freedom to choose the providers and suppliers from which they seek care. The termination of an ACO would not prevent a beneficiary from choosing to continue receiving care from a provider or supplier that had been an ACO provider/supplier before the ACO’s termination. Comment: Some commenters believe CMS does not need to terminate ACOs if all are forced to move to two-sided risk, viewing the proposed approach as unnecessary. One commenter explained that CMS’ proposal to automatically advance ACOs to performance-based risk in the BASIC track’s glide path would protect against ACOs that generate losses remaining in the Shared Savings Program just to take advantage of waivers and other provisions. As those ACOs are required to take on increasingly more risk, they would incur too many losses to remain in the program indefinitely. Some commenters suggested that the requirement for ACOs to participate under two-sided models will provide ACOs with incentives to leave the program if they were not able to generate savings. More generally, one commenter indicated that ACOs performing poorly drop out of the program voluntarily so poor financial performance is self-correcting. Response: We agree that the requirement for ACOs to participate under two-sided models within the redesign of the program established in this final rule should drive ACOs to improved program performance. We also agree that ACOs with poor financial performance, including ACOs that owe shared losses, will tend to voluntarily terminate from the program based on our experience to date with risk tracks. However, as we described in the August 2018 proposed rule (83 FR 41835 through 41836), we remain concerned that some ACOs with poor financial performance will choose to remain in the program even after they have incurred shared losses. ACOs under two-sided models may find the advantages of continued participation outweigh the amount of shared losses owed. ACOs share in a portion of the losses, and lower levels of two-sided E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations risk may potentially be available to ACOs under the BASIC track. Poor performing ACOs may be encouraged to continue their participation because of the additional features available to eligible ACOs under performance-based risk, such as the opportunity for physicians and other practitioners participating in eligible two-sided model ACOs to furnish telehealth services under section 1899(l) of the Act, the availability of a SNF 3-day rule waiver, and the ability to offer incentive payments to beneficiaries under a CMSapproved beneficiary incentive program. ACOs with shared losses may also seek to continue their participation in Level E of the BASIC track or in the ENHANCED track to participate in an Advanced APM for purposes of the Quality Payment Program. Comment: As an alternative, some commenters suggested focusing the policy on ACOs with both poor financial performance and other program integrity concerns, but did not specifically identify the types of program integrity concerns that CMS should take into consideration. Response: We appreciate commenters’ suggestion that we consider poor financial performance in combination with other program integrity concerns regarding the ACO. We do not believe we should limit our policy only to ACOs that have both financial performance and program integrity issues. We believe that poor performance is directly reflective of the ACO’s ability to achieve the program’s goals and that an ACO with no program integrity issues should be removed from the program if it is unable or unlikely to achieve the cost and quality goals of the program. We note that the existence of program integrity issues may already constitute separate grounds for termination. Comment: As another alternative approach, one commenter suggested that CMS should consider using a blended evaluation process, based on both spend outside the corridor and high cost utilization. The commenter explained that low revenue ACOs can demonstrate consistent reductions in utilization of high spend services, such as in inpatient, emergency room and SNF utilization, yet see the costs associated with that utilization increase. Response: We note that ACOs that are negative outside corridor tend to have corresponding high utilization. ACOs provide a holistic approach to lowering growth in Medicare FFS expenditures, and we have observed that successful ACOs address spending and utilization across the care continuum or in a majority of claim types. We therefore VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 decline to adjust our approach to monitor and terminate for poor financial performance in certain utilization categories. The commenter noted that its concern was specific to low revenue ACOs’ inability to control costs for inpatient, emergency room and SNF services. Elsewhere in this final rule we have explained our observation that low revenue ACOs tend to be more successful than high revenue ACOs in achieving savings, which suggests that the circumstances the commenter describes may not be a barrier to low revenue ACOs’ success in the program. We also note that during the performance year we provide ACOs with program reports with expenditure and utilization data which support ACOs’ monitoring of their financial performance trends, including by claims types, and may help ACOs respond to developing trends. Comment: One commenter suggested that CMS implement the financial monitoring proposal for performance years beginning before January 1, 2019. Specifically, the commenter noted that CMS could use existing performance data for ACOs that are currently participating in the program. Response: We decline to further modify our approach to adopt the commenter’s suggestion that we consider the performance of ACOs in current agreement periods during performance years prior to the applicability date of the policy we are finalizing. Comment: Some commenters suggested that CMS modify the proposed approach to allow ACOs additional years of poor performance before termination. The commenters suggested that CMS revise the policy to impose action after 3 or more performance years of poor financial performance. Commenters offered a variety of explanations for why the proposal does not give ACOs sufficient time to correct poor financial performance and show positive financial results, including the following. • Several commenters explained that ACOs will not have sufficient time to make and implement adjustments over 2 performance years due to the timing of financial reconciliation. Performance data for the prior year is not available until the summer of the current performance year. One commenter explained that this timing poses challenges for ACOs to affect performance for the year underway. One commenter suggested that CMS could assist ACOs in achieving shared savings or in lowering costs by making program data and results more transparent and timely so that ACOs can PO 00000 Frm 00103 Fmt 4701 Sfmt 4700 67917 actively monitor their performance in real time. • Several commenters suggested that new ACOs, and ACOs that modify their ACO participant lists during the agreement period, face challenges as a result of learning curves and a lack of experience. According to these commenters, ACOs should be allowed sufficient time to implement necessary population health, care management, provider engagement, and data strategies to enhance beneficiary care and contain costs. One commenter suggested that ACOs need at least three years to develop the competencies for success. One commenter explained its belief that no ACOs would want to invest the millions of dollars required to set up and operate an ACO if they could be terminated from the program just 24 months later. This commenter suggested there would be sufficient risk to participants under the proposed redesigned program, and that the risk of being terminated this quickly could be too much for many ACOs to bear. • Other commenters more generally indicated that ACOs need additional time to show positive performance results, explaining that the program’s results show ACOs perform better over time. One commenter, MedPAC, explained that if an ACO is improving the efficiency of care delivery, eventually its shared savings will outweigh its shared losses. Accordingly, one or two years of shared losses cannot be seen as a definitive indicator of performance given the small number of beneficiaries in most ACOs. Several commenters expressed concern that the proposed approach to potentially terminate ACOs after two years of poor financial performance, could result in termination of ACOs that may otherwise go on to achieve savings and make quality improvements for their patients if they are allowed to remain in the program. Response: We disagree with commenters’ suggestions that we modify our approach to consider three or more years of poor financial performance prior to potential termination of an ACO from the program. We believe that such an approach would effectively constrain the policy to addressing ACOs with 3 consecutive years of poor financial performance, since results for performance year 3 would not be available until mid-way through performance year 4. If the 3 years of poor financial performance were not consecutive, the policy would only allow for limited scenarios in which we could remove poor performing ACOs. For example, under a policy that provides that ACOs would be terminated after 3 performance years of poor performance, if an ACO was negative outside corridor for performance year 1 and performance year 2 and performance year 4, we would not pursue termination until mid-way through performance year 5 (when the results for the performance year 4 become available). We believe such an approach could allow ACOs E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67918 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations with a pattern of poor performance to remain in the program similar to how poorer performing ACOs persist in the program currently. We disagree with the commenters’ assertions that our proposal does not give ACOs sufficient time to identify and correct poor financial performance. ACOs have access to a variety of resources to assess their expenditure and utilization trends on an ongoing basis and to make adjustments over the course of the performance year. We provide ACOs with quarterly and annual expenditure and utilization reports, among other program reports (including historical benchmark reports, and aggregate reports with demographic data on the ACO’s assigned beneficiary population) as well as tools that ACOs can use to track and estimate their performance. We believe ACOs receive data in a timely manner from CMS, including monthly beneficiaryidentifiable claim and claim line feed files with Parts A, B, and D data, and have the ability to detect and respond to trends in a more timely fashion than commenters suggested, including before CMS has made a determination of poor financial performance. We disagree with the commenter that suggested that two performance years of shared losses is not a definitive indicator of poor performance. We have observed that ACOs with shared losses have greater difficulty in achieving shared savings within the same agreement period. As we described in the proposed rule and have restated in this final rule, our previous experience over a 5 performance year span suggests that the majority of ACOs whose first 2 performance years are negative outside corridor fail to achieve savings in subsequent years. Therefore, we believe 2 consecutive years of poor financial performance is a definitive indicator of the ACO’s performance trends and sufficient to warrant compliance actions that could include termination. We acknowledge that our experience is based on 3-year agreements (or in the case of the program’s initial entrants, agreement periods of 3 years and 9 months, or 3 years and 6 months, and four year agreements in the case of the few ACOs approved to use the deferred renewal option which we are discontinuing with this final rule) and that we are finalizing an approach that implements 5-year agreements. Therefore, we anticipate examining the effects of our financial performance monitoring policy in the context of performance trends over longer agreement periods. Further, as we state elsewhere in this section of this final rule, we will also consider improvement VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 in performance in deciding whether to terminate an ACO for 2 years of poor financial performance. This is especially relevant to ACOs that are negative outside corridor in non-sequential performance years. If an ACO shows a pattern of improving financial performance, or fluctuating financial performance, it may be indicative of the ACO’s ability to demonstrate consistent positive performance results in future performance years. Based on our experience with implementing the program, we disagree with the commenter’s assertion that the proposed policy if finalized will discourage ACOs from investing in program participation, out of concern that the potential for return on investment to cover start-up and operating costs is outweighed by the risk of being terminated for noncompliance with program requirements. We acknowledge there is risk to establishing and operating an ACO and believe that this financial performance monitoring policy can provide an additional incentive for ACOs to quickly improve their performance. Since the start of the Shared Savings Program hundreds of ACOs have agreed to participate in the program under the program’s current policies under which CMS monitors and takes compliance action, including termination, prior to the conclusion of 3-year agreement periods for ACOs that fail to meet program requirements. We note that we have terminated only a small number of ACOs for failure to meet program requirements. Notably, as we previously described in the background for this section, we terminate ACOs for failure to meet the quality performance standard over 2 consecutive performance years according to § 425.316(c). Therefore we do not believe that ACOs will be discouraged from forming or entering the program because of a financial performance monitoring policy that also requires accountability for meeting the program’s goal of lowering growth in expenditures, and under which ACOs may be terminated for poor performance after 2 performance years. Comment: A few commenters suggested that the proposed policy should be implemented only as a criterion for determining an ACO’s eligibility to renew its participation in or to re-enter the program. Several commenters suggested that ACOs should be protected from possible termination for poor financial performance for one full agreement period. These commenters suggested that ACOs that generate losses beyond their MLR by the end of their third PO 00000 Frm 00104 Fmt 4701 Sfmt 4700 performance year could be required to submit and implement a corrective action plan for their fourth performance year (of a 5-year agreement period). Then, as a condition of being approved for a second or subsequent agreement period, ACOs could be expected to meet quality standards and operate within the risk corridor (not generate savings below the MLR). Response: We decline to adopt the commenter’s suggestions because, given 5-year agreement periods, we believe it would be more protective of the Trust Funds and Medicare FFS beneficiaries to allow CMS the flexibility to more quickly remove from the Shared Savings Program ACOs showing losses outside their corridor for two performance years. We note that we are finalizing in section II.A.5.c.(5) of this final rule, our proposal to consider an ACO’s past financial performance in determining whether to approve a renewing ACO’s or re-entering ACO’s Shared Savings Program application. Comment: Several commenters suggest that if an ACO performs poorly in performance year 1, but performs well in performance year 2 (results for which would be available in performance year 3), then the ACO should be allowed to participate in performance year 4. Response: The commenters may have misunderstood the proposal. Under the proposed approach, we would not terminate such an ACO for a single year of poor performance. We note that performance results are typically made available to ACOs in the summer following the conclusion of the calendar year performance year. In the commenters’ example, the soonest we could terminate the ACO would be after PY 3 results are available, which would occur more than halfway through PY 4. Under our proposal and this final rule, CMS retains discretion not to terminate an ACO after the second year of poor financial performance. In the commenters’ example, depending on the circumstances, CMS could either impose additional remedial action in PY 4 or terminate the ACO in PY 4 if the ACO was again negative outside corridor in PY 3. Under this approach, the ACO may be allowed to complete PY 4, and if further corrective action is taken the ACO may be allowed to continue its participation in PY 5. Comment: A few commenters suggested that CMS should not terminate an ACO for poor financial performance without considering factors that might affect an ACO’s performance over its agreement period. One commenter suggested that for ACOs that have achieved significant success in the E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations past yet are struggling in the current performance year, CMS should not impose termination without considering whether the ACO’s poor performance is due to factors such as changes in the assignment methodology and risk adjustment of the patient population. Other commenters suggested we consider the impact of changes to the ACO’s participant list and changes in program policies during the agreement period. Several commenters suggested that CMS consider evidence of performance improvement over time before making a determination to terminate an ACO, but did not provide specific suggestions on how CMS should measure improvement. Response: We note that according to § 425.212 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; and (2) calculation of sharing rate. We decline to create additional exceptions by not terminating ACOs for poor financial performance based on policy changes that become applicable within the ACO’s agreement period. During an ACO’s agreement period, we adjust the ACO’s historical benchmark to address changes in assignment, such as a result of regulatory changes to the program’s assignment methodology, and changes to the ACO’s ACO participant list. These adjustments ensure that the ACO’s historical benchmark expenditures remain comparable to performance year expenditures. Further, we note that our use of blended regional and national expenditure growth rates in updating the ACO’s historical benchmark, as we are finalizing in section II.D. of this final rule, will help to ensure that the ACO’s updated benchmark reflects the broader effect of changes to Medicare FFS payment policies that may be reflected in performance year expenditures. Additionally, we believe the applicability of the CMS–HCC risk adjustment methodology is not a factor that needs to be considered because our risk adjustment methodology annually renormalizes risk scores which helps to account for year to year changes in the risk adjustment model. Commenters did not provide specific suggestions on how we should measure performance improvement, but we agree that performance improvement could justify allowing an ACO to remain in the program after two years of poor financial performance. If the performance years in which the ACO is VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 negative outside corridor are nonsequential, we anticipate considering whether the ACO generated savings or losses in the other performance years. For instance, we would be especially concerned by a pattern where an ACO generated losses outside corridor for non-sequential performance years and generated losses within corridor during the alternate year(s) especially if they missed the MLR by a small margin. This suggests a pattern of poor financial performance and the absence of corrective action to significantly improve performance to meet the program’s goals. If the years in which the ACO is negative outside corridor are non-sequential, and the ACO showed a pattern of performance improvement, such as losses or savings within their MSR/MLR corridor, or sharing savings (positive outside corridor), during the alternate year(s), then we would consider this impact and the ACO’s ability to continue a pattern of improved financial performance over time. Comment: Some commenters expressed concerns about the lack of predictability of the ACO’s historical benchmark, noting that the values can increase or decrease each performance year. One commenter stated concern about the proposed approach to terminate ACOs if they exceed their benchmarks because the commenter believes that the program’s benchmark methodology has been significantly flawed to date. This commenter explained that the construct of the benchmark is complex and many ACOs do not have the skill set or actuarial support to analyze, review and assess the complexities of benchmarking. One commenter stated that it cannot be determined that ACOs that fall outside of their negative corridor, are, in fact, losing the Medicare program money as benchmarks are not valid counterfactuals. One commenter suggested that CMS consider a standard that looks at the ACO’s cost growth relative to national expenditure growth trends to demonstrate that the ACO is an outlier requiring corrective action. For example, the commenter suggested that CMS could monitor ACOs based on whether the ACO’s expenditure trend is substantially higher than the national expenditure growth trend, such as 5 percentage points higher, and take pretermination action in those cases. Response: ACO’s historical benchmarks can fluctuate in value during an agreement period because of adjustments for ACO participant list changes, and because of annual risk adjustment and the benchmark update. These policies ensure the continued comparability of the historical PO 00000 Frm 00105 Fmt 4701 Sfmt 4700 67919 benchmark to the ACO’s performance year expenditures, for accuracy in determining shared savings and shared losses. We provide program reports, including preliminary and final historical benchmark reports, as well as annual and quarterly aggregate program reports on expenditure and utilization trends and demographic data on the ACO’s assigned population, to support ACOs’ participation in the program. We also educate ACOs on the use of quarterly program data to predict their financial performance. We disagree with the commenters who suggested that the program’s historical benchmark methodology has significant flaws. We continue to believe that the ACO’s historical benchmark is the most accurate measure for determining ACO financial performance. We also believe that the annual adjustment and update to the ACO’s historical benchmark improves the accuracy of the benchmark calculations. The annual risk adjustment methodology adjusts the benchmark so that it is reflective of the health status of the ACO’s assigned population. The annual update, as modified based on this final rule ensures that the benchmark reflects trends in both regional and national Medicare FFS expenditure growth with more weight on national trends for ACOs serving a larger percentage of beneficiaries in their region. Therefore, we decline the commenter’s suggestion that we use an alternative approach to determining financial performance (and identifying poor performers) such as comparing the ACO’s cost growth relative to national expenditure growth trends. Comment: Several commenters explained that an ACO with spending that is slightly higher than its benchmark should not be subject to remedial action or termination. The commenters described a number of reasons why spending for a performance year could be a few percentage points higher than a benchmark. For example, the beneficiary population could experience a worse than usual flu season, the hospital wage index in an ACO’s area could increase relative to their benchmark years, the ACO’s participant TINs could have joined an Innovation Center initiative that increases spending, or the ACO’s eligible clinicians could have earned a MIPS bonus, which CMS includes as ACO expenditures. Response: We decline the commenters’ suggestions to make exceptions to our approach for monitoring and terminating ACOs for poor financial performance by taking E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67920 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations into account various differences in expenditures and payment rates among providers and suppliers. Along similar lines, in earlier rulemaking, we have discussed our consideration of technical adjustments to benchmark and performance year expenditures (see, for example 80 FR 32796 through 32799). As explained in earlier rulemaking, we continue to believe that making extensive adjustments to remove the effect of all policy adjustments from benchmark and performance year expenditures, or allowing for expenditure adjustments on a case-bycase basis, would create an inaccurate and inconsistent picture of ACO patient population spending and may limit innovations in ACOs’ redesign of care processes or cost reduction strategies. Further, we believe that the modifications we are finalizing in section II.D of this final rule, to apply factors based on regional FFS expenditures in establishing, adjusting and updating the ACO’s historical benchmark beginning with an ACO’s first agreement period (for agreement periods beginning on July 1, 2019, and in subsequent years) mitigate some of the commenters’ concerns. In earlier rulemaking, we explained that by replacing the national average FFS expenditure trend and flat dollar update with trends observed for county level FFS assignable beneficiaries in each ACO’s unique assignment-weighted regional service area, benchmark calculations will be better structured to account for exogenous trend factors particular to each ACO’s region and the pool of potentially assignable beneficiaries therein (for example, higher trend due to a particularly acute flu season or an unusually large area wage index adjustment or change) (81 FR 38004). We believe that the revised approach to updating the benchmark, by blending regional and national expenditure growth rates, which we are finalizing in section II.D. of this final rule, will continue to protect against these concerns. The weight on the national component of the blended update factor is based on an ACO’s penetration in its regional service area and the weight on the regional component is equal to one minus the national weight. Because most ACOs are not highly penetrated in their regional service areas, we believe that the blended update factor will still strongly reflect regional trends for the majority of ACOs. Comment: A few commenters suggested that CMS should take into consideration the impact of extreme and uncontrollable circumstances when monitoring ACOs for losses negative VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 outside corridor and in taking related pre-termination actions. For example, one commenter suggested that ACOs that experienced an extreme and uncontrollable event during their agreement period should be allowed a waiver and/or extension of program requirements and/or deadlines when applicable. This commenter explained that by not providing such an option, some ACOs may be unfairly and prematurely terminated. Response: We appreciate the commenter’s suggestion that we take into account the impact of extreme and uncontrollable circumstances when monitoring and terminating ACOs for poor financial performance. We decline at this time to adopt the commenter’s suggestion to provide ACOs affected by extreme and uncontrollable circumstances with a waiver of or exceptions to program requirements we are finalizing to establish policies to monitor and terminate ACOs for poor financial performance. In the November 2018 final rule (83 FR 59968 through 59979), we finalized the extension of policies that we previously adopted for addressing the impact of extreme and uncontrollable circumstances on ACO financial and quality performance results for performance year 2017 to performance year 2018 and subsequent years. Specifically, these policies address quality performance scoring for ACOs affected by extreme and uncontrollable circumstances and also provide for a reduction in the amount of shared losses owed by ACOs participating under a two-sided model for performance years affected by extreme and uncontrollable circumstances. We also explained our belief that under the approach of using regional factors in establishing and updating the benchmark, as described in section II.D of this final rule, it would not be necessary to make an additional adjustment to ACOs’ historical benchmarks to account for expenditure variations related to extreme and uncontrollable circumstances (83 FR 59979). If we take pre-termination action against an ACO for poor financial performance, the ACO would have the opportunity to explain whether and how its financial performance was affected by extreme and uncontrollable circumstances and how those circumstances may also have affected its ability to take corrective action to improve its performance. We note that the pre-termination actions we could take in the case of poor financial performance are set forth in § 425.216, which include issuance of a warning letter or a request for a corrective action PO 00000 Frm 00106 Fmt 4701 Sfmt 4700 plan. As described in § 425.216(b), a corrective action plan must address what actions the ACO will take to ensure that the ACO, ACO participants, ACO providers/suppliers or other individuals or entities performing functions or services related to the ACO’s activities or both correct any deficiencies and comply with all applicable Shared Savings Program requirements. ACOs that are required to submit a corrective action plan would have the opportunity to explain to CMS the particular circumstances that impacted their prior performance, and how they will improve their financial performance. For instance, an ACO that was affected by extreme and uncontrollable circumstances would have the opportunity to explain how these circumstances may have impacted the ACO’s assigned beneficiary expenditures. This additional information may assist CMS in better understanding the circumstances that led to the ACO’s poor financial performance and allow CMS to better determine appropriate pre-termination options and evaluate the ACO’s corrective actions. Nothing in our regulations would prohibit an ACO from offering the same information in response to a warning letter. We will continue to monitor the impact of extreme and uncontrollable circumstances on ACOs, particularly as we gain experience with the disasterrelief policies we have finalized for performance year 2017 and subsequent performance years. We will consider whether any changes to our policy for monitoring and terminating ACOs for poor financial performance may be necessary to account for the effects of extreme and uncontrollable circumstances. Any such changes would be made through notice and comment rulemaking. Comment: Some commenters point out there are interactions between the proposed approach for monitoring and terminating ACOs for poor financial performance, and the policy for allowing ACOs in a two-sided model to select their MSR/MLR threshold prior to entering performance-based risk for the agreement period. These commenters expressed concern that the proposed approach to monitoring and terminating ACOs for poor financial performance could disproportionately affect ACOs that take on greater risk by electing a lower MSR/MLR. According to some commenters, CMS’ proposed definition of negative outside corridor sets a very low bar, especially for ACOs in downside financial risk models where the ACO can select a MLR as low as 0 percent. Some commenters explained E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations that many ACOs view selection of the MSR/MLR in a two-sided model as a significant incentive to move into a performance-based risk track, but this proposal would create a double-edged sword whereby an ACO that wants to take on greater accountability through a lower MLR would be faced with the potential of being terminated from the program as a result of spending that exceeds its MLR. One commenter suggested that for ACOs in a two-sided model, CMS should use a variable MLR based on the number of the ACO’s assigned beneficiaries (as used to determine the MSR under a one-sided model) for purposes of determining poor financial performance. Response: We acknowledge the commenters’ concerns about the interactions between the existing policy of permitting ACOs under two-sided models to elect a symmetrical MSR/ MLR and our proposals with respect to monitoring and termination for poor financial performance. As discussed in section II.A.6.b. of this final rule, ACOs under a one-sided model are subject to a variable MSR based on their number of assigned beneficiaries. ACOs in twosided models may select a symmetrical MSR/MLR from the following options: Zero percent MSR/MLR; symmetrical MSR/MLR in a 0.5 percent increment between 0.5–2.0 percent; symmetrical MSR/MLR that varies based on the ACO’s number of assigned beneficiaries (the same as the MSR that would apply in a one-sided model, and the MLR is equal to the negative MSR). We established the variable MSRs to provide a greater degree of protection from normal variation in expenditures for smaller ACOs. For ACOs that enter an agreement period under a two-sided model, this MSR/MLR selection is made at the time of application. For ACOs participating in the BASIC track’s glide path, this election will be made during the application cycle preceding their first performance year in a two-sided model, generally during the calendar year before entry into risk. We believe that ACOs electing their MSR/MLR recognize the implications of their selection, including the potential that a low MSR/MLR will increase the risk of owing shared losses, as they are agreeing to be held accountable for the financial consequences of participation under this level of risk and reward. As a result, we believe they would also consider the potential impact that their selection may have upon their eligibility to continue in the program in the future. Accordingly, we decline the commenter’s suggestion to apply a variable MSR/MLR based on the size of VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 the ACO’s assigned population instead of the fixed MSR/MLR selected by ACOs, in our approach to identifying ACOs with poor financial performance. We believe it is appropriate to use ACOs’ actual financial performance results in determining whether ACOs are negative outside corridor and in monitoring and terminating ACOs for poor financial performance. In calculating an ACO’s financial performance results, we use the MSR/ MLR that is applicable to the ACO. For ACOs under a one-sided model we apply a variable MSR based on the number of beneficiaries assigned to the ACO. For ACOs under a two-sided model we apply the ACO’s selected MSR/MLR, which is either a symmetrical fixed MSR/MLR between zero percent and 2 percent (in increments of 0.5 percent) or a symmetrical MSR/MLR that varies based on the number of beneficiaries assigned to the ACO. In section II.A.6.b.(3) of this final rule, we are finalizing an approach to modifying the MSR/MLR to address small population sizes for ACOs participating in twosided models. Under this final policy, we will use a variable MSR/MLR when performing shared savings and shared losses calculations if an ACO’s assigned beneficiary population falls below 5,000 for the performance year, regardless of whether the ACO selected a fixed or variable MSR/MLR. This approach will provide further protection from shared losses for ACOs with small populations. However, we note that the ACOs to which we would apply this policy would be considered out of compliance with the program requirement to maintain a minimum of 5,000 assigned beneficiaries. Comment: Several commenters suggested that expanding CMS’ authority to terminate ACOs from the program based on financial performance undermines the collaborative nature of this program and the positive results that ACOs generate. Response: We do not believe that establishing this regulatory flexibility to help ensure the integrity of the program undermines our commitment to maintaining a program that encourages and fosters the success of ACOs that are committed to achieving the program’s goals. Comment: One commenter expressed concern that the proposed approach to monitoring and termination for poor financial performance could disadvantage rural providers. Response: We decline to make an exception for rural ACOs to the policy we are finalizing to monitor and terminate ACOs for poor financial PO 00000 Frm 00107 Fmt 4701 Sfmt 4700 67921 performance. As we described in section II.A.5.b of this final rule, we believe that rural ACOs would tend to be among low revenue ACOs, which have demonstrated better financial performance in the Shared Savings Program compared to ACOs that includes hospitals (for example). Based on our experience with program performance results we do not believe that rural ACOs, such as those whose beneficiaries predominantly reside in non-metropolitan areas, would be disproportionately affected by a policy that monitors and terminates ACOs for poor financial performance, compared to ACOs whose beneficiaries predominantly reside in metropolitan areas. Comment: Several commenters suggested that CMS should create a direct channel for ACOs to report suspected fraud and abuse. These commenters stated that ACOs continuously monitor their expenditures. The commenters explained that ACOs are also monitoring services rendered by clinicians outside the ACO and keep an eye on reimbursements completely removed from their own financial interests other than to achieve shared savings. ACOs have a frontline ability and financial incentive to identify and report suspicious activity, yet ACOs have no direct access to CMS program integrity functions. Response: The program has several program and regulatory safeguards in place to encourage ACOs, ACO participants, and providers and suppliers to monitor and report allegations relating to fraud, waste, abuse, and overall program integrity. The Shared Savings Program makes referrals to CMS’ Center for Program integrity (CPI) and/or the Office of the Inspector General (OIG) whenever an ACO, ACO participant, or provider/ supplier raises an allegation of fraud, waste, or abuse. Anyone suspecting healthcare fraud, waste or abuse is encouraged to report it to CMS or the OIG. The OIG Hotline accepts tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement in Department of Health and Human Services’ programs (see https:// oig.hhs.gov/FRAUD/REPORT-FRAUD/ INDEX.ASP for instructions). Reporting methods are also specified by CMS’ Center for Program Integrity (see https:// www.cms.gov/About-CMS/Components/ CPI/CPIReportingFraud.html for instructions). Additionally, concerns may be sent to the Shared Savings Program mailboxes, ACO@cms.hhs.gov for inquiries from external parties E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67922 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations including non-ACO entities, and SharedSavingsProgram@cms.hhs.gov for inquiries from current Shared Savings Program ACOs, and we will refer them to CPI and the OIG. Comment: Several commenters suggested that CMS develop a process that would allow an ACO to contest its termination for poor financial performance on the grounds that it was due to extenuating circumstances, or based on an error in CMS’ calculations. Response: The reconsideration review process is specified in subpart I of the program regulations. We do not believe it is necessary to establish a separate appeals process (as suggested by commenters) for ACOs to contest termination based on poor financial performance. We note that the imposition of pre-termination actions is not appealable. Comment: One commenter suggested that CMS revisit the policy for monitoring and evaluation related to financial performance in future rulemaking as it becomes implemented and applicable to ACOs over time. Response: We appreciate the commenter’s suggestion. As with other program policies, we may revisit this approach in future rulemaking based on lessons learned. Comment: Some commenters responded to CMS’ concern that ACOs may seek to obtain reinsurance to help offset their liability for shared losses as a way of enabling their continued program participation while potentially undermining the program’s goals. Several commenters urged that CMS should allow ACOs taking on performance-based risk to obtain and maintain reinsurance. They explained that ACOs need additional methods to repay losses. According to these commenters, reinsurance is an acceptable option for paying back losses associated with taking on risk, and is not an issue of ‘‘gaming’’ the system. They explained that it is a prudent practice to have stop loss coverage or reinsurance to address unexpected risk, and this would support ACO participation in the ENHANCED track given the higher level of potential downward risk in this track. One commenter explained the importance of tools like reinsurance for helping ACOs manage financial risk. The commenter explained that shared losses is only one form of risk associated with beginning an ACO, another being the business risk associated with the financial investments in starting an ACO (including those that begin under a one-sided model). Further, the commenter explained that providers must consider their full book of VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 business, not just Medicare FFS, when determining the best way to protect against losses. The commenter suggested that CMS not limit providers’ ability to insure against the closure of their practices. Several commenters agreed with the discussion in the preamble where we explained our belief that prohibiting ACOs from obtaining reinsurance would be overly restrictive. One commenter found it difficult to believe that prohibiting ACOs under two-sided models from purchasing reinsurance would ultimately benefit participating ACOs and the Medicare program. A few commenters believe that as more ACOs participate under two-sided risk, more ACOs will seek reinsurance or partnerships with health management firms to mitigate risk. Several commenters indicated that the involvement of reinsurance and management firms will also add to the administrative costs of the program, eroding a key cost advantage of the ACO model over Medicare Advantage, and also weakening upside incentives for ACOs because such firms take a cut of savings. Response: We appreciate commenters’ consideration of our concerns about ACOs’ use of reinsurance to offset their liability for shared losses as a way of enabling their continued program participation while undermining the program’s goals. At this time we are not establishing new requirements to prohibit ACOs from obtaining reinsurance. As we note in section II.A.6.c. of this final rule we have also declined commenters’ suggestions to reinstate reinsurance as a permissible form of repayment mechanism arrangement. We may revisit these issues in future rulemaking as we gain additional experience with program policies, and particularly as more ACOs participate under two-sided models, which we anticipate will be the result of this final rule. Final Action: Based on our consideration of the comments we received, we are finalizing our proposal with a modification to its applicability date. We proposed to apply this approach to monitor financial performance for performance years beginning in 2019, and in subsequent years. We did not receive comments addressing the timing of applicability of the proposed policy. Due to the timing of this final rule, we believe it is appropriate to modify our proposal to finalize the applicability of this approach to performance years beginning on July 1, 2019, and in subsequent performance years. PO 00000 Frm 00108 Fmt 4701 Sfmt 4700 We are modifying § 425.316 to add paragraph (d) for monitoring ACO financial performance as follows: For performance years beginning on July 1, 2019 and subsequent performance years, CMS determines whether the Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries for the performance year exceed the ACO’s updated benchmark by an amount equal to or exceeding either the ACO’s negative MSR under a one-sided model, or the ACO’s MLR under a two-sided model. If the Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries for the performance year exceed the ACO’s updated benchmark by an amount equal to or exceeding its negative MSR or MLR, CMS may take any of the pretermination actions set forth in § 425.216. If the Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries for the performance year exceed the ACO’s updated benchmark by an amount equal to or exceeding its negative MSR or MLR for another performance year of the agreement period, CMS may immediately or with advance notice terminate the ACO’s participation agreement under § 425.218. As we described in our responses to comments in this section of this final rule, we anticipate taking into account certain relevant factors, such as an ACO’s improvement over time, before imposing remedial action or termination for poor financial performance. 6. Requirements for ACO Participation in Two-Sided Models a. Overview In this section, we address requirements related to an ACO’s participation in performance-based risk. In the August 2018 proposed rule, we proposed technical changes to the program’s policies on election of the MSR/MLR for ACOs in the BASIC track’s glide path, and to address the circumstance of ACOs in two-sided models that elected a fixed MSR/MLR that have fewer than 5,000 assigned beneficiaries for a performance year. We proposed changes to the repayment mechanism requirements to update these policies to address the new participation options included in this final rule, including the BASIC track’s glide path under which participating ACOs must transition from a one-sided model to performance-based risk within a single agreement period. We proposed to add a provision that could lower the required repayment mechanism amount for BASIC track ACOs in Levels C, D, or E. In addition, we proposed to add E:\FR\FM\31DER2.SGM 31DER2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations provisions to permit recalculation of the estimated amount of the repayment mechanism each performance year to account for changes in ACO participant composition, to specify requirements on the duration of repayment mechanism arrangements, to grant a renewing ACO (as defined in proposed § 425.20) the flexibility to maintain a single, existing repayment mechanism arrangement to support its ability to repay shared losses in the new agreement period so long as it is sufficient to cover an increased repayment mechanism amount during the new agreement period (if applicable), and to establish requirements regarding the issuing institutions for a repayment mechanism arrangement. We also proposed new policies to hold ACOs participating in two-sided models accountable for sharing in losses when they terminate, or CMS terminates, their agreement before the end of a performance year, while also reducing the amount of advance notice required for early termination. khammond on DSK30JT082PROD with RULES2 b. Election of MSR/MLR by ACOs (1) Background As discussed in earlier rulemaking, the MSR and MLR protect against an ACO earning shared savings or being liable for shared losses when the change in expenditures represents normal, or random, variation rather than an actual change in performance (see 76 FR 67927 through 67929; and 76 FR 67936 through 67937). The MSR and MLR are calculated as a percentage of the ACO’s updated historical benchmark (see §§ 425.604(b) and (c), 425.606(b), 425.610(b)). In the June 2015 final rule, we finalized an approach to offer Track 2 and Track 3 ACOs the opportunity to select the MSR/MLR that will apply for the duration of the ACO’s 3-year agreement period from several symmetrical MSR/MLR options (see 80 FR 32769 through 32771, and 80 FR 32779 through 32780; §§ 425.606(b)(1)(ii) and 425.610(b)(1)). We explained our belief that offering ACOs a choice of MSR/MLR will encourage ACOs to move to two-sided risk, and that ACOs are best positioned to determine the level of risk they are prepared to accept. For instance, ACOs that are more hesitant to enter a performance-based risk arrangement may choose a higher MSR/MLR, to have the protection of a higher threshold before the ACO would become liable to repay shared losses, thus mitigating downside risk, although the ACO would in turn have a higher threshold to meet before being eligible to receive shared VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 savings. ACOs that are comfortable with a lower threshold of protection from risk of shared losses may select a lower MSR/MLR to benefit from a corresponding lower threshold for eligibility for shared savings. We also explained our belief that applying the same MSR/MLR methodology in both of the risk-based tracks reduces complexity for CMS’ operations and establishes more equal footing between the risk models. ACOs applying to the Track 1+ Model were also allowed the same choice of MSR/MLR to be applied for the duration of the ACO’s agreement period under the Model. ACOs applying to a two-sided model (currently, Track 2, Track 3 or the Track 1+ Model) may select from the following options: • Zero percent MSR/MLR. • Symmetrical MSR/MLR in a 0.5 percent increment between 0.5–2.0 percent. • Symmetrical MSR/MLR that varies based on the ACO’s number of assigned beneficiaries according to the methodology established under the one-sided model under § 425.604(b). The MSR is the same as the MSR that would apply in the one-sided model, and the MLR is equal to the negative MSR. (2) Timing and Selection of MSR/MLR In developing the policies for the August 2018 proposed rule, we considered what MSR/MLR options should be available for the BASIC track’s glide path, as well as the timing of selection of the MSR/MLR for ACOs entering the glide path under a onesided model and transitioning to a twosided model during their agreement period under the BASIC track. We proposed that ACOs under the BASIC track would have the same MSR/ MLR options as are currently available to ACOs under one-sided and two-sided models of the Shared Savings Program, as applicable to the model under which the ACO is participating along the BASIC track’s glide path. We explained that we believe these thresholds remain important to protect against savings and losses resulting from random variation, although we described in section II.A.5.b.(3) of the proposed rule our consideration of an alternate approach that would lower the MSR for low revenue ACOs (83 FR 41819 through 41820). Further, we noted that providing the same MSR/MLR options for BASIC track ACOs under two-sided risk as ENHANCED track ACOs would be consistent with our current policy for Track 2 and Track 3 that allows ACOs to determine the level of risk they will accept while reducing complexity for CMS’ operations and establishing more equal footing between the risk models. PO 00000 Frm 00109 Fmt 4701 Sfmt 4700 67923 Specifically, we proposed that ACOs in a one-sided model of the BASIC track’s glide path would have a variable MSR based on the ACO’s number of assigned beneficiaries. We proposed to apply the same variable MSR methodology as is used under § 425.604(b) for Track 1. We proposed to specify this variable MSR methodology in a proposed new section of the regulations at § 425.605(b). We also proposed to specify in § 425.605(b) the MSR/MLR options for ACOs under twosided models of the BASIC track, consistent with the previously described symmetrical MSR/MLR options currently available to ACOs in twosided models of the Shared Savings Program and the Track 1+ Model (for example, as specified in § 425.610(b)). Because we proposed to discontinue Track 1, we believed it would be necessary to update the provision governing the symmetrical MSR/MLR options for the ENHANCED track at § 425.610(b), which currently references the variable MSR methodology under Track 1. We proposed to revise § 425.610(b)(1)(iii) to reference the requirements at § 425.605(b)(1) for a variable MSR under the BASIC track’s glide path rather than the variable MSR under Track 1. Because we also proposed to discontinue Track 2, concurrently with our proposal to discontinue Track 1, we did not believe it would be necessary to change the existing cross-reference in § 425.606(b)(1)(ii)(C) to the variable MSR methodology under Track 1. As we explained in the August 2018 proposed rule (83 FR 41837), we continue to believe that an ACO should select its MSR/MLR before assuming performance-based risk, and this selection should apply for the duration of its agreement period under risk. We believe that a policy that allows more frequent selection of the MSR/MLR within an agreement period under twosided risk (such as prior to the start of each performance year) could leave the program vulnerable to gaming. For example, ACOs could revise their MSR/ MLR selections once they have experience under performance-based risk in their current agreement period to maximize shared savings or to avoid shared losses. However, in light of our proposal to require ACOs to move between a onesided model (Level A or Level B) and a two-sided model (Level C, D, or E) during an agreement period in the BASIC track’s glide path, we stated our belief that it would be appropriate to allow ACOs to make their MSR/MLR selection during the application cycle preceding their first performance year in E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67924 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations a two-sided model, generally during the calendar year before entry into risk. ACOs that enter the BASIC track’s glide path under a one-sided model would still be inexperienced with performance-based risk, but they will have the opportunity to gain experience with the program, prior to making this selection. We noted that this approach would be another means for BASIC ACOs in the glide path to control their level of risk exposure. Therefore, we proposed to include a policy in the proposed new section of the regulations at § 425.605(b)(2) to allow ACOs under the BASIC track’s glide path in Level A or Level B to choose the MSR/MLR to be applied before the start of their first performance year in a two-sided model. This selection would occur before the ACO enters Level C, D or E of the BASIC track’s glide path, depending on whether the ACO is automatically transitioned to a two-sided model (Level C) or elects to more quickly transition to a two-sided model within the glide path (Level C, D, or E). In section II.A.5.b.(3) of the proposed rule we also described and sought comment on several approaches to allowing for potentially greater access to shared savings for low revenue ACOs compared to high revenue ACOs. We noted that such approaches would recognize the performance trends of low revenue ACOs based on performance results and the potential that low revenue ACOs would need additional capital, as a means of encouraging their continued participation in the program. One approach we considered would be to allow for a lower MSR during the one-sided model years (Level A and B) for low revenue ACOs in the BASIC track with at least 5,000 assigned beneficiaries for the performance year. For example, we considered a policy under which we would apply a MSR that is a fixed 1 percent. We also considered setting the MSR at a fixed 2 percent, or effectively removing the threshold by setting the MSR at zero percent. However, we would apply a variable MSR based on the ACO’s number of assigned beneficiaries in the event the ACO’s population falls below 5,000 assigned beneficiaries for the performance year, consistent with our proposal in section II.A.6.b of the proposed rule and as described below in section II.A.6.b.(3) of this final rule. We noted that a lower MSR (such as a fixed 1 percent) would reduce the threshold level of savings the ACO must generate to be eligible to share in savings. This would give low revenue ACOs greater confidence that they would be eligible to share in savings, VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 once generated. We noted that this may be especially important for small ACOs which otherwise would have MSRs towards the higher end of the range (closer to 3.9 percent, for an ACO with at least 5,000 beneficiaries) for years in which the ACO participates under a one-sided model. However, we did not believe that a lower MSR would be needed to encourage participation by high revenue ACOs. For one, high revenue ACOs are likely to have larger numbers of assigned beneficiaries and therefore more likely to have lower MSRs (ranging from 3 percent to 2 percent, for ACOs with 10,000 or more assigned beneficiaries). Further, we believed that their control over a significant percentage of total Medicare Parts A and B FFS expenditures for their assigned beneficiaries may provide a sufficient incentive for participation as they would have an opportunity to generate significant savings. In addition to allowing for a lower MSR for ACOs participating in a onesided model under the BASIC track, we also considered another approach under which we would allow for a relatively higher final sharing rate under the first four levels of the BASIC track’s glide path for low revenue ACOs. This approach is described further in section II.A.3.b of this final rule. Comment: Most commenters discussing the proposals related to timing and selection of the MSR/MLR agreed with allowing ACOs in a twosided model to select their MLR/MSR, with close to half also explicitly expressing support for the proposed timing of the selection. Commenters frequently noted that they appreciated the flexibility these policies would provide. A few commenters stated this flexibility was important to ACOs that may want to set the MSR/MLR higher or lower depending on how conservative or aggressive their goals are with respect to avoiding shared losses or earning shared savings, respectively. One commenter supported allowing ACOs to choose from a range of MSR values, noting the importance of allowing organizations to assume levels of risk based on their own business decisions. Another commenter noted that continuing to allow ACOs in riskbearing tracks to select their MSR/MLR provides ACOs with flexibility and autonomy that is critical to building confidence in accepting higher levels of risk. This commenter noted that the symmetrical nature of these rates will also help to protect the Medicare Trust Funds. One commenter commended CMS for what they described as providing the same options to ACOs in both one- and PO 00000 Frm 00110 Fmt 4701 Sfmt 4700 two-sided models. Another commenter noted that as the program develops it may become more apparent whether a fixed or variable MSR makes the most sense for CMS, ACOs, and beneficiaries, but recommended that CMS extend the choice of fixed and variable MSR/MLR options to all levels of the BASIC track, stating their belief that offering ACOs choices from the start of their participation in the program provides the best pathway for success. Several commenters advocated for using a fixed MSR of 2 or 2.5 percent for ACOs in one-sided models with at least 5,000 assigned beneficiaries, with some noting that this approach could provide a greater incentive for participation among low revenue ACOs and rural ACOs. A few of these commenters also supported using a variable MSR for ACOs in one-sided models that are below the 5,000 beneficiary threshold. One commenter asked that CMS reconsider its proposals related to the MSR and MLR in order to ‘‘lessen restrictions and remove barriers to participation in risk sharing arrangements,’’ but did not specify which aspects of the MSR/MLR proposals they believed to be restrictive or to create barriers. Several commenters noted that they disagree with CMS’ current policy of requiring that an ACO’s MSR/MLR selection apply for the duration of its agreement period under risk, which would also apply to ACOs in two-sided levels of the BASIC track under our proposal. Most of these commenters recommended allowing ACOs to change their selection at the start of each performance year. One commenter requested that ACOs be permitted to reselect their MSR/MLR level in the event that CMS modifies the financial conditions of a track during the agreement period. A few commenters noted that they disagreed with CMS’ stated belief that allowing for annual selections could leave the program vulnerable to gaming. They believe instead that modifying this policy to permit annual selections would allow ACOs to continue to advance in operating under performance-based risk, grow competencies, and build understanding of the benchmarking methodology, which they view as essential to informing an ACO’s MSR/MLR selection. They also noted that the assigned beneficiary populations of ACOs, and their associated risk profiles, can change significantly over time, affecting an ACO’s previous MSR/MLR selection. These commenters also mentioned that other alternative payment models such as the Bundled E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations Payments for Care Improvement (BPCI) initiative allow their participants to change their risk thresholds more frequently. Response: We appreciate commenters’ feedback on our proposals around the timing for selection of the MSR/MLR for ACOs participating in the proposed BASIC track. We agree with the commenters who noted that our proposal to allow ACOs to select their MSR/MLR prior to moving to a twosided model within the glide path will provide flexibility for ACOs that will be moving into two-sided risk arrangements in the BASIC track, and we are finalizing this policy as proposed. We continue to believe that offering a choice of MSR/MLR for ACOs participating in two-sided models will encourage ACO participation in these models, and that ACOs are best positioned to determine the level of risk they are prepared to accept. We would like to clarify that our proposal did not extend the choice of an MSR/MLR to ACOs that are participating in the onesided levels of the BASIC track; however, as we discuss elsewhere in this section, we did consider certain other options for allowing for a lower MSR for low revenue ACOs under a one-sided model. With regard to ACOs participating under a one-sided model within the BASIC track, we believe that the advantages afforded by a variable MSR that protects the Medicare Trust Funds from shared savings payments that are due to normal variation in expenditures, outweigh any suggested advantages of providing the option for these ACOs to select a fixed rate MSR. Under the policy that we are finalizing, ACOs participating in Levels A or B of the BASIC track will have an MSR based on their number of assigned beneficiaries and will have the opportunity to select their MSR/MLR during the application cycle preceding their first performance year in a twosided model. We did not propose to change the requirement that the MSR/MLR selection apply for the duration of the agreement period under performancebased risk for ACOs participating in Track 2 or the ENHANCED track. For consistency, and because we still have concerns that allowing for an annual selection could lead to gaming, we believe that it is appropriate that this requirement extend to ACOs entering a two-sided level in the BASIC track. We would also like to clarify that, absent unusual circumstances, we would not seek to modify the financial terms of an ACO’s track during an agreement period. Any such change could only be adopted through rulemaking and, per VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 § 425.212, any regulatory changes to the sharing rate, unless required by statute, do not apply to ACOs during an agreement period. We note, for example, that ACOs currently participating in Tracks 1 and 2 will be allowed to complete their existing agreement period under the financial conditions of their current track, even though these tracks will no longer be available as participation options for ACOs entering a new agreement period on or after July 1, 2019, pursuant to this final rule. Comment: A number of commenters supported a combination of a lower MSR and higher sharing rates for low revenue ACOs participating in the BASIC track and offered several different alternatives. Commenters explained that combining a lower MSR and higher final sharing rate was necessary to ensure there are sufficient and attainable incentives to support ACOs’ efforts to improve quality and lower cost, to provide early returns on investments as well as predictability of savings and the financial support ACOs need to ensure successful participation, and to incentivize low revenue and physician-led ACOs to participate in the redesigned participation options. Response: We appreciate the feedback provided by commenters on the approaches we considered to increase incentives for low revenue ACOs participating in the BASIC track. As discussed in section II.A.3.b. of this final rule, we are finalizing a 40 percent sharing rate for all one-sided model levels of the BASIC track’s glide path and a 50 percent sharing rate for twosided model levels in the BASIC track’s glide path. Additionally, in section II.A.5.c of this final rule, we are finalizing an exception that will permit new legal entities determined to be low revenue ACOs that are inexperienced with performance-based risk Medicare ACO initiatives to participate for 3 performance years under a one-sided model within the BASIC track’s glide path (or 4 performance years in the case of ACOs entering an agreement period beginning on July 1, 2019) prior to being automatically advanced to Level E of the BASIC track for the remaining years of their agreement period. As we believe these policies, which represent modifications of our original proposals, will improve the incentives for participation by low revenue ACOs, we decline to adopt a lower MSR for low revenue ACOs participating in the onesided model levels of the BASIC track at this time. Furthermore, as we noted earlier in this section and have discussed in prior rulemaking (see for example, 80 FR 32761), we continue to believe that the use of a variable MSR PO 00000 Frm 00111 Fmt 4701 Sfmt 4700 67925 for ACOs in one-sided models is appropriate in order to protect the Trust Funds from paying shared savings for savings that may result from random variation rather than from care coordination and quality improvement by the ACO. Final Action: After considering the comments received, we are finalizing the policies governing the MSR/MLR for ACOs in the BASIC track at § 425.605(b), with a modification to include a new paragraph at § 425.605(b)(2)(ii)(D) to provide that ACOs that elect the option to participate in a third year under a one-sided model based on the policy we are finalizing in section II.A.5.c of this final rule will select their MSR/MLR prior to transitioning to Level E. Under the final policies, ACOs in a one-sided model of the BASIC track’s glide path will have a variable MSR based on the number of beneficiaries assigned to the ACO. The variable MSR will be determined using the same methodology that is currently used for Track 1. ACOs in a two-sided model of the BASIC track will be able to choose among the MSR/MLR options that are available to ACOs participating in Track 2 or the ENHANCED track. ACOs participating under Level A or B of the BASIC track’s glide path will choose the MSR/MLR to be applied before the start of their first performance year in a two-sided model. This selection will occur before the ACO enters Level C, D or E of the BASIC track’s glide path, depending on whether the ACO is automatically transitioned to a two-sided model (Level C or E) or elects to more quickly transition to a two-sided model within the glide path (Level C, D, or E), and will be in effect for the duration of the agreement period that the ACO is under two-sided risk. We are also finalizing as proposed the changes to § 425.610(b)(1)(iii) to add a cross reference the new provision at § 425.605(b)(2). (3) Modifying the MSR/MLR To Address Small Population Sizes As discussed in the introduction to this section, the MSR and MLR protect against an ACO earning shared savings or being liable for shared losses when the change in expenditures represents normal, or random, variation rather than an actual change in performance. ACOs in two-sided risk models that have opted for a fixed MSR/MLR can choose a MSR/MLR of zero percent or a symmetrical MSR/MLR equal to 0.5 percent, 1.0 percent, 1.5 percent, or 2.0 percent. As discussed elsewhere in this final rule, we proposed that ACOs in a two-sided model of the new BASIC E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67926 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations track would have the same options in selecting their MSR/MLR, including the option of a variable MSR/MLR based on the number of beneficiaries assigned to the ACO. Under the current regulations, for all ACOs in Track 1 and any ACO in a twosided risk model that has elected a variable MSR/MLR, we determine the MSR and MLR (if applicable) for the performance year based on the number of beneficiaries assigned to the ACO for the performance year. For ACOs with at least 5,000 assigned beneficiaries in the performance year, the variable MSR can range from a high of 3.9 percent (for ACOs with at least 5,000 assigned beneficiaries) to a low of 2.0 percent (for ACOs with approximately 60,000 or more assigned beneficiaries). See § 425.604(b). For two-sided model ACOs under a variable MSR/MLR, the MLR is equal to the negative of the MSR. Under section 1899(b)(2)(D) of the Act, in order to be eligible to participate in the Shared Savings Program an ACO must have at least 5,000 assigned beneficiaries. In earlier rulemaking, we established the requirements under § 425.110 to address situations in which an ACO met the 5,000 assigned beneficiary requirement at the start of its agreement period, but later falls below 5,000 assigned beneficiaries during a performance year. We refer readers to the November 2011 and June 2015 final rules and the CY 2017 PFS final rule for a discussion of the relevant background and related considerations (see 76 FR 67807 and 67808, 67959; 80 FR 32705 through 32707; 81 FR 80515 and 80516). CMS deems an ACO to have initially satisfied the requirement to have at least 5,000 assigned beneficiaries if 5,000 or more beneficiaries are historically assigned to the ACO participants in each of the 3 benchmark years, as calculated using the program’s assignment methodology (§ 425.110(a)). CMS initially makes this assessment at the time of an ACO’s application to the program. As specified in § 425.110(b), if at any time during the performance year, an ACO’s assigned population falls below 5,000, the ACO may be subject to the pre-termination actions described in § 425.216 and termination of the participation agreement by CMS under § 425.218. As a pre-termination action, CMS may require the ACO to submit a corrective action plan (CAP) to CMS for approval (§ 425.216). While under a CAP for having an assigned population below 5,000 assigned beneficiaries, an ACO remains eligible for shared savings and liable for shared losses (§ 425.110(b)(1)). If the ACO’s assigned population is not at least 5,000 by the end of the performance year specified VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 by CMS in its request for a CAP, CMS terminates the ACO’s participation agreement and the ACO is not eligible to share in savings for that performance year (§ 425.110(b)(2)). As specified in § 425.1110(b)(1), if an ACO’s performance year assigned beneficiary population falls below 5,000, the ACO remains eligible for shared savings/shared losses, but the following policies apply with respect to the ACO’s MSR/MLR: (1) For ACOs subject to a variable MSR and MLR (if applicable), the MSR and MLR (if applicable) will be set at a level consistent with the number of assigned beneficiaries; (2) For ACOs with a fixed MSR/MLR, the MSR/MLR will remain fixed at the level consistent with the choice of MSR and MLR that the ACO made at the start of the agreement period. To implement the requirement for the variable MSR and MLR (if applicable) to be set at a level consistent with the number of assigned beneficiaries, the CMS Office of the Actuary (OACT) calculates the MSR ranges for populations smaller than 5,000 assigned beneficiaries. The following examples are based on our operational experience: If an ACO’s assigned beneficiary population drops to 3,000, the MSR would be set at 5 percent; if the population falls to 1,000 or 500, the MSR would correspondingly rise to 8.7 percent or 12.2 percent, respectively. These sharp increases in the MSR reflect the greater random variation that can occur when expenditures are calculated across a small number of assigned beneficiaries. In the August 2018 proposed rule (83 FR 41838), we noted that to date, the number of ACOs that have fallen below the 5,000-beneficiary threshold for a performance year has been relatively small. Among 432 ACOs that were reconciled in PY 2016, there were 12 ACOs with fewer than 5,000 assigned beneficiaries. In PY 2015 there were 15 (out of 392 ACOs) below the threshold and in PY 2014 there were 14 (out of 333 ACOs). While the majority of these ACOs had between 4,000 and 5,000 beneficiaries, we observed the performance year population fall as low as 513 for one ACO. Among the 472 ACOs that were subject to financial reconciliation for performance year 2017, over 20 ACOs (4.2 percent) fell below 5,000 assigned beneficiaries for the performance year, with three ACOs with under 1,000 assigned beneficiaries. Consistent with overall program participation trends, most ACOs that fell below the 5,000-beneficiary threshold in performance year 2017 and in prior performance years were participating in PO 00000 Frm 00112 Fmt 4701 Sfmt 4700 Track 1. These ACOs have thus automatically been subject to a variable MSR. With increased participation in performance-based risk models, however, we anticipate an increased likelihood of observing ACOs that have a fixed MSR/MLR of plus or minus 2 percent or less falling below the 5,000beneficiary threshold. Indeed, program data have demonstrated the popularity of the fixed MSR/MLR among ACOs in two-sided models. In PY 2016, the first year that ACOs in two-sided models were allowed to choose their MSR/MLR, 21 of 22 eligible ACOs selected one of the fixed options. Among the 42 Track 2 and Track 3 ACOs participating in PY 2017, 38 selected a MSR/MLR that does not vary with the ACO’s number of assigned beneficiaries, including 11 that are subject to a MSR or MLR of zero percent. Among 101 ACOs participating in two-sided models in PY 2018, 80 are subject to one of the fixed options, including 18 with a MSR and MLR of zero percent. In the August 2018 proposed rule, we indicated that while we continue to believe that ACOs operating under performance-based risk models should have flexibility in determining their exposure to risk through the MSR/MLR selection, we are concerned about the potential for rewarding ACOs with a fixed MSR/MLR that are unable to maintain a minimum population of 5,000 beneficiaries through the payment of shared savings for expenditure variation that is likely the result of normal expenditure fluctuations, rather than the performance of the ACO. If the ACO’s minimum population falls below 5,000, the ACO is no longer in compliance with program requirements. The reduction in the size of the ACO’s assigned beneficiary population would also raise concerns that any shared savings payments made to the ACO would not reward true cost savings, but instead would pay for normal expenditure fluctuations. We noted, however, that an ACO under performance-based risk potentially would be at greater risk of being liable for shared losses, also stemming from such normal expenditure variation. If an ACO’s assigned population falls below the minimum requirement of 5,000 beneficiaries, a solution to improve the confidence that shared savings and shared losses do not represent normal variation, but meaningful changes in expenditures, would be to apply a symmetrical MSR/MLR that varies based on the number of beneficiaries assigned to the ACO. The values for the variable MSR are shown in Table 9. As previously E:\FR\FM\31DER2.SGM 31DER2 67927 described, the MLR is equal to the negative MSR. In this table, the MSR ranges for population sizes varying between from 5,000 to over 60,000 assigned beneficiaries are consistent with the current approach to determining a variable MSR based on the size of the ACO’s population (see § 425.604(b)), and the corresponding variable MLR. We have also added new values, calculated by the CMS OACT, for population sizes varying from one to 4,999, as shown in Table 9. For ACOs with populations between 500–4,999 beneficiaries, the MSR would range between 12.2 percent (for ACOs with 500 assigned beneficiaries) and 3.9 percent (for ACOs with 4,999 assigned beneficiaries). For ACOs with populations of 499 assigned beneficiaries or fewer, we would calculate the MSR to be equal to or greater than 12.2 percent, with the MSR value increasing as the ACO’s assigned population decreases. Therefore, we proposed to modify § 425.110(b) to provide that we will use a variable MSR/MLR when performing shared savings and shared losses calculations if an ACO’s assigned beneficiary population falls below 5,000 for the performance year, regardless of whether the ACO selected a fixed or variable MSR/MLR. We proposed to use this approach beginning with performance years starting in 2019. The variable MSR/MLR would be determined using the same approach based on number of assigned beneficiaries that is currently used for two-sided model ACOs that have selected the variable option. If the ACO’s assigned beneficiary population increases to 5,000 or more for subsequent performance years in the agreement period, the MSR/MLR would revert to the fixed level selected by the ACO at the start of the agreement period (or before moving to risk for ACOs on the BASIC track’s glide path), if applicable. While we believed this proposal would have a fairly limited reach in terms of number of ACOs impacted, we stated our belief that it is nonetheless important for protecting the integrity of the Trust Funds and better ensuring that the program is rewarding or penalizing ACOs for actual performance. We also noted that the policy, if finalized, would make it more difficult for an ACO under performancebased risk that falls below the 5,000beneficiary threshold to earn shared savings, but would also provide greater protection against owing shared losses. We also proposed to revise the regulations at § 425.110 to reorganize the provisions in paragraph (b), so that all current and proposed policies for determining the MSR and MLR would apply to all ACOs whose population falls below the 5,000-beneficiary threshold and that are reconciled for shared savings or shared losses, as opposed to being limited to ACOs under a CAP, as provided in the existing provision at § 425.110(b)(1). Specifically, we proposed to move the current provisions on the determination of the MSR/MLR at paragraphs (b)(1)(i) and (ii) to a new provision at paragraph (b)(3) where we would also distinguish between the policies applicable to determining the MSR/MLR for performance years starting before January 1, 2019, and those that we proposed to apply for performance years starting in 2019 and subsequent years. We proposed to specify the additional ranges for the MSR (when the ACO’s population falls below 5,000 assigned beneficiaries) through revisions to the table at § 425.604(b), for use in determining an ACO’s eligibility for shared savings for a performance year starting on January 1, 2019, and any remaining years of the current agreement period for ACOs under Track 1. We noted that the proposed ranges are consistent with the program’s VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 PO 00000 Frm 00113 Fmt 4701 Sfmt 4700 E:\FR\FM\31DER2.SGM 31DER2 ER31DE18.013</GPH> khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations khammond on DSK30JT082PROD with RULES2 67928 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations current policy for setting the MSR and MLR (in the event a two-sided model ACO elected the variable MSR/MLR) when the population falls below 5,000 assigned beneficiaries, and therefore similar ranges would be applied in determining the variable MSR/MLR for performance year 2017 and 2018. These ranges in § 425.604(b) are crossreferenced in the regulations for Track 2 at § 425.606(b)(1)(ii)(C) and therefore would also apply to Track 2 ACOs if their population falls below 5,000 assigned beneficiaries. Further, as discussed in section II.A.6.b.(2). of this final rule, we proposed to specify under a new section of the regulations at § 425.605(b)(1) the range of MSR values that would apply under a one-sided model of the BASIC track’s glide path, which would also be used in determining the variable MSR/MLR for ACOs participating in two-sided models under the BASIC track and ENHANCED track. We sought comment on these proposals and specifically on the proposed MSR ranges for ACOs with fewer than 5,000 assigned beneficiaries, including the application of a MSR/ MLR in excess of 12 percent, in the case of ACOs that have failed to meet the requirement to maintain a population of at least 5,000 assigned beneficiaries and have very small population sizes. In particular, we sought commenters’ feedback on whether the proposed approach described in this section could improve accountability of ACOs. We also noted that the requirement of section 1899(b)(2)(D) of the Act, for an ACO to have at least 5,000 assigned beneficiaries, would continue to apply. The additional consequences for ACOs with fewer than 5,000 assigned beneficiaries, as specified in § 425.110(b)(1) and (2) would also continue to apply. Under § 425.110(b)(2), ACOs are not eligible to share savings for a performance year in which they are terminated for noncompliance with the requirement to maintain a population of at least 5,000 assigned beneficiaries. As discussed in section II.A.6.d. of this final rule, in the August 2018 proposed rule, we also proposed to revise our regulations governing the payment consequences of early termination to include policies applicable to involuntarily terminated ACOs. Under this proposed approach, two-sided model ACOs would be liable for a pro-rated share of any shared losses determined for the performance year during which a termination under § 425.110(b)(2) becomes effective. Comment: One commenter noted that CMS established the original MSR/MLR rates at a desired confidence level of 90 percent but, based on their own VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 analysis, they believe that CMS miscalculated and created thresholds that were closer to 75 percent, meaning many ACOs receive shared savings payments or repay losses based on random chance. The commenter recommended that CMS consider widening the MSR and MLR thresholds, such as by using a confidence level of 99 percent, to protect ACOs from paying random losses and CMS from sharing random savings. In contrast, a few other commenters suggested that the current range for variable MSRs is too high. One commenter suggested that with a floor of 2 percent for ACOs with 60,000 or more assigned beneficiaries and higher values for smaller ACOs, the current range of MSR values disincentivizes small ACOs from participating in the program. Another commenter asked CMS to consider reducing the variable MSR to a range of 1 percent to 2.9 percent. They noted that when the MSR is too high it is challenging for ACOs to be eligible for shared savings and there is a strong disincentive for ACOs to continue in the program. They believed that the proposed changes to the benchmarking methodology would reduce volatility and improve accuracy of benchmarks and that the range of the MSR should be reduced to reflect this. Response: We appreciate commenters’ feedback on the range of values used to determine the variable MSR. We believe that there are tradeoffs in setting the MSR range. We are concerned that widening the range based on a 99 percent confidence level, while protecting the Trust Funds from paying for savings and protecting risk-bearing ACOs from repaying losses due to normal variation, would prevent the payment of savings (or collection of losses) in too many cases where savings or losses were not a result of normal variation. We also believe that imposing more stringent thresholds before ACOs are eligible to earn shared savings would be a deterrent to participation. At the same time, we are also unwilling to lower the range of values used to determine the variable MSR for ACOs in a one-sided risk model. While this would, as commenters suggest, likely incentivize participation, we are concerned that lowering the range would not provide adequate protection to the Medicare Trust Funds. Final Action: We did not receive any comments on our proposal to use a variable MSR/MLR when performing shared savings and shared losses calculations if the assigned beneficiary population for an ACO participating under a two-sided model falls below 5,000 for the performance year PO 00000 Frm 00114 Fmt 4701 Sfmt 4700 regardless of whether the ACO selected a fixed or variable MSR/MLR. We are finalizing this policy as proposed through revisions to § 425.110(b), but are revising the applicability date, such that the new policy will apply to performance years beginning on or after July 1, 2019, rather than January 1, 2019, in order to ensure that this change applies only prospectively. We are also making minor revisions to paragraph (b)(1) for improved clarity and consistency. We are also finalizing our proposals to specify the additional ranges for the MSR (when the ACO’s population falls below 5,000 assigned beneficiaries) through revisions to the table at § 425.604(b) and the addition of a new section of the regulations at § 425.605(b)(1) that includes the range of MSR values that will apply under the one-sided model of the BASIC track’s glide path and will also be used in determining the variable MSR/MLR for ACOs participating in two-sided models under the BASIC track and ENHANCED track. c. ACO Repayment Mechanisms (1) Background We discussed in earlier rulemaking the requirement for ACOs applying to enter a two-sided model to demonstrate they have established an adequate repayment mechanism to provide CMS assurance of their ability to repay shared losses for which they may be liable upon reconciliation for each performance year.18 The requirements for an ACO to establish and maintain an adequate repayment mechanism are described in § 425.204(f), and we have provided additional program guidance on repayment mechanism arrangements.19 Section 425.204(f) addresses various requirements for repayment mechanism arrangements: The nature of the repayment mechanism; when documentation of the repayment mechanism must be submitted to CMS; the amount of the repayment mechanism; replenishment of the repayment mechanism funds after 18 See 76 FR 67937 through 67940 (establishing the requirement for Track 2 ACOs). See also 80 FR 32781 through 32785 (adopting the same general requirements for Track 3 ACOs with respect to the repayment mechanism and discussing modifications to reduce burden of the repayment requirements on ACOs). 19 Medicare Shared Savings Program & Medicare ACO Track 1+ Model, Repayment Mechanism Arrangements, Guidance Document (July 2017, version #6), available at https://www.cms.gov/ Medicare/Medicare-Fee-for-Service-Payment/ sharedsavingsprogram/Downloads/RepaymentMechanism-Guidance.pdf (herein Repayment Mechanism Arrangements Guidance). E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations their use; and the duration of the repayment mechanism arrangement. Consistent with the requirements set forth in § 425.204(f)(2), in establishing a repayment mechanism for participation in a two-sided model of the Shared Savings Program, ACOs must select from one or more of the following three types of repayment arrangements: Funds placed in escrow; a line of credit as evidenced by a letter of credit that the Medicare program could draw upon; or a surety bond. Currently, our regulations do not specify any requirements regarding the institutions that may administer an escrow account or issue a line of credit or surety bond. Our regulations require an ACO to submit documentation of its repayment mechanism arrangement during the application or participation agreement renewal process and upon request thereafter. Under our existing regulations, a repayment mechanism arrangement must be adequate to repay at least the minimum dollar amount specified by CMS, which is determined based on an estimation methodology that uses historical Medicare Parts A and B FFS expenditures for the ACO’s assigned population. For Track 2 and Track 3 ACOs, the repayment mechanism must be equal to at least 1 percent of the total per capita Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries, as determined based on expenditures used to establish the ACO’s benchmark for the applicable agreement period, as estimated by CMS at the time of application or participation agreement renewal (see § 425.204(f)(1)(ii), see also Repayment Mechanism Arrangements Guidance). In the Repayment Mechanism Arrangements Guidance, we describe in detail our approach to estimating the repayment mechanism amount for Track 2 and Track 3 ACOs and our experience with the magnitude of the dollar amounts. Program stakeholders have continued to identify the repayment mechanism requirement as a potential barrier for some ACOs to enter into performancebased risk tracks, particularly small, physician-only and rural ACOs that may lack access to the capital that is needed to establish a repayment mechanism with a large dollar amount. We revised the Track 1+ Model design in July 2017 (See Track 1+ Model Fact Sheet (Updated July 2017)), to allow for potentially lower repayment mechanism amounts for participating ACOs under a revenue-based loss sharing limit (that is, ACOs that do not include an ACO participant that is either (i) an IPPS hospital, cancer center, or rural hospital VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 with more than 100 beds; or (ii) an ACO participant that is owned or operated by such a hospital or by an organization that owns or operates such a hospital). This policy provides greater consistency between the repayment mechanism amount and the level of risk assumed by revenue-based or benchmark-based ACOs and helps alleviate the burden of securing a higher repayment mechanism amount based on the ACO’s benchmark expenditures, as required for Track 2 and Track 3 ACOs. We believed this approach would be appropriate for this subset of Track 1+ Model ACOs because they are generally at risk for repaying a lower amount of shared losses than other ACOs that are subject to a benchmark-based loss sharing limit (that is, ACOs that include the types of ACO participants previously identified in this final rule). Therefore, under the Track 1+ Model, a bifurcated approach is used to determine the estimated amount of an ACO’s repayment mechanism for consistency with the bifurcated approach to determining the loss sharing limit under the Track 1+ Model. For Track 1+ Model ACOs, CMS estimates the amount of the ACO’s repayment mechanism as follows: • ACOs subject to the benchmark-based loss sharing limit: The repayment mechanism amount is 1 percent of the total per capita Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries, as determined based on expenditures used to establish the ACO’s benchmark for the applicable agreement period. • ACOs subject to the revenue-based loss sharing limit: The repayment mechanism amount is the lesser of (1) 2 percent of the ACO participants’ total Medicare Parts A and B FFS revenue, or (2) 1 percent of the total per capita Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries, as determined based on expenditures used to establish the ACO’s benchmark. Under § 425.204(f)(3), an ACO must replenish the amount of funds available through the repayment mechanism within 90 days after the repayment mechanism has been used to repay any portion of shared losses owed to CMS. In addition, our regulations require a repayment mechanism arrangement to remain in effect for a sufficient period of time after the conclusion of the agreement period to permit CMS to calculate and to collect the amount of shared losses owed by the ACO. Under our current Repayment Mechanism Arrangements Guidance, this standard would be satisfied by an arrangement that terminates 24 months following the end of the agreement period. PO 00000 Frm 00115 Fmt 4701 Sfmt 4700 67929 (2) Repayment Mechanism Amounts As previously noted, an ACO that is seeking to participate in a two-sided model must submit for CMS approval documentation supporting the adequacy of a mechanism for repaying shared losses, including demonstrating that the value of the arrangement is at least the minimum amount specified by CMS. In the August 2018 proposed rule, we proposed to modify § 425.204(f) to address concerns regarding the amount of the repayment mechanism, to specify the data used by CMS to determine the repayment mechanism amount, and to permit CMS to specify a new repayment mechanism amount annually based on changes in ACO participants. In general, we believe that, like other ACOs participating in two-sided risk tracks, ACOs applying to participate in the BASIC track under performancebased risk should be required to provide CMS assurance of their ability to repay shared losses by establishing an adequate repayment mechanism. Consistent with the approach used under the Track 1+ Model, we believed the amount of the repayment mechanism should be potentially lower for BASIC track ACOs compared to the repayment mechanism amounts required for ACOs in Track 2 or the ENHANCED track. We proposed to calculate a revenue-based repayment mechanism amount and a benchmarkbased repayment mechanism amount for each BASIC track ACO and require the ACO to obtain a repayment mechanism for the lesser of the two amounts described previously. We believed this aligned with our proposed approach for determining the loss sharing limit for ACOs participating in the BASIC track, described in section II.A.3.b. of this final rule. In addition, we believed this approach would balance concerns about the ability of ACOs to take on performance-based risk and repay any shared losses for which they may be liable with concerns about the burden imposed on ACOs seeking to enter and continue their participation in the BASIC track. Previously, we have used historical data to calculate repayment mechanism amounts, typically using the same reference year to calculate the estimates consistently for all applicants to a twosided model. As a basis for the estimate, we have typically used assignment and expenditure data from the most recent prior year for which 12 months of data are available, which tends to be benchmark year 2 for ACOs applying to enter the program or renew their participation agreement (for example, calendar year 2016 data for ACOs E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67930 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations applying to enter participation agreements beginning January 1, 2018). The Repayment Mechanism Arrangements Guidance includes a detailed description of how we have previously estimated 1 percent of the total per capita Medicare Parts A and B FFS expenditures for an ACO’s assigned beneficiaries based on the expenditures used to establish the ACO’s benchmark. To continue calculating the estimates with expenditures used to calculate the benchmark, we would need to use different sets of historical data for ACOs applying to enter or renew an agreement and those transitioning to a performance-based risk track. That is because ACOs applying to start a new agreement period under the program and ACOs transitioning to risk within different years of their current agreement period will have different benchmark years. To avoid undue operational burden, we proposed in the August 2018 proposed rule to use the most recent calendar year, for which 12 months of data is available to calculate repayment mechanism estimates for all ACOs applying to enter, or transitioning to, performance-based risk for a particular performance year. We believe this approach to using more recent historical data to estimate the repayment mechanism amount would more accurately approximate the level of losses for which the ACO could be liable regardless of whether the ACO is subject to a benchmark-based or revenue-based loss sharing limit. Therefore, we proposed to amend § 425.204(f)(4) to specify the methodologies and data used in calculating the repayment mechanism amounts for BASIC track, Track 2, and ENHANCED track ACOs. For an ACO in Track 2 or the ENHANCED track, we proposed that the repayment mechanism amount must be equal to at least 1 percent of the total per capita Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries, based on expenditures for the most recent calendar year for which 12 months of data are available. For a BASIC track ACO, we proposed that the repayment mechanism amount must be equal to the lesser of (i) 1 percent of the total per capita Medicare Parts A and B FFS expenditures for its assigned beneficiaries, based on expenditures for the most recent calendar year for which 12 months of data are available; or (ii) 2 percent of the total Medicare Parts A and B FFS revenue of its ACO participants, based on revenue for the most recent calendar year for which 12 months of data are available. For ACOs with a participant agreement start date VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 of July 1, 2019, we also proposed to calculate the repayment mechanism amount using expenditure data from the most recent calendar year for which 12 months of data are available. Currently, we generally do not revise the estimated repayment mechanism amount for an ACO during its agreement period. For example, we typically do not revise the repayment mechanism amount during an ACO’s agreement period to reflect annual changes in the ACO’s certified ACO participant list. However, in the Track 1+ Model, CMS may require the ACO to adjust the repayment mechanism amount if changes in an ACO’s participant composition occur within the ACO’s agreement period that result in the application of relatively higher or lower loss sharing limits. As explained in the Track 1+ Model Fact Sheet, if the estimated repayment mechanism amount increases as a result of the ACO’s change in composition, CMS would require the Track 1+ ACO to demonstrate its repayment mechanism is equal to this higher amount. If the estimated amount decreases as a result of its change in composition, CMS may permit the ACO to decrease the amount of its repayment mechanism (for example, if CMS also determines the ACO does not owe shared losses from the prior performance year under the Track 1+ Model). As we indicated in the August 2018 proposed rule, we believe a similar approach may be appropriate to address changes in the ACO’s composition over the course of an agreement period and to ensure the adequacy of an ACO’s repayment mechanism as it enters higher levels of risk within the ENHANCED track or the BASIC track’s glide path. During an agreement period, an ACO’s composition of ACO participant TINs and the individuals who bill through the participant TINs may change. The repayment mechanism estimation methodology we previously described in this section uses data based on the ACO participant list, including estimated expenditures for the ACO’s assigned population, and in the case of the proposed BASIC track, estimated revenue for ACO participant TINs. See for example, Repayment Mechanism Arrangements Guidance (describing the calculation of the repayment mechanism amount estimate). As a result, over time the initial repayment mechanism amount calculated by CMS may no longer represent the expenditure trends for the ACO’s assigned population or ACO participant revenue and therefore may not be sufficient to ensure the ACO’s ability to repay losses. For this reason and we explained in the PO 00000 Frm 00116 Fmt 4701 Sfmt 4700 August 2018 proposed rule, we believe it would be appropriate to periodically recalculate the amount of the repayment mechanism arrangement. For agreement periods beginning on or after July 1, 2019, we proposed to recalculate the estimated amount of the ACO’s repayment mechanism arrangement before the second and each subsequent performance year in which the ACO is under a two-sided model in the BASIC track or ENHANCED track. If we determine the estimated amount of the ACO’s repayment mechanism has increased, we may require the ACO to demonstrate the repayment mechanism arrangement covers at least an amount equal to this higher amount. We proposed to make this determination as part of the ACO’s annual certification process, in which it finalizes changes to its ACO participant list prior to the start of each performance year. We would recalculate the estimate for the ACO’s repayment mechanism based on the certified ACO participant list each year after the ACO begins participation in a two-sided model in the BASIC track or ENHANCED track. If the amount has increased substantially (for example, by at least 10 percent or $100,000, whichever is the lesser value), we would notify the ACO in writing and require the ACO to submit documentation for CMS approval to demonstrate that the funding for its repayment mechanism has been increased to reflect the recalculated repayment mechanism amount. We would require the ACO to make this demonstration within 90 days of being notified by CMS of the required increase. We recognize that in some cases, the estimated amount may change insignificantly. Requiring an amendment to the ACO’s arrangement (such as the case would be with a letter of credit or surety bond) would be overly burdensome and not necessary for reassuring CMS of the adequacy of the arrangement. Therefore, we proposed to evaluate the amount of change in the ACO’s repayment mechanism, comparing the newly estimated amount and the amount estimated for the most recent prior performance year. We proposed that, if this amount increases by equal to or greater than either 10 percent or $100,000, whichever is the lesser value, we would require the ACO to demonstrate that it has increased the dollar amount of its arrangement to the recalculated amount. We solicited comments on whether a higher or lower change in the repayment mechanism estimate should trigger the ACO’s E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations obligation to increase its repayment mechanism amount. However, unlike the Track 1+ Model, we proposed that if the estimated amount decreases as a result of the ACO’s change in composition, we would not permit the ACO to decrease the amount of its repayment mechanism. The ACO repayment mechanism estimate does not account for an ACO’s maximum liability amount and it is possible for an ACO to owe more in shared losses than is supported by the repayment mechanism arrangement. Because of this, we believe it is more protective of the Trust Funds to not permit decreases in the repayment mechanism amount, during an ACO’s agreement period under a two-sided model, based on composition changes. We believe the requirements for repayment mechanism amounts should account for the special circumstances of renewing ACOs, which would otherwise have to maintain two separate repayment mechanisms for overlapping periods of time. As discussed in section II.A.5.c.(4). of this final rule, we proposed to define ‘‘renewing ACO’’ to mean an ACO that continues its participation in the program for a consecutive agreement period, without a break in participation, because it is either: (1) An ACO whose participation agreement expired and that immediately enters a new agreement period to continue its participation in the program; or (2) an ACO that terminated its current participation agreement under § 425.220 and immediately enters a new agreement period to continue its participation in the program. We proposed at § 425.204(f)(3)(iv) that a renewing ACO can use its existing repayment mechanism to demonstrate that it has the ability to repay losses that may be incurred for performance years in the next agreement period, as long as the ACO submits documentation that the term of the repayment mechanism has been extended and the amount of the repayment mechanism has been updated, if necessary. However, depending on the circumstances, a renewing ACO may have greater potential liability for shared losses under its existing agreement period compared to its potential liability for shared losses under a new agreement period. Therefore, we proposed that if an ACO wishes to use its existing repayment mechanism to demonstrate its ability to repay losses in the next agreement period, the amount of the existing repayment mechanism must be equal to the greater of the following: (1) The amount calculated by CMS in accordance with the benchmark-based VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 methodology or revenue-based methodology, as applicable by track (see proposed § 425.204(f)(4)(iv)); or (2) the repayment mechanism amount that the ACO was required to maintain during the last performance year of its current agreement. We believed that this proposal would protect the financial integrity of the program by ensuring that a renewing ACO will remain capable of repaying losses incurred under its old agreement period. Finally, we proposed to consolidate at § 425.204(f)(4) all of our proposed policies, procedures, and requirements related to the amount of an ACO’s repayment mechanism, including provisions regarding the calculation and recalculation of repayment mechanism amounts. We also proposed to revise the regulations at § 425.204 to streamline and reorganize the provisions in paragraph (f), which we believe is necessary to incorporate these and other proposed requirements discussed in this final rule. Comment: One commenter supported the flexibility that would be afforded to BASIC track ACOs to establish a repayment mechanism amount based on the lesser of 1 percent of the total per capita Medicare Parts A and B FFS expenditures for its assigned beneficiaries or 2 percent of the total Medicare Parts A and B FFS revenue of its ACO participants. The commenter noted that this proposal would encourage participation in two sidedmodels by ACOs that would otherwise have been unable to secure funds necessary to participate in a two-sided model. Response: We appreciate this feedback supporting our repayment mechanism proposal for BASIC track ACOs. We agree with the commenter that this policy should encourage participation by ACOs in two-sided models by reducing the burden associated with establishing a repayment mechanism. In addition, to address concerns raised by commenters elsewhere in this final rule regarding the burden on ACOs transitioning from the BASIC track to the ENHANCED track (see section II.A.2), we are extending this policy to ACOs participating in the ENHANCED track. We believe that this will reduce the burden associated with establishing a repayment mechanism on lowerrevenue ACOs that would qualify for the new revenue-based repayment mechanism. Accordingly, for an ACO participating in a two-sided model under either the BASIC or ENHANCED track, the repayment mechanism amount must be equal to the lesser of (1) 1 percent of the total per capita PO 00000 Frm 00117 Fmt 4701 Sfmt 4700 67931 Medicare Parts A and B FFS expenditures for its assigned beneficiaries, based on expenditures for the most recent calendar year for which 12 months of data are available; or (ii) 2 percent of the total Medicare Parts A and B FFS revenue of its ACO participants, based on the revenue for the most recent calendar year for which 12 months of data are available. Comment: A few commenters supported our proposal to establish the repayment mechanism amount based on expenditures for the most recent calendar year for which 12 months of data are available, noting this will likely allow for more accurate estimates of the level of losses for which an ACO could be liable. Response: We appreciate this feedback supporting our proposal to use expenditure data from the most recent calendar year for which 12 months of data are available in determining an ACO’s repayment mechanism amount. We agree that this approach should lead to more accurate estimates of the approximate level of losses for which an ACO could be liable. We are finalizing this policy with respect to ACOs participating in the BASIC and ENHANCED tracks. While we originally proposed changes to the regulations to also apply this policy to Track 2 ACOs, we now believe that this policy would be irrelevant to Track 2 ACOs because we are retiring Track 2 as a participation option (see section A.2 of this final rule) and no new Track 2 ACOs will be entering the program on or after July 1, 2019. Furthermore, because we proposed to apply our new policy of recalculating the repayment mechanism amount on an annual basis only for agreement periods beginning on or after July 1, 2019, we will not be required to recalculate repayment mechanism amounts for existing Track 2 ACOs. For these reasons, we are finalizing revisions to § 425.204(f) so that the repayment mechanism amount for Track 2 ACOs will be based on expenditures used to calculate the benchmark, as is our current policy. Comment: Several commenters disagreed with our proposal to require an ACO to increase the dollar amount of its repayment mechanism arrangement in instances where the estimated repayment mechanism amount has increased by equal to or greater than either 10 percent or $100,000, whichever is the lesser value. These commenters stated that a threshold of the lesser of a 10 percent or $100,000 increase in the estimated repayment mechanism value is too low. The commenters noted that nearly all ACOs with a total cost of care of $200 million E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67932 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations or more would be required to increase their repayment mechanism amount each year under a threshold of $100,000, which would increase the burden on both CMS and ACOs. One commenter recommended that CMS use only a threshold of 10 percent, rather than employing a ‘‘lesser of’’ approach. Another commenter believed that our proposed threshold seemed reasonable but requested that CMS provide information about the number of ACOs that such threshold would potentially impact before finalizing this policy. This commenter also advocated that ACOs required to increase their repayment mechanism amount under such a policy should be provided with adequate time to do so. Response: We are persuaded by commenters’ suggestions to increase the thresholds that would trigger the requirement for an ACO to increase the dollar amount of its repayment mechanism arrangement. We are therefore finalizing a provision that will require an ACO to increase its repayment mechanism amount if the estimated value of the repayment mechanism amount increases by equal to or greater than 50 percent or $1,000,000, whichever is the lesser value. This would replace our originally proposed threshold of 10 percent or $100,000. These revised amounts are based on an analysis we conducted of the most recently available ACO repayment mechanism data. The analysis showed that a higher threshold of 50 percent or $1,000,000 would likely require only ACOs that had the largest changes in their estimated repayment mechanism value (the top 5 to 10 percent of ACOs) to increase their repayment mechanism amounts. We believe that this less restrictive requirement will minimize an ACO’s administrative burden and financial institution fees while adjusting for meaningful changes in repayment mechanism amounts that will help protect the Medicare Trust Funds. Comment: A few commenters expressed the belief that it would be unfair to require repayment mechanism amounts to increase from year to year without also allowing them to decrease. These commenters requested that CMS amend its proposal to allow for decreases in a repayment mechanism amount. The commenters also requested that CMS provide flexibility to release funds available through the repayment mechanism for a limited period of time (for example, for a 60 day period) for ACOs that need to change their repayment mechanism during an agreement period. We presume that the commenter suggested this to allow an VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 ACO to switch to a new repayment mechanism without having to put up new monies, but the commenter does not directly state or suggest this. Response: We decline at this time to allow ACOs to reduce their repayment mechanism amount if their estimated repayment mechanism value decreases. As we noted in the background to this section, the repayment mechanism estimate does not account for an ACO’s maximum liability amount, and it is possible for an ACO to owe more in shared losses than is supported by a repayment mechanism arrangement. For this reason, we believe it would be more protective of the Trust Funds to not permit decreases in the repayment mechanism amount during an ACO’s agreement period under a two-sided model. Similarly, the suggestion to allow release of funds for a limited period of time is outside the scope of our proposal and we therefore decline to adopt such suggestion at this time. We will monitor the number of ACOs that are affected by our finalized policy and the extent of the administrative burden on ACOs and on CMS and will use this information to refine our policies through future notice and comment rulemaking, if warranted. Comment: Several commenters suggested the proposed repayment mechanism amounts were too high. A few commenters recommended that the repayment mechanism amount for BASIC track ACOs be lowered to 0.5 percent of the ACO’s total per capita Medicare Parts A and B FFS expenditures or 1 percent of the total Medicare Parts A and B FFS revenue of its ACO participants. The commenters believed these lower amounts would be sufficient to prompt third-party due diligence and establish credit worthiness within the probable range of shared losses. Several other commenters expressed concern that rural ACOs would not be able to fund the required repayment mechanism amounts. Some noted that small rural hospitals, rural health clinics, and FQHCs lack the necessary resources to bear the additional expense. Another noted that small ACOs in rural areas may not have the cash flow to support ACO activities that produce savings and establish a repayment mechanism arrangement at the same time. Another commenter requested that when calculating a repayment mechanism amount CMS take into consideration whether the ACO has experienced an extreme and uncontrollable event. The commenter requested that CMS address the issue when developing its policy for extreme and uncontrollable circumstances. PO 00000 Frm 00118 Fmt 4701 Sfmt 4700 Several other commenters generally warned about the cost burden associated with the repayment mechanism requirement. One commenter noted that as non-profit, low revenue organization, it would potentially be forced out of the program because of its inability to fund a repayment mechanism due to lack of capital. Another commenter described the cost of having a repayment mechanism as contributing to the ‘‘high hurdle’’ of transitioning to accountable care. Response: We appreciate the feedback on the proposed repayment mechanism amounts and the perspectives offered on rural ACOs, ACOs affected by extreme and uncontrollable circumstances, and other ACOs with limited access to capital. While we recognize that repayment mechanisms impose costs on ACOs, we believe they are necessary to protect the financial integrity of the program and of the Medicare Trust Funds. We believe that providing a ‘‘lesser of’’ approach to the repayment mechanism amount for all ACOs in twosided models will help to mitigate this issue for rural ACOs or ACOs that otherwise face funding constraints. We therefore decline to make changes to the proposed repayment mechanism amounts at this time. Final Action: After considering the comments received, we are finalizing with modification our proposed provisions at § 425.204(f)(4) regarding the repayment mechanism amount as follows. We are finalizing § 425.204(f)(4)(i) to state that, for a Track 2 ACO, the repayment mechanism amount must be equal to at least 1 percent of the total per capita Medicare Parts A and B feefor-service expenditures used to calculate the benchmark for the applicable agreement period, as estimated by CMS at the time of application. We are finalizing § 425.204(f)(4)(ii) to state that, for a BASIC track or ENHANCED track ACO, the repayment mechanism amount must be equal to the lesser of the following: (A) One percent of the total per capita Medicare Parts A and B fee-for-service expenditures for the ACO’s assigned beneficiaries, based on expenditures for the most recent calendar year for which 12 months of data are available; or (B) two percent of the total Medicare Parts A and B fee-forservice revenue of its ACO participants, based on revenue for the most recent calendar year for which 12 months of data are available. We are finalizing § 425.204(f)(4)(iii) to state that, for agreement periods beginning on or after July 1, 2019, CMS recalculates the ACO’s repayment E:\FR\FM\31DER2.SGM 31DER2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations khammond on DSK30JT082PROD with RULES2 mechanism amount before the second and each subsequent performance year in the agreement period based on the certified ACO participant list for the relevant performance year. If the recalculated repayment mechanism amount exceeds the existing repayment mechanism amount by at least 50 percent or $1,000,000, whichever is the lesser value, CMS notifies the ACO in writing that the amount of its repayment mechanism must be increased to the recalculated repayment mechanism amount. Within 90 days after receipt of such written notice from CMS, the ACO must submit for CMS approval documentation that the amount of its repayment mechanism has been increased to the amount specified by CMS. We are finalizing § 425.204(f)(4)(iv) to state that, in the case of an ACO that has submitted a request to renew its participation agreement and wishes to use its existing repayment mechanism to establish its ability to repay any shared losses incurred for performance years in the new agreement period, the amount of the repayment mechanism must be equal to the greater of the following: (A) The amount calculated by CMS in accordance with § 425.204(f)(4)(ii) of this section; or (B) the repayment mechanism amount that the ACO was required to maintain during the last performance year of the participation agreement it seeks to renew. (3) Submission of Repayment Mechanism Documentation Currently, ACOs applying to enter a performance-based risk track under the Shared Savings Program must meet the eligibility requirements, including demonstrating they have established an adequate repayment mechanism under § 425.204(f). We noted in the August 2018 proposed rule that we believed that modifications to the existing repayment mechanism requirements would be necessary to address circumstances that could arise if our proposed approach to allowing ACOs to enter or change risk tracks during the current agreement period is finalized. Specifically, we believed modifications would be necessary to reflect the possibility that an ACO that initially entered into an agreement period under the one-sided model years of the BASIC track’s glide path will transition to performance-based risk within their agreement period, and thereby would become subject to the requirement to establish a repayment mechanism. The current regulations specify that an ACO participating under a two-sided model must demonstrate the adequacy VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 of its repayment mechanism prior to the start of each agreement period in which it takes risk and upon request thereafter (§ 425.204(f)(3)). We are revisiting this policy in light of our proposal to automatically transition ACOs in the BASIC track’s glide path from a onesided model to a two-sided model beginning in their third performance year, and also under our proposal that would allow BASIC ACOs to elect to transition to performance-based risk beginning in their second performance year of the glide path. We believe ACOs participating in the BASIC track’s glide path should be required to demonstrate they have established an adequate repayment mechanism consistent with the requirement for ACOs applying to enter an agreement period under performance-based risk. Therefore, we proposed to amend the regulations to provide that an ACO entering an agreement period in Levels C, D, or E of the BASIC track’s glide path must demonstrate the adequacy of its repayment mechanism prior to the start of its agreement period and at such other times as requested by CMS. In addition, we proposed that an ACO entering an agreement period in Level A or Level B of the BASIC track’s glide path must demonstrate the adequacy of its repayment mechanism prior to the start of any performance year in which it either elects to participate in, or is automatically transitioned to a twosided model (Level C, Level D, or Level E) of the BASIC track’s glide path, and at such other times as requested by CMS. We sought comment on these proposals. Final Action: We received no comments on these proposals. We are therefore finalizing our proposed revisions to § 425.204(f)(3) without modification. (4) Repayment Mechanism Duration We acknowledged in the August 2018 proposed rule that the proposed change to an agreement period of at least 5 years would affect the term for the repayment mechanism. Under the program’s current requirements, the repayment mechanism must be in effect for a sufficient period of time after the conclusion of the agreement period to permit CMS to calculate the amount of shared losses owed and to collect this amount from the ACO (§ 425.204(f)(4)). We pointed readers to the June 2015 final rule for a discussion of the requirement for ACOs to demonstrate that they would be able to repay shared losses incurred at any time within the agreement period, and for a reasonable period of time after the end of each PO 00000 Frm 00119 Fmt 4701 Sfmt 4700 67933 agreement period (the ‘‘tail period’’). We explained that this tail period must be sufficient to permit CMS to calculate the amount of any shared losses that may be owed by the ACO and to collect this amount from the ACO (see 80 FR 32783). This is necessary, in part, because financial reconciliation results are not available until the summer following the conclusion of the performance year. We have interpreted this requirement to be satisfied if the repayment mechanism arrangement remains in effect for 24 months after the end of the agreement period (see Repayment Mechanism Arrangements Guidance). Once ACOs are notified of shared losses, based on financial reconciliation, they have 90 days to make payment in full (see §§ 425.606(h) and 425.610(h)). We proposed to specify at § 425.204(f)(6) the general rule that a repayment mechanism must be in effect for the duration of the ACO’s participation in a two-sided model plus 24 months after the conclusion of the agreement period. Based on our experience with repayment mechanisms, we believed ACOs would be able to work with financial institutions to establish repayment mechanism arrangements that would cover a 5-year agreement period plus a 24-month tail period. This proposed approach would have been consistent with the program’s current guidance. We proposed some exceptions to this general rule. First, we proposed that CMS may require an ACO to extend the duration of its repayment mechanism beyond the 24-month tail period if necessary to ensure that the ACO will repay CMS any shared losses for each of the performance years of the agreement period. We indicated that this may be necessary in rare circumstances to protect the financial integrity of the program. Second, we proposed that the duration requirement account for the special circumstances of renewing ACOs, which would otherwise have to maintain two separate repayment mechanisms for overlapping periods of time. As previously noted, we proposed at § 425.204(f)(3)(iv) that a renewing ACO can choose to use its existing repayment mechanism to demonstrate that it has the ability to repay losses that may be incurred for performance years in the next agreement period, as long as the ACO submits documentation that the term of the repayment mechanism has been extended and the amount of the repayment mechanism has been increased, if necessary. We proposed at § 425.204(f)(6) that the term of the existing repayment mechanism must be E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67934 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations extended in these cases and that it must periodically be extended thereafter upon notice from CMS. We considered the amount of time by which we would require the existing repayment mechanism to be extended. As discussed in section II.A.5. of this final rule, renewing ACOs (as we proposed to define that term at § 425.20) may have differing numbers of years remaining under their current repayment mechanism arrangements depending on whether the ACO is renewing at the conclusion of its existing agreement period or if the ACO is an early renewal (terminating its current agreement to enter a new agreement period without interruption in participation). We recognized that it may be difficult for ACOs that are completing the term of their current agreement period to extend an existing repayment mechanism by 7 years (that is, for the full 5-year agreement term plus 24 months). Therefore, we considered whether the program would be adequately protected if we permitted the existing repayment mechanism to be extended long enough to cover the first 2 or 3 performance years of the new agreement period (that is, an extension of 4 or 5 years, respectively, including the 24-month tail period). We solicited comment on whether we should require a longer or shorter extension. We explained that, if we permit an ACO to extend its existing repayment mechanism for less than 7 years, we would require the ACO to extend the arrangement periodically upon notice from CMS. Under this approach, the ACO would eventually have a repayment mechanism arrangement that would not expire until at least 24 months after the end of the new agreement period. We sought comment on whether this approach should also apply to an ACO entering two-sided risk for the first time (that is, an ACO that is not renewing its participation agreement). We would continue to permit a renewing ACO to maintain two separate repayment mechanisms (one for the current agreement period and one for the new agreement period). Under our proposal, if CMS notifies a renewing ACO that its repayment mechanism amount will be higher for the new agreement period, the ACO may either (i) establish a second repayment mechanism arrangement in the higher amount for 7 years (or for a lesser duration that we have specified in this final rule), or (ii) increase the amount of its existing repayment mechanism to the amount specified by CMS and extend the term of the repayment mechanism arrangement for an amount of time specified by CMS (7 years or for a lesser VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 duration that we have specified in this final rule). We proposed that, on the other hand, if CMS notifies a renewing ACO that the repayment mechanism amount for its new agreement period is equal to or lower than its existing repayment mechanism amount, then the ACO could similarly choose to extend the duration of its existing repayment mechanism instead of obtaining a second repayment mechanism for the new agreement period. However, in that case, the ACO would be required to maintain the repayment mechanism at the existing higher amount. Third, we believed that the term of a repayment mechanism may terminate earlier than 24 months after the agreement period if it is no longer needed. Under certain conditions, we permit early termination of a repayment mechanism and release of the arrangement’s remaining funds to the ACO. These conditions are specified in the Repayment Mechanism Arrangements Guidance, and we proposed to include similar requirements at § 425.204(f)(6). Specifically, we proposed that the repayment mechanism may be terminated at the earliest of the following conditions: • The ACO has fully repaid CMS any shared losses owed for each of the performance years of the agreement period under a two-sided model; • CMS has exhausted the amount reserved by the ACO’s repayment mechanism and the arrangement does not need to be maintained to support the ACO’s participation under the Shared Savings Program; or • CMS determines that the ACO does not owe any shared losses under the Shared Savings Program for any of the performance years of the agreement period. For example, if a renewing ACO opts to establish a second repayment mechanism for its new agreement period, it may request to cancel the first repayment mechanism after reconciliation for the final performance year of its previous agreement period if it owes no shared losses for the final performance year and it has repaid all shared losses, if any, incurred during the previous agreement period. We solicited comments on whether the provisions proposed at § 425.204(f)(6) are adequate to protect the financial integrity of the Shared Savings Program, to provide greater certainty to ACOs and financial institutions, and to facilitate the establishment of repayment mechanism arrangements. Comment: We did not receive any comments in support of our proposal to require, as a general rule, that an ACO’s repayment mechanism be in effect for the duration of the ACO’s participation in a two-sided model plus 24 months after the conclusion of the agreement PO 00000 Frm 00120 Fmt 4701 Sfmt 4700 period, or up to a seven-year period for ACOs entering a five-year agreement period under two-sided risk. A few commenters requested that CMS remove the 24-month tail period, expressing concerns that a 24-month tail period would increase financial requirements for ACOs. These commenters believe that if CMS decides to finalize the 24month tail period policy, then the agency should be liable to pay for additional shared savings discovered during the 24-months following the end of an agreement period. Several other commenters recommended that we shorten the repayment mechanism tail period to 12 months, noting that this would meet the run-out time for financial reconciliation and allow sufficient time for an ACO to repay any associated shared losses. Another commenter stated that a 24month tail period would place undue burden on small and low-revenue ACOs and recommended that CMS use a 12to 18-month tail period instead, which the commenter believes is a sufficient period for CMS to determine if an ACO has incurred shared losses and for an ACO to repay those losses. Response: We are persuaded by commenters’ concerns regarding the potential burden associated with our proposed requirement that ACOs have in effect a repayment mechanism for the duration of the ACO’s participation in a two-sided model plus 24 months after the conclusion of the agreement period (which, as proposed, would require such ACOs to procure a repayment mechanism for a five-year agreement period plus an additional 24-month tail period). We agree that financial reconciliation and the repayment of any losses will normally occur within 12 months following the conclusion of a performance year except in very limited circumstances. Because we believe that such exceptions would be rare based on or our experience in collecting shared losses from ACOs, we believe the added risk to the Trust Funds of reducing the tail period to 12 months would be limited and is outweighed by the desire to reduce burden on ACOs. We are therefore finalizing a policy to reduce the length of the required tail period to 12 months following the end of the agreement period. Comment: Several commenters raised concerns about the ability of an ACO to obtain a repayment mechanism that would cover a 5-year agreement period plus our proposed 24-month tail period. One commenter specifically raised concerns about the ability of rural ACOs to obtain a repayment mechanism that would satisfy our proposed duration requirement due to the insufficient E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations collateral available to independent, rural physicians and a likely unwillingness of lenders to extend credit when there may be changes to regulations under the Shared Savings Program after the repayment mechanism is issued. The commenter noted that if an ACO does not have funding to pay for a repayment mechanism and is therefore forced to terminate its participation in the program, then the ACO will lose its investment and anticipated shared savings. Other commenters expressed concern that the lengthened duration would adversely affect ACOs that use surety bonds as a repayment mechanism, noting that that surety bonds are rarely issued beyond five years. One commenter noted that a seven-year surety bond would likely require an ACO to bear significant carrying costs. Another commenter stated that the requirement to maintain a seven-year term would severely limit the availability of surety bonds available to ACOs and would most likely require 100 percent collateral, thereby imposing a significant liquidity and capital burden on ACOs. The commenter indicated that this would be especially problematic for physician-led and small, rural ACOs that lack access to low-cost capital. Another commenter advised that extending repayment mechanisms to five-year agreement period with a 24month tail might limit the availability of surety bonds to ACOs because the higher risk associated with the longer duration of the bonded obligation could cause issuers to tighten their underwriting standards. Some commenters recommended a repayment mechanism duration of no more than 3 years, with annual renewal of the repayment mechanism through the end of the tail period. One commenter suggested that this alternative, coupled with a reduction of the threshold for requiring an ACO to update its repayment mechanism amount, would protect the financial integrity of the program, streamline to one consistent repayment mechanism, and preserve the viability of surety bonds and letters of credit for physicianled and small, rural ACOs. Response: We appreciate the concerns raised by stakeholders regarding the potential impact of our proposed repayment mechanism duration requirements on the availability of repayment mechanism arrangements, including the availability of surety bonds. We first reiterate that we are reducing the total required duration of a repayment mechanism arrangement by reducing the length of the required tail period from 24 months to 12 months VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 following the end of an agreement period. Based on this modification to our proposed repayment mechanism duration policy and our experience with repayment mechanisms, we continue to believe that ACOs, including ACOs that obtain surety bonds, will be able to work with financial institutions to establish repayment mechanism arrangements that will cover a 5-year agreement period plus the 12-month tail period. For example, we note that five of eight ACOs that exercised the deferred renewal option finalized in the June 2016 final rule, secured an approved surety bond for a 6-year term. In addition, we are modifying our policy to permit ACOs to satisfy the duration requirement by establishing a repayment mechanism that covers a term of at least the first two performance years in which the ACO is participating under a two-sided model and that provides for automatic, annual 12month extensions of the repayment mechanism such that the repayment mechanism will eventually remain in effect for the duration of the agreement period plus 12 months following the conclusion of the agreement period. For example, an ACO seeking to enter into a participation agreement with CMS under the ENHANCED track on January 1, 2020 could choose to establish a repayment mechanism with a term of six years to cover the five-year agreement period plus a 12-month tail period. Alternatively, the ACO could establish a repayment mechanism covering the first two performance years (ending December 31, 2021) and providing for automatic annual 12 month extensions starting at the end of the first performance year. After the repayment mechanism has been in effect for one performance year (that is, at the end of 2020, the first performance year of the agreement period), the term would automatically be extended by an additional 12 months (through December 31, 2022). Additional automatic 12-month extensions would occur on a rolling basis at the end of the second, third, and fourth performance years of the agreement period, with the last of these extending the arrangement until 12 months after the end of the agreement period (through December 31, 2025). For an ACO entering into a participation agreement with CMS under two-sided risk on July 1, 2019 that chooses this option (that is, a repayment mechanism that has a term of at least two performance years and that provides for automatic, annual 12month extensions), the initial term of the repayment mechanism arrangement would be 18 months because the PO 00000 Frm 00121 Fmt 4701 Sfmt 4700 67935 repayment mechanism would cover the 6-month performance beginning July 1, 2019 and the 12-month performance year beginning January 1, 2020. At the end of 2019 (after the repayment mechanism has been in effect for one performance year), the term of the repayment mechanism would automatically be extended by 12 months through the end of the third performance year of the agreement period (through December 31, 2021). Because the agreement period would include six performance years in total, additional automatic 12-month extensions would occur on a rolling basis at the end of the second, third, fourth, and fifth performance years, ultimately extending the arrangement until 12 months after the end of the agreement period (through December 31, 2025). The initial term of the repayment mechanism cannot expire before the end of the second performance year because the amount of any shared losses incurred for the first performance year will not be known until the second half of the second performance year. We note that the annual 12-month extensions would be occurring one year before the repayment mechanism would otherwise expire. However, the rolling 12-month extensions ensure that a new performance year will not start without ensuring that the repayment mechanism will remain in effect when the ACO is obligated to repay shared losses, if any, for that new performance year. As discussed below, we are finalizing a similar policy for any renewing ACO that wishes to use its existing repayment mechanism to guarantee its ability to repay shared losses. We believe that allowing ACOs to obtain a repayment mechanism with a shorter initial term will provide additional flexibility to and lessen the potential burden on ACOs, including physician-led, small and rural ACOs. Furthermore, we believe that requiring automatic, annual 12-month extensions of the repayment mechanism will also reduce the burden on an ACO to take action to extend or renew the term of its repayment mechanism, while sufficiently protecting the Medicare Trust Funds. We also believe that this policy, along with the ‘‘lesser of’’ repayment mechanism amounts policy that we are finalizing (as described in section II.A.6.c.(2) of this final rule), addresses concerns that certain ACOs have limited access to funds to obtain a repayment mechanism. While we believe that the modifications to the repayment mechanism policies that we are finalizing in this rule will, in total, E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67936 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations reduce burden on ACOs relative to the proposed policies, we recognize that some ACOs may still be unable to meet the repayment mechanism requirements and would need to terminate their participation in the program. We note that in these cases, the policies for payment consequences of early termination that we are finalizing in section II.A.6.d.(3) of this final rule would apply. Comment: One commenter affiliated with surety bond issuers recommended that the regulation should clearly state that extending the duration or increasing the amount of a surety bond requires the surety’s consent, and that refusal by the surety to extend or increase the bond should not trigger a default under the existing bond. Response: We realize that the surety would need to consent to extending the duration or increasing the amount of a surety bond, but we do not believe that our regulations need to be revised to state this. If the surety refuses to extend the term of the bond or to increase the amount of the bond, the ACO would be required to enter into a different or additional repayment mechanism arrangement that satisfies the terms of our regulations. We therefore decline to adopt the commenter’s recommendation. Comment: One commenter supported a policy we considered in the proposed rule that would allow a renewing ACO to extend its existing repayment mechanism long enough to cover the first 2 or 3 performance years of its new agreement period, provided that the ACO periodically extends its repayment mechanism until the end of the tail period. The commenter believes that this option would balance the need to protect the integrity of the program while not necessarily creating a burden that would inhibit continued ACO participation, which could occur if ACOs are required to obtain a sevenyear extension on top of an existing repayment term. The commenter noted that a seven-year extension could be prohibitively difficult for an ACO to secure. Response: We appreciate this commenter’s feedback on the alternative approach for extension of a renewing ACO’s existing repayment mechanism, which we considered in the proposed rule. We agree with the commenter’s concerns and are therefore finalizing a policy that would allow a renewing ACO two options for extending its existing repayment mechanism to meet the duration requirement. Under the first option, a renewing ACO’s existing repayment mechanism would be extended to cover the new VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 agreement period plus 12 months following the end of the new agreement period. For example, an ACO that started participating under Track 2 of the Shared Savings Program in 2017 would have established a five year repayment mechanism expiring on December 31, 2021 (covering its current three-year agreement period plus a 24month tail period). If the ACO renews its participation in the program under the ENHANCED Track on January 1, 2020, then the ACO would have two years of its existing repayment mechanism remaining at time of renewal and could therefore satisfy the duration requirement by extending its existing repayment mechanism arrangement by four years (until December 31, 2025) when entering its new five-year agreement period. The remaining term of the existing repayment mechanism (two years) plus the extension (four years) would together cover the full duration of the new five-year agreement period plus the 12-month tail period. Under the second option, a renewing ACO’s existing repayment mechanism would be extended, if necessary, to cover a term of at least the first two performance years of the new agreement period and would provide for automatic, annual 12-month extensions of the repayment mechanism such that the repayment mechanism will eventually remain in effect until 12 months following the completion of the new agreement period. For example, consider an ACO that has one year remaining on its existing repayment mechanism at the time it renews its participation on January 1, 2020. In this case, the existing arrangement would need to be extended by one year (until December 31, 2021) such that the new term of the existing repayment arrangement does not expire before the end of the second performance year of the new agreement period. The arrangement would also need to be amended to include a clause that provides for automatic, annual 12month extensions of the arrangement starting at the end of the first performance year of the new agreement period. Thus, at the end of the first performance year in December 2020, the repayment mechanism (which would otherwise expire on December 31, 2021) would be extended an additional 12 months and thereby expire on December 31, 2022. At the end of the second performance year in December 2021, the repayment mechanism would again be extended another 12 months and thereby expire on December 31, 2023. Eventually, the rolling annual 12-month PO 00000 Frm 00122 Fmt 4701 Sfmt 4700 extensions would cause the repayment mechanism to expire 12 months after the end of the agreement period (on December 31, 2025), and no further extensions would be required. We believe that these options for the extension of an existing repayment mechanism arrangement will help ensure payment of shared losses and alleviate the concerns raised by the commenter about lengthy extensions potentially inhibiting continued ACO participation in the program. We also wish to note that these options would also be available to an ACO that voluntarily terminates its existing agreement period and then immediately enters a new agreement period without a break in participation (described as an early renewal in section II.A.5.c.(4) of this final rule) and would be applied in the same manner. Finally we wish to clarify that renewing ACOs (including early renewals) can also choose to establish a new repayment mechanism arrangement that either covers the full duration of the new agreement period plus the 12-month tail period or covers a term of at least two years and provides for automatic annual 12-month extensions as described above. Comment: One commenter supported our proposal to permit early termination of a repayment mechanism under certain conditions, such as when we determine that the ACO does not owe shared losses under the Shared Savings Program for any of the performance years of the ACO’s agreement period. Response: We thank the commenter for their support of this proposal. We are finalizing our policy regarding early termination of a repayment mechanism as proposed. Final Action: After considering the comments received, we are finalizing with modification our proposed provisions regarding the duration of the repayment mechanism at § 425.204(f)(6) as follows. We are finalizing § 425.204(f)(6) to state that with limited exceptions, a repayment mechanism must be in effect for the duration of an ACO’s participation under a two-sided model plus 12 months after the conclusion of the agreement period. We are finalizing § 425.204(f)(6)(i) to state that for an ACO that is establishing a new repayment mechanism to meet this requirement, the repayment mechanism must satisfy one of the following criteria: (A) The repayment mechanism covers the entire duration of the ACO’s participation under a twosided model plus 12 months following the conclusion of the agreement period; or (B) the repayment mechanism covers an term of at least the first two E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations performance years in which the ACO is participating under a two sided model and provides for automatic, annual 12month extensions of the repayment mechanism such that the repayment mechanism will eventually remain in effect through the duration of the agreement period plus 12 months following the conclusion of the agreement period. We are finalizing § 425.204(f)(6)(ii) to state that for a renewing ACO that wishes to use its existing repayment mechanism to establish its ability to repay any shared losses incurred for performance years in the new agreement period, the existing repayment mechanism must be amended to meet one of the following criteria (A) the duration of the existing repayment mechanism is extended by an amount of time that covers the duration of the new agreement period plus 12 months following the conclusion of the new agreement period; or (B) the duration of the existing repayment mechanism is extended, if necessary, to cover a term of at least the first two performance years of the new agreement period and provides for automatic, annual 12month extensions of the repayment mechanism such that the repayment mechanism will eventually remain in effect through the duration of the new agreement period plus 12 months following the conclusion of the new agreement period. We are finalizing § 425.204(f)(6)(iii) to state that, CMS may require an ACO to extend the duration of its repayment mechanism beyond the 12-month tail period if necessary to ensure that the ACO fully repays CMS any shared losses for each of the performance years of the agreement period. We are finalizing § 425.204(f)(6)(iv) to state that a repayment mechanism may be terminated at the earliest of the following conditions: (A) The ACO has fully repaid CMS any shared losses owed for each of the performance years of the agreement period under a twosided model; (B) CMS has exhausted the amount reserved by the ACO’s repayment mechanism and the arrangement does not need to be maintained to support the ACO’s participation under the Shared Savings Program; or (C) CMS determines that the ACO does not owe any shared losses under the Shared Savings Program for any of the performance years of the agreement period. We note that, as modified, paragraphs § 425.204(f)(6)(i) and (ii), set forth the ways in which an ACO may meet the general requirement for the repayment mechanism described in § 425.204(f)(6). VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 Based on these finalized provisions, if CMS notifies a renewing ACO that its repayment mechanism amount will be higher for the new agreement period, the ACO may either (i) establish a second repayment mechanism arrangement in the higher amount under one of the options set forth in § 425.204(f)(6)(i); or (ii) increase the amount of its existing repayment mechanism to the higher amount and amend the existing repayment mechanism arrangement under one of the options set forth in § 425.204(f)(6)(ii). On the other hand, if CMS notifies a renewing ACO that the repayment mechanism amount for its new agreement period is equal to or lower than its existing repayment mechanism amount, the ACO may choose to amend its existing repayment mechanism under one of the options set forth in instead of obtaining a second repayment mechanism for the new agreement period. However, in that case, the ACO would be required to maintain the repayment mechanism at the existing higher amount. (5) Institutions Issuing Repayment Mechanism Arrangements We also proposed additional requirements related to the financial institutions through which ACOs establish their repayment mechanism arrangements that would be applicable to all ACOs participating in a performance-based risk track. With the proposed changes to offer only the BASIC track and ENHANCED track for agreement periods beginning on July 1, 2019 and in subsequent years, we anticipate an increase in the number of repayment mechanism arrangements CMS will review with each annual application cycle. We believe the proposed new requirements regarding the financial institutions with which ACOs establish their repayment mechanisms would provide CMS greater certainty about the adequacy of repayment mechanism arrangements and ultimately ease the process for reviewing and approving the ACO’s repayment mechanism arrangement documentation. Currently, as described in the program’s Repayment Mechanism Arrangements Guidance, CMS will accept an escrow account arrangement established with a bank that is insured by the Federal Deposit Insurance Corporation (FDIC), a letter of credit established at a FDIC-insured institution, and a surety bond issued by a company included on the U.S. Department of Treasury’s list of certified (surety bond) companies (available at https://www.fiscal.treasury.gov/ PO 00000 Frm 00123 Fmt 4701 Sfmt 4700 67937 fsreports/ref/suretyBnd/c570_a-z.htm). We have found that arrangements issued by these institutions tend to be more conventional arrangements that conform to the program’s requirements. However, we recognize that some ACOs may work with other types of financial institutions that may offer similarly acceptable products, but which may not conform to the standards described in our existing Repayment Mechanism Arrangements Guidance. For example, some ACOs may prefer to use a credit union to establish an escrow account or a letter of credit for purposes of meeting the repayment mechanism arrangements requirement, but credit unions are insured under the National Credit Union Share Insurance Fund program, rather than by the FDIC. Although the insuring entity is different, credit unions typically are insured up to the same insurance limit as FDIC-insured banks and are otherwise capable of offering escrow accounts and letters of credit that meet program requirements. We also believe that incorporating more complete standards for repayment mechanisms into the regulations would provide additional clarity for ACOs regarding acceptable repayment mechanisms and will help to avoid situations where an ACO may obtain a repayment mechanism arrangement from an entity that ultimately is unable to pay CMS the value of the repayment mechanism in the event CMS seeks to use the arrangement to recoup shared losses for which the ACO is liable. Since the June 2015 final rule, several ACO applicants have requested use of arrangements from entities other than those described in our Repayment Mechanism Arrangements Guidance, such as a letter of credit issued by the parent corporation of an ACO, and funds held in escrow by an attorney’s office. In reviewing these requests, we found a similar level of complexity resulting from the suggested arrangements as we did with our earlier experiences reviewing alternative repayment arrangements, which were permitted during the initial years of the Shared Savings Program until the regulations were revised in the June 2015 final rule to remove the option to establish an appropriate alternative repayment mechanism. In proposing to eliminate this option, we explained that a request to use an alternative repayment mechanism increases administrative complexity for both ACOs and CMS during the application process and is more likely to be declined by CMS (see 79 FR 72832). Although our program guidance (as specified in Repayment Mechanism E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67938 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations Arrangements Guidance, version 6, July 2017) encourages ACOs to obtain a repayment mechanism from a financial institution, these recent requests for approval of more novel repayment arrangements have alerted CMS to the potential risk that ACOs may seek approval of repayment mechanism arrangements from organizations other than those that CMS has determined are likely to be most financially sound and able to offer products that CMS can readily verify as appropriate repayment mechanisms that ensure the ACO’s ability to repay any shared losses. Therefore, we proposed to revise § 425.204(f)(2) to specify the following requirements about the institution issuing the repayment mechanism arrangement: An ACO may demonstrate its ability to repay shared losses by placing funds in escrow with an insured institution, obtaining a surety bond from a company included on the U.S. Department of Treasury’s List of Certified Companies, or establishing a line of credit (as evidenced by a letter of credit that the Medicare program can draw upon) at an insured institution. We anticipated updating the Repayment Mechanism Arrangements Guidance to specify the types of institutions that would meet these new requirements. For example, in the case of funds placed in escrow and letters of credit, the repayment mechanism could be issued by an institution insured by either the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund. The proposed revisions would bring clarity to the program’s requirements, which will assist ACOs in selecting, and reduce burden on CMS in reviewing and approving, repayment mechanism arrangements. We welcomed commenters’ suggestions on these proposed requirements for ACOs regarding the issuing institution for repayment mechanism arrangements. Comment: Several commenters expressed support for our proposal to expand the list of institutions with which an ACO may establish a repayment mechanism to include any insured institution. Some commenters noted that credit unions may provide ACOs with more economical repayment mechanism arrangements and could increase market competition, which could potentially lower the overall cost of accessing repayment mechanisms. Another commenter expressed appreciation for our proposed policies on the basis that they would alleviate burden and reduce barriers to participation for small and rural ACOs. Several other commenters expressed the belief that ACOs need repayment mechanism alternatives other than the VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 arrangements that we addressed in our Repayment Mechanism Arrangements Guidance or proposed in the August 2018 proposed rule. Some commenters specifically requested that CMS allow insurance or reinsurance coverage as a repayment mechanism. A few commenters noted that reinsurance is an established health care industry standard, and that accepting reinsurance as a repayment mechanism would encourage more ACOs to participate in the ENHANCED track. Other commenters noted that some ACOs already obtain reinsurance in addition to meeting their repayment mechanism obligations and that CMS should therefore consider reinsurance to be an acceptable repayment mechanism, as we did in our November 2011 final rule (76 FR 67979). Other commenters requested that we to permit ACOs to establish alternative repayment mechanisms as we did in our November 2011 final rule (76 FR 67979). These commenters expressed the belief that having alternative options would facilitate ACO participation in the program. While the commenters recognized the additional administrative complexity of permitting ACO to establish alternative arrangements, they believe that the number of ACOs seeking these such arrangements would be small, thus limiting the burden on ACOs and CMS during the repayment mechanism application process. A few commenters recommended that CMS consider allowing ACOs to repay losses through reduced payment rates for ACO eligible clinicians, similar to the MACRA financial risk standards. The commenters believe that some ACOs would prefer such a method over repaying losses in a lump sum. These commenters also recommended that CMS remove the repayment mechanism requirement when an ACO can prove that it has an investor or financial backer with a demonstrated high credit rating. Such financial backers could include outside investors, insurers, or hospitals or health systems that are involved with the ACO and providing financial support. The commenters believe that the current repayment mechanism process is time consuming and costly and that this suggested alternative could reduce those burdens while still protecting the Medicare Trust Funds. Response: We appreciate the support offered for our proposal to expand the list of institutions with which an ACO may establish a repayment mechanism, as well as the feedback from other stakeholders recommending that CMS offer ACOs additional options for establishing a repayment mechanism PO 00000 Frm 00124 Fmt 4701 Sfmt 4700 arrangement. As indicated by some of the commenters, we originally allowed ACOs to obtain reinsurance coverage or to establish another appropriate repayment mechanism in the early years of the program. However, we elected to eliminate those alternatives in the June 2015 final rule (see 80 FR 32783– 32784). We noted in that rule that no ACO had ultimately established reinsurance as its repayment mechanism. ACOs that explored that option told us that it was 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 performancebased risk rather than insurance risk. Additionally, we indicated that the terms of reinsurance policies could vary greatly and prove difficult for CMS to effectively evaluate. We also noted that, based on our experience, alternative repayment mechanisms increased administrative complexity for ACOs and CMS during the application process, and were more likely to be rejected by CMS than one of the specified repayment mechanisms. While we indicated in the June 2015 rule that we would potentially consider reinstating reinsurance as a repayment mechanism option at some point in the future, we did not propose to reinstate either reinsurance or alternative repayment mechanisms in the August 2018 rule, and we therefore consider these comments to fall outside the scope of this final rule. We similarly believe that suggestions to allow ACOs to repay loses through reductions to payment rates or to waive the repayment mechanism in the presence of a creditworthy financial backer fall outside the scope of this final rule. We would need to further evaluate these suggestions before considering whether to propose them in future rulemaking. Final Action: After considering comments received, we are finalizing § 425.204(f)(2) as proposed to specify that an ACO that will participate in a two-sided model must establish one or more of the following repayment mechanisms in an amount and by a deadline specified by CMS in accordance with § 425.204: An escrow account with an insured institution; a surety bond from a company included on the U.S. Department of Treasury’s List of Certified Companies; or a line of credit at an insured institution (as evidenced by a letter of credit that the Medicare program can draw upon). E:\FR\FM\31DER2.SGM 31DER2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations d. Advance Notice for and Payment Consequences of Termination khammond on DSK30JT082PROD with RULES2 (1) Background Sections 425.218 and 425.220 of the regulations describe the Shared Savings Program’s termination policies. Section 425.221, added by the June 2015 final rule, specifies the close-out procedures and payment consequences of early termination. Under § 425.218, CMS can terminate the participation agreement with an ACO when the ACO fails to comply with any of the requirements of the Shared Savings Program. As described in § 425.220, an ACO may also voluntarily terminate its participation agreement. The ACO must provide at least 60 days advance written notice to CMS and its ACO participants of its decision to terminate the participation agreement and the effective date of its termination. The November 2011 final rule establishing the Shared Savings Program indicated at § 425.220(b) (although this provision was subsequently revised) that ACOs that voluntarily terminated during a performance year would not be eligible to share in savings for that year (76 FR 67980). The June 2015 final rule revised this policy to specify in § 425.221(b)(1) that if an ACO voluntarily terminates with an effective termination date of December 31st of the performance year, the ACO may share in savings only if it has completed all required close-out procedures by the deadline specified by CMS and has satisfied the criteria for sharing savings for the performance year. ACOs that voluntarily terminate with an effective date of termination prior to December 31st of a performance year and ACOs that are involuntarily terminated under § 425.218 are not eligible to share in savings for the performance year. In the November 2018 final rule (83 FR 59958 and 59959) we finalized revisions to § 425.221(b) to allow our policies on the payment consequences of early termination to apply to ACOs participating in a 6-month performance year from January 1, 2019, through June 30, 2019. The current regulations also do not impose any liability for shared losses on two-sided model ACOs that terminate from the program prior to the last calendar day of a given performance year. As explained in the June 2015 final rule, the program currently has no methodology for partial year reconciliation (80 FR 32817). As a result, ACOs that voluntarily terminate before the end of the performance year are neither eligible to share in savings nor accountable for any shared losses. VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 In the August 2018 proposed rule (83 FR 41843 and 41844), we indicated that the existing policies on termination and the payment consequences of early termination raise concerns for both stakeholders and CMS. First, stakeholders have raised concerns that the current requirement for 60 days advance notice of a voluntary termination is too long because it does not allow ACOs to make timely, informed decisions about their continued participation in the program. Further, we noted that we were concerned that under the current policy, ACOs in two-sided models that are projecting losses have an incentive to leave the program prior to the end of a performance year, whereas ACOs that are projecting savings are likely to stay. Absent a change in our current policies on early termination, we believed these incentives could have a detrimental effect on the Medicare Trust Funds. (2) Advance Notice of Voluntary Termination In the August 2018 proposed rule, we stated that we were sympathetic to stakeholder concerns that the existing requirement for a 60-day notification period may hamper ACOs’ ability to make timely and informed decisions about their continued participation in the program. A key factor in the timing of ACOs’ participation decisions is the availability of program reports. Financial reconciliation reports (showing CMS’ determination of the ACO’s eligibility for shared savings or losses) are typically made available in the summer following the conclusion of the calendar year performance year (late July–August of the subsequent calendar year). Due to the timing of the production of quarterly reports (with information on the ACO’s assigned beneficiary population, and expenditure and utilization trends), an ACO contemplating a year-end termination typically only has two quarters of feedback for the current performance year to consider in its decision-making process. This is because quarterly reports are typically made available approximately 6 weeks after the end of the applicable calendar year quarter. For example, quarter 3 reports would be made available to ACOs in approximately mid-November of each performance year. These dates for delivery of program reports also interact with the application cycle timeline (with ACOs typically required to notify CMS of their intent to apply in May, typically before quarter 1 reports are available, and submit applications during the month of July, prior to receiving quarter 2 reports), as PO 00000 Frm 00125 Fmt 4701 Sfmt 4700 67939 applicants seek to use financial reconciliation data for the prior performance year and quarterly report data for the current performance year to make participation decisions about their continued participation, particularly ACOs applying to renew their participation for a subsequent agreement period. In the proposed rule, we stated that our belief that adopting a shorter notice requirement would provide ACOs with more flexibility to consider their options with respect to their continued participation in the program. We therefore proposed to revise § 425.220 to reduce the minimum notification period from 60 to 30 days. Reducing the notice requirement to 30 days would typically allow ACOs considering a year-end termination to base their decision on three quarters of feedback reports instead of two, given current report production schedules. Comment: We received several comments supporting our proposal to reduce the notice requirement for voluntary termination to 30 days, with some commenters noting that this change would allow an ACO to have more data on which to base its participation decision for the upcoming performance year. A few other commenters noted that they would support reducing the minimum notification period if an ACO that complied with the notice requirement could voluntarily terminate from the program without financial reconciliation for that year. Response: We appreciate the commenters’ support for this policy and agree that reducing the length of the notice requirement would allow an ACO to consider additional information, such as the information provided in their third quarter feedback reports, when making its participation decisions for the upcoming performance year and are finalizing this policy as proposed. As described in the next section of this final rule, we are also finalizing our proposal, with modification, to conduct financial reconciliation for voluntarily terminating ACOs with an effective date of termination after June 30 and, if applicable, to pro-rate any shared losses. This policy for voluntarily terminating ACOs will be applicable for 12-month performance years beginning on or after January 1, 2020, delayed from the original proposed date of January 1, 2019. Under this policy, ACOs giving at least 30 days advance notice for an effective termination date on or before June 30 of the performance year will not be subject to financial reconciliation and will not be accountable for shared E:\FR\FM\31DER2.SGM 31DER2 67940 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations losses for the performance year in which their termination becomes effective. Final Action: After considering the comments received on this issue, we are finalizing the proposed revisions to § 425.220 to reduce the minimum notification period for voluntary termination from 60 to 30 days without modification. (3) Payment Consequences of Termination khammond on DSK30JT082PROD with RULES2 In section II.6.d.3 of the August 2018 proposed rule, we discussed the payment consequences of early termination of an ACO’s participation agreement. We reconsidered the program’s current policies on payment consequences of termination under § 425.221 in light of our proposal to reduce the amount of advance notice from ACOs of their voluntarily termination of participation under § 425.220. While we believed that the proposal to shorten the notice period for voluntary termination under § 425.220 from 60 to 30 days would be beneficial to ACOs, we recognized that it might increase gaming among risk-bearing ACOs facing losses, as ACOs would have more time and information to predict their financial performance with greater accuracy. To deter gaming while still providing flexibility for ACOs in two-sided models to make decisions about their continued participation in the program, we considered several policy alternatives to hold these ACOs accountable for some portion of the shared losses generated during the performance year in which they terminate their participation in the program. We first considered a policy similar to that used in the Next Generation ACO (NGACO) Model whereby ACOs may terminate without penalty if they provide notice of termination to CMS on or before February 28, with an effective date 30 days after the date of the notice (March 30). ACOs that terminate after that date are subject to financial reconciliation. These ACOs are liable for any shared losses determined.20 The NGACO Model adopted March 30 as the deadline for the effective termination date in order to align with timelines for the Quality Payment Program. Specifically, this date ensures that clinicians affiliated with a terminating 20 In the August 2018 proposed rule (83 FR 41845), we inadvertently stated that the ACOs that terminate from the NGACO Model with an effective date of termination after March 30 are also eligible to share in savings. We wish to clarify that ACOs that terminate from the NGACO Model at any point after the start of the performance year are not eligible to earn shared savings for that performance year. VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 NGACO will not be included in the March 31 snapshot date for QP determinations. However, while we acknowledged the merit of reducing provider uncertainty around Quality Payment Program eligibility, we also recognized that in the early part of the performance year ACOs have a limited amount of information on which to base termination decisions. We noted that we are especially concerned that holding ACOs accountable for full shared losses may lead many organizations to leave the program early in the performance year, including those that would have ultimately been eligible for shared savings had they continued their participation. Post-termination, Shared Savings Program ACOs no longer have access to the same program resources that can help facilitate care management, such as beneficiaryidentifiable claims data or payment rule waivers, including the SNF 3-day rule waiver. This could make it more challenging for these entities to reduce costs, possibly offsetting any benefits to the Medicare Trust Funds from reduced gaming. Given the drawbacks of setting an early deadline for ACOs to withdraw without financial risk, we also considered a policy under which riskbearing ACOs that voluntarily terminate with an effective date after June 30 of a performance year would be liable for a portion of any shared losses determined for the performance year. We explained that we believe June 30 is a reasonable deadline for the effective date of termination as it allows ACOs time to accumulate more information and make decisions regarding their continued participation in the program. As is the case under current policy, for eligible clinicians in an ACO that terminates its participation in a Shared Savings Program track that is an Advanced APM effective between March 31 and June 30, we would make QP determinations as specified in our regulation at § 414.1425(b) based on one or more QP determination snapshot periods (January 1–March 31, and possibly also January 1–June 30). But, in accordance with our regulations at § 414.1425(c)(5) and (d)(3), an eligible clinician who would otherwise have received QP status based on one of those QP determinations would not be a QP or Partial QP for the year. Instead, those eligible clinicians would be subject to MIPS and scored using the APM scoring standard (unless they are excluded from MIPS on some other ground). We proposed to conduct financial reconciliation for all ACOs in two-sided models that voluntarily terminate after June 30. We proposed to use the full 12 PO 00000 Frm 00126 Fmt 4701 Sfmt 4700 months of performance year expenditure data in performing reconciliation for terminated ACOs with partial year participation. For those ACOs that generate shared losses, we would pro-rate the shared loss amount by the number of months during the year in which the ACO was in the program. To calculate the pro-rated share of losses, CMS would multiply the amount of shared losses calculated for the performance year by the quotient equal to the number of months of participation in the program during the performance year, including the month in which the termination was effective, divided by 12. We would count any month in which the ACO had at least 1 day of participation. Therefore, an ACO with an effective date of termination any time in July would be liable for 7/12 of any shared losses determined, while an ACO with an effective date of termination any time in August would be liable for 8/12, and so forth. An ACO with an effective date of termination in December would be liable for the entirety of shared losses. Terminated ACOs would continue to receive aggregate data reports following termination, but, as under current policy, would lose access to beneficiarylevel claims data and any payment rule waivers. In the August 2018 proposed rule (83 FR 41846), we explained that we believe this approach provides an incentive for ACOs to continue to control growth in expenditures and report quality for the relevant performance year even after they leave the program, as both can reduce the amount of shared losses owed. Increasing the proportion of shared losses owed with the number of months in the year that the ACO remains in the program also helps to counteract the potential for gaming, as ACOs that wait to base their termination decision on additional information would be liable for a higher portion of any shared losses that are incurred. This approach also reflects the fact that ACOs that terminate later in the performance year would have had access to program flexibilities (for example, the SNF 3-day rule waiver) for a longer period of time. We also considered the payment consequences of early termination for ACOs that are involuntarily terminated by CMS under § 425.218. Although these ACOs are not choosing to leave the program of their own accord and thus are not using termination as a means of avoiding their responsibility for shared losses, we believe they should not be excused from responsibility for some portion of shared losses simply because they failed to comply with program requirements. E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations Further, as we explained in the August 2018 proposed rule, we believe it is more appropriate to hold involuntarily terminated ACOs accountable for a portion of shared losses during any portion of the performance year. Since involuntary terminations can occur throughout the performance year, establishing a cut-off date for determining the payment consequences for these ACOs could allow some ACOs to avoid accountability for their losses. Therefore, we proposed to pro-rate shared losses for ACOs in two-sided models that are involuntarily terminated by CMS under § 425.218 for any portion of the performance year during which the termination becomes effective. We proposed that the same methodology as previously described for pro-rating shared losses for voluntarily terminated ACOs would also apply to determine shared losses for involuntarily terminated ACOs. We considered whether to allow ACOs voluntarily terminating after June 30 but before December 31 an opportunity to share in a portion of any shared saving earned. However, we decided to limit the proposed changes to shared losses. While we recognized that this approach might appear to favor CMS, we noted our belief that ACOs expecting to generate savings are less likely to terminate early in the first place. We explained that under the program’s current regulations at § 425.221(b)(1), ACOs that voluntarily terminate effective December 31 and that meet the current criteria in § 425.221 may still share in savings. We note that this provision was subsequently revised in November 2018 final rule (83 FR 59958 and 59959) to refer to an effective date of termination of the last calendar day of the performance year, in order to allow the policies governing the payment consequences of early termination to apply to ACOs participating in a 6month performance year from January 1, 2019, through June 30, 2019. In the August 2018 proposed rule, we proposed to amend § 425.221 to provide that ACOs in two-sided models that are terminated by CMS under § 425.218 or certain ACOs that voluntarily terminate under § 425.220 will be liable for a prorated amount of any shared losses determined for the performance year in which the termination becomes effective, with the pro-rated amount reflecting the number of months during the performance year that the ACO was in the program. We proposed to apply this policy to ACOs in two-sided models for performance years beginning in 2019 and subsequent performance years. VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 We also proposed to specify in the regulations at § 425.221 the payment consequences of termination during CY 2019 for ACOs preparing to enter or participating under agreements beginning July 1, 2019. First, as discussed in detail in section II.A.7. of the proposed rule, we would reconcile ACOs based on the respective 6-month performance year methodology for their participation during a 6-month period in 2019 in which they are either in a current agreement period beginning on or before January 1, 2019, or under a new agreement period beginning on July 1, 2019. We proposed that an ACO would be eligible to receive shared savings for a 6-month performance year during 2019, if they complete the term of this performance year, regardless of whether they choose to continue their participation in the program after the end of the performance year. That is, we would reconcile: ACOs that started a first or second agreement period on January 1, 2016, that extend their agreement period for a fourth performance year, and complete this performance year (concluding June 30, 2019); and ACOs that enter an agreement period on July 1, 2019, and terminate December 31, 2019, the final calendar day of their first performance year (defined as a 6-month period). For an ACO that participates for a portion of a 6-month performance year during 2019 (January 1, 2019, through June 30, 2019, or July 1, 2019, through December 31, 2019) we proposed the following: (1) If the ACO terminates its participation agreement effective before the end of the performance year, we would not reconcile the ACO for shared savings or shared losses (if a two-sided model ACO); (2) if CMS terminates a two-sided model ACO’s participation agreement effective before the end of the performance year, the ACO would not be eligible for shared savings and we would reconcile the ACO for shared losses and pro-rate the amount reflecting the number of months during the performance year that the ACO was in the program. To determine pro-rated shared losses for a portion of the 6-month performance year, we would determine shared losses incurred during CY 2019 and multiply this amount by the quotient equal to the number of months of participation in the program during the performance year, including the month in which the termination was effective, divided by 12. We would count any month in which the ACO had at least one day of participation. Therefore, if an ACO that started a first or second agreement period on January 1, 2016, extended its agreement period PO 00000 Frm 00127 Fmt 4701 Sfmt 4700 67941 for a 6-month performance year from January 1, 2019, through June 30, 2019, and was terminated by CMS with an effective date of termination of May 1, 2019, the ACO would be liable for 5/12 of any shared losses determined. If a July 1, 2019 starter was terminated by CMS with an effective date of termination of November 1, 2019, the ACO would also be liable for 5/12 of any shared losses determined. An ACO with an effective date of termination in December would be liable for the entirety of shared losses for the 6-month performance year. Second, ACOs that are starting a 12month performance year in 2019 would have the option to participate for the first 6 months of the year prior to terminating their current agreement and entering a new agreement period beginning on July 1, 2019. This includes ACOs that would be starting their 2nd or 3rd performance year of an agreement period in 2019, as well as ACOs that deferred renewal under § 425.200(e) and are starting a new agreement period in Track 2 or Track 3 on January 1, 2019. We proposed that ACOs with an effective date of termination of June 30, 2019, that enter a new agreement period beginning on July 1, 2019, would be eligible for pro-rated shared savings or shared losses for the 6-month period from January 1, 2019, through June 30, 2019, determined according to § 425.609. In the August 2018 proposed rule (83 FR 41846), we noted that we believe some ACOs may act quickly to enter one of the new participation options made available under the proposed redesign of the program. We explained our view that ACOs that complete the 6-month period of participation in 2019 should have the opportunity to share in the savings or be accountable for the losses for this period. However, we acknowledged that certain ACOs may ultimately realize they are not yet prepared to participate under a new agreement beginning on July 1, 2019 and seek to terminate quickly. We stated that although we would encourage ACOs to consider making the transition to one of the newly available participation options in 2019 in order to more quickly enter a participation agreement based on the proposed polices, we also did not want to unduly bind ACOs that aggressively pursue these new options. We believed the proposed approach would provide a means for ACOs to terminate their current participation agreement effective on June 30, 2019, prior to renewing their participation for an agreement period beginning July 1, 2019, or to quickly terminate from a E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67942 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations new agreement period beginning on July 1, 2019, without the concern of liability for shared losses for a portion of the year. In addition to the proposed changes to § 425.221(b) to accommodate the proposed new requirements governing the payment consequences of early termination, we also proposed further revisions to streamline and reorganize the provisions in § 425.221(b), which we believed were necessary to incorporate the proposed requirements. We sought comment on these proposals and the alternative policies discussed in section II.6.d.3 of the proposed rule. In section II.E.4 of the August 2018 proposed rule (83 FR 41899), we proposed policies to mitigate the impacts of extreme and uncontrollable circumstances on ACO quality and financial performance. As part of these proposals, we discussed an approach for mitigating shared losses for ACOs participating in a performance-based risk track (83 FR 41903 and 41904). In this discussion, we acknowledged that it is possible that ACOs that either voluntarily terminate after June 30th of a 12-month performance year or are involuntarily terminated and will be reconciled to determine a pro-rated share of any shared losses could also be affected by extreme and uncontrollable circumstances. In this case, we proposed that the amount of shared losses calculated for the calendar year would be adjusted to reflect the number of months and the percentage of the assigned beneficiary population affected by extreme and uncontrollable circumstances, before we calculate the pro-rated amount of shared losses for the portion of the year the ACO participated in the Shared Savings Program. For example, assume that: A disaster was declared for October 2019 through December 2019; an affected ACO had been involuntarily terminated on March 31, 2019 and will be reconciled for its participation during the portion of the performance year from January 1, 2019 through March 31, 2019. The ACO is determined to have shared losses of $100,000 for calendar year 2019; and 25 percent of the ACO’s assigned beneficiaries reside in the disaster area. In this scenario, we would adjust the ACO’s losses in the following manner: $100,000¥($100,000 × 0.25 × 0.25) = $100,000¥$6,250 = $93,750, then we would multiply these losses by the portion of the year the ACO participated = $93,750 × 0.25 = $23,437.50. We proposed to specify in revisions to §§ 425.606(i) and 425.610(i), and in the proposed new provision for the BASIC track at § 425.605(f), that the policies VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 regarding extreme and uncontrollable circumstances proposed in section II.E.4 of the August 2018 proposed rule would also apply to ACOs that are reconciled for a partial year of performance under § 425.221(b)(2) as a result of voluntary or involuntary early termination. The proposed revisions to §§ 425.606(i) and 425.610(i) also addressed the applicability of these policies to a Track 2 or Track 3 ACO that starts a 12-month performance year on January 1, 2019, and then elects to voluntarily terminate its participation agreement with an effective termination date of June 30, 2019, and enters a new agreement period starting on July 1, 2019; these ACOs would be reconciled for the performance period from January 1, 2019, through June 30, 2019, consistent with the proposed new provision at § 425.221(b). Comment: One commenter expressed support for our proposal to pro-rate shared losses for any ACO in a twosided model that voluntarily terminates after June 30 or that is involuntarily terminated by CMS under § 425.218. The commenter also supported our proposed methodology for calculating pro-rated shared losses. Several commenters agreed that an ACO that voluntarily terminates from the program should be held responsible for repayment of pro-rated shared losses based on the date of termination; however, they expressed their belief that an ACO that is involuntarily terminated by CMS should not be held responsible for any shared losses. They believe that an ACO that is involuntarily terminated by CMS is willing to continue to participate in the program and comply with program requirements, and, therefore, if CMS chooses to terminate any such ACO’s participation agreement, CMS should be the one to absorb any losses. Response: We appreciate the support for our proposals to pro-rate shared losses and for our proposed methodology for calculating pro-rated shared losses. We are finalizing these policies as proposed with the exception of the date of applicability which, as described below, is being delayed to performance years starting on or after July 1, 2019. We disagree with the commenters who believe that an ACO that is subject to involuntary termination by CMS under § 425.218 should be unaccountable for any shared losses. Under § 425.218, CMS may terminate an ACO’s participation agreement when the ACO, or its ACO participants, ACO provider/suppliers or other individuals or entities performing functions or services related to ACO activities, failed PO 00000 Frm 00128 Fmt 4701 Sfmt 4700 to comply with one or more program requirements. Accordingly, we believe that it would be unfair to treat any such ACO more favorably with respect to the payment consequences of early termination than an ACO that voluntarily decided to terminate its participation agreement. Comment: Several commenters requested that we reconsider allowing ACOs that voluntarily terminate after June 30 (but before December 31) an opportunity to share in a portion of any savings earned. A few of these commenters noted that there may be scenarios in which an ACO is forced to terminate early, and the ACO should not be penalized when such scenarios occur. Another commenter suggested that we allow an ACO that terminates early to continue to be eligible to share in savings so long as the ACO meets the criteria set forth in § 425.221. It was unclear whether this commenter was expressing support for our existing policy set forth in § 425.221, regarding an ACO’s eligibility to receive shared savings when the ACO terminates its participation prior to the end of its agreement period with an effective date of December 31 of a performance year, or whether the commenter believes that an ACO should be eligible to receive shared savings when it terminates its participation agreement before December 31 of a performance year so long as the ACO completes the requisite close-out procedures described in the current provision at § 425.221(a). Response: We continue to believe that it is important to maintain incentives for continued program participation and therefore, we decline to make any changes to our existing policies regarding the eligibility of an ACO to share in savings when the ACO voluntarily terminates its participation agreement. Under the program’s current regulations at § 425.221(b)(1), an ACO that voluntarily terminates its participation agreement effective on the last calendar day of the performance year and that meets the criteria in § 425.221 may still share in savings. Comment: One commenter opposed our proposal to conduct financial reconciliation for ACOs in two-sided models that voluntarily terminate after June 30, stating that it would compel an ACO to assume greater risk for losses during the year in which it voluntarily terminates. The commenter also noted that there are significant adjustments to benchmarks that occur as part of the annual financial reconciliation that are unknowable to ACOs early in the year, providing limited time for planning and decision-making regarding program participation. The commenter further E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations stated that most ACOs have invested significant resources to participate in the program and usually terminate only as a last resort. Response: We recognize that, in contrast to our current regulations, our proposed policies regarding the payment consequences of early termination would place ACOs at risk for shared losses in a year in which they voluntarily terminate prior to the end of the performance year. We also recognize that ACOs deciding whether to terminate early will be required to do so with incomplete information. While we do not intend to harm ACOs that decide to terminate as a last resort, we believe that our proposed policies are necessary to safeguard the Medicare Trust Funds against ACOs potentially gaming their participation decisions. Comment: Several commenters, while not expressing general opposition to requiring a voluntarily terminating ACO to repay a pro-rated share of shared losses, did disagree with our proposal to use June 30 as the cut-off date for determining whether an ACO would be liable, noting that ACOs would not have sufficient information on which to base a termination decision that early in the year. One commenter expressed the belief that the proposed date was problematic given 60- to 90-day lags associated with being able to perform claims-based analytics and therefore recommended that CMS simply continue the current practice of not prorating shared losses for early termination. Another commenter noted that an ACO would only have one quarter of performance year data by that point and would not have yet received its financial reconciliation report for the prior performance year. This commenter noted that a June 30 deadline would also conflict with the performance period for QPs under the Quality Payment Program, which ends on August 31, thus potentially affecting their ability to qualify as participating in an Advanced APM. The commenter recommended that CMS should therefore hold an ACO accountable for shared losses only if the ACO voluntarily terminates with an effective termination date on or after August 31. Commenters also suggested several other different alternatives to the proposed June 30 cut-off date. Several commenters expressed the belief that ACOs should have three quarters of data available to them to make an informed decision about continued participation. A few other commenters suggested using an effective date of termination for this policy that is 30 days after the receipt of second quarter data. Another commenter requested using September VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 30 as the cut-off date, noting this deadline would allow ACOs time to fully analyze two quarters of financial data before making the decision to voluntarily terminate. Another commenter supported using a September 30 date for ACOs in their first year under any risk track model and, in particular, for ACOs in Level C of the BASIC track. Response: We believe there are tradeoffs between allowing ACOs more time and information to make participation decisions without penalty and requiring an earlier cut-off date to reduce the risk of gaming. We continue to believe that the proposed cut-off date of June 30 strikes a balance between these tradeoffs. We also acknowledge one commenter’s point that under this policy there may be cases in which an ACO voluntarily terminates with an effective date after June 30 but before August 31 would mean that QPs participating in the ACO would no longer qualify as participating in an Advanced APM even though the ACO would still be accountable for a portion of any shared losses. However, we believe that the potential benefits to the Trust Funds outweighs this concern. For these reasons, we decline to adopt the commenters’ suggested alternatives and are finalizing our proposal to hold ACOs in two-sided models that voluntarily terminate with an effective date after June 30 liable for a pro-rated share of shared losses. Comment: One commenter recommended that CMS take into consideration whether an ACO had experienced an extreme and uncontrollable circumstance when applying the proposed policies around payment consequences of early termination. The commenter requested that the proposed methodology exclude losses that occur as a direct result of an extreme and uncontrollable event. Response: In the November 2018 final rule we finalized our proposals to extend the extreme and uncontrollable circumstances policies used for performance year 2017 to performance year 2018 and subsequent years (see 83 FR 59968 through 59979). In this final rule we are finalizing additional changes to address how these policies will be implemented for ACOs that are responsible for pro-rated shared losses under our new policies governing the payment consequences of early termination and that experience an extreme and uncontrollable event during the calendar year in which their termination becomes effective. Specifically, we will calculate the ACO’s shared loss amount based on the 12 month calendar year, adjusting the PO 00000 Frm 00129 Fmt 4701 Sfmt 4700 67943 shared losses amount to reflect the number of months and the percentage of the assigned beneficiary population affected by extreme and uncontrollable circumstances, before we calculate the pro-rated amount of shared losses for the portion of the year the ACO participated in the Shared Savings Program before termination. Accordingly, the policies we are finalizing regarding the payment consequences of early termination do in fact consider whether an ACO experienced an extreme and uncontrollable circumstance during the performance year and the losses that may have occurred as a result of any such circumstance. Final Action: After considering the comments received, we are finalizing the proposals described in this section with modifications to reflect a new date of applicability. We are amending § 425.221(b) of the regulations to provide that for performance years beginning on or after July 1, 2019, ACOs in two-sided models with an effective termination date before the last calendar day of the performance year that voluntarily terminate under § 425.220 with an effective date of termination after June 30 or that are terminated by CMS at any time during the performance year will be liable for a pro-rated amount of any shared losses determined, with the pro-rated amount reflecting the number of months during the performance year that the ACO was in the program. We originally proposed that the modifications to our policies on the payment consequences of early termination would be effective for performance years beginning in 2019. As a result of the delayed date of applicability, we are not finalizing our proposal to require ACOs under a twosided risk model that begin a 6-month performance year on January 1, 2019, and that are involuntarily terminated by CMS to repay a pro-rated amount of any shared losses determined. However, we are finalizing our proposal that ACOs under a two-sided model that begin a 6month performance year on July 1, 2019, and that are involuntarily terminated by CMS would be required to repay a pro-rated amount of any shared losses determined. We are finalizing this provision at § 425.221(b)(2)(ii). As reflected in § 425.221(b)(3)(i), we are also finalizing our proposal that ACOs that start a 12month performance year on January 1, 2019, that subsequently terminate their participation agreement with an effective date of termination of June 30, 2019, and enter a new agreement period beginning on July 1, 2019, would be E:\FR\FM\31DER2.SGM 31DER2 67944 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations eligible for pro-rated shared savings or accountable for pro-rated shared losses for the 6-month period from January 1, 2019, through June 30, 2019, as determined in accordance with § 425.609. We are also finalizing our proposal that the amount of shared losses determined for ACOs that are liable for pro-rated shared losses due to early termination will be adjusted to account for extreme and uncontrollable circumstances through revisions to §§ 425.606(i) and 425.610(i) and in the new provision for the BASIC track at § 425.605(f). 7. Participation Options for Agreement Periods Beginning in 2019 khammond on DSK30JT082PROD with RULES2 a. July 1, 2019 Agreement Start Date and Early Renewal Option (1) Background From the August 2018 Proposed Rule on Proposals for 6-Month Performance Years During CY 2019 In the August 2018 proposed rule (83 FR 41847 through 41849), we proposed a July 1, 2019 start date for ACOs to enter agreement periods under the proposed new participation options within the BASIC track and the ENHANCED track, and a voluntary 6month extension for ACOs whose first or second agreement periods expire December 31, 2018 to ensure these ACOs could continue their participation in the program without interruption. In conjunction with these proposals, we would also need a methodology to determine performance for ACOs under two, 6-month performance years during CY 2019, from January 1, 2019, through June 30, 2019, and from July 1, 2019, through December 31, 2019. We explained that in the November 2011 final rule establishing the Shared Savings Program, we implemented an approach for accepting and reviewing applications from ACOs for participation in the program on an annual basis, with agreement periods beginning January 1 of each calendar year. We also finalized an approach to offer two application periods for the first year of the program, allowing for an April 1, 2012 start date and a July 1, 2012 start date. In establishing these alternative start dates for the program’s first year, we explained that the statute does not prescribe a particular application period or specify a start date for ACO agreement periods (see 76 FR 67835 through 67837). We considered concerns raised by commenters about a January 1, 2012 start date, which would have closely followed the November 2011 publication of the final rule. Specifically, commenters were concerned about the ability of potential VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 ACOs to organize, complete, and submit an application in time to be accepted into the first cohort as well as our ability to effectively review applications by January 1, 2012. Comments also suggested that larger integrated health care systems would be able to meet the application requirements on short notice while small and rural entities might find this timeline more difficult and could be unable to meet the newlyestablished application requirements for a January 1 start date (76 FR 67836). In the August 2018 proposed rule, we explained that the considerations that informed our decision to establish alternative start dates at the inception of the Shared Savings Program were also relevant in determining the timing for making the proposed new participation options available. We explained that postponing the start date for agreement periods under these new participation options until later in 2019 would allow ACOs time to consider the new participation options and prepare for program changes; make investments and other business decisions about participation; obtain buy-in from their governing bodies and executives; complete and submit an application that conforms to the new participation options, if finalized; and resolve any deficiencies and provider network issues that may be identified, including as a result of program integrity and law enforcement screening. Postponing the start date for new agreement periods would also allow both new applicants and ACOs currently participating in the program an opportunity to make any changes to the structure and composition of their ACO as may be necessary to comply with the new program requirements for the ACO’s preferred participation option, if changes to the participation options are finalized as proposed. Therefore, we proposed to offer a July 1, 2019 start date as the initial opportunity for ACOs to enter an agreement period under the BASIC track or the ENHANCED track. As described in the August 2018 proposed rule, we anticipated the application cycle for the July 1, 2019 start date would begin in early 2019. We also elected to forgo the application cycle that otherwise would take place during CY 2018 for a January 1, 2019 start date for new Shared Savings Program participation agreements, initial use of the SNF 3-day rule waiver (as further discussed in section II.A.7.c.(1). of this final rule), and entry into the Track 1+ Model (as further discussed in section II.F. of this final rule). We explained that although several ACOs that entered initial agreements beginning in 2015 had PO 00000 Frm 00130 Fmt 4701 Sfmt 4700 deferred renewal into a second agreement period by 1 year in accordance with § 425.200(e) and will begin participating in a new 3-year agreement period beginning on January 1, 2019 under a performance-based risk track, applications would not be accepted from other ACOs for a new agreement period beginning on January 1, 2019. We proposed that the July 1, 2019 start date would be a one-time opportunity, and thereafter we would resume our typical process of offering an annual application cycle that allows for review and approval of applications in advance of a January 1 agreement start date. Therefore, we anticipated also offering an application cycle in 2019 for a January 1, 2020 start date for new, 5year participation agreements, and continuing to offer an annual start date of January 1 thereafter. We acknowledged that a delayed application due date for an agreement period beginning in 2019 could affect parties planning to participate in the Shared Savings Program for performance year 2019 and that are relying on the pre-participation waiver. Guidance for affected parties was posted on the CMS website. See Medicare Shared Savings Program Waivers: Special ACO Pre-Participation Waiver Guidance for the 2019 Application Cycle (Issued: August 9, 2018), available at https://www.cms.gov/Medicare/ Fraud-and-Abuse/ PhysicianSelfReferral/Downloads/2019Pre-Participation-Waiver-Guidance.pdf. We also explained that under the current Shared Savings Program regulations, the policies for determining financial and quality performance are based on an expectation that a performance year will have 12 months that correspond to the calendar year. Beneficiary assignment also depends on use of a 12-month assignment window, with retrospective assignment based on the 12-month calendar year performance year, and prospective assignment based on an offset assignment window before the start of the performance year. Given the calendar year basis for performance years under the current regulations, we considered how to address—(1) the possible 6-month lapse in participation that could result for ACOs that entered a first or second 3-year agreement period beginning on January 1, 2016, due to the lack of availability of an application cycle for a January 1, 2019 start date; and (2) the July 1 start date for agreement periods starting in 2019. To address the implications of a midyear start date on program participation and applicable program requirements, we considered our previous experience with the program’s E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations initial entrants, April 1, 2012 starters and July 1, 2012 starters. In particular, we considered our approach for determining these ACOs’ first performance year results (see § 425.608). The first performance year for April 1 and July 1 starters was defined as 21 and 18 months respectively (see § 425.200(c)(2)). The methodology we used to determine shared savings and losses for these ACOs’ first performance year consisted of an optional interim payment calculation based on the ACO’s first 12 months of participation and a final reconciliation occurring at the end of the ACO’s first performance year. This final reconciliation took into account the 12 months covered by the interim payment period as well as the remaining 6 or 9 months of the performance year, thereby allowing us to determine the overall savings or losses for the ACO’s first performance year. All ACOs opting for an interim payment reconciliation, including ACOs participating under Track 1, were required to assure CMS of their ability to repay monies determined to be owed upon final first year reconciliation. For Track 2 ACOs, the adequate repayment mechanism required for entry into a performance-based risk arrangement was considered to be sufficient to also assure return of any overpayment of shared savings under the interim payment calculation. Track 1 ACOs electing interim payment were similarly required to demonstrate an adequate repayment mechanism for this purpose. (See 76 FR 67942 through 67944). This interim payment calculation approach used in the program’s first year resulted in relatively few ACOs being eligible for payment based on their first 12 months of program participation. Few Track 1 ACOs established the required repayment mechanism in order to be able to receive an interim payment of shared savings, if earned. Not all Track 2 ACOs, which were required to establish repayment mechanisms as part of their participation in a two-sided model, elected to receive payment for shared savings or to be held accountable for shared losses based on an interim payment calculation. Of the 114 ACOs reconciled for a performance year beginning on April 1 or July 1, 2012, only 16 requested an interim payment calculation in combination with having established the required repayment mechanism. Of these 16 ACOs, 9 were eligible for an interim payment of shared savings, of which one Track 1 ACO was required to return the payment based on final results for the performance year. One Track 2 ACO VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 repaid interim shared losses, which were ultimately returned to the ACO based on its final results for the performance year. This approach to interim and final reconciliation was developed for the first two cohorts of ACOs, beginning in the same year and to which the same program requirements applied. The program has since evolved to include different benchmarking methodologies (depending on whether an ACO is in its first agreement period, or second agreement period beginning in 2016 or in 2017 and subsequent years) and different assignment methodologies (prospective assignment and preliminary prospective assignment with retrospective reconciliation), among other changes. In the August 2018 proposed rule, we expressed concern about introducing further complexity into program calculations by proposing to follow a similar approach of offering an extended performance year with the option for an interim payment calculation with final reconciliation for ACOs affected by the delayed application cycle for agreement periods starting in 2019. To address the implications of a midyear start date on program participation and applicable program requirements, we proposed to use an approach that would maintain financial reconciliation and quality performance determinations based on a 12-month calendar-year period, but would pro-rate shared savings/shared losses for each potential 6-month period of participation during 2019. Accordingly, we proposed an approach for implementing the proposed July 1, 2019 start date that included the following opportunities for ACOs, based on their agreement period start date: ACOs entering an agreement period beginning on July 1, 2019, would be in a participation agreement for a term of 5 years and 6 months, of which the first performance year would be defined as 6 months (July 1, 2019, through December 31, 2019), and the 5 remaining performance years of the agreement period would each consist of a 12month calendar year. ACOs that entered a first or second agreement period with a start date of January 1, 2016, would have the opportunity to elect to extend their agreement period for an optional fourth performance year, defined as the 6month period from January 1, 2019 through June 30, 2019. This election to extend the agreement period would be voluntary and an ACO could choose not to make this election and therefore conclude its participation in the program with the expiration of its PO 00000 Frm 00131 Fmt 4701 Sfmt 4700 67945 current agreement period on December 31, 2018. As discussed in section II.A.7.a.(2) of this final rule, we finalized the 6-month extension and the related policies for the 6-month performance year from January 1, 2019, through June 30, 2019, in the November 2018 final rule. An existing ACO that wants to quickly move to a new participation agreement under the BASIC track or the ENHANCED track could voluntarily terminate its participation agreement with an effective date of termination of June 30, 2019, and apply to enter a new agreement period with a July 1, 2019 start date to continue its participation in the program. This includes 2017 starters, 2018 starters, and 2015 starters that deferred renewal by 1 year, and entered into a second agreement period under Track 2 or Track 3 beginning on January 1, 2019. If the ACO’s application is approved by CMS, the ACO could enter a new agreement period beginning on July 1, 2019. (We would consider these ACOs to be early renewals.) ACOs currently in an agreement period that includes a 12month performance year 2019 that choose to terminate their current participation agreement effective June 30, 2019, and enter a new agreement period beginning on July 1, 2019, would be reconciled for their performance during the first 6 months of 2019. As described in section II.A.5.c.(5).(b). of this final rule, an ACO’s participation options for the July 1, 2019 start date would depend on whether the ACO is a low revenue ACO or a high revenue ACO and the ACO’s experience with performance-based risk Medicare ACO initiatives. As described in the August 2018 proposed rule, and section II.A.5.c.(5).(c) of this final rule, an early renewal ACO would be considered to be entering its next consecutive agreement period for purposes of the applicability of policies that phase-in over time (the weight used in the regional benchmark adjustment, equal weighting of the benchmark years, and the quality performance standard). In the August 2018 proposed rule, we considered several alternatives to the proposal to offer an agreement period of 5 years and 6 months beginning on July 1, 2019 (made up of 6 performance years, the first of which is 6 months in duration). We considered whether to offer instead an agreement period of five performance years (including a first performance year of 6 months). Under this alternative the agreement period would be 4 years and 6 months in duration. As previously described, in section II.A.2. of this final rule in connection with the discussion of our E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67946 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations proposal to extend the agreement period from 3 years to 5 years, program results have shown that ACOs tend to perform better the longer they are in the program and longer agreement periods provide additional time for ACOs to perform against a benchmark based on historical data from the 3 years prior to their start date. Further, the proposed changes to the benchmarking methodology (see section II.D. of this final rule) would result in more accurate benchmarks and mitigate the effects of reliance on increasingly older historical data as the agreement period progresses. We believed these considerations were also relevant to the proposed one-time exception to allow for a longer agreement period of 5 years and 6 months for ACOs that enter a new agreement period on July 1, 2019. We also considered forgoing an application cycle for a 2019 start date altogether and allowing ACOs to enter agreement periods for the BASIC track and ENHANCED track for the first time beginning in January 1, 2020. We noted that this approach would allow ACOs additional time to consider the redesign of the program, make organizational and operational plans, and implement business and investment decisions, and would avoid the complexity of needing to determine performance based on 6month performance years during CY 2019. However, our proposed approach of offering an application cycle during 2019 for an agreement period start date of July 1, 2019, would allow for a more rapid progression of ACOs to the redesigned participation options, starting in mid-2019. Further, we noted that under this alternative, we would also want to offer ACOs that started a first or second agreement period on January 1, 2016, a means to continue their participation between the conclusion of their current 3-year agreement (December 31, 2018) and the start of their next agreement period (January 1, 2020), should the ACO wish to continue in the program. Under an alternative that would postpone the start date for the new participation options to January 1, 2020, we would need to allow ACOs that started a first or second agreement period on January 1, 2016, to elect a 12-month extension of their current agreement period to cover the duration of CY 2019. We also proposed a number of modifications to the regulations text in order to effectuate the decision to delay the start date to July 1, 2019, and to allow for agreement periods of at least five years as opposed to 3-year agreement periods. We proposed modifications to the definitions of ‘‘agreement period’’ and ‘‘performance VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 year’’ in § 425.20. We proposed modifications to the provision at § 425.200(b)(2) to reflect that the term of the participation agreement is 3 years and 6 months for an ACO that entered an agreement period starting on January 1, 2016, that elects to extend its agreement period until June 30, 2019. We proposed to add a heading to § 425.200(b)(3) to specify that the provision applies to agreement periods beginning in 2017 and 2018. In addition, we proposed to add a new provision at § 425.200(b)(4) to specify that, for agreement periods beginning in 2019 the start date is—(1) January 1, 2019, and the term of the participation agreement is 3 years for ACOs whose first agreement period began in 2015 and who deferred renewal of their participation agreement under § 425.200(e); or (2) July 1, 2019, and the term of the participation agreement is 5 years and 6 months. We also proposed to add a new provision at § 425.200(b)(5) to specify that, for agreement periods beginning in 2020 and subsequent years, the start date is January 1 of that year and the term of the participation agreement is 5 years. In light of the proposed modifications to § 425.200(c) to establish two 6-month performance years during CY 2019, we also proposed to revise the regulation at § 425.200(d), which reiterates an ACO’s obligation to submit quality measures in the form and manner required by CMS for each performance year of the agreement period, to address the quality reporting requirements for ACOs participating in a 6-month performance year during CY 2019. We sought comment on these proposals and the related considerations, as well as the alternatives considered. (2) Background on the November 2018 Final Rule Establishing a Voluntary 6Month Performance Year From January 1, 2019, Through June 30, 2019 for Eligible ACOs In the November 2018 final rule (83 FR 59941 through 59959), we finalized a voluntary 6-month extension for ACOs that entered a first or second agreement period beginning on January 1, 2016, whose agreement periods would otherwise expire December 31, 2018. We also adopted a methodology for determining financial and quality performance for the 6-month performance year from January 1, 2019, through June 30, 2019, in a new section of the regulations at § 425.609. Under this methodology, we will perform reconciliation for ACOs that extend their agreement period for the 6-month performance year from January 1, 2019, PO 00000 Frm 00132 Fmt 4701 Sfmt 4700 through June 30, 2019, based on the ACO’s performance during the entire 12-month calendar year, and then prorate the calendar year shared savings or shared losses to reflect the ACO’s participation in that 6-month period. We also finalized certain changes to the program’s regulations to establish the 6-month extension and to make certain technical and conforming changes. We finalized as proposed the modifications to the definition of ‘‘agreement period’’ in § 425.20 to broaden the definition to generally refer to the term of the participation agreement and the revisions to § 425.200(a) to allow for agreement periods greater than 3 years. We also finalized our proposal to add a provision at § 425.200(b)(2) specifying that the term of the participation agreement is 3 years and 6 months for an ACO that entered an agreement period starting on January 1, 2016, that elects to extend its agreement period until June 30, 2019. We also finalized as proposed the revision to the definition of ‘‘performance year’’ in § 425.20 to mean the 12-month period beginning on January 1 of each year during the agreement period, unless otherwise specified in § 425.200(c) or noted in the participation agreement. Therefore, we also finalized the proposed revisions to § 425.200(c) to make necessary formatting changes and specify an additional exception to the definition of performance year as a 12-month period. Specifically, we finalized our proposal to add a provision specifying that for an ACO that entered a first or second agreement period with a start date of January 1, 2016, and that elects to extend its agreement period by a 6month period, the ACO’s fourth performance year is the 6-month period between January 1, 2019, and June 30, 2019. In light of the modifications we finalized to § 425.200(c) to establish a 6month performance year during CY 2019, we also finalized the proposed revisions to the regulation at § 425.200(d), which reiterates an ACO’s obligation to submit quality measures in the form and manner required by CMS for each performance year of the agreement period, to address the quality reporting requirements for ACOs participating in the 6-month performance year from January 1, 2019, through June 30, 2019. We noted that ACOs electing the voluntary 6-month extension will be required to report quality measures for the 2019 reporting period, based on CY 2019, consistent with the existing quality reporting process and methodology. E:\FR\FM\31DER2.SGM 31DER2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations khammond on DSK30JT082PROD with RULES2 (3) Establishing a July 1, 2019 Start Date and Early Renewal Option In the following discussion, we address the comments we received on our proposal to allow for a July 1, 2019 agreement start date, as well as the alternatives we considered to this proposed approach. We also address comments we received on the proposed early renewal option that would allow ACOs currently in an agreement period that includes a 12-month performance year 2019 that choose to terminate their current participation agreement effective June 30, 2019, and enter a new agreement period beginning on July 1, 2019, to be reconciled for their performance during the first 6 months of 2019. We described these proposals in section II.A.7.a.(1) of this final rule. Comment: Some commenters supported the proposed approach of offering a July 1, 2019 agreement start date, indicating the importance of providing ACOs the opportunity to begin or continue their participation in the program. Some commenters expressed their disappointment that the delay in rulemaking prevented a new cohort of ACOs from starting on January 1, 2019, and indicated that many ACOs have been eagerly awaiting application details and are prepared to participate in 2019. These commenters explained that while the timing will present challenges, such as a compressed timeline to analyze program changes, review application materials, make decisions regarding participation and gather all of the required information to submit applications, it is critical that CMS continue to offer a participation option for 2019. One commenter explained that given the interconnected relationship between the Shared Savings Program and the Quality Payment Program, it is crucial that CMS policy development not inadvertently deter ACOs from transitioning to risk in 2019. Of the commenters addressing the timing for implementation of the redesigned participation options, many commenters urged CMS to implement the redesigned participation options under the BASIC track and the ENHANCED track for agreement periods beginning on January 1, 2020 and in subsequent years. Many of these commenters suggested allowing ACOs whose agreement periods expire on December 31, 2018, a 12-month extension instead of a 6-month extension. Commenters expressed the following concerns with the proposed July 1, 2019 start date: VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 • Commenters raised concerns regarding the approach for determining performance for the two, 6-month performance years, as summarized elsewhere in section II.A.7 of this final rule. Some commenters expressed concerns about the complexity caused by ACOs being reconciled under two different methodologies for each 6-month performance year during CY 2019, with some ACOs operating under current program rules and others operating under new program rules. One commenter stated that the proposed July 1, 2019 start date, if implemented, would add confusion and make the program less predictable for participating providers whose prior experience with the program has been based on full calendar year performance periods. • Some commenters expressed concerns about rapid implementation of the proposed redesigned participation options. One commenter explained that in past experience when CMS has rushed the application period and start date it has resulted in implementation issues. One commenter pointed to the significant changes proposed to the program, and the lateness of the proposed rule as reasons to move the start date from July 1, 2019, to January 1, 2020. Several commenters suggested that CMS should ensure there is enough time for CMS and participants to consider the participation options, and prepare for an application cycle after the final rule is finalized. A few commenters requested that CMS delay the implementation of the redesigned participation options under the BASIC track and the ENHANCED track until January 1, 2020, if CMS is not ready to implement the new participation options for a July 1, 2019 start date. Another commenter suggested allowing at least a 6-month preparation period for the application cycle after publication of the final rule so that ACOs and ACO participants can adequately prepare and successfully implement any changes adopted in the final rule. • Several commenters expressed concerns about the timing of a mid-year start date, because ACOs would have limited data about their performance during performance year 2018, and the first 6-months of 2019 (if applicable). • One commenter stated that a July 1, 2019 start date would result in only six months to improve performance. Commenters explained that the advantages of a January 1, 2020 start date included the following: • Allowing additional time for ACOs and program stakeholders to assess the policy changes and for ACOs, ACO participants and ACO providers/suppliers to make participation decisions to maximize their financial and quality outcomes. One commenter explained that CMS and program stakeholders will need time to disseminate information to physicians. • Giving new ACOs adequate time to form and to review participation criteria. • Allowing CMS additional time to ensure smooth and effective implementation of the significant changes that were proposed in the August 2018 proposed rule. • Avoiding the complexity of the July 1, 2019 start date and the methodology for PO 00000 Frm 00133 Fmt 4701 Sfmt 4700 67947 determining performance for the two, 6month performance years during CY 2019. One commenter explained a January 2020 start date was preferable because it would give ACOs the opportunity to succeed under the new participation options for a full 12month performance year, as opposed to requiring these ACOs to participate in two partial years under 2 different methodologies. • Allowing ACOs entering performancebased risk models additional time to prepare their repayment mechanism arrangements, including to raise capital for their repayment mechanism. Other commenters more generally urged CMS to slow the pace of regulatory change for the Shared Savings Program. One commenter explained that early adopters of the Shared Savings Program have expressed dissatisfaction with CMS’ repeated changes to the program requirements and structure, which the commenter describes as burdensome particularly for rural and small health systems. One commenter expressed their appreciation for the changes to date implemented by CMS throughout the Medicare program to meaningfully reduce provider burden and allow providers to spend more time with patients. However, the commenter expressed their belief that implementing new Shared Savings Program participation agreements under such an accelerated timeframe does not align with these other welcomed reductions in provider burden or with CMS’ goals of strengthening and stabilizing the Shared Savings Program. Response: We appreciate commenters’ support for the proposed one-time, July 1, 2019 agreement period start date. This mid-year start date would allow for continuity in participation by ACOs whose agreement periods expire December 31, 2018, that elect to voluntarily extend their current agreement period for the 6-month performance year from January 1, 2019, through June 30, 2019, under the policies adopted in the November 2018 final rule (83 FR 59942 through 59946), without requiring additional rulemaking to establish an option for a longer extension. Recently, 90 percent of eligible ACOs with a first or second agreement period start date of January 1, 2016, whose agreements would otherwise expire on December 31, 2018, elected to voluntarily extend their agreements for the 6-month performance year from January 1, 2019, through June 30, 2019. We believe this demonstrates a high level of interest by ACOs in continuing their participation in the program by preserving their option to renew their participation uninterrupted for a new agreement period starting on July 1, 2019. E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67948 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations Further, as discussed in the August 2018 proposed rule, we continue to believe it is important to create a pathway for ACOs to more rapidly transition to performance-based risk. Allowing for a July 1, 2019 agreement start date would allow for a more rapid progression to the redesigned participation options under the BASIC track and the ENHANCED track, compared to alternatives that would postpone implementation of the redesigned participation options until 2020 or later. We also recognize the possibility that there are prospective ACOs that may have been unable to apply to enter the program given our decision to forgo an application cycle in CY 2018 for a January 1, 2019 agreement start date, and a July 1, 2019 start date will allow them to enter the program sooner. We refer readers to the November 2018 final rule (83 FR 59942 through 59946) for our responses to comments on the length of the extension available to ACOs whose agreement periods expire December 31, 2018. We believe many of the same considerations discussed in those responses are relevant in responding to the comments suggesting that we forgo an application cycle in CY 2019 and offer an initial agreement start date under the redesigned participation options of January 1, 2020 (necessitating a 12 month extension for ACOs whose agreement periods expire December 31, 2018). For instance, we believe ACOs whose agreement periods expire on December 31, 2018, have been weighing their participation options in advance of applying to renew for a subsequent agreement period, and will have additional time to make these determinations during the 6-month extension (if elected). In particular, ACOs reaching the end of their second agreement period under Track 1, would already have been weighing their participation options under two-sided models, given the current requirement that ACOs transition to a two-sided model by the start of their third agreement period in the program. In fact, our decision to finalize the 6month extension allows ACOs completing their second agreement period in Track 1 to continue participation under their current agreement period and thereby have additional time under a one-sided model that otherwise would not have been available to them. In response to commenters’ concerns about the timing of a mid-year agreement period start date in relation to the availability of performance results for prior performance years, including VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 performance year 2018 and the 6-month performance year from January 1, 2019, through June 30, 2019, we note that we provide ACOs with quarterly and annual aggregate program reports as well as other tools that they can use to track and estimate their performance. We educate ACOs on the use of quarterly program data to predict their financial performance. Therefore, we believe that ACOs have access to a variety of resources to assess their performance trends in order to help inform their participation decisions. With respect to the commenter’s concern that ACOs entering the program with an agreement period start date of July 1, 2019 would have only six months to improve performance, we note that such ACOs may take steps to ensure their readiness to meet the program’s objectives in advance of program entry. Specifically, we believe that ACOs preparing to enter an initial agreement period starting on July 1, 2019, may wish to take steps to ensure their operational readiness by implementing redesigned care processes in preparation to meet the program’s goals beginning July 1, 2019. These steps will assist these ACOs in succeeding under the approach for determining performance for the 6month performance year from July 1, 2019, through December 31, 2019, which we are finalizing in this final rule, under which they will be accountable for pro-rated performance during the entire CY 2019. Further we believe ACOs new to the Shared Savings Program that are considering participation under the BASIC track’s glide path may find the longer agreement period available with the July 1, 2019 start date advantageous. With an agreement period spanning 5 years and 6 months, ACOs that start in the program on July 1, 2019, would gain additional time in the program under the same historical benchmark prior to benchmark rebasing. As we previously described in section II.A.2. of this final rule, ACOs may find the greater predictability of benchmarks under longer agreement periods to be an advantage. Under our policies described in section II.A.7.c.(7). of this final rule, ACOs entering the BASIC track’s glide path under a one-sided model, for an agreement period beginning on July 1, 2019, gain an additional 6-months of participation under a one-sided model, prior to being automatically advanced through the glide path. Therefore, eligible ACOs entering an agreement period beginning on July 1, 2019, may participate for a total of 2.5 years (3 performance years) under a one-sided PO 00000 Frm 00134 Fmt 4701 Sfmt 4700 model if they begin in Level A and transition through each level of the glide path, or 3.5 years (4 performance years) if the ACO is a new legal entity, low revenue ACO that enters in Level A, transitions to Level B, and opts to remain in Level B for an extra performance year before transitioning to Level E for the remaining years of its agreement period. We appreciate commenters’ concerns about the possible need for additional time for CMS to prepare to implement the redesigned participation options. However, the timeframe for implementing the initial offering of the redesigned participation options for a July 1, 2019 start date is operationally feasible. We have recently redesigned our ACO management system, which supports application management functions among other functions. This management system facilitates our implementation of the redesigned participation options finalized in this final rule. The system changes include providing new user friendly interfaces for ACOs to manage their ACO participant list and list of ACO providers/suppliers. We have received positive feedback from ACOs on the functionality of this new system, which includes opportunities for real-time feedback on the Medicare enrollment status of ACO participants and streamlined processes. We also note that compared to the first year of the program where we had 3 application cycles, in advance of the April 1, 2012, July 1, 2012, and January 1, 2013 start dates, we will have only two application cycles in CY 2019, in advance of the July 1, 2019 start date and January 1, 2020 start date. Furthermore, unlike the first year of the program, we now have experience with 8 application cycles, and have applied lessons learned to streamline the process to make it more user friendly and efficient after each cycle. As a result, we will be able to provide an efficient and transparent process for ACOs to apply for a new agreement period beginning on July 1, 2019, so that they may begin participation under the redesigned program options as soon as possible. On balance, we believe it is important not to delay the implementation of the redesigned participation options under the Shared Savings Program, and to offer an opportunity for ACOs to enter the program or renew their participation for an agreement period under the new BASIC track or the ENHANCED track beginning on July 1, 2019. While we recognize that ACOs, ACO participants, and ACO providers/suppliers will need to adapt to the redesigned program requirements, we decline commenters’ E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations suggestions that we delay the implementation of these changes, and thereby maintain the status quo, in an effort to avoid the burden associated with what we believe are necessary program changes to drive ACOs to more aggressively pursue the program’s goals of lowering growth in Medicare FFS expenditures and improving quality of care for Medicare beneficiaries. We appreciate commenters’ concerns about the potential complexity of the approach for determining performance for 6-month performance years during CY 2019, as opposed to an alternative approach that would allow for implementation of the redesigned participation options for agreement periods beginning on January 1, 2020, and subsequent years, which would maintain 12-month performance years. To assist ACOs in understanding the operational details of participation in a 6-month performance year from July 1, 2019, through December 31, 2019, we anticipate providing education and offering outreach to ACOs through the various methods available, including guidance documents, webinars, FAQs and a weekly newsletter. In sections II.A.7.b. and II.A.7.c. of this final rule we respond to comments on the specific aspects of the methodology for determining financial and quality performance for the 6month performance year from July 1, 2019, through December 31, 2019, and other aspects of program participation affected by a 6-month performance year, including concerns about ACOs participating in two 6-month performance years during CY 2019. Comment: One commenter urged CMS to stagger the implementation of the proposed program redesign, so that it would apply on July 1, 2019, as proposed only to those ACOs that have been in the Shared Savings Program the longest, and would go into effect on January 1, 2020, for organizations that joined the program more recently, and January 1, 2021 for organizations that began in the program in 2018. Response: We decline the commenter’s suggested approach for staggering the program redesign policies based upon an ACO’s experience within the Shared Savings Program. As discussed previously, we continue to believe it is important to create a pathway for ACOs to more rapidly transition to performance-based risk. We note, as explained in section II.A.2 of this final rule, ACOs within a current agreement period may complete their current agreement under their existing track (Track 1, Track 2, Track 3, or the Track 1+ Model). Under the policies we proposed and are finalizing, these ACOs VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 would be required to renew in either the BASIC track or the ENHANCED track to continue their participation in the Shared Savings Program for a subsequent agreement period. For example, ACOs that entered a first or second agreement period beginning on January 1, 2016, and that elect the voluntary 6-month extension for the performance year from January 1, 2019, through June 30, 2019, would need to renew under the redesigned program participation options for a new agreement period beginning on July 1, 2019. ACOs with a first or second agreement period start date of January 1, 2017, or January 1, 2018, would be required to renew in either the BASIC track or the ENHANCED track to continue their participation in the Shared Savings Program for a subsequent agreement period beginning on January 1, 2020, or January 1, 2021 (respectively). Comment: Several commenters expressed confusion over whether ACOs may complete their current 3-year agreement period, or if early renewal for an agreement beginning on July 1, 2019, is mandatory. One commenter questioned whether the early renewal option includes the 6-month extension from January 1, 2019, through June 30, 2019. Response: We wish to clarify that early renewal is voluntary. Early renewal does not include a 6-month extension from January 1, 2019, through June 30, 2019, which was finalized in the November 2018 final rule and is limited to ACOs that entered a first or second agreement period beginning on January 1, 2016, whose agreement periods would otherwise expire on December 31, 2018. However, we note that early renewal will be available for ACOs that begin a 12-month performance year on January 1, 2019, and voluntarily elect to terminate their participation agreement with an effective date of termination of June 30, 2019, in order to enter a new agreement period starting on July 1, 2019. As discussed in section II.A.7.b. of this final rule, these early renewal ACOs would be reconciled for the 6-month performance period from January 1, 2019, through June 30, 2019, and for the 6-month performance year from July 1, 2019, through December 31, 2019. Comment: A few commenters expressed their support for the availability of the ACO Pre-Participation Waiver to protect ACO-related start-up arrangements in anticipation of new participants in the Shared Savings Program and the proposed redesigned program tracks. PO 00000 Frm 00135 Fmt 4701 Sfmt 4700 67949 Response: We thank the commenters for their feedback. Comments on the waivers of fraud and abuse laws are beyond the scope of this rulemaking. However, we note that on August 9, 2018, OIG and CMS jointly issued special guidance on the start date and end dates of the ACO Pre-Participation Waiver for the 2019 application cycle. See Medicare Shared Savings Program Waivers: Special ACO Pre-Participation Waiver Guidance for the 2019 Application Cycle (Issued: August 9, 2018), available at https://www.cms.gov/ Medicare/Fraud-and-Abuse/ PhysicianSelfReferral/Downloads/2019Pre-Participation-Waiver-Guidance.pdf. Complete information on fraud and abuse waivers issued in connection with the Shared Savings Program is available at: https://www.cms.gov/Medicare/ Fraud-and-Abuse/ PhysicianSelfReferral/Fraud-andAbuse-Waivers.html. No waivers of any fraud and abuse authorities are being issued in this final rule. Final Action: After consideration of the public comments received, we are finalizing our proposal for a one-time July 1, 2019 agreement period start date as the initial opportunity for ACOs to enter an agreement period under the redesigned participation options of the BASIC track or the ENHANCED track as described in sections II.A.2. and II.A.3. of this final rule. Further, as described in section II.A.5.c. of this final rule, we are finalizing our proposals with respect to the removal of the ‘‘sit-out’’ period after termination, and the definition of ‘‘renewing ACO’’ and are revising our regulations to allow an ACO to terminate its current participation agreement and renew early by entering a new agreement period without a break in participation. Under these final policies, ACOs that begin a 12-month performance year on January 1, 2019, may voluntarily elect to terminate their participation agreement with an effective date of termination of June 30, 2019, in order to enter a new agreement period under the new participation options starting on July 1, 2019. We are finalizing the proposed modifications to § 425.200(b)(3) to add a heading to specify that the provision applies to agreement periods beginning in 2017 and 2018. We are also finalizing the addition of a new provision at § 425.200(b)(4) to specify that, for agreement periods beginning in 2019 the start date is—(1) January 1, 2019, and the term of the participation agreement is 3 years for ACOs whose first agreement period began in 2015 and who deferred renewal of their participation agreement under § 425.200(e); or (2) July 1, 2019, and the E:\FR\FM\31DER2.SGM 31DER2 67950 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations term of the participation agreement is 5 years and 6 months. We are also finalizing the addition of a new provision at § 425.200(b)(5) specifying that, for agreement periods beginning in 2020 and subsequent years, the start date is January 1 of the applicable year, and the term of the participation agreement is 5 years. We are also finalizing the proposed revisions to § 425.200(c) to incorporate an additional exception to the definition of performance year as a 12-month period. We are adding paragraph (c)(3) specifying that for an ACO that entered an agreement period with a start date of July 1, 2019, the ACO’s first performance year of the agreement period is defined as the 6-month period between July 1, 2019, and December 31, 2019. The provision at § 425.200(d), as revised in the November 2018 final rule, reiterates an ACO’s obligation to submit quality measures in the form and manner required by CMS for each performance year of the agreement period, including as applicable according to § 425.609. Because the existing language of § 425.200(d), as revised by the November 2018 final rule, is broad enough to cover the quality reporting requirements for both 6-month performance years as specified under § 425.609, no further revision to this provision is required at this time to reflect our decision to finalize the July 1, 2019 agreement start and the provisions in § 425.609(c) governing the 6-month performance year from July 1, 2019, through December 31, 2019 (see section II.A.7.c.(4) of this final rule for a discussion of the related quality reporting requirements). b. Methodology for Determining Financial and Quality Performance for the 6-Month Performance Year During 2019 khammond on DSK30JT082PROD with RULES2 (1) Overview In this section we discuss our final policies for determining financial and quality performance for the 6-month performance year from July 1, 2019, through December 31, 2019. We also finalize an approach for determining performance during the period from January 1, 2019, through June 30, 2019, for ACOs that begin a 12-month performance year on January 1, 2019, and terminate their participation agreement with an effective date of termination of June 30, 2019, in order to enter a new agreement period starting on July 1, 2019. Consistent with our proposal in the August 2018 proposed rule (83 FR 41851 through 41853), the methodology that we are adopting for VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 making this determination aligns with the methodology for determining financial and quality performance for ACOs whose agreement periods would otherwise expire on December 31, 2018, that voluntarily elect to extend their agreement for the 6-month performance year from January 1, 2019, through June 30, 2019, as finalized in the November 2018 final rule (83 FR 59946 through 59951) and as specified at § 425.609(b). As we noted in the August 2018 proposed rule, this approach to reconciling ACO performance for a 6month performance year (or performance period) during 2019 will not alter the methodology that will be applied to determine financial performance for ACOs that complete a 12 month performance year corresponding to CY 2019 (83 FR 41850). In this section of this final rule, we also explain that the policies we are adopting require use of our authority under section 1899(i)(3) of the Act. Consistent with the approach taken in the August 2018 proposed rule, we use two terms, ‘‘6-month performance year’’ and ‘‘performance period’’ in discussing the 6-month periods during 2019. We use the term ‘‘6-month performance year’’ to refer to the following: (1) The fourth performance year from January 1, 2019, through June 30, 2019, for ACOs that started a first or second agreement period on January 1, 2016, and extend their current agreement period for this 6-month period; and (2) the first performance year from July 1, 2019, through December 31, 2019, for ACOs that enter an agreement period beginning on July 1, 2019. For an ACO starting a 12-month performance year on January 1, 2019, that terminates its participation agreement with an effective date of termination of June 30, 2019, and enters a new agreement period beginning on July 1, 2019, we refer to the 6-month period from January 1, 2019, through June 30, 2019, as a ‘‘performance period’’. In section II.A.7.b. of the August 2018 proposed rule, we proposed to use the same overall approach to determining ACO financial and quality performance for the two 6-month performance years during CY 2019 (the 6-month performance year from January 1, 2019, through June 30, 2019, and the 6-month performance year from July 1, 2019, through December 31, 2019). We noted that the specific policies used to calculate factors used in making these determinations would differ based on the ACO’s track, its agreement period start date, and the agreement period in which the ACO participates (for factors that phase-in over multiple agreement periods). In the August 2018 proposed PO 00000 Frm 00136 Fmt 4701 Sfmt 4700 rule, we proposed to specify the methodologies for reconciling these 6month performance years during 2019 in a new section of the regulations at § 425.609. Under our proposed approach to determining performance for ACOs participating in the 6-month performance years (or the 6-month performance period) during 2019, CMS would reconcile the financial and quality performance of these ACOs after the conclusion of CY 2019. For ACOs that extended their agreement period for the 6-month performance year from January 1, 2019, through June 30, 2019, or ACOs that terminated their agreement period early on June 30, 2019, and entered a new agreement period beginning on July 1, 2019, CMS would first reconcile the ACO based on its performance during the entire 12-month calendar year, and then pro-rate the calendar year shared savings or shared losses to reflect the ACO’s participation in that 6-month period. In a separate calculation, CMS would reconcile an ACO that participated for a 6-month performance year from July 1, 2019, through December 31, 2019, for the 12month calendar year in a similar manner, and pro-rate the shared savings or shared losses to reflect the ACO’s participation during that 6-month performance year. In the August 2018 proposed rule (83 FR 41850 and 41851), we explained this approach would avoid a more burdensome interim payment process that could accompany an alternative approach of implementing, for example, an 18-month performance year from July 1, 2019 to December 31, 2020. Consistent with the policies that applied to the 18- and 21-month performance years offered for the first cohorts of Shared Savings Program ACOs, such a policy could require ACOs to establish a repayment mechanism that otherwise might not be needed, create uncertainty over whether the ACO may ultimately need to repay CMS based on final results for the extended performance year, and delay ACOs seeing a return on their investment in program participation, if eligible for shared savings. We explained our belief that the proposed approach of determining performance during a 6-month performance year (or performance period) based on data for the full 12month calendar year would allow continuity in program operations (including operations that occur on a calendar year basis) for ACOs that have either one or two 6-month performance years (or performance period) within CY 2019. Specifically, the proposed E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations approach would allow for payment reconciliation to remain on a calendar year basis, which would be most consistent with the calendar year-based methodology for calculating benchmark expenditures, trend and update factors, risk adjustment, county expenditures and regional adjustments. We also explained that deviating from a 12month reconciliation calculation by using fewer than 12 months of expenditures could interject actuarial biases relative to the benchmark expenditures, which are based on 12month benchmark years. As a result, we believed this approach to reconciling ACOs based on a 12-month period would protect the actuarial soundness of the financial reconciliation methodology. We also explained our belief that the alignment of the proposed approach with the standard methodology used to perform the same calculations for 12-month performance years that correspond to a calendar year would make it easier for ACOs and other program stakeholders to understand the proposed methodology. As is the case with typical calendar year reconciliations in the Shared Savings Program, we anticipated results with respect to participation during CY 2019 would be made available to ACOs in summer 2020. We explained that this would allow those ACOs that are eligible to share in savings as a result of their participation in the program during CY 2019 to receive payment of shared savings following the conclusion of the calendar year consistent with the standard process and timing for annual payment reconciliation under the program. We proposed to provide separate reconciliation reports for each 6-month performance year (or performance period) and to pay shared savings or recoup shared losses separately for each 6-month performance year (or performance period) during 2019 based on these results. In section II.A.7.b.(2). of the August 2018 proposed rule (83 FR 41851 through 41853), we described in detail our proposed approach to determining an ACO’s performance for the 6-month performance year from January 1, 2019, through June 30, 2019. These policies were adopted in the November 2018 final rule (83 FR 59946 through 59951) and are specified in paragraph (b) of a new section of the regulations at § 425.609. (2) Determining Performance for the 6Month Performance Year From July 1, 2019, Through December 31, 2019 In section II.A.7.b.(3). of the August 2018 proposed rule (83 FR 41853 VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 through 41854), we described in detail our proposed approach to determining an ACO’s performance for the 6-month performance year from July 1, 2019, through December 31, 2019. Our proposed policies addressed the following: (1) The ACO participant list that will be used to determine beneficiary assignment; (2) the approach to assigning beneficiaries for the 6month performance year; (3) the quality reporting period for the 6-month performance year; (4) the benchmark year assignment methodology and the methodology for calculating, adjusting and updating the ACO’s historical benchmark; and (5) the methodology for determining shared savings and shared losses for the ACO for the performance year. We proposed to specify the methodology for reconciling the 6month performance year from July 1, 2019, through December 31, 2019, in paragraph (c) of a new section of the regulations at § 425.609. We noted that in determining performance for the 6-month performance year from July 1, 2019, through December 31, 2019, we would follow the same general methodological steps for calculating pro-rated shared savings and shared losses as would apply for the 6-month performance year from January 1, 2019 through June 30, 2019. However, we noted that, for example, the applicable benchmarking methodology, which is based on the ACO’s agreement period in the program, and financial model, which is based on the track in which the ACO is participating, would be different. We proposed to use the ACO participant list for the performance year beginning July 1, 2019, to determine beneficiary assignment, consistent with the assignment methodology the ACO selected at the start of its agreement period under proposed § 425.400(a)(4)(ii). As discussed in section II.A.7.c. of the August 2018 proposed rule (83 FR 41855 through 41856), this would be the ACO participant list that was certified as part of the ACO’s application to enter an agreement period beginning on July 1, 2019. To determine beneficiary assignment, we proposed to consider the allowed charges for primary care services furnished to the beneficiary during a 12 month assignment window, allowing for a 3 month claims run out. For the 6month performance year from July 1, 2019, through December 31, 2019, we proposed to determine the assigned beneficiary population using the following assignment windows: PO 00000 Frm 00137 Fmt 4701 Sfmt 4700 67951 • For ACOs under preliminary prospective assignment with retrospective reconciliation, the assignment window would be CY 2019. • For ACOs under prospective assignment, Medicare FFS beneficiaries would be prospectively assigned to the ACO based on the beneficiary’s use of primary care services in the most recent 12 months for which data are available. We would use an assignment window before the start of the agreement period on July 1, 2019. As an example, we noted that we could use an assignment window from April 30, 2018, through March 31, 2019 (note that the example in the proposed rule inadvertently included only 11 months and should have been April 1, 2018, through March 31, 2019). Under this approach, the 3-month gap between the end of the assignment window and the start of the performance year would be consistent with the typical gap for calendar year performance years that begin on January 1. Beneficiaries would remain prospectively assigned to the ACO at the end of CY 2019 unless they meet any of the exclusion criteria under § 425.401(b) during the calendar year. As discussed in section II.A.7.c.(4). of the August 2018 proposed rule (83 FR 41856), to determine ACO performance during either 6-month performance year in 2019, we proposed to use the ACO’s quality performance for the 2019 reporting period, and to calculate the ACO’s quality performance score as provided in § 425.502. Consistent with current program policy, we would determine assignment for the benchmark years based on the ACO’s certified ACO participant list for the agreement period beginning on July 1, 2019. For the 6-month performance year from July 1, 2019, through December 31, 2019, we would calculate the benchmark and assigned beneficiary expenditures as though the performance year were the entire calendar year. The ACO’s historical benchmark would be determined according to the methodology applicable to the ACO based on its agreement period in the program. We proposed to apply the methodology for establishing, updating and adjusting the ACO’s historical benchmark as specified in proposed § 425.601, except that data from CY 2019 would be used in place of data for the 6-month performance year in certain calculations, as follows: • The benchmark would be adjusted for changes in severity and case mix between benchmark year 3 and CY 2019 based on growth in prospective HCC risk scores, subject to a symmetrical cap of positive or negative 3 percent that would apply for the agreement period such that the adjustment between BY3 and any performance year in the agreement period would never be more than 3 percent in either direction. (See the discussion in section II.D.2. of the August 2018 proposed rule.) E:\FR\FM\31DER2.SGM 31DER2 67952 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations • The benchmark would be updated to CY 2019 according to the methodology described under proposed § 425.601(b) using a blend of national and regional growth rates. (See the discussion in section II.D.3.(d). of the August 2018 proposed rule.) khammond on DSK30JT082PROD with RULES2 For determining performance during the 6-month performance year from July 1, 2019, through December 31, 2019, we would apply the methodology for determining shared savings and shared losses according to the approach specified for the ACO’s track under its agreement period beginning on July 1, 2019: The proposed BASIC track (§ 425.605) or ENHANCED track (§ 425.610). However, we acknowledged that some exceptions to the otherwise applicable methodology would be needed because we were proposing to calculate the expenditures for assigned beneficiaries over the full CY 2019 for purposes of determining shared savings and shared losses for the 6-month performance year from July 1, 2019 through December 31, 2019. We proposed to use the following steps to calculate shared savings and shared losses: • Average per capita Medicare expenditures for Parts A and B services for CY 2019 would be calculated for the ACO’s performance year assigned beneficiary population. Additionally, when calculating CY 2019 expenditures to be used in determining performance for the July 1, 2019 through December 31, 2019 performance year, we would include expenditures for all assigned beneficiaries that are alive as of January 1, 2019, including those with a date of death prior to July 1, 2019, except prospectively assigned beneficiaries that are excluded under § 425.401(b). We explained that the inclusion of beneficiaries with a date of death before July 1, 2019, is necessary to maintain consistency with benchmark year and regional expenditure adjustments and associated trend and update factor calculations. • We would compare these expenditures to the ACO’s updated benchmark determined for the calendar year as previously described. • We would apply the MSR and MLR (if applicable). ++ The ACO’s assigned beneficiary population for the performance year starting on July 1, 2019, would be used to determine the MSR for one-sided model ACOs (under Level A or Level B of the BASIC track) and the variable MSR/MLR for ACOs in a twosided model that selected this option at the start of their agreement period. In the event a two-sided model ACO selected a fixed MSR/MLR at the start of its agreement period, and the ACO’s performance year assigned population falls below 5,000 beneficiaries, the MSR/MLR would be determined based on the number of assigned beneficiaries as proposed in section II.A.6.b. of the August 2018 proposed rule (83 FR 41837 through 41839). ++ To qualify for shared savings, the ACO’s average per capita Medicare VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 expenditures for its performance year assigned beneficiaries during CY 2019 must be below its updated benchmark for the year by at least the MSR established for the ACO. ++ To be responsible for sharing losses with the Medicare program, the ACO’s average per capita Medicare expenditures for its performance year assigned beneficiaries during CY 2019 must be above its updated benchmark for the year by at least the MLR established for the ACO. • We would determine the shared savings amount if we determine the ACO met or exceeded the MSR, and if the ACO met the minimum quality performance standards established under § 425.502, and as described in section II.A.7.c.(4) of the August 2018 proposed rule (83 FR 41856 through 41858), and otherwise maintained its eligibility to participate in the Shared Savings Program. We would determine the shared losses amount if we determine the ACO met or exceeded the MLR. To determine these amounts, we would do the following: ++ We would apply the final sharing rate or loss sharing rate to first dollar savings or losses. ++ For ACOs that generated savings that met or exceeded the MSR, we would multiply the difference between the updated benchmark expenditures and performance year assigned beneficiary expenditures by the applicable final sharing rate based on the ACO’s track and its quality performance under § 425.502. ++ For ACOs that generated losses that met or exceeded the MLR, we would multiply the difference between the updated benchmark expenditures and performance year assigned beneficiary expenditures by the applicable shared loss rate based on the ACO’s track and its quality performance under § 425.502 (for ACOs in the ENHANCED track where the loss sharing rate is determined based on the ACO’s quality performance). • We would adjust the shared savings amount for sequestration by reducing by 2 percent and compare the sequestrationadjusted shared savings amount to the applicable performance payment limit based on the ACO’s track. • We would compare the shared losses amount to the applicable loss sharing limit based on the ACO’s track. • We would pro-rate any shared savings amount, as adjusted for sequestration and the performance payment limit, or any shared losses amount, as adjusted for the loss sharing limit, by multiplying by one half, which represents the fraction of the calendar year covered by the 6-month performance year. This pro-rated amount would be the final amount of shared savings that would be paid to the ACO for the 6-month performance year or the final amount of shared losses that would be owed by the ACO for the 6-month performance year. We sought comment on these proposals. Comment: Several commenters expressed concerns that under the proposed approach, ACOs participating in the performance year from July 1, 2019, through December 31, 2019, PO 00000 Frm 00138 Fmt 4701 Sfmt 4700 would also be accountable for their financial performance during the first six months of CY 2019. Several commenters indicated that ACOs would not have program reports or sufficient patient data to affect care for their assigned population during the first six months of CY 2019, during the period prior to the start of their agreement period. These commenters noted this concern with respect to ACOs that are entering an initial agreement period beginning on July 1, 2019, as well as ACOs that are currently participating in the program that make ACO participant list changes effective for a new agreement period beginning on July 1, 2019. To address this issue, one commenter suggested that one approach could be to create a 6-month benchmark comparison that adjusts for the ACO’s participation in a portion of the year, taking into account differences in expenditures based on seasonality. Response: We appreciate the commenters’ concern that ACOs entering agreement periods beginning on July 1, 2019, may have relatively little data in order to be able to understand and affect change for their assigned Medicare FFS population for the 6-month performance year, but would be accountable for the cost and quality of care for this beneficiary population for the entire 12 month CY 2019. We note, beneficiaries who are prospectively assigned or preliminary prospectively assigned to the ACO would have received the plurality of their primary care services from physicians and other practitioners in the ACO during the 12 month assignment window. As a result, ACO participants will have data based on the services they furnished to these Medicare FFS beneficiaries. Additionally, to assist in addressing this concern, we will provide aggregate and beneficiary-level data, consistent with §§ 425.702 and 425.704 (respectively), shortly after ACOs begin the agreement period. We will provide each ACO with an Assignment List Report identifying the ACO participant and ACO provider/ supplier who provided the most primary care services to an assigned beneficiary during the assignment window. Further, we will provide monthly beneficiary-identifiable claim and claim line feed data files. The first time a beneficiary is included in an eligible ACO’s claim and claim line feed data files we provide 36 months of historical Part A, B and D data to the ACO. Additionally, quarterly and annual aggregate reports include expenditure and utilization trends, and demographic data on the ACO’s assigned population E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations will be provided during the performance year. This information should help ACOs identify the practitioners with data necessary to coordinate care for their beneficiaries, observe trends in the care for the ACO’s assigned population, and support the ACO’s care coordination activities for its assigned population during the 6-month performance year from July 1, 2019, through December 31, 2019. We continue to believe the proposed approach is the most appropriate methodology for determining an ACO’s financial and quality performance for the 6-month performance year from July 1, 2019, through December 31, 2019, based on its performance during the entire 12-month calendar year. This approach maintains alignment with the program’s existing methodology for using 12 months of expenditure data in determining the ACO’s financial performance, and also allows for the use of a 12-month period for quality measure assessment. Further, this approach maintains alignment with the methodology we finalized for the 6month performance year from January 1, 2019, through June 30, 2019, in the November 2018 final rule. We therefore decline to adopt the commenter’s suggestion to use an alternative approach of calculating the benchmark based on a period of other than 12 months, such as 6 months. Comment: A few commenters suggested that ACOs beginning an agreement period on July 1, 2019, should participate in an 18-month first performance year under the new agreement. Another commenter suggested that CMS allow for 18-month performance years in subsequent years, as well as for agreement periods beginning on July 1, 2019. Response: We decline to adopt the commenters’ suggestions that we allow for an 18-month performance year for ACOs entering agreement periods beginning on July 1, 2019, and in subsequent years. In the August 2018 proposed rule (83 FR 41850 through 41851), we explained our concerns about using a performance year that is determined based on a period other than 12 months, and described the challenges with our experience with the program’s initial 21-month and 18-month performance years for ACOs entering the Shared Savings Program with start dates in 2012. We expressed our concerns that using such an approach might introduce further complexity into program calculations, and could require ACOs to establish a repayment mechanism that otherwise might not be required, adding additional burden and expense. In addition, we noted that this VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 approach would create uncertainty over whether the ACO may ultimately need to repay CMS based on final results for the extended performance year and delay ACOs seeing a return on their investment in program participation if eligible for shared savings. Comment: Many commenters expressed concerns about the potential burden on ACOs of managing and implementing the necessary modifications to operational processes to account for two separate beneficiary populations (derived from two separate ACO participant lists, and potentially two different assignment windows and assignment methodologies) in one calendar year, while also meeting program expectations. Several commenters indicated that the burdens associated with this approach could result in shared losses and/or possible exit from the program by ACOs under a two-sided model. A few commenters expressed this concern, in particular, for ACOs under the prospective assignment methodology. They explained that while some beneficiaries will be attributed to the ACO for both performance periods, there will be a portion of an ACO’s beneficiary population that is assigned for only one performance period. For beneficiaries assigned for only the first performance period, the ACO would have to continue to deploy resources to manage this population even after they are no longer assigned to the ACO. For beneficiaries assigned only in the second performance period, the ACO would be responsible for costs incurred in the first half of the year when the ACO had no ability to manage these beneficiaries’ care. As a result, ACOs will have to scale up resources and infrastructure in order to mitigate the impact on quality and cost. Moreover, with little influence over beneficiaries’ expenditures outside of the performance period, ACOs could potentially be at risk for exceeding their benchmark. To address these concerns, some commenters suggested that CMS use a single assignment window and beneficiary assignment methodology to determine an ACO’s assigned beneficiary population for the entire CY 2019, including for ACOs that participate in multiple performance years during 2019, regardless of whether the ACO is in the fourth performance year of an extended agreement period, the first half of a 12-month performance year starting on January 1, 2019, or an initial performance year under the proposed BASIC track or ENHANCED track starting on July 1, 2019. Specifically, some commenters suggested that we use the assignment PO 00000 Frm 00139 Fmt 4701 Sfmt 4700 67953 window from October 1, 2017, through September 30, 2018, for determining prospective assignment for both 6month performance years. These commenters believe this approach to determining prospective assignment would remove the challenges associated with population churn and the mismatch between at-risk expenditures and potential savings. Several commenters made this suggestion as part of describing an alternative approach under which we would use the ACO participant list certified by the ACO for the performance year beginning on January 1, 2019, in determining a prospectively assigned population for both 6-month performance years. However, other commenters urged CMS to allow ACOs participating in a performance year beginning on January 1, 2019, to make changes to their ACO participant lists before entering a new agreement period beginning on July 1, 2019. See discussion in section II.A.7.c.(2). of this final rule. Response: We agree with commenters’ suggestions that for purposes of determining prospective assignment for the 6-month performance year from July 1, 2019, through December 31, 2019, it is preferable to use an offset assignment window from October 1, 2017, through September 30, 2018, rather than a later assignment window, as we originally proposed. We believe that maintaining the same prospective assignment window for both 6-month performance years during CY 2019 has a number of advantages, including avoiding inconsistencies between the performance year and benchmark year assignment windows, and reducing the potential differences in the populations assigned to the ACO for each performance year during CY 2019. We note, however, that ACO participant list differences between each 6-month performance year could still result in significantly different assigned beneficiary populations, even when the assignment window remains the same. Given our desire to offer currently participating ACOs entering a new agreement period starting on July 1, 2019, an opportunity to make changes to their ACO participant lists applicable for the 6-month performance year starting on July 1, 2019, we decline the commenters’ suggestion that we use the same ACO participant list finalized for the performance year starting on January 1, 2019, in determining beneficiary assignment for the performance year from July 1, 2019, through December 31, 2019. Accordingly, for the performance year from July 1, 2019, through December 31, 2019, for ACOs under the preliminary E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67954 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations prospective assignment methodology, the assigned beneficiary population would be determined after the end of the performance year, consistent with how it is currently determined for ACOs under the preliminary prospective assignment methodology, based on the 12-month calendar year that corresponds to the performance year. For ACOs under the prospective assignment methodology the assignment window for the 6-month performance year from July 1, 2019, through December 31, 2019, would be the same as the assignment window for the 6month performance year from January 1, 2019, through June 30, 2019. Therefore, for ACOs that participate in both 6month performance years during CY 2019, if the ACO maintains the same ACO participant list for all of CY 2019 and the same beneficiary assignment methodology, then the assigned beneficiary population for the July 1, 2019, through December 31, 2019 performance year would be expected to closely resemble the assigned beneficiary population for the performance year or performance period from January 1, 2019, through June 30, 2019. However, we also recognize that under the redesign of program participation options, ACOs entering an agreement period beginning on July 1, 2019, would have the opportunity to select the beneficiary assignment methodology that would apply for the 6month performance year from July 1, 2019, through December 31, 2019, and this could result in the ACO being under a different assignment methodology than it was under for the first 6 months of CY 2019. In this case, there may be greater differences in the assigned beneficiary populations for each 6-month performance year for ACOs that participate in both 6-month performance years, even if their ACO participant list remains similar or unchanged. Final Action: After consideration of the public comments received, we are finalizing, with modifications, the proposed approach for determining financial and quality performance for ACOs participating in a 6-month performance year from July 1, 2019, through December 31, 2019. Our final policies are specified in paragraph (c) of § 425.609. For ACOs that select a prospective beneficiary assignment methodology for the 6-month performance year from July 1, 2019, through December 31, 2019, we plan to use an assignment window from October 1, 2017, through September 30, 2018, to align with the assignment window used to determine prospective VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 assignment for performance years beginning on January 1, 2019. This is a modification to our proposal to use an assignment window reflecting the most recent 12 months of data available as described in the August 2018 proposed rule. Accordingly, we are revising the provision at § 425.609(c)(1)(ii)(A) to state that for ACOs under prospective assignment, the assignment window is the same as the assignment window that applies under § 425.609(b)(1)(ii)(A) for ACOs under prospective assignment for the 6-month performance year from January 1, 2019, through June 30, 2019. As explained in section II.D of this final rule, we are finalizing our proposed changes to the risk adjustment methodology with modification. Consistent with our original proposal, growth in prospective HCC risk scores will be subject to a cap of positive 3 percent, but we are not finalizing our proposal to cap downward adjustments in these risk scores. Therefore we are making necessary conforming changes to the provision at § 425.609(c)(3)(i)(A) to reflect this change. In addition, in the November 2018 final rule we made certain clarifying revisions to the introductory text in § 425.609(b). Accordingly, we are also modifying the introductory text at § 425.609(c) to incorporate similar clarifying revisions. In summary, we will do the following to determine the ACO’s financial and quality performance during the 6-month performance year from July 1, 2019, through December 31, 2019. (Where applicable, we have identified references to policies we are finalizing elsewhere in this final rule.) We will use the ACO participant list for the performance year beginning July 1, 2019, to determine beneficiary assignment, consistent with the assignment methodology the ACO selected at the start of its agreement period according to the provision we are finalizing at § 425.400(a)(4)(ii) (as discussed in section II.A.4.c of this final rule). We will use the ACO’s quality performance for the 2019 reporting period to determine the ACO’s quality performance score as specified in § 425.502, and as described in section II.A.7.c.(4) of this final rule. We will establish, adjust and update the ACO’s historical benchmark according to the benchmarking policies we are finalizing for agreement periods beginning on July 1, 2019, and in subsequent years, except that the benchmark will be adjusted for changes in severity and case mix based on growth in prospective HCC risk scores between BY3 and CY 2019, subject to a PO 00000 Frm 00140 Fmt 4701 Sfmt 4700 cap of positive 3 percent, and the benchmark will be updated to CY 2019. (See section II.D. of this final rule and the new section of the regulations at § 425.601.) We will compare the ACO’s updated historical benchmark to the expenditures during CY 2019 for the ACO’s performance year assigned beneficiaries. We will apply the MSR and MLR (if applicable). The ACO’s assigned beneficiary population for the performance year starting on July 1, 2019, will be used to determine the MSR for one-sided model ACOs (under Level A or Level B of the BASIC track) and the variable MSR/MLR for ACOs in a two-sided model that selected this option at the start of their agreement period. The provisions on the MSR/ MLR are specified in a new section of the regulations at § 425.605(b) for the BASIC track, and § 425.610(b) for the ENHANCED track. In the event a twosided model ACO selected a fixed MSR/ MLR at the start of its agreement period, and the ACO’s performance year assigned population falls below 5,000 beneficiaries, the MSR/MLR will be determined based on the number of assigned beneficiaries, according to the approach we are finalizing at § 425.110(b)(3), as discussed in section II.A.6.b.(3). of this final rule. If the difference between the ACO’s updated benchmark and assigned beneficiary expenditures is positive and is greater than or equal to the MSR and the ACO has met the quality performance standard, the ACO will be eligible for shared savings. If the ACO is in a two-sided model and the difference between the ACO’s updated benchmark and assigned beneficiary expenditures is negative and is greater than or equal to the MLR (in absolute value terms), the ACO will be liable for shared losses. ACOs will share in first dollar savings and losses. The amount of any shared savings will be determined using the applicable final sharing rate, which is determined based on the ACO’s track for the agreement period (and the payment model within that track, if applicable) and taking into account the ACO’s quality performance for 2019. We will adjust the amount of shared savings for sequestration, and then cap the amount of shared savings at the applicable performance payment limit for the ACO’s track. Similarly, the amount of any shared losses will be determined using the loss sharing rate for the ACO’s track and, as applicable, for ACOs in tracks with a loss sharing rate that depends upon quality performance, the ACO’s quality performance for 2019. We will then cap the amount of shared losses at the E:\FR\FM\31DER2.SGM 31DER2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations khammond on DSK30JT082PROD with RULES2 applicable loss sharing limit for the ACO’s track (and the payment model within that track, if applicable). We will then pro-rate the amount of shared savings or shared losses by multiplying by one-half, which represents the fraction of the calendar year covered by the 6-month performance year. This prorated amount is the final amount of shared savings earned or shared losses owed by the ACO for the 6-month performance year from July 1, 2019, through December 31, 2019. (3) Determining Performance for the 6Month Performance Period From January 1, 2019, Through June 30, 2019, for Early Renewals Under the policies we are finalizing in this final rule to remove the ‘‘sit-out’’ period after termination (see section II.A.5.c. of this final rule) and to allow for a July 1, 2019 agreement start date (see section II.A.7.a. of this final rule), ACOs that begin a 12-month performance year on January 1, 2019, may voluntarily elect to terminate their participation agreement with an effective date of termination of June 30, 2019, in order to enter a new agreement period starting on July 1, 2019 (referred to as early renewal). Under the changes that we are finalizing to our policies governing the payment consequences of early termination at § 425.221, ACOs with an effective date of termination of June 30, 2019, that enter a new agreement period beginning on July 1, 2019, will be eligible for pro-rated shared savings or liable for pro-rated shared losses for the 6-month period from January 1, 2019, through June 30, 2019, determined according to § 425.609. In the August 2018 proposed rule (83 FR 41849 and 41850), we proposed to determine performance for the 6-month performance period from January 1, 2019, through June 30, 2019, for ACOs renewing early for a July 1, 2019 agreement start date, using the same methodology as would be used to determine an ACO’s performance for the 6-month performance year from January 1, 2019, through June 30, 2019. In the November 2018 final rule (83 FR 59946 through 59951), we finalized the methodology for determining an ACO’s performance for this 6-month performance year in a new provision of the regulations at § 425.609(b). In the August 2018 proposed rule, we described the applicability of certain aspects of this methodology to early renewal ACOs for the 6-month performance period from January 1, 2019, through June 30, 2019. We noted that the approach for determining beneficiary assignment, and for VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 adjusting and updating the historical benchmark for the 6-month performance year from January 1, 2019, through June 30, 2019, would be consistent with the assignment and benchmarking methodologies in the program’s regulations applicable for performance years beginning on January 1, 2019. Therefore, these policies would similarly apply to determining performance for the period from January 1, 2019, through June 30, 2019, for early renewals. Accordingly, in the August 2018 proposed rule, we proposed to include a cross reference to the provision under § 425.221 in the introductory text to § 425.609(b) in order to allow reconciliation of early renewals for the performance period from January 1, 2019, through June 30, 2019, to be based on their financial performance during the entire 12-month calendar year 2019 according to the methodology in the provision at § 425.609. In section II.A.7.c. of this final rule we discuss other modifications that we are making to § 425.609 to address the applicability of certain policies to ACOs participating in a 6-month performance year or performance period in 2019. The affected policies include the following: the quality measure sampling methodology (section II.A.7.c.(4)); the extreme and uncontrollable circumstances policies (section II.A.7.c.(5)); payment and recoupment (section II.A.7.c.(6)); and sharing of CY 2019 aggregate data (section II.A.7.c.(9)). Final Action: We did not receive any comments specifically addressing the methodology for determining financial and quality performance for the 6month performance period from January 1, 2019, through June 30, 2019, for ACOs that terminate their agreement effective June 30, 2019, and enter a new agreement period starting on July 1, 2019. Therefore, we are finalizing without modification our proposal to determine performance for the 6-month performance period from January 1, 2019, through June 30, 2019, for ACOs renewing early for the July 1, 2019 agreement start date, by applying the same methodology as is used to determine an ACO’s performance for the 6-month performance year from January 1, 2019, through June 30, 2019 (finalized at § 425.609(b) in the November 2018 final rule). We are also finalizing revisions to the introductory text at § 425.609(b) to incorporate a reference to the provision at § 425.221(b)(3)(i), which specifies that an ACO starting a 12-month performance year on January 1, 2019, that terminates its participation agreement with an effective date of termination of June 30, 2019, and that PO 00000 Frm 00141 Fmt 4701 Sfmt 4700 67955 enters a new agreement period beginning on July 1, 2019, is eligible for pro-rated shared savings or liable for pro-rated shared losses for the 6-month period from January 1, 2019, through June 30, 2019, as determined in accordance with § 425.609. (4) Use of Authority Under Section 1899(i)(3) of the Act In the August 2018 proposed rule (83 FR 41851), we explained our belief that the proposals to determine shared savings and shared losses for the 6month performance years starting on January 1, 2019, and July 1, 2019 (or the 6-month performance period from January 1, 2019, through June 30, 2019, for ACOs that elect to voluntarily terminate their existing participation agreement, effective June 30, 2019, and enter a new agreement period starting on July 1, 2019), using expenditures for the entire CY 2019 and then pro-rating these amounts to reflect the shorter performance year, require the use of our authority under section 1899(i)(3) of the Act to use other payment models. Section 1899(d)(1)(B)(i) of the Act specifies that, in each year of the agreement period, an ACO is eligible to receive payment for shared savings only if the estimated average per capita Medicare expenditures under the ACO for Medicare FFS beneficiaries for Parts A and B services, adjusted for beneficiary characteristics, is at least the percent specified by the Secretary below the applicable benchmark under section 1899(d)(1)(B)(ii) of the Act. We explained our belief that the proposed approach to calculating the expenditures for assigned beneficiaries over the full calendar year, comparing this amount to the updated benchmark for 2019, and then pro-rating any shared savings (or shared losses, which already are implemented using our authority under section 1899(i)(3) of the Act) for the 6-month performance year (or performance period) involves an adjustment to the estimated average per capita Medicare Part A and Part B FFS expenditures determined under section 1899(d)(1)(B)(i) of the Act that is not based on beneficiary characteristics. Such an adjustment is not contemplated under the plain language of section 1899(d)(1)(B)(i) of the Act. As a result, we stated it would be necessary to use our authority under section 1899(i)(3) of the Act to calculate performance year expenditures and determine the final amount of any shared savings (or shared losses) for a 6-month performance year (or performance period) during 2019, in the proposed manner. In order to use our authority under section 1899(i)(3) of the Act to adopt an E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67956 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations alternative payment methodology to calculate shared savings and shared losses for a 6-month performance year (or performance period) during 2019, we must determine that the alternative payment methodology will improve the quality and efficiency of items and services furnished to Medicare beneficiaries, without additional program expenditures. In the August 2018 proposed rule, we explained our belief that the proposed approach of allowing ACOs that started a first or second agreement period on January 1, 2016, to extend their agreement period for a 6-month performance year from January 1, 2019, through June 30, 2019, and of allowing entry into the program’s redesigned participation options beginning on July 1, 2019, if finalized, would support continued participation by current ACOs that must renew their agreements to continue participating in the program, while also resulting in more rapid progression to two-sided risk by ACOs within current agreement periods and ACOs entering the program for an initial agreement period. As discussed in the Regulatory Impact Analysis of the August 2018 proposed rule (83 FR 41915 through 41928), it was our belief that this approach would continue to allow for lower growth in Medicare FFS expenditures based on projected participation trends. Therefore, we did not believe that the proposed methodology for determining shared savings or shared losses for ACOs in a 6-month performance year (or performance period) during 2019 would result in an increase in spending beyond the expenditures that would otherwise occur under the statutory payment methodology in section 1899(d) of the Act. Further, we noted that the proposed approach to measuring ACO quality performance for a 6-month performance year (or performance period) based on quality data reported for CY 2019 would maintain accountability for the quality of care ACOs provide to their assigned beneficiaries. Participating ACOs would also have an incentive to perform well on the quality measures in order to maximize the shared savings they may receive and minimize any shared losses they must pay in tracks where the loss sharing rate is determined based on the ACO’s quality performance. Therefore, we noted our expectation that the proposed approach to reconciling ACOs for a 6-month performance year (or performance period) during 2019 would continue to lead to improvement in the quality of care furnished to Medicare FFS beneficiaries. VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 In the November 2018 final rule, we finalized the proposed approach to determining financial and quality performance for the 6-month performance year from January 1, 2019, through June 30, 2019. In that final rule (83 FR 59949 through 59950), we explained our belief that the approach to determining shared savings and shared losses for this 6-month performance year meets the requirements for use of our authority under section 1899(i)(3) of the Act because it will not result in an increase in spending beyond the expenditures that would otherwise occur under the statutory payment methodology in section 1899(d) of the Act and will lead to continued improvement in the quality of care furnished to Medicare FFS beneficiaries. Similarly, as discussed in the Regulatory Impact Analysis section of this final rule (see section V), we believe the approach to determining shared savings and shared losses for the 6month performance year from July 1, 2019, through December 31, 2019, for ACOs that enter an agreement period beginning on July 1, 2019, and for the 6-month performance period from January 1, 2019, through June 30, 2019, for ACOs that elect to voluntarily terminate their existing participation agreement, effective June 30, 2019, and enter a new agreement period starting on July 1, 2019, meets the requirements for use of our authority under section 1899(i)(3) of the Act. The considerations we described in the August 2018 proposed rule in relation to the proposed methodology and in the November 2018 final rule in conjunction with finalizing the methodology for determining shared savings and shared losses for the 6month performance year from January 1, 2019, through June 30, 2019, were relevant in making this determination. Specifically, we do not believe that the methodology for determining shared savings or shared losses for ACOs in a 6-month performance year (or performance period), as finalized in this section of this final rule, will result in an increase in spending beyond the expenditures that would otherwise occur under the statutory payment methodology in section 1899(d) of the Act. We believe the following factors would allow for lower growth in Medicare FFS expenditures based on projected participation trends: (1) In combination with the voluntary 6month extension we finalized in the November 2018 final rule for ACOs whose agreement periods expire on December 31, 2018, the July 1, 2019 agreement start date will support PO 00000 Frm 00142 Fmt 4701 Sfmt 4700 continued participation by these ACOs; (2) the early renewal option for the July 1, 2019 agreement start date could also result in more rapid progression to twosided risk by ACOs within current agreement periods; and (3) the July 1, 2019 start date encourages participation by new ACOs in initial agreement periods under redesigned participation options in which ACOs will more rapidly progress to performance-based risk. Further, we believe the approach we are finalizing for reconciling early renewal ACOs for the 6-month performance period from January 1, 2019 through June 30, 2019, and for reconciling the 6-month performance year from July 1, 2019, through December 31, 2019, for ACOs that begin a new agreement period on July 1, 2019, will continue to lead to improvement in the quality of care furnished to Medicare FFS beneficiaries. As described elsewhere in this section of this final rule, the approach to measuring ACO quality performance for the 6-month performance year from July 1, 2019, through December 31, 2019, or for the 6-month performance period from January 1, 2019, through June 30, 2019, based on quality data reported for CY 2019, will maintain accountability for the quality of care ACOs provide to their assigned beneficiaries. Participating ACOs will have an incentive to perform well on the quality measures in order to maximize the shared savings they may receive and minimize any shared losses they must pay in tracks where the loss sharing rate is determined based on the ACO’s quality performance. c. Applicability of Program Policies to ACOs Participating in a 6-Month Performance Year or Performance Period in 2019 In the August 2018 proposed rule (83 FR 41854), we proposed that program requirements under 42 CFR part 425 that are applicable to the ACO under the ACO’s chosen participation track and based on the ACO’s agreement start date would be applicable to an ACO participating in a 6-month performance year, unless otherwise stated. We finalized this approach with respect to ACOs participating in the 6-month performance year from January 1, 2019, through June 30, 2019, in the November 2018 final rule (83 FR 59951). In that final rule, we explained that we received no comments on this general proposal, which would allow routine program operations to continue to apply for ACOs participating under a shorter performance year, and ensure consistency in the applicability and E:\FR\FM\31DER2.SGM 31DER2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations implementation of our requirements across all program participants, including ACOs participating in a 6month performance year. For these same reasons, we are also finalizing this approach with respect to ACOs participating in the 6-month performance year from July 1, 2019, through December 31, 2019, and the 6month performance period from January 1, 2019, through June 30, 2019. This approach will ensure program policies are applied consistently for all ACOs participating in a 6-month performance year from January 1, 2019, through June 30, 2019 and/or from July 1, 2019, through December 31, 2019, and to ACOs that terminate their agreement effective June 30, 2019, and enter a new agreement period starting on July 1, 2019. In this section, we describe the program participation options that are affected by our decision to forgo an application cycle in CY 2018 for a January 1, 2019 start date, and offer instead an application cycle in CY 2019 for a July 1, 2019 start date. We also discuss modifications to program policies to allow for the 6-month performance period from January 1, 2019, through June 30, 2019 for early renewal ACOs, and the 6-month performance year from July 1, 2019, through December 30, 2019. These modifications include updates to the existing provisions in § 425.609, which were initially established for the 6month performance year from January 1, 2019, through June 30, 2019, to extend them to the 6-month performance period from January 1, 2019, through June 30, 2019, and the 6-month performance year from July 1, 2019, through December 30, 2019. khammond on DSK30JT082PROD with RULES2 (1) Application Cycle for Use of a SNF 3-Day Rule Waiver Beginning July 1, 2019 Eligible ACOs may apply for use of a SNF 3-day rule waiver at the time of application for an initial agreement or to renew their participation. Further, as described in sections II.B.2.a. and II.F. of this final rule, ACOs within a current agreement period under Track 3, or the Track 1+ Model may apply for a SNF 3day rule waiver, which if approved would begin at the start of the next performance year. As discussed in section II.B.2.a. of this final rule, we are finalizing our proposal to make the SNF 3-day rule waiver under the Shared Savings Program more broadly available to BASIC track ACOs (under a two-sided model) and ENHANCED track ACOs, regardless of their choice of beneficiary assignment methodology. VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 As described in the November 2018 final rule (83 FR 59951), in light of our decision to forgo an application cycle in CY 2018 for a January 1, 2019 agreement start date, we are not offering an opportunity for ACOs to apply for a start date of January 1, 2019, for initial use of a SNF 3-day rule waiver. The application cycle for the July 1, 2019 start date will be the next opportunity for eligible ACOs to begin use of a SNF 3-day rule waiver, if they apply for and are approved to use the waiver as part of the application cycle for the July 1, 2019 start date. This includes ACOs within an existing agreement period in Track 3 that would not otherwise have the opportunity to apply to begin use of the waiver until January 1, 2020. We note that the existing regulation at § 425.612(b), which requires applications for waivers to be submitted to CMS in the form and manner and by a deadline specified by CMS, provides the flexibility to accommodate a July 1, 2019 SNF 3-day rule waiver start date for eligible ACOs in a performance year beginning on January 1, 2019. As a result, we do not need to make any corresponding revisions to this provision to accommodate the July 1, 2019 start date. Final Action: We received generally supportive comments for our SNF 3-day rule waiver proposals, and we point readers to the related discussion in section II.B.2.a. of this final rule. We are finalizing without modification our proposal to offer ACOs within existing agreement periods in Track 3 and the Track 1+ Model the opportunity to apply to begin use of a SNF 3-day rule waiver as part of the application cycle for the July 1, 2019 start date. (2) Annual Certifications and ACO Participant List Modifications At the end of each performance year, ACOs complete an annual certification process. At the same time as this annual certification process, CMS also requires ACOs to review, certify and electronically sign official program documents to support the ACO’s participation in the upcoming performance year. As we stated in the August 2018 proposed rule (83 FR 41855), and reiterated in the November 2018 final rule (83 FR 59951 and 59952), requirements for this annual certification, and other certifications that occur on an annual basis, continue to apply to all currently participating ACOs in advance of the performance year beginning on January 1, 2019. As we explained in the August 2018 proposed rule (83 FR 41855), in the case of ACOs that participate for a portion of CY 2019 under one agreement and enter PO 00000 Frm 00143 Fmt 4701 Sfmt 4700 67957 a new agreement period starting on July 1, 2019, the certifications made in advance of the performance year starting on January 1, 2019, would have relevance only for the 6-month period from January 1, 2019, through June 30, 2019. These ACOs would need to complete another certification as part of completing the requirements to enter a new agreement period beginning on July 1, 2019, which would be applicable for the duration of their first performance year under the new agreement period, from July 1, 2019, through December 31, 2019. Each ACO is required to certify its list of ACO participant TINs before the start of its agreement period, before every performance year thereafter, and at such other times as specified by CMS in accordance with § 425.118(a). A request to add ACO participants must be submitted prior to the start of the performance year in which these additions would become effective. In order to remove an ACO participant, an ACO must notify CMS no later than 30 days after termination of an ACO participant agreement, and the entity is deleted from the ACO participant list effective as of the termination date of the ACO participant agreement. However, absent unusual circumstances, the ACO participant list that was certified prior to the start of the performance year is used for the duration of the performance year. An ACO’s certified ACO participant list for a performance year is used to determine beneficiary assignment for the performance year and therefore also the ACO’s quality reporting samples and financial performance. See § 425.118(b)(3) and see also Medicare Shared Savings Program ACO Participant List and Participant Agreement Guidance (July 2018, version 5), available at https://www.cms.gov/ Medicare/Medicare-Fee-for-ServicePayment/sharedsavingsprogram/ Downloads/ACO-Participant-ListAgreement.pdf. As we explained in the August 2018 proposed rule, these policies would apply for ACOs participating in a 6-month performance year consistent with the terms of the existing regulations. As we explained in the August 2018 proposed rule (83 FR 41855) and reiterated in the November 2018 final rule (83 FR 59952), ACOs that started a first or second agreement period on January 1, 2016, that extend their agreement period for a 6-month performance year beginning on January 1, 2019, will have the opportunity during 2018 to make changes to their ACO participant list to be effective for the 6-month performance year from E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 67958 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations January 1, 2019, through June 30, 2019. If these ACOs elect to continue their participation in the program for a new agreement period starting on July 1, 2019, they would have an opportunity to submit a new ACO participant list as part of their renewal application for the July 1, 2019 start date. An ACO that enters a new agreement period beginning on July 1, 2019, will submit and certify its ACO participant list for the agreement period beginning on July 1, 2019, according to the requirements in § 425.118(a). The ACO’s approved ACO participant list will remain in effect for the full performance year from July 1, 2019, through December 31, 2019. These ACOs will have the opportunity to add or delete ACO participants prior to the start of the next performance year, following the established schedule. Any additions to the ACO participant list that are approved by CMS will become effective at the start of performance year 2020. The program’s current regulations prevent duplication of shared savings payments; thus, under § 425.114, ACOs may not participate in the Shared Savings Program if they include an ACO participant that participates in another Medicare initiative that involves shared savings. In addition, under § 425.306(b)(2), each ACO participant that submits claims for services used to determine the ACO’s assigned beneficiary population must be exclusive to one Shared Savings Program ACO. If, during a benchmark or performance year (including the 3month claims run out for such benchmark or performance year), an ACO participant that participates in more than one ACO submits claims for services used in assignment, CMS will not consider any services billed through the TIN of the ACO participant when performing assignment for the benchmark or performance year, and the ACO may be subject to the pretermination actions set forth in § 425.216, termination under § 425.218, or both. In the August 2018 proposed rule (83 FR 41855 and 41856), we noted the following examples regarding ACO participants that submit claims for services that are used in assignment, and that are participating in a Shared Savings Program ACO for a 12-month performance year during 2019 (such as a 2017 starter, 2018 starter, or 2015 starter that deferred renewal until 2019). If the ACO remains in the program under its current agreement past June 30, 2019, these ACO participants would not be eligible to be included on the ACO participant list of another ACO applying to enter a new agreement VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 period under the program beginning on July 1, 2019. An ACO participant in these circumstances could be added to the ACO participant list of a July 1, 2019 starter effective for the performance year beginning on January 1, 2020, only if it is no longer participating in the other Shared Savings Program ACO and is not participating in another initiative identified in § 425.114(a). If an ACO starting a 12-month performance year on January 1, 2019, terminates its participation agreement with an effective date of termination of June 30, 2019, the effective end date of the ACO participants’ participation would also be June 30, 2019. Such ACOs that elect to enter a new agreement period beginning on July 1, 2019, can make ACO participant list changes that would be applicable for their new agreement period. This means that the ACO participants of the terminating ACO could choose to be added to the ACO participant list of another July 1, 2019 starter, effective for the performance year beginning on July 1, 2019. Comment: Some commenters urged CMS to provide ACOs with opportunities to add and delete ACO participants throughout the performance years (or performance period) during 2019 and to clarify when such opportunities would be available. One commenter encouraged CMS to allow ACO participants to switch ACOs effective for the July 1, 2019 agreement start date, even if the ACO participant is in an ACO with an existing participation agreement that expires after July 1, 2019. Response: As we described in the August 2018 proposed rule, an ACO that enters a new agreement period beginning on July 1, 2019, would submit and certify its ACO participant list before July 1, 2019, according to the existing requirements in § 425.118(a). We do not believe it is operationally feasible to allow, as the commenters suggest, ACOs within a 12-month performance year beginning on January 1, 2019, to make ACO participant list changes effective for the second half of the year, unless the ACO is an early renewal ACO that elects to voluntarily terminate its existing participation agreement, effective June 30, 2019, and enter a new agreement period starting on July 1, 2019. For ACOs participating in a 12-month performance year during 2019, such mid-year changes to their ACO participant lists would alter the 2019 prospective assignment lists (if applicable), and may have other significant operational impacts (such as on benchmark calculations). Therefore, we will allow ACOs to submit ACO PO 00000 Frm 00144 Fmt 4701 Sfmt 4700 participant change requests in accordance with usual program procedures in order to indicate additions, updates, and deletions to their existing ACO participant lists and, if applicable, SNF affiliate lists at the following times: During 2018, in advance of a 12-month or 6-month performance year beginning on January 1, 2019; and as part of the application cycle for a July 1, 2019 agreement start date for ACOs applying to enter, renew or re-enter an agreement period in the Shared Savings Program. Comment: More generally, a few commenters suggest that there is a lost opportunity for ACO participants to collaborate if some join an ACO for the 6-month performance year beginning on July 1, 2019, and other ACO participants are added to the same ACO for the performance year beginning on January 1, 2020. Response: Although it is possible that ACOs with a July 1, 2019 agreement start date may be precluded from adding certain providers and suppliers to their ACO participant list for the 6-month performance year from July 1, 2019, through December 31, 2019, because they are already participating in another ACO, there will be only a short amount of time before the ACO may modify its ACO participant list for the performance year beginning January 1, 2020, to include these entities. In addition, this initial 6-month performance year will give the original ACO participants time to gain experience with the ACO and its selected payment track before additional ACO participants are added at the start of performance year 2020. We also note that ACO participant list additions are optional. We encourage ACOs to carefully consider the impact of modifying their ACO participant lists, given the potential impact of these changes on a variety of program operations, including assignment, the ACO’s historical benchmark, performance-year financial calculations, and the quality reporting sample. (3) Repayment Mechanism Requirements ACOs must demonstrate that they have in place an adequate repayment mechanism prior to entering a two-sided model. Consistent with the final policy described in section II.A.6.c of this final rule, and the new provision at § 425.204(f)(6), the repayment mechanism must be in effect for the duration of an ACO’s participation in a two-sided model plus 12 months following the conclusion of the agreement period. An ACO may fulfill this requirement by establishing a repayment mechanism that covers the E:\FR\FM\31DER2.SGM 31DER2 khammond on DSK30JT082PROD with RULES2 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations entire agreement period plus an additional 12 months or by obtaining a repayment mechanism with a term of at least the first two performance years in which the ACO is participating under a two-sided model and that provides for automatic, annual 12-month extensions of the repayment mechanism through the remaining duration of the agreement period such that the repayment mechanism will eventually remain in effect until 12 months following the conclusion of the agreement period. Consistent with the final policy described in section II.A.6.c. of this final rule and in § 425.204(f)(4)(iv), a renewing ACO that is currently participating under a two-sided model and enters a new agreement period beginning on July 1, 2019, will also be permitted to use its existing repayment mechanism to establish its ability to repay shared losses incurred for performance years in its new agreement period. An ACO choosing this option would be required to either extend the term of the existing repayment mechanism such that it is in effect until 12 months following the end of the new agreement period or extend the term of the existing repayment mechanism, if necessary, such that it covers the first two performance years of the new agreement period and provides for automatic, annual 12-month extensions of the repayment mechanism, which will result in the repayment mechanism eventually remaining in effect for 12 months after the end of the new agreement period. The ACO would also be required to increase the amount of its repayment mechanism to reflect the new repayment mechanism amount determined for its new agreement period, unless CMS notifies the renewing ACO that the repayment mechanism amount for its new agreement period is equal to or lower than its existing repayment mechanism amount. If the repayment mechanism amount calculated for the new agreement period is lower than the existing repayment mechanism amount, the ACO would be required to maintain the repayment mechanism at the existing higher amount. We are also finalizing a policy that, for agreement periods beginning on or after July 1, 2019, we will recalculate the estimated amount of the ACO’s repayment mechanism arrangement before the second and each subsequent performance year in which the ACO is under a two-sided model in the BASIC track or ENHANCED track. For example, for an ACO with a July 1, 2019 agreement start date, we will recalculate the amount of the ACO’s repayment mechanism, in accordance with our VerDate Sep<11>2014 16:59 Dec 28, 2018 Jkt 247001 final regulation at § 425.204(f)(4), before the start of performance year 2020. If the recalculated repayment mechanism amount exceeds the existing repayment mechanism amount by at least 50 percent or $1,000,000, whichever is the lesser value, we would require the ACO to increase its repayment mechanism amount, consistent with the approach described in section II.A.6.c. of this final rule and § 425.204(f)(4)(iii). We refer readers to section II.A.6.c. of this final rule for a discussion of comments received on the proposed changes to the repayment mechanism requirements. (4) Quality Reporting and Quality Measure Sampling As described in the August 2018 proposed rule (83 FR 41856 through 41858), to determine an ACO’s quality performance during either 6-month performance year during 2019, we proposed to use the ACO’s quality performance for the 2019 reporting period as determined under § 425.502. For ACOs that participate in only one of the 6-month performance years (such as ACOs that started a first or second agreement period on January 1, 2016, that extend their agreement period by 6 months and do not continue in the program past June 30, 2019, or ACOs that enter an initial agreement period beginning on July 1, 2019), we would also account for the ACO’s quality performance using quality measure data reported for the 12-month CY 2019. ACOs that terminate their agreement effective June 30, 2019, and enter a new agreement period starting on July 1, 2019, would also be required to complete quality reporting for the 2019 reporting period, and we would determine quality performance for the performance period from January 1, 2019, through June 30, 2019, in the same manner as for ACOs with a 6month performance year from January 1, 2019, through June 30, 2019, that enter a new agreement period beginning on July 1, 2019. As we explained in