Medicare Program: Mitigating the Impact of Significant, Anomalous, and Highly Suspect Billing Activity on Medicare Shared Savings Program Financial Calculations in Calendar Year 2023, 79152-79172 [2024-22054]

Agencies

• Centers for Medicare & Medicaid Services
• DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 89, Number 188 (Friday, September 27, 2024)]
[Rules and Regulations]
[Pages 79152-79172]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-22054]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 425

[CMS-1799-F]
RIN 0938-AV20


Medicare Program: Mitigating the Impact of Significant, 
Anomalous, and Highly Suspect Billing Activity on Medicare Shared 
Savings Program Financial Calculations in Calendar Year 2023

AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of 
Health and Human Services (HHS).

ACTION: Final rule.

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SUMMARY: This final rule addresses policies for assessing performance 
year (PY) 2023 financial performance of Medicare Shared Savings Program 
(Shared Savings Program) Accountable Care Organizations (ACOs); 
establishing

[[Page 79153]]

benchmarks for ACOs starting agreement periods in 2024, 2025, and 2026; 
and calculating factors used in the application cycle for ACOs applying 
to enter a new agreement period beginning on January 1, 2025, and the 
change request cycle for ACOs continuing their participation in the 
program for PY 2025, as a result of significant, anomalous, and highly 
suspect billing activity for selected intermittent urinary catheters on 
Medicare Durable Medical Equipment, Prosthetics, Orthotics & Supplies 
(DMEPOS) claims. Under the Shared Savings Program, providers of 
services and suppliers that participate in ACOs continue to receive 
traditional Medicare fee-for-service (FFS) payments under Medicare 
Parts A and B, but the ACO may be eligible to receive a shared savings 
payment if it meets specified quality and savings requirements. ACOs 
participating in two-sided models may also share in losses. In this 
final rule, we respond to public comments we received on the proposal 
to mitigate the impact of significant, anomalous, and highly suspect 
billing activity on Medicare Shared Savings Program financial 
calculations in calendar year (CY) 2023.

DATES: These regulations are effective on October 15, 2024.

FOR FURTHER INFORMATION CONTACT: Richard (Chase) Kendall, (410) 786-
1000, or [email protected].

SUPPLEMENTARY INFORMATION:

CPT (Current Procedural Terminology) Copyright Notice

    Throughout this final rule, we use CPT codes and descriptions to 
refer to a variety of services. We note that CPT codes and descriptions 
are copyright 2019 American Medical Association. All Rights Reserved. 
CPT is a registered trademark of the American Medical Association 
(AMA). Applicable Federal Acquisition Regulations (FAR) and Defense 
Federal Acquisition Regulations (DFAR) apply.

I. Background

A. Statutory Background on Shared Savings Program Financial 
Calculations

    Section 1899 of the Social Security Act (the Act) (42 U.S.C. 
1395jjj), as added by section 3022 of the Patient Protection and 
Affordable Care Act (Pub. L. 111-148, enacted March 23, 2010), 
establishes the general requirements for payments to participating 
Accountable Care Organizations (ACOs) in the Shared Savings Program. 
Specifically, section 1899(d)(1)(A) of the Act provides that providers 
of services and suppliers participating in an ACO will continue to 
receive payment under the original Medicare fee-for-service program 
under Parts A and B in the same manner as they would otherwise be made. 
However, section 1899(d)(1)(A) of the Act also provides for an ACO to 
receive payment for shared savings provided that the ACO meets both the 
quality performance standards established by the Secretary and 
demonstrates that it has achieved savings against a benchmark of 
expected average per capita Medicare FFS expenditures. Additionally, 
section 1899(i) of the Act authorizes the Secretary to use other 
payment models in place of the one-sided model described in section 
1899(d) of the Act. This provision authorizes the Secretary to select a 
partial capitation model or any other payment model that the Secretary 
determines will improve the quality and efficiency of items and 
services furnished to Medicare beneficiaries without additional program 
expenditures. We have used our authority under section 1899(i)(3) of 
the Act to establish the Shared Savings Program's two-sided payment 
models (see for example, 80 FR 32771 and 32772, and 83 FR 67834 through 
67841) and to mitigate shared losses owed by ACOs affected by extreme 
and uncontrollable circumstances during performance year (PY) 2017 and 
subsequent performance years (82 FR 60916 and 60917, 83 FR 59974 
through 59977), among other uses of this authority described elsewhere 
in this final rule.
    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. Section 1899(d)(1)(B)(ii) of the 
Act addresses how ACO benchmarks are to be established and updated 
under the Shared Savings Program. 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. This benchmark shall be adjusted for beneficiary 
characteristics and such other factors as the Secretary determines 
appropriate and updated by the projected absolute amount of growth in 
national per capita expenditures for Parts A and B services under the 
original Medicare FFS program, as estimated by the Secretary.
    In past rulemaking, we have used our authority under sections 
1899(d)(1)(B)(ii) and 1899(i)(3) of the Act to establish adjustments to 
the benchmark and program expenditure calculations, respectively, to 
exclude certain Medicare Parts A and B payments. In the November 2011 
final rule (76 FR 67920 through 67922), we adopted an alternate payment 
methodology that excluded Indirect Medical Education (IME) and 
Disproportionate Share Hospital (DSH) payments from ACO benchmark and 
performance year expenditures due to concerns that the inclusion of 
these amounts would incentivize ACOs to avoid referring patients to the 
types of providers that receive these payments. In the Calendar Year 
(CY) 2023 Physician Fee Schedule final rule (87 FR 69954 through 
69956), we excluded new supplemental payments to Indian Health Service/
Tribal hospitals and hospitals located in Puerto Rico consistent with 
our longstanding policy to exclude IME, DSH and uncompensated care 
payments from ACOs' assigned and assignable beneficiary expenditure 
calculations. In the interim final rule with comment period entitled 
``Medicare and Medicaid Programs; Basic Health Program, and Exchanges; 
Additional Policy and Regulatory Revisions in Response to the COVID-19 
Public Health Emergency and Delay of Certain Reporting Requirements for 
the Skilled Nursing Facility Quality Reporting Program'' which was 
effective on May 8, 2020, and appeared in the May 8, 2020 Federal 
Register (85 FR 27550) (hereinafter referred to as the ``May 8, 2020 
COVID-19 IFC''), we established a methodology to adjust Shared Savings 
Program financial calculations to account for the COVID-19 Public 
Health Emergency (85 FR 27577 through 27582). Specifically, we 
established a methodology that would exclude all Medicare Parts A and B 
FFS payment amounts for a beneficiary's episode of care for treatment 
of COVID-19 to prevent distortion to, among other calculations, an 
ACO's benchmark and program expenditure calculations.
    We published a proposed rule entitled ``Significant, Anomalous, and 
Highly Suspect Billing Activity on Medicare Shared Savings Program 
Financial Calculations in Calendar Year 2023, which appeared in the 
July 3, 2024 Federal Register (89 FR 55168) (hereinafter referred to as 
the ``SAHS

[[Page 79154]]

billing activity proposed rule''). In the SAHS billing activity 
proposed rule, we proposed to use our authority under sections 
1899(d)(1)(B)(ii) and 1899(i)(3) of the Act to make adjustments to the 
Shared Savings Program's benchmark and program expenditure 
calculations, among other calculations, to remove payment amounts for 
codes displaying significant, anomalous, and highly suspect (SAHS) 
billing activity in CY 2023. We proposed this rule to mitigate the 
impact of SAHS billing activity for selected intermittent urinary 
catheter supplies on Shared Savings Program calculations.

B. Background on Significant, Anomalous, and Highly Suspect Billing 
Activity in Calendar Year 2023

    In the SAHS billing activity proposed rule (89 FR 55169), we 
explained that recently, ACOs and other interested parties have raised 
concerns about an increase in billing to Medicare for selected 
intermittent urinary catheter supplies on Durable Medical Equipment, 
Prosthetics, Orthotics & Supplies (DMEPOS) claims in CY 2023, alleging 
that the increase in payments represents fraudulent activity (the 
``alleged conduct''). Numerous ACOs have alerted the Centers for 
Medicare & Medicaid Services (CMS) to potential impacts on their PY 
2023 expenditures because of the increased catheter billings.
    In early 2023, CMS detected a suspicious increase in billing for 
urinary catheters. Using our authority to suspend payments, CMS quickly 
stopped payment on almost all of these claims and began investigating 
the suppliers who were billing.1 2 Since then, the top 15 
billers of suspicious catheter claims have had their Medicare 
enrollment revoked.
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    \1\ In the preamble to the proposed rule, we stated our 
investigation into the matter was ongoing, and that we had made 
referrals to law enforcement, recouped payments, and terminated 
certain suppliers from the Medicare program (89 FR 55169). We 
clarify in this final rule that, CMS stopped payment to the 
suppliers for these claims, thus no recoupments were needed.
    \2\ As claim suspensions are the ``withholding of payment . . . 
from a provider or supplier of an approved Medicare payment amount 
before a determination of the amount of the overpayment exists, or 
until the resolution of an investigation of a credible allegation of 
fraud,'' 42 CFR 405.370, amounts suspended are considered payable 
under the Shared Savings Program.
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    As explained in the proposed rule, CMS continues to adapt its 
monitoring, investigative targeting, and data analytics programs to 
prevent future fraud, waste, and abuse. CMS also continues to work 
closely with the Department of Health and Human Services Office of 
Inspector General and Department of Justice, as well as our Unified 
Program Integrity Contractors, to investigate health care fraud 
activities, such as those involving urinary catheter supplies, that 
exploit the Medicare program.
    The observed DMEPOS billing volume for intermittent urinary 
catheters in CY 2023 represents SAHS billing activity. Generally, this 
means that a given HCPCS or CPT code exhibits a level of billing that 
represents a significant claims increase either in volume or dollars 
(for example, dollar volume significantly above prior year, or claims 
volume beyond expectations) with national or regional impact (for 
example, not only impacting one or few ACOs) and represents a deviation 
from historical utilization trends that is unexpected and is not 
clearly attributable to reasonably explained changes in policy or the 
supply or demand for covered items or services. The billing level is 
significant and represents billing activity that would cause 
significantly inaccurate and inequitable payments and repayment 
obligations in the Shared Savings Program if not addressed.
    We explained that current Shared Savings Program regulations, 
codified at 42 CFR part 425, do not provide a basis for CMS to adjust 
program expenditure or revenue calculations to remove the impact of 
SAHS billing activity such as that arising from the alleged conduct in 
advance of issuing an initial determination. CMS may reopen an initial 
determination or a final agency determination and issue a revised 
initial determination at any time in the case of fraud or similar 
fault, and not later than 4 years after the date of the notification to 
the ACO of the initial determination of savings or losses for the 
relevant performance year for good cause (Sec.  425.315). This does not 
allow for CMS to address SAHS billing activity, which must be addressed 
prior to conducting financial reconciliation, which is an initial 
determination, to prevent significant inequity and inaccurate payment 
determinations.
    We explained that we shared (and continue to share) the concerns 
recently raised by some ACOs and other interested parties that SAHS 
billing activity for the selected codes for intermittent urinary 
catheters would impact Shared Savings Program calculations for PY 2023 
and we are also concerned about the impact on other program 
calculations based on CY 2023 data. Specifically, we are concerned that 
absent mitigation measures, this SAHS billing activity would inflate 
Medicare Parts A and B payment amounts, including:
     PY 2023 reconciliation calculations, including 
expenditures for each ACO's assigned beneficiaries for PY 2023, the 
national-regional blended update factor used to update the benchmark 
for all ACOs (refer to Sec.  425.601(b)), and factors based on ACO 
participant revenue to determine the loss recoupment limits for ACOs 
participating under two-sided models of the BASIC track (Levels C, D, 
E) (refer to Sec.  425.605(d)).
     Historical benchmark calculations for establishing the 
benchmark for ACOs beginning new agreement periods on January 1, 2024, 
January 1, 2025, or January 1, 2026, for which CY 2023 serves as 
benchmark year (BY) 3, BY2 and BY1, respectively (refer to Sec.  
425.652(a)).
     Factors used in the application cycle for ACOs applying to 
enter a new agreement period beginning on January 1, 2025, and the 
change request cycle for ACOs continuing their participation in the 
program for PY 2025, including data used to determine an ACO's 
eligibility for Advance Investment Payments under Sec.  425.630(b), or 
for the CMS Innovation Center's new ACO Primary Care Flex Model (ACO PC 
Flex Model) for the January 1, 2025, start date based on ACO revenue 
status (high revenue or low revenue), and to determine repayment 
mechanism amounts for ACOs entering, or continuing in, two-sided models 
for PY 2025 (refer to Sec.  425.204(f)).
    The accuracy of the Shared Savings Program's determination of an 
ACO's financial performance (through a process referred to as financial 
reconciliation) in terms of the ACO's eligibility for and amount of a 
shared savings payment or liability for shared losses, depends on the 
accuracy of claims data. Absent CMS action, the SAHS billing activity 
would affect PY 2023 financial reconciliation program-wide rather than 
being limited to ACOs that have assigned beneficiaries directly 
impacted by the issue. For instance:
     An ACO with assigned beneficiaries impacted by the SAHS 
billing activity for intermittent urinary catheters would see an 
increase in performance year expenditures, reducing the ACO's shared 
savings or increasing the amount of shared losses owed by the ACO. The 
impact on the ACO's performance may be partially mitigated if the SAHS 
billing activity also increases the ACO's regional service area 
expenditures and the national expenditures used to calculate the two-
way national-regional blended benchmark update factor.
     An ACO with assigned beneficiary expenditures and regional 
service area expenditures with little or no impact from the SAHS 
billing activity would

[[Page 79155]]

receive a relatively higher benchmark update under the national-
regional blended update factors used in PY 2023 reconciliation, and 
therefore, may appear to perform better as a result of the national 
impact of the intermittent urinary catheters billing increase, 
resulting in higher earned performance payments or lower or no losses 
for the ACO.
    Unaddressed, the SAHS billing activity would distort the historical 
benchmarks for an ACO that entered an agreement period beginning on 
January 1, 2024, or will enter an agreement period beginning on January 
1, 2025, or January 1, 2026 (for which CY 2023 will continue to be a 
benchmark year) and the accuracy of any future financial reconciliation 
performed against those benchmarks. Similarly, inaccurate revenue and 
expenditure calculations based on CY 2023 data may affect an ACO's 
revenue status and the amount of funds an ACO in a two-sided model must 
secure as a repayment mechanism, one of the program's important 
safeguards for protecting the Medicare Trust Funds. Given the scope of 
the SAHS billing activity, there is a high likelihood that, absent CMS 
action, shared savings and losses calculations for PY 2023, and for 
future performance years where CY 2023 is a benchmark year, would be 
significantly impacted for ACOs. Under these circumstances, some ACOs 
are likely to experience adverse impacts (for example, lower or no 
shared savings or higher shared losses) while other ACOs would 
experience windfall gains (for example, higher shared savings or lower 
or no shared losses).
    In the SAHS billing activity proposed rule (89 FR 55170), we 
explained that failing to address SAHS billing activity that occurred 
in CY 2023 would jeopardize the integrity of the Shared Savings 
Program. There are 480 ACOs in the Shared Savings Program with over 
608,000 health care providers who care for 10.8 million assigned FFS 
beneficiaries.\3\ In PY 2022, the most recent year for which data is 
available, savings achieved by ACOs relative to benchmarks amounted to 
$4.3 billion, of which ACOs received shared savings payments totaling 
$2.5 billion, and Medicare retained $1.8 billion in savings.\4\ ACOs 
are held accountable for 100 percent of total Medicare Parts A and B 
expenditures for their assigned beneficiary populations (with limited 
exceptions). This incentivizes ACOs to generate savings for the 
Medicare program as they have the opportunity to share in those savings 
if certain requirements are met. It also discourages the ACO from 
generating unnecessary expenditures for Medicare as they may be 
required to repay those amounts to CMS. Accountable care arrangements 
such as this cannot function if the ACO may be held responsible for all 
SAHS billing activity that is outside of their control. Holding an ACO 
accountable for substantial losses due to SAHS billing activity, such 
as that observed in connection with the increase in billing for 
intermittent urinary catheters, is not only inequitable but would 
dramatically increase the level of risk associated with participation, 
making the Shared Savings Program unattractive.
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    \3\ Refer to CMS, Shared Savings Program Fast Facts--As of 
January 1, 2024, available at https://www.cms.gov/files/document/2024-shared-savings-program-fast-facts.pdf.
    \4\ Refer to CMS, Shared Savings Program Performance Year 
Financial and Quality Results, 2022, available at https://data.cms.gov/medicare-shared-savings-program/performance-year-financial-and-quality-results/data.
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    For these reasons, we determined it was timely and appropriate to 
undertake notice and comment rulemaking to propose an approach for 
mitigating the impact of SAHS billing activity in CY 2023 on Shared 
Savings Program financial calculations. In this Background section of 
the final rule, we summarize and respond to general comments we 
received related to CMS undertaking notice and comment rulemaking on 
this topic. In the following sections of this final rule, we summarize 
and respond to public comments we received on the specific proposals 
outlined in the SAHS billing activity proposed rule and discuss our 
final policies after taking into consideration the public comments.
    Comment: Most commenters expressed broad support for the proposed 
rule or general support for the proposed rule with additional 
recommendations. Many commenters stated their ``strong,'' ``full,'' or 
``general'' support for the proposed rule and urged CMS to finalize the 
proposals. Many commenters also commended CMS for taking action to 
address concerns raised by ACOs and other interested parties about the 
impact of SAHS billing activity for the catheter codes, and many also 
characterized CMS's attention to the matter as ``prompt,'' ``swift,'' 
``timely,'' or ``responsive to stakeholder input.'' No commenters 
expressed general opposition to the proposed rule.
    Supportive commenters offered a variety of reasons why they 
believed undertaking rulemaking was appropriate to mitigate SAHS 
billing activity for selected catheter codes. Many commenters agreed 
that the proposals would ensure the accuracy, fairness, or integrity of 
Shared Savings Program financial calculations. One commenter described 
the proposal as a ``crucial step'' and a ``necessary and well-supported 
measure'' to ensure or enhance the accuracy, fairness, and integrity of 
financial calculations in the Shared Savings Program. A couple of 
commenters agreed with CMS that addressing the SAHS billing activity 
promptly is essential to preventing inaccurate and inequitable payment 
and repayment obligations for ACOs, with one also stating that the 
proposals will help ``rectify the financial distortions'' caused by the 
SAHS billing activity for the catheter codes. One commenter stated that 
the proposed rule highlights CMS's dedication to addressing fraud as 
well as ensuring that the Shared Savings Program operates effectively 
while fostering a more transparent and equitable system. Other 
commenters stated that the proposals would improve sustainability of 
the Shared Savings Program. For instance, one commenter claimed that an 
``accurate and fair reconciliation process will ensure that health 
systems, ACOs and providers continue to participate in value-based care 
models with CMS in the future,'' and a couple of other commenters 
asserted that the proposals will help keep ACOs in the program. Another 
commenter said that the proposals are important to ``maintain a strong, 
predictable ACO program,'' and another mentioned that not addressing 
the SAHS billing activity could lead to ACOs leaving the program.
    Response: We thank commenters for their support for CMS's actions 
to undertake notice and comment rulemaking to mitigate the impact of 
SAHS billing activity on Medicare Shared Savings Program financial 
calculations in CY 2023. We agree with the commenters who stated that 
mitigating the impact of SAHS billing activity in CY 2023 is important 
for promoting continued integrity and fairness and improving the 
accuracy of Shared Savings Program financial calculations. 
Additionally, addressing the SAHS billing activity promptly is 
essential to preventing inaccurate and inequitable payment and 
repayment obligations for ACOs. We agree with the commenters that this 
course of action will in turn support the sustainability of the Shared 
Savings Program.
    Comment: Commenters addressed the role that ACOs play in the 
identification of SAHS billing activity or fraud, waste, and abuse in 
Medicare. Many commenters representing ACOs stated that their ACO 
reported SAHS billing activity for catheter codes to regulatory

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or law enforcement agencies, with one adding that ``as an ACO, it is 
our responsibility to report suspect fraud to authorities,'' and 
another stating that they will be submitting documentation about 
suspect claims for their ACO beneficiaries to the HHS Office of 
Inspector General (HHS-OIG). Other commenters credited ACOs for playing 
a role in identifying the SAHS billing activity for catheter codes in 
CY 2023. One commenter stated their belief that ACOs are ``well 
positioned to detect anomalous billing'' given their ongoing and in-
depth analysis of claims and utilization data, and others noted that 
the HHS-OIG identified ACOs as sources to uncover potential fraud, 
waste, and abuse by identifying patterns of unusual billing. One 
commenter stated they will continue to monitor for SAHS billing 
activity. Some commenters stated there are opportunities to improve how 
ACOs report fraud or better educate ACOs on the processes CMS and HHS-
OIG undertake to investigate fraud.
    Response: We agree that ACOs are well positioned to support 
monitoring efforts that will improve the integrity of the Medicare 
program. ACOs have tools to detect unusual or suspect billing among 
their assigned beneficiary population through data reports provided by 
CMS and through their own data systems. We appreciate ACOs' efforts to 
alert CMS to potential impacts on their PY 2023 expenditures because of 
the increased catheter billings. ACOs are encouraged to report 
potential fraud or abuse by submitting a complaint to the CMS Center 
for Program Integrity (CPI), Fraud Investigations Group (FIG), Division 
of Provider Investigations (DPI) at https://[email protected]. 
ACOs can also report potential fraud or abuse by submitting a complaint 
to the OIG website,\5\ OIG hotline at 1-800-HHS-TIPS (1-800-447-8477), 
TTY at 1-800-377-4950, by fax at 1-800-223-8164, or by mailing to: 
Office of Inspector General ATTN: OIG HOTLINE OPERATIONS P.O. Box 23489 
Washington, DC 20026. ACOs suspecting healthcare fraud, waste, or abuse 
are encouraged to visit the CMS CPI website \6\ at https://www.cms.gov/medicare/medicaid-coordination/center-program-integrity, for more 
information.
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    \5\ https://oig.hhs.gov/fraud/report-fraud/.
    \6\ https://www.cms.gov/medicare/medicaid-coordination/center-program-integrity/reporting-fraud.
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    As described above, CMS continues to investigate the matter and we 
have taken initial actions in response. We have made referrals to law 
enforcement and terminated certain suppliers from the Medicare program. 
CMS also continues to work closely with the HHS-OIG and Department of 
Justice, as well as our Unified Program Integrity Contractors, to 
investigate health care fraud activities, such as those involving 
urinary catheters, that exploit the Medicare program. We also undertook 
this notice and comment rulemaking to propose an approach for 
mitigating the impact of SAHS billing activity in CY 2023 on Shared 
Savings Program financial calculations.
    Comment: A couple of commenters appeared to interpret the proposals 
as new rules for providers to follow in their billing practices. One 
commenter, while stating their support for preventing ``fraudulent 
practices that jeopardize the program's sustainability and unfairly 
impact the financial calculations for participating providers,'' 
cautioned that CMS should not put in place ``compliance requirements 
that overly burden honest providers'' and recommended that CMS provide 
additional support and resources to help providers understand and 
comply with the new requirements. The other commenter, while 
characterizing the proposed rule as ensuring fairness, accuracy in 
financial calculations, fraud prevention, and cost control, also stated 
that one potential drawback was that ``some providers might feel 
unfairly targeted or burdened by additional scrutiny and adjustments.''
    Response: We clarify that rules or requirements for providers in 
how they bill or are paid by Medicare are beyond the scope of this 
proposed rule. The proposed changes do not impose new rules or 
requirements related to provider billing and payment. The proposed 
changes are specific to ACOs and Shared Savings Program calculations to 
mitigate the impact of SAHS billing activity in CY 2023 that would 
otherwise be included in Shared Savings Program expenditure and revenue 
calculations under the current regulations governing the Shared Savings 
Program.

II. Provisions of the Regulations

A. Identifying Codes Displaying Significant, Anomalous, and Highly 
Suspect Billing Activity in CY 2023

    As we explained in the SAHS billing activity proposed rule (89 FR 
55170), DMEPOS billing to Medicare for selected intermittent urinary 
catheter supplies has increased significantly since the first quarter 
of CY 2023, with a relatively small number of suppliers submitting a 
large majority of all claims for these devices. At a program level, 
spending in these codes remained less than 0.1 percent of total FFS 
spending in every year from CY 2016 to CY 2022 before increasing to 
nearly 1 percent in CY 2023. The SAHS billing activity has had a 
national impact, as evidenced by discussion of the issue in the 2024 
Medicare Trustees Report, which noted a significant increase in 
suspected fraudulent spending on certain intermittent catheters in 
2023. The DME projections in the report include the assumption that 
this suspected fraud would be addressed during 2024.\7\
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    \7\ The Boards of Trustees, Federal Hospital Insurance and 
Federal Supplementary Medical Insurance Trust Funds, ``2024 Annual 
Report of the Boards of Trustees of the Federal Hospital Insurance 
and Federal Supplementary Medical Insurance Trust Funds'', available 
at https://www.cms.gov/oact/tr/2024.
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    We explained that based on our evaluation of billing trends for 
individual catheter codes across CY 2023 and in consultation with the 
CMS Center for Program Integrity (CPI) and the CMS Office of the 
Actuary (OACT), we have determined that two specific HCPCS codes 
displayed SAHS billing activity in CY 2023: A4352 (Intermittent urinary 
catheter; Coude (curved) tip, with or without coating (Teflon, 
silicone, silicone elastomeric, or hydrophilic, etc.), each) and A4353 
(Intermittent urinary catheter, with insertion supplies). Both HCPCS 
codes were billed at significantly higher rates in CY 2023 compared to 
CY 2022 (claims increasing by 163 percent for A4352 and by over 5,000 
percent for A4353), for which CMS was unable to identify a clear 
justification for the increases (for example, neither represent a newly 
adopted code for which a natural increase in billing might be 
expected). The change in claim volume is significant and unexplained, 
and if not addressed, would cause inaccurate and inequitable payments 
and repayment obligations in the Shared Savings Program. Furthermore, 
the growth in claims is not attributable to Medicare providers or 
suppliers participating in Shared Savings Program ACOs and thus outside 
of the ACOs' ability to reasonably control.
    Comment: Many commenters agreed with CMS' determination that HCPCS 
codes A4352 and A4353 displayed SAHS billing activity in CY 2023. 
Multiple commenters specifically referred to HCPCS codes A4352 and 
A4353 when expressing their support for CMS' proposals, with many 
others stating their support with less specificity--for instance 
stating their support for CMS to address billing activity associated 
with ``catheters,''

[[Page 79157]]

``the HCPCS codes,'' or ``the catheter codes.''
    Some commenters supported their agreement that the two catheter 
codes displayed SAHS billing activity by including data to highlight 
how billing activity for the selected catheter codes impacted their ACO 
expenditures, and other commenters offered data on the impact on 
national assignable FFS expenditures.
    Response: We appreciate the specific feedback from commenters and 
agree that the observed DMEPOS billing volume for A4352 (Intermittent 
urinary catheter; Coude (curved) tip, with or without coating (Teflon, 
silicone, silicone elastomeric, or hydrophilic, etc.), each) and A4353 
(Intermittent urinary catheter, with insertion supplies) in CY 2023 
represents SAHS billing activity.
    Comment: One commenter stated they identified and reported 
``anomalous billing activity'' for an additional catheter billing 
procedure code (HCPCS code A4351) and that the proposal to identify 
HCPCS codes A4352 and A4353 as SAHS billing activity in CY 2023 does 
not fully address the potential ``bias'' in financial calculations for 
their ACO of SAHS billing activity for catheter services.
    Response: We defined SAHS billing activity in the proposed rule (89 
FR 55169) to mean that a given HCPCS or CPT code exhibits a level of 
billing that represents a significant claims increase either in volume 
or dollars (for example, dollar volume significantly above prior year, 
or claims volume beyond expectations) with national or regional impact 
(for example, not only impacting one or few ACOs) and represents a 
deviation from historical utilization trends that is unexpected and is 
not clearly attributable to reasonably explained changes in policy or 
the supply or demand for covered items or services. The billing level 
is significant and represents billing activity that would cause 
significantly inaccurate and inequitable payments and repayment 
obligations in the Shared Savings Program if not addressed.
    In developing the proposed rule, we assessed the impact of an 
increase in billing to Medicare for intermittent urinary catheter 
services on DMEPOS claims in CY 2023. We determined that billing 
activity for HCPCS codes A4352 and A4353 was SAHS billing activity 
while A4351 was not. HCPCS codes A4352 and A4353 were billed at 
significantly higher rates in CY 2023 compared to CY 2022 (claims 
increasing by 163 percent for A4352 and by over 5,000 percent for 
A4353), for which CMS was unable to identify a clear justification for 
the increases (for example, neither represent a newly adopted code for 
which a natural increase in billing might be expected). We also 
determined that the change in claim volume was significant and 
unexplained, and if not addressed, would cause inaccurate and 
inequitable payments and repayment obligations in the Shared Savings 
Program.
    Our assessment found that billing activity for HCPCS code A4351, 
however, was not SAHS billing activity. Compared to catheter codes 
A4352 and A4353, billing for HCPCS code A4351 exhibited a much smaller 
increase between CY 2022 and CY 2023, with claims rising by 
approximately 16 percent. Also, unlike A4352 and A4353, where the 
unexplained billing increase represented the vast majority of spending 
on those codes in CY 2023, the billing increase for A4351 represented a 
small proportion of total billing activity for the code in CY 2023. We 
determined that this level of billing did not represent a significant 
claims increase with national or regional impact that unexpectedly 
deviated from historical utilization trends. We also determined that 
the increase in utilization of HCPCS code A4351 was not clearly a 
billing level that was representative of activity that would cause 
significantly inaccurate and inequitable payments and repayment 
obligations in the Shared Savings Program if not addressed. This 
conclusion was based on our finding that the increase in billing for 
the code was so small relative to overall spending for most ACOs and to 
overall national or regional spending that it would be unlikely to have 
significant program-wide impacts on payment and repayment obligations. 
However, we will continue to monitor the billing activity with this 
code in partnership with our program integrity colleagues.
    Comment: Some commenters stated that, in addition to catheter 
codes, codes for skin substitutes exhibited SAHS billing activity in CY 
2023. Other commenters urged CMS to assess or evaluate whether 
additional codes warranted adjustment in Shared Savings Program 
calculations and cited increases in billing for skin substitutes as an 
example.
    Response: We assessed the impact of an increase in billing to 
Medicare for skin substitutes and determined that the billing activity 
for these services was not SAHS billing activity.\8\ Specifically, we 
found that increases in billing activity for skin substitutes were 
explained by the deviation in Local Coverage Determinations (LCDs) 
across Medicare Administrative Contractors and the variety of 
innovative products which fall under this area, which made these 
services more available in CY 2023.\9\ However, we will continue to 
monitor this area and work with our program integrity partners. 
Furthermore, as part of our larger strategy to address SAHS billing 
activity and improper payments on Shared Savings Program financial 
calculations, CMS has proposals in the CY 2025 PFS proposed rule, 
including (respectively): to adjust Shared Savings Program calculations 
to mitigate the impact of SAHS billing activity occurring in CY 2024 
and subsequent calendar years, and to establish a calculation 
methodology to account for the impact of improper payments in 
recalculating expenditures and payment amounts used in Shared Savings 
Program financial calculations upon reopening a payment determination.
---------------------------------------------------------------------------

    \8\ Refer to the definition of SAHS billing activity stated 
elsewhere in this final rule.
    \9\ Medicare Administrative Contractors also released a proposed 
LCD on April 25, 2024 for skin substitute grafts/cellular and 
tissue-based products for the treatment of diabetic foot ulcers and 
venous leg ulcers. See https://www.cms.gov/newsroom/press-releases/cms-statement-proposed-local-coverage-determination-lcd-skin-substitute-grafts/cellular-and-tissue.
---------------------------------------------------------------------------

    Comment: Some commenters identified additional codes or services 
that they believed exhibited SAHS billing activity in CY 2023 or 
warranted additional evaluation by CMS. Specifically, commenters 
mentioned: glucose monitoring, laboratory services, telemedicine, 
ventilators, diabetic supplies, collagen dressings, and other 
unspecified DMEPOS supplies billed by the same suppliers involved in 
the anomalous catheter billing. Several commenters suggested that the 
billing activity associated with some of these codes had regional, 
rather than national impacts, and there would be a detrimental impact 
to ACO savings unless accounted for by CMS.
    Response: We appreciate commenters notifying us of their concerns 
over billing activity in CY 2023 for other services; however, only the 
billing for urinary catheter services met the definition of SAHS 
billing activity as finalized in this rule with respect to CY 2023. We 
defined SAHS billing activity in the proposed rule to mean that a given 
HCPCS or CPT code exhibits a level of billing that represents a 
significant claims increase either in volume or dollars (for example, 
dollar volume significantly above prior year, or claims volume beyond 
expectations) with national or regional impact (for example, not only 
impacting one or few ACOs) and represents a deviation from

[[Page 79158]]

historical utilization trends that is unexpected and is not clearly 
attributable to reasonably explained changes in policy or the supply or 
demand for covered items or services (89 FR 55169). The billing level 
is significant and represents billing activity that would cause 
significantly inaccurate and inequitable payments and repayment 
obligations in the Shared Savings Program if not addressed. Unlike the 
two urinary catheter codes, some of the other services mentioned by 
commenters were too broad in nature to be considered SAHS billing 
activity. While a group of codes may exhibit patterns that could 
constitute SAHS billing activity, each individual code must still 
exhibit SAHS billing activity for it to be considered under the 
definition of SAHS billing activity we relied on in our proposal. Some 
of the commenters' concerns span entire claim types or hundreds of 
procedure codes, suggesting that SAHS billing activity existed only in 
aggregate and not for any individual code. For the other services 
suggested by commenters that were more specific in nature, the facts 
necessary to support a determination of SAHS billing activity had not 
been developed at the time of this rulemaking.
    We narrowly crafted the definition of SAHS billing activity in part 
out of fairness to ACOs. Both under this rule and a related proposal in 
the CY 2025 Medicare Physician Fee Schedule (PFS) (89 FR 61909 through 
61916) to address future instances of SAHS billing activity, we are 
mindful of equitable concerns that may arise from CMS revising 
standards for the calculation of an ACO's financial performance after 
the start of a performance year or, in the case of CY 2023, the 
completion of the performance year. More specifically, we described 
that for billing activity to be considered SAHS, the billing activity 
would need to show a significant claims increase either in volume or 
dollars and have national or regional impact. These high standards are 
appropriate because the remedy we are using to correct for SAHS billing 
activity is the broad exclusion of the relevant CPT or HCPCS code from 
certain important financial calculations, and this could have mixed 
impact on Shared Savings Program ACOs. Without these high standards, 
ACOs are more likely to be held liable for losses that they would not 
be otherwise be accountable for or have a reduction in or loss of their 
shared savings.
    We remain committed to evaluating other cases when improper 
payments may have been made and assessing the impact on Shared Savings 
Program calculations. For these reasons, we proposed two policies of 
general applicability in the CY 2025 PFS (89 FR 61596) to address 
instances of improper billing and payments. The first proposal in the 
CY 2025 PFS proposed rule would allow CMS to address instances of SAHS 
billing activity occurring in CY 2024 or subsequent years prior to 
financially reconciling the performance year in which the activity 
occurred (89 FR 61909 through 61916). Under the proposal, following the 
end of each calendar year, we would determine whether any codes 
exhibited SAHS billing activity (defined as described elsewhere in this 
final rule) and adjust expenditure and revenue calculations to exclude 
payment amounts. We would make these adjustments both when the calendar 
year serves as a benchmark or performance year. Additionally, under the 
proposed policy, we would adjust historical benchmarks used to 
reconcile the performance year when the SAHS activity occurred to 
remove payment amounts for the codes from benchmark year expenditures.
    The second proposal would provide relief to ACOs that are affected 
by instances of fraud or other improper payments that may not meet the 
definition of SAHS billing activity (89 FR 61892 through 61909) or for 
which there is not enough information available at the close of the 
affected calendar year to make a determination of whether SAHS billing 
activity occurred. Under this proposal, an ACO could request the 
reopening of its previously completed financial reconciliation results 
so that they can be reevaluated for inaccuracies as a result of new 
information being available. In the CY 2025 PFS proposed rule (89 FR 
61596) we invited interested parties to comment on these proposals.
    Comment: Several commenters also urged CMS to consider HCPCS codes 
A4352 and A4353 as displaying SAHS billing activity for time periods 
beyond CY 2023. Multiple commenters urged CMS to remove--or assess 
whether to remove--the selected catheter codes from CY 2024, with some 
referencing CMS's proposals in the CY 2025 PFS rule related to 
mitigating SAHS billing activity occurring in CY 2024 and subsequent 
years. One of these commenters also urged CMS to assess whether billing 
for the selected catheter codes in CY 2022 constitutes SAHS billing 
activity and recommended that CMS and HHS-OIG review potentially 
fraudulent claims for other DMEPOS provided between 2022 and 2024. One 
commenter expressed concerns that limiting the scope of the adjustment 
to the selected catheter claims and to the CY 2023 time period would 
not fully address the ``bias'' affecting its ACO.
    Response: With respect to any billing increases of the selected 
catheter codes in CY 2024, we note that this is outside the scope of 
this final rule. However, in the CY 2025 PFS proposed rule (89 FR 61909 
through 61916), we proposed policies to mitigate the impact of SAHS 
billing activity occurring in CY 2024 or subsequent calendar years. 
Specifically, we proposed that CMS may determine at its sole discretion 
that the billing of specified HCPCS or CPT codes represents SAHS 
billing activity in CY 2024 or subsequent calendar years that warrants 
adjustments to Shared Savings Program calculations.
    With respect to performance years prior to CY 2023, we note that 
CMS has already completed financial reconciliation for those years, and 
therefore the policy approach proposed in the SAHS billing proposed 
rule and adopted in this final rule would not address any billing 
increases of catheter codes. As discussed elsewhere in this final rule, 
the Shared Savings Program reopening policy proposal in the CY 2025 PFS 
proposed rule (89 FR 61892 through 61909) presents a mechanism by which 
issues affecting already reconciled performance years may be addressed.
    Final Action: After consideration of public comments, we are 
finalizing our proposal to specify in the Shared Savings Program 
regulations at Sec.  425.670(b) that CMS has determined that the 
billing of HCPCS codes A4352 (Intermittent urinary catheter; Coude 
(curved) tip, with or without coating (Teflon, silicone, silicone 
elastomeric, or hydrophilic, etc.), each) and A4353 (Intermittent 
urinary catheter, with insertion supplies) represents significant, 
anomalous, and highly suspect billing activity for CY 2023 that would 
cause significantly inaccurate and inequitable payments and repayment 
obligations in the Shared Savings Program if not addressed.

B. Removing Payment Amounts for Codes Displaying Significant, 
Anomalous, and Highly Suspect Billing Activity in Calendar Year 2023 
From Shared Savings Program Expenditure and Revenue Calculations

    Given our concerns about leaving the SAHS billing activity 
unaddressed and the limitations with using an approach available under 
the current regulations (as we describe elsewhere in this rule), we 
proposed to revise the policies governing Shared Savings Program 
financial calculations to mitigate the impact of SAHS billing activity 
for selected catheter codes identified for CY

[[Page 79159]]

2023. The provisions would rely on our authority under section 
1899(d)(1)(B)(ii) of the Act to adjust benchmark expenditures for 
beneficiary characteristics and such other factors as the Secretary 
determines appropriate. Here, we proposed to adjust the benchmark to 
remove payments for the specified catheter codes from the determination 
of benchmark expenditures. We proposed to use our authority under 
section 1899(i)(3) of the Act to apply this adjustment to certain other 
program calculations, including the determination of performance year 
expenditures.
    We proposed to exclude all Medicare Parts A and B payment amounts 
for the selected catheter HCPCS codes on DMEPOS claims from expenditure 
and revenue calculations for CY 2023. We would perform these 
adjustments for calculations for CY 2023 when it is the performance 
year, including when CY 2023 is used to calculate the ACO's performance 
year expenditures and when it is used to calculate the national-
regional blended update to the benchmark used in determining financial 
performance for PY 2023, and also when CY 2023 is a benchmark year for 
ACOs in agreement periods beginning on January 1, 2024, January 1, 
2025, or January 1, 2026. In performing this adjustment, we would 
remove payment amounts for the selected catheter HCPCS codes on DMEPOS 
claims submitted by any supplier; that is, we would not limit the 
exclusion to payment amounts on claims submitted by certain suppliers 
that may have individually displayed SAHS billing activity so as to 
protect the integrity of any potential investigations which may be 
ongoing.
    Specifically, we would adjust the following Shared Savings Program 
calculations, as applicable, to exclude all Medicare Parts A and B 
payment amounts on DMEPOS claims (claim types 72 and 82) \10\ 
associated with HCPCS codes A4352 and A4353 in CY 2023:
---------------------------------------------------------------------------

    \10\ We note that in some Shared Savings Program documentation 
(see, for example, Table 2 in the Medicare Shared Savings Program, 
Shared Savings and Losses, Assignment and Quality Performance 
Standard Methodology Specifications (version #11, January 2023), 
available at https://www.cms.gov/files/document/medicare-shared-savings-program-shared-savings-and-losses-and-assignment-methodology-specifications.pdf-2), we classify claim type 72 (along 
with claim type 71) as Carrier (including physician/supplier Part B) 
and we classify claim type 82 (along with claim type 81) as DME. We 
will continue to use these classifications, which are based on the 
type of carrier to which the claim was submitted, for other program 
operations. As described by the CMS Research Data Assistance Center 
(ResDAC), claim type 71 refers to local carrier non-DMEPOS claims, 
72 to local carrier DMEPOS claims, 81 to durable medical equipment 
regional carrier (DMERC) non-DMEPOS claims, and 82 to DMERC DMEPOS 
claims (see https://resdac.org/cms-data/variables/nch-claim-type-code).
---------------------------------------------------------------------------

     Calculation of Medicare Parts A and B FFS expenditures for 
an ACO's assigned beneficiaries for all purposes including the 
following: Establishing, adjusting, updating, and resetting the ACO's 
historical benchmark and determining performance year expenditures.
     Calculation of FFS expenditures for assignable 
beneficiaries as used in determining county-level FFS expenditures and 
national Medicare FFS expenditures, including the following 
calculations:
    ++ Determining average county FFS expenditures based on 
expenditures for the assignable population of beneficiaries in each 
county in the ACO's regional service area according to Sec. Sec.  
425.601(c) and 425.654(a) for purposes of calculating the ACO's 
regional FFS expenditures.
    ++ Determining the 99th percentile of national Medicare FFS 
expenditures for assignable beneficiaries for purposes of the 
following:
    --Truncating assigned beneficiary expenditures used in calculating 
benchmark expenditures under Sec.  425.652(a)(4), and performance year 
expenditures under Sec. Sec.  425.605(a)(3) and 425.610(a)(4).
    --Truncating expenditures for assignable beneficiaries in each 
county for purposes of determining county FFS expenditures according to 
Sec. Sec.  425.601(c)(3) and 425.654(a)(3).
    --Truncating expenditures for assignable beneficiaries for purposes 
of determining truncated national per capita FFS expenditures for 
purposes of calculating the Accountable Care Prospective Trend (ACPT) 
according to Sec.  425.660(b)(3).
    ++ Determining truncated national per capita expenditures FFS per 
capita expenditures for assignable beneficiaries for purposes of 
calculating the ACPT according to Sec.  425.660(b)(3).
    ++ Determining national per capita expenditures for Parts A and B 
services under the original Medicare FFS program for assignable 
beneficiaries for purposes of capping the regional adjustment to the 
ACO's historical benchmark according to Sec.  425.656(c)(3), and 
capping the prior savings adjustment according to Sec.  
425.658(c)(1)(ii).
    ++ Determining national growth rates that are used as part of the 
blended growth rates used to trend forward benchmark year (BY) 1 and 
BY2 expenditures to BY3 according to Sec.  425.652(a)(5)(ii) and as 
part of the blended growth rates used to update the benchmark according 
to Sec. Sec.  425.601(b)(2) and 425.652(b)(2)(i).
     Calculation of Medicare Parts A and B FFS revenue of ACO 
participants for purposes of calculating the ACO's loss recoupment 
limit under the BASIC track as specified in Sec.  425.605(d).
     Calculation of total Medicare Parts A and B FFS revenue of 
ACO participants and total Medicare Parts A and B FFS expenditures for 
the ACO's assigned beneficiaries for purposes of identifying whether an 
ACO is a high revenue ACO or low revenue ACO, as defined under Sec.  
425.20, and determining an ACO's eligibility to receive advance 
investment payments according to Sec.  425.630.
     Calculation or recalculation of the amount of the ACO's 
repayment mechanism arrangement according to Sec.  425.204(f)(4).
    This approach recognizes that SAHS billing activity has the 
potential to impact an ACO's savings and loss determination for both PY 
2023 (the year when the SAHS billing activity occurred) and future 
performance years for which CY 2023 is a benchmark year. Making 
adjustments when the affected period represents a performance year or 
benchmark year is consistent with our approach for the exclusion of 
payment amounts for episodes of care for treatment of COVID-19 that we 
established in the May 8, 2020 COVID-19 IFC (85 FR 27577 through 
27581).
    The listed calculations reflect the same set of calculations that 
CMS adjusts for a beneficiary's episode of care for treatment of COVID-
19, specified at Sec.  425.611(c), as amended by the CY 2021 PFS final 
rule (85 FR 85044), the CY 2023 PFS final rule (87 FR 70241), and the 
CY 2024 PFS final rule (88 FR 79548), with a few exceptions. First, 
Sec.  425.611(c) includes certain provisions that are not relevant for 
the proposed policy.\11\ Second, the proposed policy includes 
calculations related to truncated national per capita expenditures used 
in determining the

[[Page 79160]]

ACPT as described in Sec.  425.660(b)(3) that are not included in Sec.  
425.611(c).\12\
---------------------------------------------------------------------------

    \11\ This includes provisions under Sec. Sec.  425.600, 425.602, 
425.603, 425.604, and 425.606 which are not relevant for the 
proposed policy because they are not applicable to PY 2023 or for 
agreement periods where CY 2023 is a benchmark year. It also 
includes certain provisions under Sec.  425.601 which are not 
relevant for the proposed policy because the proposed policy does 
not include adjustments to benchmark year calculations for the 
benchmarks used to financially reconcile ACOs for PY 2023. These 
provisions are relevant for the COVID-19 episode exclusion policy 
under Sec.  425.611 because they are applicable to performance or 
benchmark years that overlap with the PHE for COVID-19.
    \12\ When establishing the ACPT in the CY 2023 PFS final rule, 
we noted that the first ACPT release would be published in 2024 for 
agreement periods beginning on January 1, 2024, and would provide a 
projected annualized growth rate (or rates) relative to the 2023 
benchmark year (BY3). We noted further that to the extent that 
Medicare projections made at that time (2024) anticipated lingering 
effects from the COVID-19 pandemic then they would be reflected in 
the ACPT (see 87 FR 69894), and we opted not to amend Sec.  425.611 
to include adjustments of ACPT-related calculations. However, given 
the known nation-wide impact of the SAHS billing activity in CY 
2023, it is appropriate to propose making adjustments to ACPT-
related calculations in this proposed rule.
---------------------------------------------------------------------------

    For agreement periods beginning on January 1, 2024, and in 
subsequent years, CMS incorporates a fixed projected growth rate 
determined at the beginning of the ACO's agreement period called the 
ACPT into the blended update factor described in Sec.  425.652(b) when 
updating an ACO's benchmark for each performance year of the agreement 
period.\13\ Specifically, the ACPT is an annual rate of growth in 
projected expenditures during the ACO's 5-year agreement period 
relative to BY3 and is calculated using a modified version of the 
existing FFS United States Per Capita Cost (USPCC) growth trend 
projections. The USPCCs are calculated by OACT and projects Medicare 
program spending for various recurring deliverables, including the 
Medicare Trustees Report and the Advance Notice and Announcement of 
Medicare Advantage capitation rates and Part C and Part D payment 
policies. These publications include both historical and projected 
future Medicare spending amounts expressed on a per capita basis. The 
Modified USPCC Annualized Growth Rate used for calculating the ACPT in 
the Shared Savings Program reflects the following: (1) exclusion of IME 
and DSH payments, and the supplemental payment for Indian Health 
Service/Tribal hospitals and Puerto Rico hospitals; and (2) inclusion 
of payments associated with hospice claims (see Sec.  425.660(b)(1), 
see also 87 FR 69882).
---------------------------------------------------------------------------

    \13\ For more details on the ACPT and the terminology used to 
describe it, refer to the CY 2023 PFS final rule (87 FR 69881 
through 69898) and Medicare Shared Savings Program, Shared Savings 
and Losses, Assignment and Quality Performance Standard Methodology, 
Specifications of the Accountable Care Prospective Trend (ACPT) and 
Three-Way Blended Benchmark Update Factor (May 2023, Version #1), 
available at https://www.cms.gov/files/document/medicare-ssp-acpt-specifications.pdf.
---------------------------------------------------------------------------

    In considering whether to propose adjusting calculations used for 
the ACPT, we considered whether adjusting Shared Savings Program 
calculations detailed earlier in this section to exclude all payment 
amounts for the selected catheter codes but not adjusting projected 
growth rates used in the three-way blend would result in a bias. We 
expected that a bias would be introduced if we adjusted Shared Savings 
Program calculations to remove SAHS billing activity from expenditures 
but did not make an adjustment for SAHS billing activity from the 
corresponding year used in ACPT projections. We thus determined it was 
necessary to adjust the ACPT to promote continued integrity and 
fairness and improve the accuracy of Shared Savings Program financial 
calculations. This ensures that the projected growth rates in future 
years (for which billing for the selected catheter claims is expected 
to revert to typical levels) will not be biased.
    As noted in the Regulatory Impact Statement (section V. of this 
final rule), we anticipate that the magnitude and direction of the net 
impact of these various adjustments may vary from ACO to ACO. For 
example, excluding the selected catheter payments may reduce an ACO's 
performance year expenditures, but may also reduce the performance year 
regional and national expenditures and, in turn, the update factors 
applied to the ACO's historical benchmark. If the reduction to an ACO's 
expenditures is larger than the reduction to the national-regional 
blended update to the benchmark (indicating that the ACO's performance 
year assigned population was disproportionately impacted by the SAHS 
billing activity than assignable beneficiaries in the ACO's regional 
service area or the nation as a whole), the ACO would see an increase 
in total savings (or a reduction in total losses) relative to the 
current methodology, which makes no adjustments for SAHS billing 
activity. Conversely, if the reduction to the ACO's performance year 
expenditures is smaller than the reduction to the national-regional 
blended update to the benchmark, the ACO would see a decrease in total 
savings (or increase in total losses) relative to the current 
methodology.
    In the SAHS billing activity proposed rule (89 FR 55172), we 
acknowledged that by excluding all payments for the selected HCPCS 
codes from CY 2023 calculations, we would exclude some payments that 
would have been made during the period in the absence of SAHS billing 
activity. This, in turn, would create some degree of inconsistency 
between performance year expenditure calculations and expenditure 
calculations for the historical benchmark against which the performance 
year will be reconciled, as years not directly affected by the SAHS 
billing activity include some level of payments for the selected codes. 
We explained that we considered whether to propose adjusting historical 
benchmarks that will be used for PY 2023 financial reconciliation to 
remove all payments for the selected codes from benchmark year 
expenditures (for example, for an ACO that started an agreement period 
in 2022, adjusting the benchmark used for PY 2023 financial 
reconciliation to remove payments for the selected codes from benchmark 
years 2019, 2020, and 2021). We explained that we opted against this 
approach for two reasons.
    First, historical billing for the selected catheter HCPCS codes has 
generally been relatively low, including in recent years. As noted in 
the Regulatory Impact Statement (section V. of this final rule), 
billing for these codes remained less than 0.1 percent of total FFS 
billing in every year from 2016 to 2022, the period encompassing all 
benchmark years for ACOs being financially reconciled for PY 2023. 
Thus, in a year not impacted by SAHS billing activity, payments for 
these codes would likely represent only a very small portion of an 
ACO's total per capita expenditures or total expenditures for an ACO's 
regional service area or the national assignable population. This 
conclusion is supported by analysis at the regional level. Tabulating 
the difference in per capita spending for these codes at the Hospital 
Referral Region (HRR) from national average per capita spending across 
2016 to 2022 (and expressing such difference as a percentage of per 
capita spending) results in a standard deviation of only 0.03 
percentage points. Therefore, we believe that the impact of adjusting 
the benchmarks to be used for PY 2023 financial reconciliation to 
exclude the selected catheter payments would be very small.
    Second, adjusting benchmarks for over 450 ACOs being reconciled for 
PY 2023 would require the recalculation of ACO, national, and regional 
expenditures for seven benchmark calendar years and recalculation of 
benchmarks under multiple benchmarking methodologies. Performing these 
adjustments would delay the issuance of initial determinations, and 
thus the disbursement of earned performance payments, potentially by 
several months. The SAHS billing activity in CY 2023 was unforeseen and 
could not have been planned for or integrated into existing operational 
timelines. It would take time to recompute expenditure calculations for 
multiple years and benchmark calculations for multiple cohorts of ACOs 
and review and

[[Page 79161]]

validate the results. Such a delay would be harmful to ACOs and the 
beneficiaries they care for, as ACOs rely on earned performance 
payments for critical investments in care delivery. The negative 
implications of a prolonged delay to the issuance of initial 
determinations and earned performance payments for PY 2023 would 
outweigh the potential benefits gained by adjusting the benchmarks, 
especially as we anticipate the magnitude of the impact of such 
adjustments would be small.
    Section 1899(d)(1)(B)(ii) of the Act permits the Secretary to 
adjust the benchmark for beneficiary characteristics and such other 
factors as the Secretary determines appropriate. This rule relies on 
this authority to remove payments for the specified catheter codes from 
the determination of benchmark expenditures where CY 2023 serves as a 
benchmark year when establishing benchmarks for ACOs in agreement 
periods beginning in January 2024, 2025, or 2026.
    Other changes are authorized by section 1899(i)(3) of the Act. 
Specifically, we rely on section 1899(i)(3) of the Act to remove 
payment amounts for HCPCS or CPT codes for which CMS has identified 
SAHS billing activity from the following calculations: (1) performance 
year expenditures; (2) updates to the historical benchmark; and (3) ACO 
participants' Medicare FFS revenue used for multiple purposes across 
the Shared Savings Program, including determinations of loss sharing 
limits in the two-sided models of the BASIC track \14\ and 
determinations of eligibility for advance investment payments.\15\ 
Section 1899(i)(3) of the Act requires that we determine that the 
alternative payment methodology adopted under that provision will 
improve the quality and efficiency of items and services furnished to 
Medicare beneficiaries, without resulting in additional program 
expenditures. The adjustments we proposed, which would remove payment 
amounts for codes with identified SAHS billing activity from the 
specified Shared Savings Program calculations specified in a new 
section of the regulations at Sec.  425.670, would capture and remove 
from program calculations expenditures that are outside of an ACO's 
control, but that could significantly affect the ACO's performance 
under the program. In particular, failing to remove these payments 
would create highly variable savings and loss results for individual 
ACOs that happen to have over-representation or under-representation of 
SAHS billing activity for the selected codes among their assigned 
beneficiary populations.
---------------------------------------------------------------------------

    \14\ See Sec.  425.605(d)(1)(iii)(D), 425.605(d)(1)(iv)(D), and 
425.605(d)(1)(v)(D) for BASIC track Levels C, D and E, respectively.
    \15\ See Sec.  425.630(b).
---------------------------------------------------------------------------

    As described in the Regulatory Impact Statement (section V. of this 
final rule), excluding payment amounts for the selected catheter HCPCS 
codes from the specified calculations is not expected to 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, these adjustments to our calculations to remove payment 
amounts for these codes will promote continued integrity and fairness 
and improve the accuracy of Shared Savings Program financial 
calculations as well as timely completion of PY 2023 financial 
reconciliation. As a result, we expect these policies will support ACOs 
continued participation in the Shared Savings Program and the program's 
goals of lowering growth in Medicare FFS expenditures and improving the 
quality of care furnished to Medicare beneficiaries.
    Based on these considerations, and as specified in the Regulatory 
Impact Statement (section V. of this final rule), we have determined 
that adjusting certain Shared Savings Program calculations to remove 
payment amounts for selected codes identified as having SAHS billing 
activity in CY 2023 from the calculation of performance year 
expenditures, updates to the historical benchmark, and ACO 
participants' Medicare FFS revenue used for multiple purposes across 
the Shared Savings Program, meets the requirements for use of our 
authority under section 1899(i)(3) of the Act when incorporated into 
the existing other payment model we have established pursuant to that 
section.
    This final rule will be applied retroactively, as it affects a 
performance year that has already been completed (PY 2023) and a 
performance year that has already started (PY 2024). More specifically, 
we are retroactively adjusting expenditure calculations used in 
determining shared savings and losses for PY 2023 and certain other 
calculations including to establish historical benchmarks for ACOs 
entering an agreement period beginning on January 1, 2024, that are 
used to determine ACO financial performance for PY 2024 and subsequent 
years of an ACO's agreement period. Section 1871(e)(1)(A)(ii) of the 
Act permits a substantive change in regulations, manual instructions, 
interpretive rules, statements of policy, or guidelines of general 
applicability under Title XVIII of the Act to be applied retroactively 
to items and services furnished before the effective date of the change 
if the failure to apply the change retroactively would be contrary to 
the public interest.
    Failing to apply these policies retroactively would be contrary to 
the public interest because it would unfairly punish Shared Savings 
Program ACOs by forcing them to unexpectedly assume a substantial 
magnitude of financial risk for costs that are outside their control 
and were not previously contemplated in the Shared Savings Program, 
undermining both the sustainability of the Shared Savings Program and 
the public's faith in CMS as a fair partner. We did not fully 
contemplate the potential for SAHS billing activity outside of an ACO's 
control to negatively impact ACOs financially when the Shared Savings 
Program was established.\16\ For this reason, the Shared Savings 
Program financial methodology and the procedures we have utilized in 
the past did not provide a means to adequately account for instances of 
SAHS billing activity outside of an ACO's control, and thereby the 
related financial risk is assumed entirely by ACOs. We view this 
outcome as particularly inequitable to ACOs because they have no direct 
means of controlling such costs. Unlike Medicare Advantage 
organizations, ACOs are not responsible for processing claims for their 
assigned beneficiaries and otherwise have no means of causing the 
denial of such claims. CMS thus cannot reasonably have expected ACOs to 
have assumed responsibility for all instances of SAHS billing activity 
outside of an ACO's control when they joined the Shared Savings 
Program. Loss of faith in CMS's ability to effectively administer the 
Shared Savings Program by ACOs, providers, and the public would likely 
substantially reduce ACO and provider participation in the program. 
Reduced participation, in turn, would significantly diminish the 
savings generated to the Medicare Trust Funds and quality of care 
improvements resulting from the Program and reduce the coordination of 
care performed for Medicare beneficiaries when obtaining items and 
services from ACO providers and suppliers.\17\ For these reasons, it

[[Page 79162]]

would be contrary to the public interest for CMS to fail to apply a 
policy mitigating this issue retroactively.
---------------------------------------------------------------------------

    \16\ See, for example, 76 FR 67948 through 67950. Such 
approaches were more focused on policies to support monitoring of 
ACO performance and ensuring program integrity.
    \17\ See, for example, Medicare CY 2023 PFS final rule, 87 FR 
70195 through 70196 (estimating that the addition of new low revenue 
ACOs would produce $3 billion in net savings over a 5-year period).
---------------------------------------------------------------------------

    Undertaking notice and comment rulemaking for this issue prior to 
the start of PY 2023 to avoid retroactive rulemaking was not possible 
because we could not have foreseen the SAHS billing activity prior to 
the start of the performance year. More specifically, we were only able 
to determine that the increase in billing on HCPCS codes A4352 and 
A4353 in CY 2023 was significant, anomalous, and highly suspect after 
the calendar year ended. To identify that the billing activity in CY 
2023 was significant, anomalous, and highly suspect, CMS reviewed 
actual billing levels after the calendar year closed and services 
furnished in CY 2023 had occurred and the billing level could then be 
compared to billing levels observed in prior calendar years.
    We proposed adding and reserving Sec. Sec.  425.661 through 425.669 
in subpart G and adding a new section at Sec.  425.670 to describe 
adjustments CMS would make to Shared Savings Program calculations to 
mitigate the impact of SAHS billing activity occurring in CY 2023 (89 
FR 55174). We proposed that Sec.  425.670(b) would specify that CMS has 
determined that the billing of HCPCS codes A4352 (Intermittent urinary 
catheter; Coude (curved) tip, with or without coating (Teflon, 
silicone, silicone elastomeric, or hydrophilic, etc.), each) and A4353 
(Intermittent urinary catheter, with insertion supplies) represents 
significant, anomalous, and highly suspect billing activity for CY 2023 
that warrants adjustment. We proposed under Sec.  425.670(c) to specify 
the Shared Savings Program calculations for which CMS would exclude all 
Medicare Parts A and B FFS payment amounts on DMEPOS claims (claim 
types 72 and 82) associated with HCPCS codes A4352 and A4353 and 
include references to all relevant sections of the regulations in these 
provisions. In Sec.  425.670(d), on the period of adjustment, we 
proposed to specify that CMS would adjust Shared Savings Program 
calculations for SAHS billing activity of HCPCS codes A4352 and A4353 
for CY 2023, when CY 2023 is either a performance year or a benchmark 
year. We proposed to specify under Sec.  425.670(e) that we would make 
adjustments for payments associated with HCPCS codes A4352 and A4353 
for BY3 in projecting per capita growth in Parts A and B FFS 
expenditures, according to Sec.  425.660(b)(1), for purposes of 
calculating the ACPT for agreement periods beginning on January 1, 
2024.
    The following is a summary of the comments we received on this 
proposal and our responses.
    Comment: Many commenters provided input on the methodology outlined 
in the proposed rule to mitigate the impact of SAHS billing activity 
occurring in CY 2023. Most of these commenters stated their support for 
removing payment amounts for the specified catheter HCPCS codes in CY 
2023 from the specified Shared Savings Program expenditure and revenue 
calculations.
    Response: We thank the commenters for their support of the proposed 
adjustments to Shared Savings Program calculations. We interpret the 
commenters' general descriptions of our proposed adjustments and broad 
support for the proposed rule as supportive of all the adjustments to 
Shared Savings Program calculations we proposed in the proposed rule 
(89 FR 55171 through 55172) and described elsewhere in this section of 
the final rule.
    Comment: Many supportive commenters specified their support for 
removing ``all'' Medicare Part A and B payment amounts related to the 
selected catheter codes, or for removing Medicare Part A and B payment 
amounts for the selected catheter codes ``by any supplier'' or ``across 
all suppliers.''
    Response: We thank the commenters for their support of our proposal 
to remove payment amounts for the selected catheter HCPCS codes on 
DMEPOS claims submitted by any supplier. By removing all catheter HCPCS 
payments, we ensure that all of the SAHS billing activity in CY 2023 
for the selected catheter codes will be removed from any calculations 
used to financially reconcile ACOs for PY 2023 or in future performance 
years when CY 2023 serves as a historical benchmark year for an ACO. 
This approach ensures that ACO expenditures, as well as regional and 
national expenditures, are not distorted by payment amounts for SAHS 
billing activity beyond the ACOs' control.
    Comment: Many commenters supported the proposal to apply the 
adjustments when CY 2023 is a benchmark year for ACOs in the agreement 
periods starting in 2024, 2025, or 2026. A couple of commenters stated 
their support for removing payment amounts for the specified catheter 
codes from the determination of ``benchmark expenditures'' or from ``CY 
2023 benchmark expenditures'' without specifying which agreement 
periods these adjusted benchmark expenditures would be used to 
reconcile.
    Response: We thank the commenters for their support of the proposed 
adjustments to Shared Savings Program calculations when CY 2023 serves 
as a benchmark year. We explain in this section of the final rule that 
the adjustments would apply to BY 2023 in calculating the historical 
benchmark for agreement periods beginning in 2024, 2025 and 2026. In 
contrast, as we also explain in this section of this final rule, we 
opted not to propose adjusting historical benchmarks that will be used 
for PY 2023 financial reconciliation to remove all payment amounts for 
the selected codes from benchmark year expenditures. That means, for 
example, that when performing financial reconciliation for PY 2023 for 
an ACO that started an agreement period in 2023, we will not adjust the 
ACO's historical benchmark to exclude payment amounts for the selected 
codes from expenditures for BYs 2020 through 2022.
    While some commenters expressed high level support for adjusting 
benchmark expenditures, we interpret these comments as supportive of 
all the adjustments to Shared Savings Program calculations we proposed 
in the proposed rule (89 FR 55171 through 55172) and described 
elsewhere in this section of the final rule.
    Comment: Some commenters specifically supported the proposal to 
exclude all Medicare Parts A and B payment amounts for the selected 
catheter codes on DMEPOS claims when CY 2023 is used to calculate the 
national-regional blended update to the benchmark used in determining 
financial performance for PY 2023. A couple of these commenters 
explained that this proposal, alongside the proposals to adjust ACO 
expenditures when CY 2023 serves as a performance year and a benchmark 
year, was ``a comprehensive approach'' and ``the most 
straightforward.'' One commenter stated that the proposals will promote 
accuracy and validity of the data used for trending benchmarks.
    Response: We thank commenters for their support for the proposal to 
remove payment amounts when CY 2023 is used to calculate the national-
regional blended update to the benchmark. We agree with the comments 
that removing payment amounts in calculating both ACO expenditures and 
update factors is a comprehensive approach, as it will ensure that no 
SAHS billing activity for the selected catheter codes is included in 
the national-regional blended update factor and promotes symmetry when

[[Page 79163]]

comparing an ACO's performance year expenditures to its updated 
benchmark.
    Comment: Some commenters also expressed support specifically for 
the proposal to exclude all Medicare Parts A and B payment amounts for 
the selected catheter codes on DMEPOS claims from CY 2023 in revenue 
calculations, or from calculations to determine revenue status and 
repayment mechanism amounts in the application and change request cycle 
for ACOs applying to enter a new agreement period beginning on January 
1, 2025 or continue their participation in the program in PY 2025.
    Response: We thank commenters for their support of the proposal.
    Comment: Two commenters expressed concern that some ACOs may be 
financially disadvantaged by the proposed adjustments to Shared Savings 
Program calculations, with one emphasizing that the approach would harm 
ACOs that have DME services below national and regional benchmark 
trends and thus would have more dollars removed from their benchmark 
than from their own expenditures. The commenters encouraged CMS to 
ensure that ACOs are not adversely impacted financially by the 
adjustments. They requested that--due to the retroactive nature of the 
policy--CMS should hold ACOs harmless for the removal of the codes or 
limit the impact of the policy using a guardrail (for example, 0.02 
percent in either direction) for PY 2023 financial calculations. One 
also expressed concern that ACOs could be disadvantaged if CMS removes 
the selected catheter codes from BY 2023 but not from future 
performance years that are reconciled using a historical benchmark that 
includes BY 2023.
    Response: We decline to adopt an approach that would have CMS 
perform two versions of Shared Savings Program calculations--one that 
makes adjustments for SAHS billing activity and one that does not--and 
then issuing initial determinations based on the version of the 
calculations that would result in a ACO maximizing their shared savings 
or minimizing their shared losses for PY 2023 or based on calculations 
that impose a guardrail that limits the impact of the proposed policy. 
As we explained elsewhere in this final rule, the SAHS billing activity 
for the selected catheter codes would cause significantly inaccurate 
and inequitable payments and repayment obligations if not addressed. It 
would be inequitable for ACOs to be held accountable for SAHS billing 
activity that occurred among their assigned population in the 
performance year. It would also be inequitable to allow other ACOs 
whose assigned populations were less affected by SAHS billing in CY 
2023 to benefit from the inclusion of these expenditures in the PY 2023 
benchmark update factors. Such ACOs would receive an inaccurate updated 
benchmark as a result of SAHS billing activity affecting national or 
regional expenditures. Allowing either source of inequity or imposing 
an artificial limit on the impacts of excluding the SAHS billing 
activity would undermine the integrity, fairness and accuracy of Shared 
Savings Program calculations.
    As part of our final policy, we also decline to remove the selected 
catheter codes from future performance years that are reconciled using 
a historical benchmark that includes BY 2023. For example, when 
performing financial reconciliation for PY 2024 for an ACO with 
benchmark years 2021 through 2023, we will only exclude payment amounts 
for the selected catheter codes from BY 2023 expenditures and not from 
BY 2021, BY 2022, and PY 2024 expenditures. As we explained in the 
proposed rule (89 FR 55172), historical billing for the selected 
catheter HCPCS codes has consistently been relatively low, including in 
recent years. As noted in the Regulatory Impact Statement (section V. 
of this final rule), billing for these codes remained less than 0.1 
percent of total FFS billing in every year from 2016 to 2022, the 
period encompassing all benchmark years for ACOs being financially 
reconciled for PY 2023. Thus, in a year not impacted by SAHS billing 
activity, payments for these codes would likely represent only a very 
small portion of an ACO's total per capita expenditures or total 
expenditures for an ACO's regional service area or the national 
assignable population.
    Comment: A couple of commenters suggested CMS should modify its 
approach to mitigating the impact of SAHS billing activity from the 
proposal. One commenter expressed concern over any approach that would 
remove catheter codes from the national component of the update factor 
used to calculate the benchmark for PY 2023 but not from the regional 
component of the update factor. The second commenter stated their 
suspicion that the impacts of SAHS billing activity for the catheter 
codes varies widely across ACOs and explained their ``hope'' that the 
methodology for adjusting historical benchmarks will account for 
individual and regional variation in this element, so it does not 
adversely impact benchmarks of some over others.
    Response: We proposed to exclude all Medicare Parts A and B payment 
amounts for the selected catheter HCPCS codes on DMEPOS claims from 
expenditure and revenue calculations for CY 2023. We will perform this 
adjustment when CY 2023 is used to calculate the ACO's performance year 
expenditures and when it is used to calculate the national-regional 
blended update to the benchmark used in determining financial 
performance for PY 2023.\18\ That is, payment amounts will be removed 
from both the national component and the regional component of the 
national-regional blended update factor. By applying this adjustment to 
both components of the update factor, the adjustment will account for 
any individual and regional variation of SAHS billing activity for the 
catheter codes so that the impact of the exclusion of the catheter 
codes on an ACO is dependent on the degree to which SAHS billing 
activity for the catheter codes impacted the ACO's region and the ACO's 
beneficiaries. Additionally, we will perform this adjustment when CY 
2023 serves as a benchmark year.
---------------------------------------------------------------------------

    \18\ For PY 2023, the only portion of the financial 
reconciliation calculations that retain the codes is the calculation 
of historical benchmarks, excluding the national-regional update 
factor.
---------------------------------------------------------------------------

    Comment: Many commenters in support of the proposals expressed 
differing views on the anticipated impact of the proposed changes on 
Shared Savings Program ACOs' financial performance. Many supportive 
commenters suggested the proposed changes would be financially 
advantageous for ACOs or that they will improve the accuracy of CMS' 
evaluation of the ACO's financial performance. One commenter stated 
that not finalizing the proposed changes and including payment amounts 
for SAHS billing activity for catheter codes would have a ``severely 
inappropriate impact'' on Shared Savings Program calculations and might 
lead to a loss of shared savings for some ACOs. Several commenters 
characterized the proposals as helping to hold ACO's ``harmless'' for 
SAHS billing activity for the catheter codes on ACO expenditures, with 
one stating their belief that ACOs should not be responsible for costs 
``that were not associated with the care of their beneficiaries'' and 
another stating that ACOs should not be held responsible for 
``anomalous Medicare spending'' beyond their control. One commenter 
stated that the proposals are vital to supporting ACOs in maintaining 
their financial stability, and another stated that the proposals are 
vital to ensuring that ACOs are not ``unfairly penalized for expenses 
beyond their control.'' Other commenters stated that SAHS

[[Page 79164]]

billing activity ``weakens the integrity'' of the Shared Savings 
Program and can have a detrimental impact on organizations' financial 
reconciliation.
    Some supportive commenters from ACOs described the anticipated 
impact the SAHS billing activity would have on their own ACO's 
financial performance absent the adjustments to calculations. One 
commenter stated their belief that the inclusion of payment amounts for 
the catheter codes would ``damage the integrity'' of their ACO's PY 
2023 financial reconciliation. A few commenters stated that without 
these adjustments their ACOs may not share in savings, shared savings 
could be negatively impacted, or their ACOs would have a high 
probability of being liable for shared losses. One commenter stated 
that if payment amounts for the selected catheter codes were included, 
their ACO would have a high probability of being liable for shared 
losses. One commenter expressed their belief that removing payment 
amounts for the selected catheter codes will lead to a more accurate 
and true evaluation of their performance, and another stated that the 
proposals will have a substantial impact on their ACO's 
``sustainability.'' A couple of commenters asserted their ACO 
expenditures were significantly impacted by the SAHS billing activity 
for the catheter codes.
    Response: We agree with the commenters who stated the changes we 
are finalizing in this final rule will improve the accuracy and 
integrity of Shared Savings Program calculations. SAHS billing activity 
in CY 2023 for the selected catheter codes had a substantial impact on 
ACO expenditures as well as national expenditures. Failing to address 
SAHS billing activity that occurred in CY 2023 would jeopardize the 
integrity of the Shared Savings Program. Holding an ACO accountable for 
substantial losses due to the SAHS billing activity is not only 
inequitable but will dramatically increase the level of risk associated 
with participation, making the Shared Savings Program unattractive. We 
also agree with the many commenters who characterized the proposals as 
promoting continued integrity and fairness and improving the accuracy 
of Shared Savings Program financial calculations. Alternatively, 
proceeding with program operations using the current methodology that 
does not adjust for SAHS billing activity would cause significantly 
inaccurate and inequitable payments and repayment obligations.
    Comment: Some commenters who expressed support for the proposed 
adjustments to Shared Savings Program calculations acknowledged the 
need for the application of the changes retroactively, with one stating 
that failure to do so would unfairly punish Shared Savings Program ACOs 
and potentially jeopardize the sustainability of the program.
    A couple of commenters shared a concern about the retroactive 
nature of the changes, with one stating that ``unforeseen financially 
harmful calculations'' would be applied after the performance year has 
been completed with no time for ACOs to make any changes in decisions 
or operations. Both noted that ACOs used data received during the 
performance year (which would not have excluded payment amounts 
associated with the selected codes) to inform ACO activities, including 
strategies, resourced interventions, and participation decisions.
    Response: We appreciate the support from some commenters for the 
retroactive applicability of this rulemaking, and we acknowledge the 
concern expressed by others. Any changes to calculations involving PY 
2023 financial reconciliation or final historical benchmarks for ACOs 
starting new agreement periods on January 1, 2024, must have 
retroactive applicability because PY 2023 is already completed and PY 
2024 has already begun. As we explain elsewhere in this section, 
applying the proposal retroactively is justifiable and consistent with 
our statutory authority because failing to apply the proposed changes 
retroactively would be contrary to the public interest. Failure to 
modify PY 2023 financial reconciliation and final historical benchmarks 
in the manner we describe in this rule would unfairly punish Shared 
Savings Program ACOs by forcing them to unexpectedly assume a 
substantial magnitude of unexpected financial risk for costs outside 
their control and not previously contemplated in the Shared Savings 
Program, undermining both the sustainability of the Shared Savings 
Program and the public's faith in CMS as a fair partner.
    Comment: Several commenters requested that CMS provide ACOs with 
information about the payment amounts excluded at the regional level or 
at both the regional and national level. A couple of commenters 
requested that CMS not remove claims associated with SAHS billing 
activity from the monthly claim and claim line feeds (CCLFs), 
requesting instead that CMS flag them.
    Response: In order to promote transparency in calculations and 
address commenter's concerns, within program reports provided with PY 
2023 financial reconciliation results, we will provide ACOs with the 
per capita amount of the two catheter codes removed from their 
performance year assigned beneficiary expenditures consistent with 
other spending categories. Medicare claim payment amounts for the two 
catheter codes will continue to be included in the monthly Part A, B 
and D Medicare CCLF files sent to ACOs.
    Comment: Some commenters urged CMS to develop or strengthen 
policies and processes to monitor, report, and address SAHS billing 
activity should it occur in the future. One commenter, for example, 
recommended CMS ``build algorithms to concurrently identify fraud prior 
to making payments.'' Another commenter urged CMS to work with ACOs to 
improve the process for reporting suspected fraud, waste, and abuse. 
Several commenters also urged CMS to finalize policies to mitigate the 
impact of SAHS billing activity occurring in CY 2024 and subsequent 
years that were proposed in the CY 2025 PFS proposed rule.
    Response: We thank commenters on their suggestions for 
strengthening policies and processes to monitor for potential fraud, 
waste, and abuse. We will share these comments with our program 
integrity colleagues, and we note that we have also provided 
information to ACOs on ways they can report potential fraud or abuse to 
CPI or HHS-OIG. We also thank commenters for their support for proposed 
policies to mitigate the impact of SAHS billing activity occurring in 
CY 2024 and subsequent years proposed in the CY 2025 PFS proposed rule. 
We will summarize and respond to comments submitted directly in 
response to that proposed rule within the CY 2025 PFS final rule.
    Comment: Some commenters made recommendations for mitigating the 
impact of SAHS billing activity on Innovation Center models. Most of 
these commenters requested that the Center for Medicare and Medicaid 
Innovation (CMS Innovation Center) perform similar adjustments to 
mitigate SAHS billing activity for the catheter codes in the ACO 
Realizing Equity, Access, and Community Health (ACO REACH) Model, 
although several commenters expressed concerns that the approach being 
used by the ACO REACH Model would disadvantage ACOs. One commenter 
requested that the CMS Innovation Center exclude payment amounts for 
the catheter codes from the Bundled Payments for Care Improvement 
Advanced Model and the Comprehensive Care for Joint Replacement Model.

[[Page 79165]]

    Response: The commenters' suggestions are beyond the scope of this 
rulemaking, which addresses adjustments to Shared Savings Program 
calculations to mitigate the impact of SAHS billing activity for 
selected catheter codes in CY 2023. The CMS Innovation Center did an 
assessment of the effects of SAHS billing in 2023 on each model. 
Determinations of whether action to address SAHS billing was necessary 
were made on a model-by-model basis.
    Final Action: After consideration of public comments, we are 
finalizing our proposal to retroactively remove payment amounts for 
codes displaying SAHS billing activity in CY 2023 from Shared Savings 
Program expenditure and revenue calculations. Specifically, we are 
finalizing our proposal to add and reserve Sec. Sec.  425.661 through 
425.669 in subpart G and add a new section at Sec.  425.670 to describe 
adjustments CMS will make to Shared Savings Program calculations to 
mitigate the impact of SAHS billing activity occurring in CY 2023. 
Section 425.670(b) specifies that CMS has determined that the billing 
of HCPCS codes A4352 (Intermittent urinary catheter; Coude (curved) 
tip, with or without coating (Teflon, silicone, silicone elastomeric, 
or hydrophilic, etc.), each) and A4353 (Intermittent urinary catheter, 
with insertion supplies) represents significant, anomalous, and highly 
suspect billing activity for CY 2023 that warrants adjustment. Section 
425.670(c) specifies the Shared Savings Program calculations for which 
CMS will exclude all Medicare Parts A and B FFS payment amounts on 
DMEPOS claims (claim types 72 and 82) associated with HCPCS codes A4352 
and A4353 and includes references to all relevant sections of the 
regulations in these provisions. In Sec.  425.670(d), on the period of 
adjustment, we specify that CMS will adjust Shared Savings Program 
calculations for SAHS billing activity of HCPCS codes A4352 and A4353 
for CY 2023, when CY 2023 is either a performance year or a benchmark 
year. We specify under Sec.  425.670(e) that we will make adjustments 
for payments associated with HCPCS codes A4352 and A4353 for BY3 in 
projecting per capita growth in Parts A and B FFS expenditures, 
according to Sec.  425.660(b)(1), for purposes of calculating the ACPT 
for agreement periods beginning on January 1, 2024.

III. Reduction of the Comment Period and Reduction of the 30-Day Delay 
in Effective Date of This Final Rule

A. Reduction of the Comment Period to 30 Days

    In the SAHS billing activity proposed rule (89 FR 55174), we 
explained that there is an urgent need to address the impact of SAHS 
billing activity on Shared Savings Program calculations based on CY 
2023 data used in determining PY 2023 financial performance, in 
establishing benchmarks for ACOs participating in agreement periods 
beginning on January 1, 2024, and in calculating factors used in the 
application cycle for ACOs applying to enter a new agreement period 
beginning on January 1, 2025, and the change request cycle for ACOs 
continuing their participation in the program for PY 2025.\19\ These 
program operations depend on the timely use of CY 2023 data. Notice and 
comment rulemaking to consider the proposed adjustments to Shared 
Savings Program calculations for SAHS billing activity identified for 
CY 2023 has necessitated delaying key program operations that depend on 
CY 2023 data, pending the issuance of this final rule that specifies 
our final policy as informed by public comment on the SAHS billing 
activity proposed rule. We described in the proposed rule the impact of 
delayed use of CY 2023 data in the aforementioned program operations 
and approaches that would allow us to continue to meet the statutory 
requirements for notice and comment rulemaking procedures, such as by 
reducing the comment period, and possibly reducing or eliminating the 
delay in the effective date of a final rule (if issued).
---------------------------------------------------------------------------

    \19\ Failing to take any action to address this SAHS billing 
activity would result in CMS using inaccurate data to make 
eligibility determinations and require ACOs to establish repayment 
mechanism arrangements for inflated amounts that include the impact 
of SAHS billing activity.
---------------------------------------------------------------------------

    We explained (89 FR 55174) that significant delays in the issuance 
of initial determinations for PY 2023 financial performance, and 
related shared savings payments, would be substantially disruptive to 
ACOs that exclusively receive revenue from shared savings payments, 
particularly small, rural, and low revenue ACOs and those serving 
underserved populations. With few exceptions, the Shared Savings 
Program historically completes calculations of shared savings and 
shared losses and issues initial determinations of ACO financial 
performance approximately 8 months after the conclusion of the 
performance year, and shortly thereafter issues performance payments to 
ACOs eligible to share in savings.\20\ CMS initiates payments to ACOs 
that have earned shared savings for a performance year in September of 
the year following the applicable performance year. ACOs rely on the 
orderly and timely calculation of financial reconciliation, and 
distribution of shared savings. We noted that modifications to Shared 
Savings Program financial methodology as proposed in the proposed rule 
necessitate delaying the delivery of financial reconciliation reports 
to ACOs, and issuance of performance payments to ACOs that have earned 
shared savings.
---------------------------------------------------------------------------

    \20\ Refer to discussion in the CY 2023 PFS final rule, 87 FR 
69869 through 69870.
---------------------------------------------------------------------------

    We further explained in the proposed rule (89 FR 55174) that 
delayed use of CY 2023 data would also impair administration of the 
Shared Savings Program in 2024 and 2025. CY 2023 data are instrumental 
in determining factors used in the application cycle for ACOs applying 
to enter a new agreement period beginning on January 1, 2025, and 
change request cycle for existing ACOs continuing their participation 
in the program for PY 2025. For instance, CY 2023 data will be used in 
the calculation of total Medicare Parts A and B FFS revenue of ACO 
participants and total Medicare Parts A and B FFS expenditures for the 
ACO's assigned beneficiaries for purposes of identifying whether an ACO 
is high revenue or low revenue, as defined under Sec.  425.20. The 
high/low revenue status is then used to determine an ACO's eligibility 
to receive advance investment payments to expand accountable care to 
underserved communities according to Sec.  425.630, and an ACO's 
eligibility for the CMS Innovation Center's new ACO PC Flex Model for 
the January 1, 2025 start date. CY 2023 data will also be the basis for 
calculating the amount of required repayment mechanism arrangements for 
ACOs entering two-sided models for PY 2025. We explained that the 
proposed approach would help ensure the accuracy of the calculations 
used in determining ACO revenue status and repayment mechanism amounts. 
We noted that delays in the application cycle already underway could 
jeopardize our ability to timely issue application dispositions, 
execute participation agreements with eligible ACOs for the new 
agreement period beginning on January 1, 2025, deliver PY 2025 initial 
assignment list reports, and timely deliver initial advance investment 
payments for newly eligible ACOs. Substantial delays in change

[[Page 79166]]

request cycle milestones also would jeopardize our ability to ensure 
ACOs have met program requirements to facilitate their continued 
participation in the Shared Savings Program for the performance year 
beginning on January 1, 2025.
    Finally, we explained (89 FR 55175) that modifications to Shared 
Savings Program financial methodology as proposed in the proposed rule 
would also necessitate delaying the delivery of final historical 
benchmark reports to ACOs. We expressed our recognition that delaying 
the availability of these program reports to ACOs could hamper ACOs' 
ability to set effective cost targets that may depend on the ACO's 
projected financial performance based on its benchmark value and that 
substantial delays in issuance of the historical benchmark reports to 
ACOs could make it more challenging for ACOs to effectively curb growth 
in Medicare FFS expenditures, a central aim of the Shared Savings 
Program.
    Section 1871(b)(1) of the Act generally requires that Medicare 
rules must be proposed with a 60-day comment period. Section 1871(b)(2) 
of the Act provides that this requirement does not apply where a 
statute specifically permits a regulation to be issued in interim final 
form or otherwise with a shorter period for public comment; a statute 
establishes a specific deadline for the implementation of a provision 
and the deadline is less than 150 days after the date of the enactment 
of the statute in which the deadline is contained; or subsection (b) of 
section 553 of title 5, United States Code, does not apply under 
subparagraph (B) of such subsection. Subparagraph (B) of 5 U.S.C. 
553(b) provides an exception to the requirement for an agency to 
publish a general notice of proposed rulemaking in the Federal Register 
when the agency for good cause finds (and incorporates the finding and 
a brief statement of reasons therefore in the rules issued) that notice 
and public procedure thereon are impracticable, unnecessary, or 
contrary to the public interest.
    We found that a 60-day comment period was both impracticable and 
contrary to the public interest (89 FR 55174 through 55176). For the 
reasons stated, we therefore reduced the comment period of the proposed 
rule to 30 days. We noted in the proposed rule that failing to use a 
30-day comment period in lieu of a 60-day comment period would be 
impracticable and contrary to the public interest in part for the same 
reasons described in section II.B. of the proposed rule that failing to 
apply this rule retroactively to PY 2023 and PY 2024 would be contrary 
to the public interest. Additionally, we explained that failing to use 
the reduced comment period would be impracticable and contrary to the 
public interest because the additional time would not substantially 
enhance the public's ability to participate in this rulemaking, and it 
would substantially impair CMS's ability to administer the Shared 
Savings Program, by delaying the following:
     Issuance of initial determinations of shared savings and 
shared losses to ACOs for PY 2023.
     Disbursement of PY 2023 earned performance payments to 
ACOs.
     Determination of ACO revenue status used in determining 
ACO eligibility for advance investment payments and eligibility for the 
ACO PC Flex Model, in connection with the application cycle for ACOs 
applying to enter a new agreement period beginning on January 1, 2025.
     Calculation of required amounts for repayment mechanism 
arrangements for ACOs entering a two-sided model for PY 2025 and the 
deadline for ACO submission of repayment mechanism documentation to CMS 
for review, to ensure compliance with related requirements.
     Calculation of final historical benchmarks for ACOs 
beginning an agreement period on January 1, 2024, and delivery of final 
historical benchmark reports to ACOs.
    We noted that it would be contrary to the public interest for ACOs 
to be harmed by the delay in administration of the Shared Savings 
Program caused by the rule that intended to relieve them from the 
unexpected harm arising from SAHS billing activity (89 FR 55175). A 60-
day comment period would have likely necessitated delaying these key 
operations until at least late 2024, substantially delaying these 
operations and related processes, which would harm ACOs and impair the 
operation of the Shared Savings Program and thwart the relief to ACOs 
that would otherwise be provided by this rule.
    We explained that a substantial delay to initial determinations of 
shared savings and losses for PY 2023 and disbursement of earned 
performance payments would be financially ruinous to the many ACOs that 
rely on these payments to operate (89 FR 55175). For example, in PY 
2022, 304 ACOs earned $2.52 billion in performance payments. Shared 
savings payments are the primary revenue source of ACOs. Many ACOs, 
particularly small, rural, and low revenue ACOs and those serving 
underserved populations, depend on receiving shared savings payments on 
a predictable annual schedule to continue operating. We noted that it 
is self-evident that enabling ACOs to continue to operate with minimal 
disruption is itself in the public interest and in particular is in the 
interest of Medicare beneficiaries whose care is coordinated by ACOs.
    We explained that delaying adjudication of application and 
repayment mechanism decisions also would jeopardize or prevent CMS and 
ACOs starting performance year 2025 (89 FR 55175). CMS and ACOs cannot 
timely enter into agreements for the agreement period beginning on 
January 1, 2025, jeopardizing the expansion of accountable care to 
underserved communities, stifling innovation in primary care payment 
reform and restricting ACOs' ability to meet requirements for entering 
or continuing their participation in a two-sided model for PY 2025. 
Phase 1 of the application period closed June 17, 2024.\21\ Failing to 
timely adjudicate hundreds of applications and over ten thousand change 
requests, for new and renewing ACOs, and ACOs continuing their 
participation in Shared Savings Program, would impair our ability to 
timely and accurately evaluate ACOs based on statutorily required 
eligibility criteria and existing regulatory requirements. We cannot 
start performance year 2025 until all applications and change requests 
have been reviewed, processed, and adjudicated.
---------------------------------------------------------------------------

    \21\ See for example, Medicare Shared Savings Program, Key 
Application Actions and Deadlines For Agreement Period Beginning on 
January 1, 2025, available at https://www.cms.gov/files/document/key-application-actions-and-deadlines.pdf.
---------------------------------------------------------------------------

    Additionally, we noted that given the limited scope of the proposed 
rule, addressing a single issue through proposed changes to the Shared 
Savings Program regulations, a 30-day comment period was a reasonable 
amount of time for public inspection and comment (89 FR 55175). In 
advance of the SAHS billing activity proposed rule, many interested 
parties wrote to the Administrator requesting relief from SAHS billing 
activity, so they are familiar with this issue and would likely be 
ready to review the policy and impacts within the 30-day timeframe.
    Furthermore, we explained that starting notice and comment 
rulemaking sooner to allow a 60-day comment period was impracticable 
(89 FR 55175 through 55176). As we described in the proposed rule, we 
could not have foreseen the SAHS billing activity in advance and were 
only able to determine that the increase in billing on HCPCS codes 
A4352 and A4353 in CY 2023 was significant, anomalous, and

[[Page 79167]]

highly suspect after the calendar year ended. To identify that the 
billing activity in CY 2023 was SAHS billing activity, CMS reviewed 
actual billing levels after the calendar year closed and services 
furnished in CY 2023 had occurred and the billing level could then be 
compared to billing levels observed in prior calendar years. Careful 
analysis of the billing activity, plus careful analysis of the impact 
on ACOs in the Shared Savings Program, was critical to determining 
whether mitigation measures were necessary. Given the unprecedented 
nature of the circumstances, time was also required to develop the 
appropriate proposed mitigation approach. Once we determined that this 
billing activity in CY 2023 was significant, anomalous, and highly 
suspect, that it was necessary to mitigate its impact on Shared Savings 
Program expenditures and revenue calculations, and the appropriate 
proposed mitigation approach, we immediately began the process to 
undertake notice and comment rulemaking. For the aforementioned 
reasons, among others discussed the proposed rule, we found that a 
failure to reduce the comment period was impracticable and contrary to 
the public interest, and thus found the agency has good cause to set a 
30-day comment period.
    The modifications to the Shared Savings Program financial 
methodology that we are finalizing in this final rule, following the 
30-day comment period, will allow us to maintain timely adjudication of 
certain determinations of applicant ACOs' eligibility to participate 
under the advance investment payment option, or the ACO PC Flex Model, 
for an agreement period beginning on January 1, 2025, and timely 
finalization of repayment mechanism arrangements required for ACOs to 
enter or continue their participation in two-sided models for PY 2025. 
While our use of the 30-day comment period will minimize disruptions to 
timelines for certain milestones, we anticipate that the issuance of 
initial determinations and the disbursement of earned performance 
payments for PY 2023 will still be delayed by approximately 6 weeks. 
Where possible, we will work to reduce delays and will proactively 
communicate with ACOs about changes in timelines for these, or other, 
milestones.
    Comment: Some commenters requested that CMS extend deadlines by the 
same amount of time for the annual application and change request 
cycle, including deadlines for risk track selection, participant lists, 
and ACO PC Flex Model participation decisions.
    Response: While we appreciate the interests of ACOs in requesting 
an extension of deadlines in the annual application and change request 
cycle by the same amount of time as the delay in issuance of 
performance year determinations, we are unable to delay deadlines by 
multiple weeks since it would delay application dispositions scheduled 
for early December until after the January 1, 2025, agreement period 
start date. This would require delaying the start of PY 2025 until 
sometime after January 1, 2025. This would, among other things, require 
CMS to propose policies for conducting financial calculations using a 
non-standard performance year, as was done to accommodate a July 1, 
2019, performance year start date in the Share Savings Program final 
rule published in December 2018 (83 FR 67816). This would also create 
further delays and uncertainty for ACOs. A delay in finalizing 
participant lists would delay the publication of PY 2025 initial 
assignment lists, hindering ACOs' ability to effectively coordinate 
care for their assigned beneficiary populations.
    A delay in the start of the Shared Savings Program's performance 
year also may have significant adverse consequences for ACO 
professionals participating in ACOs. Many Shared Savings Program tracks 
are Advanced Alternative Payment Models (APMs) for purposes of the 
Quality Payment Program APM incentive. Qualifying APM Participants 
(QPs) are not subject to the Merit-based Incentive Payment System 
reporting requirements or payment adjustments (though they may have 
separate and similar reporting obligations under the Shared Savings 
Program). See 42 CFR 414.1310(b)(1)(i) and (ii). For payment years 
through CY 2025, QPs also earn a lump-sum APM incentive payment based 
on estimated aggregate payments for covered professional services 
furnished during the preceding calendar year. See 42 CFR 414.1310; 
414.1450. A reduction in the length of the Shared Savings Program's 
performance year could cause some ACO professionals to fail to achieve 
QP status.
    While we are unable to modify Shared Savings Program applications 
deadlines for the reasons described previously in this final rule, we 
were able to extend the deadline for ACOs to apply to the ACO PC Flex 
Model from August 1, 2024, until August 23, 2024, as this delay would 
not delay Shared Savings Program application dispositions or the start 
of the Model.\22\
---------------------------------------------------------------------------

    \22\ See https://www.cms.gov/priorities/innovation/innovation-models/aco-primary-care-flex-model.
---------------------------------------------------------------------------

    Furthermore, we are clarifying that we anticipate releasing PY2023 
results in late October and making payments to ACOs in mid-November. 
Where possible, we will work to reduce delays and will proactively 
communicate with ACOs about changes in timelines.

B. Reduction of the 30-Day Delay in Effective Date of This Final Rule

    In the proposed rule we explained that section 1871(e)(1)(B)(i) of 
the Act prohibits a substantive change in Medicare regulations from 
taking effect before the end of the 30-day period beginning on the date 
the rule is issued or published (89 FR 55176). Section 
1871(e)(1)(B)(ii) of the Act permits a substantive rule to take effect 
on a date that precedes the end of the 30-day period if the Secretary 
finds that a waiver of the 30-day period is necessary to comply with 
statutory requirements or that the application of the 30-day period is 
contrary to the public interest. The Administrative Procedure Act 
(APA), 5 U.S.C. 553(d), similarly requires a 30-day delay in the 
effective date of a substantive final rule. This 30-day delay in 
effective date can be waived, however, if an agency finds good cause to 
support an earlier effective date, among other reasons. 5 U.S.C. 
553(d)(3). We indicated in the proposed rule that, if CMS were to 
finalize a rule based on the proposed rule, we would strongly consider 
reducing or waiving the 30-day delay in effective date under the 
provisions described previously to the extent that the delay in 
effective date would also harm ACOs or thwart the purpose of this 
provision by delaying our timely administration of the Shared Savings 
Program functions as described in section III.A of the proposed rule 
(89 FR 55176). We noted that this waiver would be in part for the same 
reasons that we reduced the comment period on the proposed rule from 60 
days to 30 days, as described in section III.A. of the proposed rule. 
We requested comment on this approach, including a possible finding of 
good cause and how ACOs would be impacted by the delay.
    The following is a summary of the comments we received and our 
responses.
    Comment: One commenter expressly supported an exception to the 30-
day delay in effective date, while several other commenters urged CMS 
to finalize the proposed rule ``as expeditiously as it can within its 
legal authority'' and

[[Page 79168]]

others urged CMS to finalize its proposals as quickly as possible to 
minimize delays in shared savings distribution.
    Response: We thank commenters for their support of measures to 
finalize changes to Shared Savings Program regulations expeditiously to 
reduce delays to Shared Savings Program operations.
    We find that the application of the 30-day period would be 
impracticable and contrary to the public interest. In conjunction with 
our application of this rule retroactively and the reduction of the 
proposed rule's comment period to 30 days, we have determined that, for 
us to timely adjudicate applicant ACOs' eligibility to participate 
under the advance investment payment option and the ACO PC Flex Model 
for agreement periods beginning on January 1, 2025, and timely finalize 
repayment mechanisms necessary for ACOs to participate in two-sided 
models for PY 2025, we must use expenditure and revenue calculations 
for CY 2023, adjusted to exclude all Medicare Parts A and B payment 
amounts on DMEPOS claims associated with HCPCS codes A4352 and A4353, 
to make certain initial determinations on ACO eligibility and determine 
final repayment mechanism amounts, and provide related information to 
ACOs no later than October 17, 2024.\23\ Delaying the effective date of 
this final rule beyond this date would harm ACOs and ACO professionals, 
and thwart the purpose of the rule. Were we to issue initial 
determinations for the advance investment payment option and ACO PC 
Flex Model, as well as determine final repayment mechanism amounts 
after this date, the aforementioned processes would not be complete, 
which would jeopardize entry by ACOs into new agreement periods 
beginning on January 1, 2025 and continued participation by ACOs in the 
Shared Savings Program for the PY beginning on January 1, 2025. 
Delaying the start of the PY 2025 would cause the harm to ACOs, ACO 
professionals, and CMS described in section III.A. of this final rule. 
Therefore, we find that there is good cause to reduce the 30-day delay 
in effective date for this final rule to 20 days from date of display, 
which provides CMS ample time to issue Phase 1 application dispositions 
on or before October 17, 2024 after this rule becomes effective.
---------------------------------------------------------------------------

    \23\ See for example, Medicare Shared Savings Program, Key 
Application Actions and Deadlines For Agreement Period Beginning on 
January 1, 2025, available at https://www.cms.gov/files/document/key-application-actions-and-deadlines.pdf (specifying Phase 1 
Dispositions to be issued on Oct. 17, 2024, at which time CMS makes 
available ACO Participant List and SNF Affiliate List dispositions, 
Beneficiary assignment eligibility Phase 1, and AIP eligibility 
final disposition). See also, CMS, Center for Medicare & Medicaid 
Innovation, ACO Primary Care Flex Model, Request for Applications 
(05/30/2024), available at https://www.cms.gov/files/document/aco-pc-flex-rfa.pdf (explaining that an applicant ACO will be notified 
whether CMS has selected them for participation in the ACO PC Flex 
Model during the phase 1 final disposition on October 17, 2024, 
which aligns with the Shared Savings Program phase 1 final 
dispositions).
---------------------------------------------------------------------------

IV. Collection of Information Requirements

    Section 1899(e) of the Act provides that chapter 35 of title 44 
U.S.C., which includes such provisions as the Paperwork Reduction Act 
of 1995, shall not apply to the Shared Savings Program. Accordingly, we 
are not setting out any requirements and burden estimates under this 
section of the preamble. Please refer to section V. (Regulatory Impact 
Statement) of this final rule for a discussion of the impacts 
associated with the changes described in section II. (Provisions of the 
Regulations) of this preamble.

V. Regulatory Impact Statement

A. Overview

    We have examined the impact of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(January 18, 2011), Executive Order 14094 entitled ``Modernizing 
Regulatory Review'' (April 6, 2023), the Regulatory Flexibility Act 
(RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the Act, 
section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 
1995; Pub. L. 104-4), and Executive Order 13132 on Federalism (August 
4, 1999), and the Congressional Review Act (5 U.S.C. 804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). The 
Executive Order 14094 entitled ``Modernizing Regulatory Review'' 
(hereinafter, the Modernizing E.O.) amends section 3(f) of Executive 
Order 12866 (Regulatory Planning and Review). A Regulatory Impact 
Analysis (RIA) must be prepared for rules that are significant under 
section 3(f)(1) of Executive Order 12866. Based on our estimates, OMB's 
Office of Information and Regulatory Affairs (OIRA) has determined this 
rulemaking is not significant per section 3(f)(1) as measured by the 
$200 million or more in any 1 year threshold. OMB's Office of 
Information and Regulatory Affairs has determined that this final rule 
does not meet the criteria set forth in 5 U.S.C. 804(2).
    The RFA requires agencies to analyze options for regulatory relief 
of small entities. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and small governmental 
jurisdictions. Most hospitals and most other providers and suppliers 
are small entities, either by nonprofit status or by having revenues of 
less than $9.0 million to $47.0 million in any 1 year. Individuals and 
States are not included in the definition of a small entity. As 
explained elsewhere in this section, while this final rule will help 
preserve the accuracy of shared savings and losses calculations for 
ACOs in the Shared Savings Program, the great majority of ACOs will 
experience at most a minimal impact on their PY 2023 financial outcome. 
We did not prepare an analysis for the RFA because we determined, and 
the Secretary certified, that this final rule will not have a 
significant economic impact on a substantial number of small entities.
    In addition, section 1102(b) of the Act requires us to prepare an 
RIA if a rule may have a significant impact on the operations of a 
substantial number of small rural hospitals. This analysis must conform 
to the provisions of section 604 of the RFA. For purposes of section 
1102(b) of the Act, we define a small rural hospital as a hospital that 
is located outside of a Metropolitan Statistical Area for Medicare 
payment regulations and has fewer than 100 beds. As previously 
mentioned in this section of this final rule, all but a small fraction 
of ACOs will experience relatively minimal changes in their PY 2023 
financial outcome. We did not prepare an analysis for section 1102(b) 
of the Act because we determined, and the Secretary certified, that 
this final rule will not have a significant impact on the operations of 
a substantial number of small rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2024, that 
threshold is approximately $183 million. This rule imposes no mandates 
on State, local, or tribal governments or on the private sector.

[[Page 79169]]

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. Since this regulation does not impose any costs on State 
or local governments, the requirements of Executive Order 13132 are not 
applicable.

B. Analysis

    In this final rule, we discuss the reasons that excluding payment 
amounts incurred in 2023 for two urinary catheter HCPCS codes \24\ on 
DMEPOS claims will prevent SAHS billing activity from deteriorating the 
accuracy of Shared Savings Program calculations determining both: (1) 
shared savings or losses for PY 2023 and (2) historical benchmarks for 
future performance years for ACOs entering agreement periods in 2024, 
2025 or 2026. Total FFS spending in the two specified codes was minimal 
in preceding years before the SAHS billing activity in 2023 sharply 
increased in highly disparate ways. At a program level, billing for 
these codes remained less than 0.1 percent of total FFS billing in 
every year from 2016 to 2022 before increasing to nearly 1 percent in 
2023. And while a handful of hospital referral regions (HRRs) still 
managed to exhibit billing for the specified codes totaling less than 
0.1 percentage points of total spending, approximately 10 percent of 
HRRs showed billing for the specified codes rising to at least 2 
percentage points of total spending. In the most impacted HRR, billing 
for these codes in 2023 accounted for over a 5 percentage-point 
increase in total per capita billing from 2022, an astonishing and 
plainly unjustifiable increase in billing for the medical device 
supplied under these codes. By analyzing ACO-level program data, we 
observed material impacts likely for many PY 2023 ACOs related to these 
geographically heterogeneous and highly suspect increases in spending 
for the specified urinary catheter codes.
---------------------------------------------------------------------------

    \24\ A4352 (Intermittent urinary catheter; Coude (curved) tip, 
with or without coating (Teflon, silicone, silicone elastomeric, or 
hydrophilic, etc.), each), and A4353 (Intermittent urinary catheter, 
with insertion supplies).
---------------------------------------------------------------------------

    Preliminary estimates of PY 2023 performance after removing the 
specified codes, using three months of claims runout, and applying risk 
adjustment were used to update the impacts estimated for ACO shared 
savings and losses. These data were analyzed to estimate the marginal 
impact that catheter spending had on each ACO's performance. These 
marginal impact estimates continue to rely on analysis performed on 
preliminary data without final beneficiary assignment information and 
without 3 months of claims runout. Despite these remaining limitations, 
the precision in this analysis has increased relative to the analysis 
included in the proposed rule.
    Billing for the specified codes was estimated in this study to have 
a nominal impact to overall shared savings (net of losses) across the 
mix of ACOs in PY 2023. The neutral overall impact exemplifies to the 
fact that billing for these specific codes was not correlated to any 
ability for an average ACO to actively manage the rapid growth. For 
most ACOs, the inclusion of the specified catheter codes did not 
substantially change their estimated financial outcome in PY 2023. When 
expressing projected shared savings (or losses) as a percentage of 
benchmark, the impact of spending in the specified codes on projected 
shared savings (or losses) was projected to be within +/-0.05 percent 
for 56 percent of ACOs, within +/-0.10 percent for 74 percent of ACOs, 
and within 0.15 percent for 83 percent of ACOs. However, the impacts 
would potentially be substantial at the tails of the distribution. 
Table 1 shows that failing to exclude the specified codes would 
increase the net earnings for one ACO in the study by an amount 
equivalent to 1.5 percent of benchmark spending relative to the policy 
we are finalizing to exclude the codes. At the other extreme, leaving 
in the specified codes was estimated to reduce earnings to another ACO 
by an amount equivalent to 2.4 percent of benchmark relative to the 
policy we are finalizing to exclude such specified codes. The impact 
estimated at these extremes highlights the benefit of the proposed 
policy to prevent highly suspect billing in the two specified codes 
from materially impacting outcomes in the program.

[[Page 79170]]

[GRAPHIC] [TIFF OMITTED] TR27SE24.000

    While providing a valid illustration of the impacts likely across 
the distribution of ACOs, a key component of the simulation relies on 
preliminary data for PY 2023 with less than 7 days of claims runout 
(specifically, the estimated marginal impact of catheter spending on 
each ACO's performance relative to benchmark) versus the 90 day claims 
runout used in financial reconciliation. Because of the limitations in 
the data used for this simulation, and because of the potential for the 
overall impact to be influenced by the proximity of individual ACO-
level outcomes to the applicable minimum savings rate or minimum loss 
rate (particularly for large ACOs), a stochastic simulation was 
employed to generate a range of outcomes surrounding the best estimate. 
Assuming the marginal impact of catheter spending on ACO gross savings 
(expressed on percent of benchmark basis) would vary relative to data 
used in the analysis under a normal distribution with standard 
deviation equal to the higher of (a) 0.1 percentage points or (b) one-
fourth of the absolute value of the marginal percentage impact 
estimated for the ACO using preliminary data, the impact of removing 
spending in the specified codes across all ACOs combined was estimated 
to be roughly budget neutral on average, ranging from a $10 million 
decrease at the 10th percentile to a $20 million dollar increase at the 
90th percentile.

C. Compliance With Requirements of Section 1899(i)(3) of the Act

    Certain policies, including both existing policies and the new 
policy described in this final rule, rely upon the authority granted in 
section 1899(i)(3) of the Act to use other payment models that the 
Secretary determines will improve the quality and efficiency of items 
and services furnished under the Medicare program, and that do not 
result in program expenditures greater than those that would result 
under the statutory payment model. By preventing SAHS spending growth 
in the two catheter codes from disrupting the accuracy and fairness of 
shared savings and loss outcomes for ACOs in the 2023 performance year, 
the policy furthers the goals of quality and efficiency by protecting 
the validity and integrity of the program's incentive for quality and 
efficiency. The provisions of this final rule, together with all 
existing program policies (including but not limited to those requiring 
authority granted in section 1899(i)(3) of the Act), result in a 
program that is expected to improve the quality and efficiency of items 
and services furnished under the Medicare program and is not expected 
to result in a situation in which the payment methodology under the 
Shared Savings Program, including all policies adopted under the 
authority of section 1899(i) of the Act, results in more spending under 
the program than would have resulted under the statutory payment 
methodology in section 1899(d) of the Act.
    In the CY 2023 PFS final rule, we estimated that the projected 
impact of the payment methodology that incorporates all policies 
finalized by that final rule would result in $4.9 billion in greater 
program savings compared to a hypothetical baseline payment methodology 
that excluded the policies that required section 1899(i)(3) of the Act 
authority (see 87 FR 70195 and 70196). The marginal impact of the 
changes in the CY 2024 PFS final rule were estimated to lower net 
spending by $330 million over the 10-year window for all new policies 
combined, including the cap an ACO's regional service area risk score 
growth, the addition of a new third step to the beneficiary assignment 
methodology, and the revised approach to identify the assignable 
beneficiary population (88 FR 79496). The marginal impact of the 
changes in this final rule are estimated to be budget neutral for the 
2023 performance year, with a range

[[Page 79171]]

of uncertainty spanning $10 million lower spending at the 10th 
percentile to $20 million higher spending at the 90th percentile. The 
cumulative impact of all policies including the provisions in this 
final rule are estimated to result in more than $4.9 billion in greater 
program savings compared to the hypothetical baseline payment 
methodology that excludes policies that require 1899(i)(3) of the Act 
authority. Therefore, we estimated that the implementation of the 
provision made in this final rule would not result in a program with 
spending greater than what would result under the statutory payment 
model, consistent with the requirements of section 1899(i)(3)(B) of the 
Act.
    We will continue to reexamine this projection in the future to 
ensure that the requirement under section 1899(i)(3)(B) of the Act that 
an alternative payment model not result in additional program 
expenditures continues to be satisfied. Additional Shared Savings 
Program data beginning to accumulate after the end of the COVID-19 
public health emergency, along with emerging information on the 
characteristics of new entrants in the Shared Savings Program for 
agreement periods beginning on January 1, 2024 and January 1, 2025, are 
anticipated to gradually improve our ability to reevaluate program 
impacts in a comprehensive fashion. In the event that we later 
determine that the payment model that includes policies established 
under section 1899(i)(3) of the Act no longer meets this requirement, 
we will undertake additional notice and comment rulemaking to make 
adjustments to the payment model to assure continued compliance with 
the statutory requirements.
    In accordance with the provisions of Executive Order 12866, this 
final rule was reviewed by the Office of Management and Budget.
    Chiquita Brooks-LaSure, Administrator of the Centers for Medicare & 
Medicaid Services, approved this document on September 23, 2024.

List of Subjects in 42 CFR Part 425

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

    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services amends 42 CFR part 425 as set forth below:

PART 425--MEDICARE SHARED SAVINGS PROGRAM

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

    Authority: 42 U.S.C. 1302, 1306, 1395hh, and 1395jjj.


Sec. Sec.  425.661 through 425.669  [Reserved]

0
2. Add reserved Sec. Sec.  425.661 through 425.669 to subpart G.

0
3. Section 425.670 is added to subpart G to read as follows:


Sec.  425.670  Adjustments to mitigate the impact of significant, 
anomalous, and highly suspect billing activity on Shared Savings 
Program financial calculations involving calendar year 2023.

    (a) General. This section describes adjustments CMS makes to Shared 
Savings Program calculations to mitigate the impact of significant, 
anomalous, and highly suspect billing activity occurring in calendar 
year 2023.
    (b) Significant, anomalous, and highly suspect billing activity for 
a HCPCS or CPT code impacting Shared Savings Program calculations. CMS 
has determined that the billing of the following HCPCS codes represents 
significant, anomalous, and highly suspect billing activity for 
calendar year 2023 that warrants adjustment--
    (1) A4352 (Intermittent urinary catheter; Coude (curved) tip, with 
or without coating (Teflon, silicone, silicone elastomeric, or 
hydrophilic, etc.), each); and
    (2) A4353 (Intermittent urinary catheter, with insertion supplies).
    (c) Applicability of adjustments to performance year and benchmark 
year calculations. Notwithstanding any other provision in this part, 
CMS adjusts the following Shared Savings Program calculations, as 
applicable, to exclude all Medicare Parts A and B fee-for-service 
payment amounts on DMEPOS claims (claim types 72 and 82) associated 
with a HCPCS code specified in paragraph (b) of this section for the 
period specified in paragraph (d) of this section:
    (1) Calculation of Medicare Parts A and B fee-for-service 
expenditures for an ACO's assigned beneficiaries for all purposes 
including the following: Establishing, adjusting, updating, and 
resetting the ACO's historical benchmark and determining performance 
year expenditures.
    (2) Calculation of fee-for-service expenditures for assignable 
beneficiaries as used in determining county-level fee-for-service 
expenditures and national Medicare fee-for-service expenditures, 
including the following calculations:
    (i) Determining average county fee-for-service expenditures based 
on expenditures for the assignable population of beneficiaries in each 
county in the ACO's regional service area according to Sec. Sec.  
425.601(c) and 425.654(a) for purposes of calculating the ACO's 
regional fee-for-service expenditures.
    (ii) Determining the 99th percentile of national Medicare fee-for-
service expenditures for assignable beneficiaries for purposes of the 
following:
    (A) Truncating assigned beneficiary expenditures used in 
calculating benchmark expenditures under Sec.  425.652(a)(4), and 
performance year expenditures under Sec. Sec.  425.605(a)(3) and 
425.610(a)(4).
    (B) Truncating expenditures for assignable beneficiaries in each 
county for purposes of determining county fee-for-service expenditures 
according to Sec. Sec.  425.601(c)(3) and 425.654(a)(3).
    (C) Truncating expenditures for assignable beneficiaries for 
purposes of determining truncated national per capita fee-for service 
expenditures for purposes of calculating the ACPT according to Sec.  
425.660(b)(3).
    (iii) Determining truncated national per capita fee-for-service 
Medicare expenditures for assignable beneficiaries for purposes of 
calculating the ACPT according to Sec.  425.660(b)(3).
    (iv) Determining national per capita expenditures for Parts A and B 
services under the original Medicare fee-for-service program for 
assignable beneficiaries for purposes of capping the regional 
adjustment to the ACO's historical benchmark according to Sec.  
425.656(c)(3) and capping the prior savings adjustment according to 
Sec.  425.658(c)(1)(ii).
    (v) Determining national growth rates that are used as part of the 
blended growth rates used to trend forward BY1 and BY2 expenditures to 
BY3 according to Sec.  425.652(a)(5)(ii) and as part of the blended 
growth rates used to update the benchmark according to Sec. Sec.  
425.601(b)(2) and 425.652(b)(2)(i).
    (3) Calculation of Medicare Parts A and B fee-for-service revenue 
of ACO participants for purposes of calculating the ACO's loss 
recoupment limit under the BASIC track as specified in Sec.  
425.605(d).
    (4) Calculation of total Medicare Parts A and B fee-for-service 
revenue of ACO participants and total Medicare Parts A and B fee-for-
service expenditures for the ACO's assigned beneficiaries for purposes 
of identifying whether an ACO is a high revenue ACO or low revenue ACO, 
as defined under Sec.  425.20, and determining an ACO's eligibility to

[[Page 79172]]

receive advance investment payments according to Sec.  425.630.
    (5) Calculation or recalculation of the amount of the ACO's 
repayment mechanism arrangement according to Sec.  425.204(f)(4).
    (d) Period of adjustment. CMS adjusts the Shared Savings Program 
calculations specified in paragraph (c) of this section for 
significant, anomalous, and highly suspect billing activity identified 
pursuant to paragraph (b) of this section for calendar year 2023, when 
calendar year 2023 is either a performance year or a benchmark year.
    (e) Adjustments for growth rates used in calculating the ACPT. In 
addition to adjustments described in paragraph (c) of this section, CMS 
makes adjustments for payments associated with a HCPCS code specified 
in paragraph (b) of this section for BY3 in projecting per capita 
growth in Parts A and B fee-for-service expenditures, according to 
Sec.  425.660(b)(1), for purposes of calculating the ACPT for agreement 
periods beginning on January 1, 2024.

Xavier Becerra,
Secretary, Department of Health and Human Services.
[FR Doc. 2024-22054 Filed 9-24-24; 4:15 pm]
BILLING CODE 4120-01-P