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Federal Government Finalizes Changes to Accountable Care Organization Program

January 10th, 2019

Sam Cohen

The Centers for Medicare and Medicaid Services (CMS) on Dec. 31 issued the Pathways to Success Final Rule. This document outlines changes to the Medicare Shared Savings Program (MSSP), the most prominent program for accountable care organizations (ACOs) operated by the federal government. Below, we outline the various changes introduced by this final rule and explore the ways in which they could potentially affect physicians and practices.

What is the MSSP?

The MSSP was established by the Affordable Care Act and launched in 2012. This program enables groups of healthcare providers to converge into ACOs that assume responsibility for the total cost and quality of patient care. If the ACOs are able to provide healthcare services at lower-than-expected costs while maintaining quality of care, then they are granted a portion of the achieved savings. When participating in an “upside-only” (or “one-sided”) payment model, an ACO is not responsible for repaying CMS for any spending above the projected benchmark. Conversely, when following a “two-sided” payment model, ACOs may receive shared savings or be required to make payments back to CMS as shared losses. More than 25 percent of current fee-for-service Medicare beneficiaries are in an ACO that participates in the MSSP.

Finalized Changes

Overall, the final rule closely follows the structure outlined in the proposed rule. Most importantly, the final rule maintains redesigned program options, including “basic” and “enhanced” tracks for participating ACOs. Under both options, participating ACOs are required to enter into agreement periods of at least five years, and they must assume two-sided risk.

In response to comments on the proposed rule, CMS introduced a number of revisions in the final rule. These include increasing the amount of shared savings that ACOs are eligible to receive during the first four years on the basic track, increasing the dollar threshold for a “low-revenue” ACO designation (typically organizations that include physician-owned practices and rural hospitals), and allowing low-revenue ACOs to remain in an upside-only model for an additional year.

  • Basic track: With this option, participating ACOs progress through a five-level glide path during the five-year agreement period. In most cases, ACOs will advance one level each year they are in the program. The initial two levels, A and B, feature upside-only payment models in which ACOs are eligible to receive up to 40 percent of shared savings after a savings threshold has been reached. Levels C, D, and E feature two-sided payment models, with a higher shared savings rate of 50 percent that is counter-balanced by a shared loss rate of 30 percent. Both shared savings and shared losses are capped, with the cap increasing as an ACO progresses along the glide path.


Both low-revenue and high-revenue ACOs (typically organizations that include hospitals) that are not experienced with performance-based risk Medicare ACO initiatives may participate in the basic track. In addition, inexperienced, low-revenue ACOs may choose to remain in Level B for an extra year to remain in an upside-only payment model. Should an ACO elect to do this, the organization must agree to advance directly to Level E for its fourth year in the program. Low-revenue ACOs are able to participate in the basic track for up to two agreement periods, spending the second agreement period at the highest risk/reward level.

Furthermore, low-revenue ACOs that have participated in previous performance-based risk Medicare ACO initiatives are only permitted to participate in either the enhanced track or Level E of the basic track. Inexperienced high-revenue ACOs are limited to a single agreement period under the basic track, while experienced high-revenue ACOs may only participate in the enhanced track.

  • Enhanced track: This option is based on the MSSP’s current Track 3, and it includes risk and reward levels higher than the basic track. The enhanced track includes a shared savings rate of up to 75 percent after the saving threshold has been reached and a shared loss rate of between 40 and 75 percent after the loss threshold has been exceeded.


CMS also finalized provisions that grant flexibility surrounding certain existing regulatory requirements for ACOs in two-sided risk models, including:

  • Allowing expanded use of telehealth services
  • Expanding eligibility for waivers from the Skilled Nursing Facility Three-Day Rule
  • Allowing ACOs to establish a beneficiary incentive program (under which ACOs could provide an incentive payment of up to $20 to an assigned beneficiary for each qualifying primary care service the beneficiary receives from certain ACO professionals)


For additional information about these changes, CMS has provided a summary of key provisions here.

What Does It Mean for Practices?

As I discussed in an initial examination of the proposed rule, mandating that all ACOs participating in the MSSP assume two-sided risk is a significant change in the operation of the program. This new model will have major implications for both existing ACOs and those considering joining the MSSP.

  • For ACOs (and affiliated providers) currently participating in the MSSP: Existing participants will need to decide whether they are prepared to assume financial risk if they are not doing so already. In a survey conducted by the National Association of ACOs (NAACOS) on the provisions of the proposed rule, only 48 percent of participating ACOs reported that they were likely to continue using the MSSP, while 36 percent stated that they were unlikely to continue. While the final rule is more favorable to ACOs than the proposed rule, it is likely that some will still choose to terminate their participation
  • For physicians considering joining ACOs and ACOs deciding whether to participate in the MSSP: Prospective participants will need to evaluate this decision in light of the potential need to assume financial risk. For many providers, the time, effort, and financial resources necessary to build a successful ACO were already a significant barrier to entry, even when considering an upside-only model. The need to commit to assuming two-sided risk after a much shorter time period may make ACOs less willing to invest these resources. In the same NAACOS study noted above, more than half of participating ACOs reported that they would have been “unlikely to begin” participation in the MSSP if the new rules had been in place during the evaluation process.


Whether already involved in an ACO or considering joining one, physicians and practices should review the finalized changes to determine how the new rule will affect their individual circumstances. As always, Medical Mutual member physicians and practices may contact me for support when evaluating how to proceed.

Disclaimer: This post is written in general terms and is not a substitute for legal advice or intended to create an attorney-client relationship.

Sam Cohen is Medical Mutual’s Senior Vice President of Health Policy. Medical Mutual members may contact him directly at sam.cohen@mmicnc.com and 919.878.7602. Readers also can follow him on Twitter @samuel_c_cohen.


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