Entities eligible for ACO participation

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1 On Oct. 20, 2011, the Centers for Medicare & Medicaid Services (CMS) finalized new rules under the Medicare Shared Savings Program (MSSP) to help doctors, hospitals, and other health care providers better coordinate care for Medicare patients through Accountable Care Organizations (ACOs). The final rule will be effective on Jan. 2, 2012 as mandated by 3022 of the Affordable Care Act (ACA). The American Academy of Dermatology Association reviewed the final rule and developed the following summary. In general, the final rule provides greater flexibility and increased financial incentives for entities wishing to participate as ACOs under the MSSP. CMS has made significant changes to the participation requirements in response to the more than 1,300 comments received on the framework of the program laid out in the proposed rule. The most notable of the changes is the elimination of risk for ACOs participating under the one-sided model, assigning Medicare beneficiaries based on primary care services provided by specialty physicians, reducing the number of quality measures that an ACO must report, and the addition of an access to specialist module for care coordination. In conjunction with the release of the final rule, other Federal agencies also issued guidance or regulations related to the MSSP. At the same time, a new program called the Advance Payment Program was launched, which is designed to provide financial incentives for physician groups and other types of providers to participate in the MSSP. An outline highlighting the most significant aspects of the final rule is provided below. Entities eligible for ACO participation The ACA allows for the following designated groups of providers of services and suppliers to participate as an ACO under the condition that they have an established mechanism for shared governance. In addition to the following providers, the final rule, unlike the proposed rule, allows Rural Health Clinics (RHCs) and Federally Qualified Health Centers (FQHCs) to both form and participate in an ACO in an effort to help providers serving in rural and other underserved areas. Networks of individual practices of ACO professionals Partnerships or joint ventures arrangements between hospitals and ACO professionals Hospitals employing ACO professionals Other Medicare providers and suppliers as determined appropriate by the Secretary

2 Eliminating risk in the one-sided model In the proposed rule, ACOs could choose from two tracks, each entailing a 3-year agreement. Track 1 would comprise two years of one-sided shared savings with a mandatory transition in the third year to a two-sided model of shared savings and losses. Track 2 would comprise the entire 3-year agreement under the two-sided model. In the final rule, CMS will continue to offer ACOs a choice of two tracks, but has modified Track 1 to eliminate risk. Under the one-sided model, ACOs will share savings for the full term of the initial agreement period and may earn a sharing rate of up to 50 percent based on quality performance, with a payment limit of 10 percent of the applicable year s Part A and Part B updated benchmark. Those ACOs that wish to continue participating in the Shared Savings Program beyond the first agreement period must do so under Track 2, the two-sided model. As proposed, for the one-sided model, CMS will use a sliding scale confidence interval between 2.0 to 3.9 percent based on the number of assigned beneficiaries to establish the Minimum Savings Rate (MSR) for participating ACOs, with first dollar sharing once the MSR is met or exceeded. More experienced ACOs that are ready to share in losses in return for the opportunity for a higher share of savings may elect to enter Track 2, the two-sided model. ACOs that enter the Shared Savings Program under Track 2 will be under the two-sided model for the entire term of their initial agreement and any subsequent agreement periods. Under this model, the ACO may earn a sharing rate of up to 60 percent based on quality performance, with a payment limit of 15 percent of the applicable year s Part A and Part B updated benchmark, and a Minimum Loss Rate (MLR) of 2.0 percent. CMS will also apply a flat 2 percent minimum savings rate (MSR) to all ACOs participating under the two-sided model, with first dollar sharing once the MSR is met or exceeded. As proposed, the limit on the amount of losses to be shared will be phased in over threeyears starting at 5 percent in the first year, 7.5 percent in the second year, and 10 percent in third year. Losses in excess of the annual limit would not be shared. CMS believes these changes will provide an entry point for organizations with less experience with risk models, such as some physician-driven organizations or smaller ACOs, to gain experience with population management before transitioning to a riskbased model. The changes also provide an opportunity for more experienced ACOs that are ready to share in losses to enter a sharing arrangement that provides a greater share of savings, but at the risk of repaying Medicare a portion of any losses. Options for start date of performance year Based on public comments received on the proposed rule, CMS will now provide for two application periods for the first year of the Shared Savings Program and accept applications for an April 1, 2012 or July 1, 2012 start dates. All ACOs that start in 2012 will have agreement periods that terminate at the end of CMS summarized the application of this final policy as follows: ACO starts April 1, 2012: First performance year is 21 months, ending on Dec. 31, Agreement period is three performance years, ending on Dec. 31,

3 ACO starts July 1, 2012: First performance year is 18 months, ending on Dec. 31, Agreement period is three performance years, ending on Dec. 31, Under the final rule, ACOs will begin receiving data immediately upon entry to the program (historical and quarterly aggregate reports along with rolling information on their preliminary prospective assigned beneficiary population as described in section II.D. of the final rule). After completing its first performance year, the ACO will be evaluated on its performance on the ACO quality metrics and a shared savings payment will be calculated. All ACOs will be eligible to receive the PQRS incentive payments for each calendar year in which they fully and completely report the Group Practice Reporting Option (GPRO) measures, regardless of their start date. This will provide ACOs that join the program in April or July 2012 with some working capital in advance of the completion of the first ACO performance year, regardless of their ability to generate shared savings. CMS believes this approach fulfills several desirable goals for the program including: Establishment of the program by Jan. 1, Flexibility for newly formed ACOs to apply when ready. A partial year on-ramp for ACOs to gain experience with understanding the assigned population through receipt of data reports and to gain experience in reporting measures. Using the PQRS GPRO tool before entering into a period of performance assessment. Assurance that no beneficiary will be double-counted for purposes of establishing ACO performance when there is more than one ACO in a geographic region. Changes in plurality standard for beneficiary assignment to an ACO Under the proposed rule, CMS put forward a method for retrospective assignment of beneficiaries to an ACO based on a plurality of allowed charges for primary care services rendered by a primary care physician with a designated specialty of internal medicine, general practice, family practice, or geriatric medicine. In our comments, the AADA questioned CMS s failure to acknowledge the role of specialty physicians in assigning beneficiaries to an ACO. In the final rule, CMS adopted a two-step process to assign beneficiaries to an ACO to recognize the necessary and appropriate role of specialists in providing primary care services if they receive at least one primary care service from a physician within the ACO. This is a fundamental change to the proposed rule, which had explicitly excluded consideration of primary care services provided by specialists. The first step assigns a beneficiary to an ACO if the beneficiary receives the plurality of his or her primary care services from primary care physicians within the ACO. Primary care physicians are defined as those with one of four specialty designations: internal medicine, general practice, family practice, and geriatric medicine. The second step only considers beneficiaries who have not had a primary care service furnished by any primary care physician. Under this second step, a beneficiary is assigned to an ACO if the beneficiary receives a plurality of his or her primary care 3

4 services from physicians and certain non-physician practitioners (nurse practitioners, clinical nurse specialists, and physician assistants) within the ACO. CMS also adopted preliminary prospective assignment with final retrospective reconciliation in response to comments from the Academy and many other groups objecting to retrospective assignment. At the start of each agreement period, the performance year and quarterly thereafter, CMS, upon the request of the ACO, will provide the ACO with a list of preliminarily (prospectively) assigned beneficiaries based on the most recent available data. CMS will also provide the ACO with aggregate beneficiary level data regarding this population. Preliminary prospective assignment will allow ACOs to develop care plans and undertake appropriate quality initiatives on the basis of some knowledge regarding the beneficiaries for whom they will ultimately be held accountable. However, final assignment, for the purposes of determining an ACO s quality and financial performance under the program, will be made at the end of the performance year (retrospectively). A final retrospective reconciliation allows CMS to assess an ACO s performance based on where beneficiaries have chosen to receive services during the performance year. Establishing the benchmark The final rule largely adopts the methodology laid out in the proposed rule for establishing an ACO's initial benchmark based on the Parts A and B fee-for-service expenditures of beneficiaries who would have been assigned to the ACO in any of the three years prior to the start of an ACO's agreement period using the ACO participants' Taxpayer identification numbers (TINs) identified at the start of the agreement period. CMS will calculate benchmark expenditures by categorizing beneficiaries in the following cost categories: ESRD, disabled, aged/dual eligible Medicare and Medicaid beneficiaries, and aged/non-dual eligible Medicare and Medicaid beneficiaries. This benchmarking methodology will apply to all ACOs, including those consisting of FQHCs and/or RHCs (either independently or in partnership with other eligible entities). CMS will also make final its proposals to truncate an assigned beneficiary's total annual Parts A and B fee-for-service per capita expenditures at the 99th percentile of national Medicare fee-for-service expenditures as determined for each benchmark and performance year; weight the most recent year of the benchmark (year 3 at 60 percent, year 2 at 30 percent and year 1 at 10 percent); and reset the benchmark at the start of each agreement period. Furthermore, CMS makes no changes in response to concerns that setting the benchmark based on historical data disadvantages low-cost, efficient providers, including rural providers, or may discourage them from participating in the ACO program. Finally, CMS rejected recommendations to not reset the benchmark for ACOs that continue in the program after the first agreement period, or to limit how far the baseline could move from one agreement period to the next. Determining Shared Savings 4

5 Under the final rule, the Minimum Savings Rate (MSR) for ACOs participating under the one-sided model will be established using a sliding scale ranging from 2 percent to 3.9 percent to account for normal variation based upon the number of assigned beneficiaries. The proposed rule included a requirement under which ACOs participating under the one-sided model would have to produce savings of at least 2 percent over the MSR in order to be eligible for any shared savings payments, while ACOs participating under the two-sided model would share first dollar savings once the MSR was exceeded. The final rule was modified to allow ACOs participating under either model to share in the first dollar of savings once savings exceed the MSR. Under the two-sided model, for which there is no requirement for the MSR to be based on the number of assigned beneficiaries, both the MSR and Minimum Loss Rate (MLR) are set at a flat 2 percent for all ACOs. This relatively lower MSR appropriately balances the risk that an ACO will achieve savings due to normal variation in expenditures, with the guarantee that they will share in losses. To calculate savings or losses, the ACO s per capita, risk-adjusted Medicare expenditures in each performance year will be compared to its updated benchmark. If actual expenditures are lower than the updated benchmark and savings meet or exceed the MSR, the ACO will be eligible for shared savings. Under the two sided model only, if actual expenditures are higher than the benchmark and losses meet or exceed the MLR, a loss is incurred. CMS will adjust the benchmark and performance year expenditures to account for changes in severity and case mix for beneficiaries. Full prospective CMS-HCC risk scores will be used to adjust each ACO s three-year historical benchmark. During the performance years, for beneficiaries continuously assigned to the ACO, year to year, CMS will update the risk score using demographic factors only unless this subpopulation experiences a decline in risk scores, in which case the risk score will be reset at the lower risk score rate. For beneficiaries that are newly assigned to the ACO during the performance year, full CMS-HCC prospective risk scores will apply to encourage ACOs to continue to accept high risk and complex patients. If an ACO meets quality standards and achieves savings, the ACO will share in savings. CMS will apply a sharing rate, determined for each ACO based upon its quality performance, to the difference between the updated benchmark and the actual expenditures for the performance year. The ACO will share in savings at this rate on a first dollar basis up to the performance payment limit. Determining shared losses under the two-sided model As noted above, ACOs in the two-sided model will share losses with CMS if the per capita costs for beneficiaries assigned to the ACO in the performance year are above the updated benchmark by an amount equal to or greater than the MLR, which is set at a flat 2 percent under this model. ACOs are liable for up to 60 percent of the entire difference between the updated benchmark and the actual expenditures for the performance year. The actual amount varies based on their quality performance. CMS 5

6 will calculate a final sharing rate, determined for each ACO based upon its quality performance in the same manner as if the ACO were sharing in savings. The shared loss rate will be determined based on the inverse of the ACO s final sharing rate (i.e., 1 minus the final shared savings rate). This approach rewards an ACO with a high quality score by reducing the amount of losses it will owe to CMS. Conversely, an ACO with a low quality score will owe a larger percentage of shared losses to CMS. Additionally, CMS will implement a loss sharing limit on the total amount owed based on a percent of the ACO s updated benchmark for the applicable performance year. In the ACO s first performance year under the two-sided model, the loss sharing limit will be 5 percent of the Part A and Part B updated benchmark, 7.5 percent in the second performance year, and 10 percent in the third performance year. Distribution of shared savings CMS upheld its proposal to make shared savings payments directly to the ACO and not specify how shared savings must be distributed. Under the proposed rule, savings otherwise payable to an ACO would be subject to withholding by CMS of 25 percent of the total amount of savings to ensure repayment of potential future losses. In the final rule, however, CMS eliminated this 25 percent withholding provision. Timing and process for evaluating shared savings CMS will use three months of claims run-out data with the application of an appropriate completion percentage to calculate the benchmark and per capita expenditures for the performance year. New program standards established during the agreement period CMS finalized its proposal that ACOs be held responsible for all regulatory changes in policy, with the exception of eligibility requirements concerning the structure and governance of ACOs, calculation of sharing rate, and beneficiary assignment. However, CMS will modify the proposal to allow ACOs the flexibility to voluntarily terminate their agreement in those instances where regulatory standards are established during the agreement period which the ACO believes will impact the ability of the ACO to continue to participate in the Shared Savings Program. Managing significant changes to the ACO during the agreement period Based on public comments, CMS modified its proposal so that ACO participants and ACO providers/suppliers may be added and subtracted over the course of the agreement period. ACOs must notify CMS of the change within 30 days of these additions/subtractions of ACO participants or providers/suppliers. Additionally, in the event of "significant changes," which is defined as an event that occurs resulting in an ACO being unable to meet the eligibility or program requirements of the Shared Savings Program, the ACO must also notify CMS within 30 days. Such changes may necessitate adjustments to the ACO s benchmark, but would also allow the ACO to continue participating in the Shared Savings Program. However, such changes may also cause the ACO to no longer meet eligibility, for example, losing a large primary care practice could cause the ACO assignment to fall below 5,000 and result in termination of the agreement. 6

7 Coordination with other federal agencies In developing the final rule, CMS worked closely with other Federal agencies to ensure a coordinated and aligned effort to facilitate implementation of the Shared Savings Program. The Antitrust Agencies will publish a final Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program in the Federal Register. Waivers of CMP, anti-kickback, and physician self-referral laws Section 1899(f) of the Act authorizes the Secretary to waive certain fraud and abuse laws as necessary to carry out the provisions of the Shared Savings Program. Accordingly, pursuant to section 1899(f) of the Act, CMS and OIG are jointly publishing an interim final rule with comment period describing waivers applicable to ACOs, ACO participants, and ACO providers/suppliers in the Shared Savings Program. The waivers described in the interim final rule with comment period will also apply to the Innovation Center s Advance Payment Model demonstration because ACOs participating in that model will also be participating in the Shared Savings Program. IRS guidance relating to tax-exempt organizations participating in ACOs Nonprofit hospitals and other health care organizations recognized by the IRS as taxexempt organizations are likely to participate in the development and operation of ACOs in the Shared Savings Program. Accordingly, the IRS has issued Notice soliciting public comment on whether existing guidance relating to the Internal Revenue Code provisions governing tax-exempt organizations is sufficient for those tax-exempt organizations planning to participate in the Shared Savings Program through ACOs and, if not, what additional guidance is needed. For additional information, tax-exempt organizations and ACOs should refer to Notice and other applicable IRS guidance available on CMS received comments relating to the tax treatment of ACOs. However, tax issues are not within the jurisdiction of CMS. Accordingly, those issues were not addressed in the final rule, but CMS has shared the relevant comments with IRS. Antitrust Policy Statement The proposed Antitrust Policy Statement had several features relevant to the Shared Savings Program, including: An antitrust "safety zone." The Antitrust Agencies, absent extraordinary circumstances, would not challenge as anticompetitive ACOs that were within the safety zone. The safety zone also included a rural exception for ACOs operating in rural areas. For ACOs outside the safety zone, guidance on the types of conduct to avoid that could present competitive concerns. A mandatory Antitrust Agency review procedure for ACOs that met certain thresholds. The mandatory review would be triggered if two or more ACO participants that provide a common service (as defined in the proposed Antitrust Policy Statement) to patients from the same Primary Service Area (PSA) have a 7

8 combined share of greater than 50 percent for that service in each ACO participant s PSA. The proposed Antitrust Policy Statement describes the methodology that ACO participants could use to determine whether the ACO was required to obtain an Antitrust Agency review. Some of the data to be used in this methodology are available at The proposed Antitrust Policy Statement applied to collaborations among otherwise independent providers and provider groups, formed after March 23, 2010 (the date on which the ACA was enacted) and that have otherwise been approved to participate, or seek to participate, as ACOs in the Shared Savings Program. The Antitrust Agencies are releasing concurrently with the final rule, a final Antitrust Policy Statement in response to the comments. For further guidance on antitrust enforcement policy with respect to ACOs, ACOs should review the final Antitrust Policy Statement. Coordinating the Shared Savings Program application with the Antitrust Agencies CMS proposed to require that certain ACOs be subject to mandatory review by the Antitrust Agencies before CMS would approve their participation in the Shared Savings Program. Any newly formed ACO with a PSA share above 50 percent for any common service that two or more ACO participants provide to patients from the same PSA, and that did not qualify for the rural exception articulated in the proposed Antitrust Policy Statement would require mandatory review. However, based on the comments received, CMS has reconsidered this approach and can achieve the same objectives identified in the proposed rule using a less burdensome approach that is consistent with antitrust law enforcement norms and does not raise sub-delegation concerns. CMS will not condition Shared Savings Program eligibility on whether an ACO has obtained the requisite letter from the Antitrust Agencies. CMS will accept an ACO into the Shared Savings Program regardless of whether it voluntarily obtains a letter from the Antitrust Agencies and regardless of the contents of any letter it may have voluntarily obtained from the Antitrust Agencies, assuming that the ACO meets the other eligibility requirements set forth in this final rule. CMS agrees with comments that suggested CMS provide the Antitrust Agencies the data and information necessary to help identify potentially anticompetitive conduct. CMS has also requested that the Antitrust Agencies conduct a study examining how ACOs participating in the Shared Savings Program have affected the quality and price of health care in private markets. CMS anticipates using the results of this study to evaluate whether it should expand the eligibility criteria. This voluntary expedited review approach, coupled with the Antitrust Agencies traditional law enforcement authority and CMS s collaborative efforts to share data and information with the Antitrust Agencies, will allow ACOs a reasonable opportunity to obtain guidance regarding their antitrust risk in an expedited fashion, while also providing appropriate safeguards so that potential or actual anticompetitive harm can be identified and remedied. ACO final quality measures and performance scoring methodology 8

9 Quality measures: In response to concerns raised by the Academy and other comments regarding the large number of quality measures outlined in the proposed rule and the lack of specificity around reporting requirements for specialists, in the final rule, CMS reduced the quality measures from 65 to 33 and eliminated one domain so that there are now only four domains: Patient Experience of Care, Care Coordination/Patient Safety, Preventive Health, and At-Risk Population. To satisfy quality performance requirements for a domain, the final rule requires that the ACO must report all measures within a domain and score above the minimum attainment level determined by CMS on 70 percent of the measures in a domain. The modified proposal of 33 required quality measures, removing redundant, operationally complex, or burdensome measures should encourage participation in the program while still demanding a high standard of quality. Under the proposed rule, an ACO that did not meet the quality performance thresholds for all of the proposed measures would not be eligible for shared savings, regardless of how much per capita costs were reduced. Under the final rule, however, an ACO that achieves the minimum attainment level for at least one measure in each of the four domains, and also satisfies the requirements for realizing shared savings under the final rule, would be eligible to receive the portion of those shared savings for which it qualifies. Reporting: The measures will be reported through a combination of a Web interface designed for clinical quality measure reporting and patient experience of care surveys. In addition, CMS claims and administrative data will be used to calculate other measures in order to reduce administrative burden. CMS will also administer and pay for the patient experience of care survey for the first two years of the Shared Savings Program, 2012 and ACOs will be responsible for selecting and paying for a CMScertified vendor to administer the patient survey beginning in While an ACO s first performance year for shared savings purposes would be 18 or 21 months, depending on the start date, quality data will be collected on a calendar year basis, beginning with the reporting period ending Dec. 31, The AADA is still concerned with the lack of specificity around reporting requirements for specialists. It is clear that the majority of the measures are irrelevant to our specialty, and in some cases would only be reported by hospitals and/or primary care physicians. We will request further clarification regarding quality measures that are not applicable in a physician-led ACO (i.e., a non-hospital affiliated ACO). An explanation is warranted as to whether a physician group ACO would still be required to report on these hospital measures or if they would be able to report zero denominators, as is the case with the Meaningful Use incentive program. It is unclear as to what the reporting requirements would be for dermatologists in an ACO, and as such we are not able to fully analyze and respond to the provisions and their impact on the specialty. Quality performance scoring: As required by the ACA, before an ACO can share in any savings created, it must demonstrate that it met the quality performance standard for that year. For the first performance year, CMS is defining the quality performance standard at the level of complete and accurate reporting for all quality measures. During subsequent performance years, the quality performance standard will be phased in 9

10 such that ACOs must continue to report all measures but will eventually be assessed on performance. Pay for performance will be phased in over the ACO s first agreement period as follows: Year 1: Pay for reporting applies to all 33 measures. Year 2: Pay for performance applies to 25 measures. Pay for reporting applies to eight measures. Year 3: Pay for performance applies to 32 measures. Pay for reporting applies to one measure that is a survey measure of functional status. CMS will keep the measure in pay for reporting status for the entire agreement period. This will allow ACOs to gain experience with the measure and will provide important information to them on improving the outcomes of their patient populations. CMS intends to establish national benchmarks for ACO quality measures and will release benchmark data at the start of the second performance year when the pay-forperformance phase-in begins. For pay-for-performance measures, the minimum attainment level will be set at a national 30 percent or the national 30th percentile of the performance benchmark. Performance benchmarks will be national and established using national fee-for-service claims data, national MA quality reporting rates, or a flat national percentage for measures where MA or fee-for-service claims data is not available. Performance equal to or greater than the minimum attainment level for a measure will receive points on a sliding scale based on the level of performance. Performance at or above 90 percent or the 90th percentile of the performance benchmark will earn the maximum points available for the measure. Access to specialist module for care coordination In response to recommendations for a care coordination and specialty care construct, CMS intends to add an Access to Specialists module to emphasize the importance of specialty care for patients served by the ACO, and complements the program s focus on care coordination and monitoring activities to ensure ACOs are not engaged in practices to avoid at-risk patients. This undertaking will also align with the two-step methodology for assigning beneficiaries to ACOs, which will consider primary care services furnished by specialty physicians and other non-physician providers. Physician Quality Reporting System and the Shared Savings Program ACO participants that include providers/suppliers who are also eligible professionals for purposes of the Physician Quality Reporting System (PQRS) will earn the PQRS incentive as a group practice under the Shared Savings Program by reporting required clinical quality measures through the ACO Group Practice Reporting Option (GPRO) Web interface. In each calendar year reporting period, the ACO must fully and completely report the ACO GPRO measures. Electronic health records 10

11 As part of its quality measurement and quality requirements, CMS s proposed rule required that at least 50 percent of an ACO s primary care physicians be determined to be meaningful EHR users by the start of the second performance year in order to continue participation in the MSSP. In the final rule, CMS is no longer requiring a minimum level of EHR meaningful use as a condition of participation. EHR use is still retained as a quality measurement, however, and will be weighted higher than other measures for quality-scoring purposes. ********** 11

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