Posted: August 2nd, 2022

Healthcare Leadership & Management

 Read the attached The Final Rule for the Medicare Shared Savings Program.

In 400 to 500 words, address the following:

-Describe the board’s roles, functions, and liabilities in a managed care organization.

-Assess the main differences regarding Governance as well as Leadership and Management Structure between the Medicare Shared Savings Program and a managed care organization.

Support your response with at least two scholarly sources published in APA Style within the last five years.

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THE FINAL RULE FOR THE
MEDICARE SHARED SAVINGS PROGRAM

The Affordable Care Act authorizes the Centers for Medicare and Medicaid Services (CMS) to
establish a Medicare Shared Savings Program that would create a new category of health care
provider, called accountable care organizations (ACOs), in the Medicare program. On March 31,
2011, CMS released a proposed rule for implementing the new program and solicited public
comment.1 On October 20, 2011, CMS released the final rule for implementing the new
program.2 The following is a detailed summary of the final rule.

OPERATIONAL DEFINITION OF AN ACCOUNTABLE CARE ORGANIZATION FOR
THE MEDICARE SHARED SAVINGS PROGRAM

CMS defines an ACO as a legal entity that is recognized and authorized under applicable state,
federal, and tribal law and composed of certified Medicare providers or suppliers. These
participants work together to manage and coordinate care for a defined population of Medicare
fee-for-service (FFS) beneficiaries and have established a mechanism for shared governance that
provides appropriate control over the ACO’s decision-making process. ACOs that meet specified
quality performance standards are eligible to receive payments for shared savings if they can
reduce spending growth below target amounts.

ELIGIBILITY REQUIREMENTS TO PARTICIPATE IN THE MEDICARE SHARED
SAVINGS PROGRAM

Eligible Providers
A core principle of the Medicare Shared Savings Program is that providers should be able to
innovate in terms of care delivery. Accordingly, CMS has made an effort to avoid being overly
prescriptive in the eligibility requirements. In fact, CMS expands the list of providers eligible to
apply for the program beyond the four specified in the Affordable Care Act: 1) professionals
(i.e., physicians and other clinicians) in group practice arrangements; 2) networks of individual
practices; 3) joint venture arrangements between hospitals and professionals; and 4) hospitals
employing professionals. In addition to these four, eligibility will be open to a subset of critical
access hospitals (CAHs), rural health clinics (RHCs) and federally qualified health clinics (FQHCs).

The eligibility of CAHs is limited to those that are paid by Medicare in a manner that supports
the collection of cost and utilization data needed to assign patients to providers. It should also be
noted that while other providers (such as home health agencies, hospice facilities, and dialysis
centers) cannot independently participate in the ACO program, any provider can participate in
the program by partnering with eligible providers. For example, a home health agency can
partner with a network of individual practices. This will allow for participation from a broad
range of provider configurations.

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Legal Entities
ACOs that want to participate in the Medicare Shared Savings Program are required to be a legal
entity such as a corporation, partnership, limited liability company, or foundation recognized and
authorized to conduct its business under applicable state, federal, and tribal law. It must be
capable of:

• receiving and distributing shared savings;

• repaying shared losses;

• establishing, reporting, and ensuring all its participating providers comply with program
requirements, including quality performance standards; and

• performing the other requisite ACO functions identified in the statute.

An ACO with operations in multiple states would have to certify that it is recognized as a legal
entity in the state in which it was established and that it is authorized to conduct business in each
state in which it operates.

Existing organizations that meet the legal requirements can participate. That is, a self-
encompassing ACO entity, such as a hospital employing providers, is eligible and would not
have to form a new legal entity. However, an ACO formed by two or more otherwise
independent participants (such as a hospital and a large physician group) must form a new legal
entity separate from any of its participants.

Each ACO must have a tax identification number (TIN) that will be used to identify all ACO
participants. The ACO itself is not required to be a certified Medicare provider separately from
its component providers.

Governance Requirements
The final rule requires that an ACO must establish and maintain a governing body, such as a
board of directors or board of managers, with adequate authority to execute the statutory
functions of an ACO. This governing body is to be largely composed of its participating
providers (or their designated representatives), include Medicare beneficiaries served by the
ACO, and possess broad responsibility for the ACO’s administrative, fiduciary, and clinical
operations. ACOs are also encouraged to have community representation on the board to satisfy
a requirement for partnering with community stakeholders.

If the ACO is composed of multiple participants (such as multiple physician group practices), it
will need to form a new governing body that is separate and unique to the ACO. However, the
representatives on the ACO governing body could serve in a similar manner for organizations
that are components within the ACO. On the other hand, if the ACO is an existing entity, the
ACO governing body may be the same as the governing body of the existing entity.

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The ACO participants (i.e., providers) must have at least 75 percent control of the ACO’s
governing body. This leaves room on the board for nonprovider participation, as it is expected
that some ACOs, particularly those composed of small-group practices, will need to partner with
managerial companies and health plans, as they may not have the capital or infrastructure
necessary to administer an ACO.

If the ACO cannot meet the 75 percent criteria or explicitly include a Medicare beneficiary on
the board, the ACO must describe why it cannot meet those requirements and identify alternative
ways to meaningfully involve its participants and beneficiaries in the governance process. This
flexibility will allow existing entities with consumer-led boards that have more that 25 percent
participation to meet eligibility requirements. It will also allow ACOs in states with Corporate
Practice of Medicine restrictions to structure beneficiary representation accordingly. It should
also be noted that although CMS requires ACO participants to have at least 75 percent control of
the governing body, it does not require “proportionate control” by each ACO participant (thus,
not every provider group or other participant needs to have equal voting rights). This should add
further flexibility for ACOs to develop an effective governance structure.

Leadership and Management Structure
ACOs must have a leadership and management structure that includes clinical and administrative
systems. In addition, ACOs must meet the following criteria:

• Operations are managed by an executive who must certify that all ACO participants are
willing to become accountable to and report on quality, cost, and overall care of the
Medicare beneficiaries assigned to the ACO. In addition, the appointment and removal of
the executive must be under the control of the organization’s governing body and the
executive’s leadership team must have demonstrated the ability to effectively direct
clinical practice to improve efficiency processes and outcomes.

• Clinical management and oversight is managed by a senior-level medical director who is
a board-certified physician, licensed in the state in which the ACO operates, and reside in
that state.

• Providers must make a meaningful commitment—either financial or human (i.e., labor)
investment —to the ACO’s clinical integration program.

The final rule allows flexibility for innovative management and leadership structures, but ACOs
will have to provide evidence that alternative structures can meet the same goals. Also, as part of
its application, the ACO must describe how it will establish and maintain an ongoing quality
assurance and process improvement program, overseen by an appropriately qualified health
care professional.

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Processes to Promote Evidence-Based Medicine, Patient Engagement, Reporting,
Coordination of Care, and Patient-Centeredness
The ACO must provide documentation in its application that describes its plans to: 1) promote
evidence-based medicine; 2) promote beneficiary engagement; 3) report internally on quality and
cost metrics; and 4) coordinate care. ACOs are given the flexibility to choose the tools for
meeting these functional requirements that are most appropriate for their practitioners and patient
populations. Over time, as CMS learns more about successful strategies in these areas, CMS may
become more prescriptive. CMS will be monitoring strategies undertaken by ACOs to ensure
that they do not impede the ability of the beneficiary to seek care from providers outside the
ACO’s network.

In their plans to improve care management and coordination, ACOs must also exhibit a strong
patient-centeredness element. This includes developing individualized care plans—based on the
person’s unique needs, preferences, values, and priorities—that are regularly assessed and
evaluated for improvement opportunities. Care should also be integrated with community
resources that beneficiaries require to maintain well-being. In addition, beneficiaries (and their
caregivers or family members, where applicable) should be encouraged to be partners in care and
should have access to their own medical records and to clinical knowledge to make informed
choices about their care. Furthermore, transitions in care among providers in the ACO, as well as
providers outside the ACO, should be supported, consistent with the patient-centeredness goals.
Based on these principles, ACOs must demonstrate how they will meet several specific actions
to ensure patient-centeredness, including:

• A beneficiary care experience survey in place and a description in the ACO application of
how the ACO will use the results to improve care over time. This survey will be used as
part of the ACO performance assessment. CMS is requiring that ACOs use the Consumer
Assessment of Healthcare Providers and Systems (CAHPS) survey in their efforts so
performance data can be standardized across ACOs.

• Patient involvement in ACO governance by representation in the governing body.

• A process for evaluating the health needs of the ACO’s assigned population, including
diversity considerations and a plan to address the needs of their population.

• Systems in place to identify high-risk individuals and processes to develop individualized
care plans for targeted patient populations, including integration of community resources
(e.g., employers, commercial health plans, local businesses, local government agencies,
local quality improvement organizations, or collaboratives such as health information
exchanges) to address individual needs.

• A mechanism in place for the coordination of care (e.g., via use of enabling technologies
or care coordinators).

• A process in place for communicating clinical knowledge/evidence-based medicine to
beneficiaries in an understandable way. This process should allow for beneficiary

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engagement and shared decision-making that takes into account beneficiaries’ unique
needs, preferences, values, and priorities.

• Written standards in place for beneficiary communication and a process to allow
beneficiaries to access their medical record.

• Development of an infrastructure and internal processes for measuring clinical or service
performance by physicians across the practices, and using these results to improve care
and service over time.

The patient-centeredness requirements are more extensive and prescribed than those for
promoting evidence-based medicine, beneficiary engagement, internal quality and cost reporting,
and care coordination. However, many of the patient-centeredness requirements can serve to
meet those process objectives as well.

Sufficient Number of Primary Care Providers and Beneficiaries
All ACOs will be required to have at least 5,000 Medicare beneficiaries assigned to it for each
performance year. If the number of assigned beneficiaries falls below 5,000 during the
performance period, CMS will issue a warning and place the ACO on a corrective action plan.
The ACO agreement will be terminated if the ACO fails to meet this 5,000-beneficiary
requirement by the completion of the next performance year and the ACO will not be eligible for
shared savings that year.

The Affordable Care Act specifies that each ACO must include sufficient primary care
professionals for the number of Medicare FFS beneficiaries assigned to it. However, CMS has
chosen not to be prescriptive as to the specific number, type, or location of providers that are
included as ACO participants.

Program Integrity Requirements
ACOs must also have a compliance plan that addresses how the ACO will meet applicable legal
requirements. The plan must include: 1) a lead compliance official who reports to the governing
body; 2) mechanisms for identifying compliance problems; 3) a method for ACO employees or
contractors to report suspected problems; 4) compliance training; and 5) a requirement to report
suspected violations to the appropriate law enforcement agency. In addition, the ACO must have
a conflict of interest policy. CMS recommends that the ACO coordinate its compliance programs
with those of its participating provider groups.

CMS will screen ACOs, including ACO participants, for a history of program integrity issues.
Although the Medicare program includes screening procedures for enrolling providers and
suppliers, ACOs may not be subject to those procedures to the extent that they are not Medicare-
eligible entities separate from their components. ACOs and the component providers and
suppliers that are eligible to enroll in Medicare will be subject to screening in accordance with
applicable regulations, and their program integrity experience will be considered when reviewing
the ACO’s application for the Shared Savings Program.

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The final rule prohibits ACOs from utilizing preferential referral agreements with its ACO
providers for care to beneficiaries that ACOs know will not be assigned. Such arrangements
could result in inappropriate cost-shifting, as ACOs are not held accountable for the cost of
nonassigned patients. ACOs will also be prohibited from providing gifts, cash, or other
remuneration (such as gift certificates) to beneficiaries as inducements for receiving services.
ACOs could use such incentives to keep patients within their ACO provider network. However,
consistent with guidance from the Office of the Inspector General describing waivers of certain
fraud and abuse protections (which are discussed below), ACOs may provide beneficiaries
certain services or items for free or below fair-market value. The items or services must be
directly related to the medical care of the beneficiary. They must also be either preventive or
advance a clinical goal for the beneficiary (e.g., adherence to treatment or drug regimen). For
example, an ACO provider could give blood pressure monitors to patients with hypertension to
encourage regular blood pressure monitoring.

ACO MARKETING GUIDELINES

The Centers for Medicare and Medicaid Services wants to ensure that accountable care
organizations avoid engaging in activities that prevent its assigned beneficiaries from taking
advantage of the full range of benefits they are entitled to under the traditional Medicare fee-for-
service program. In addition, CMS wants to limit the potential for ACOs to market themselves as
endorsed Medicare ACOs or for marketing materials to misrepresent the Shared Savings
Program. Toward those ends, all ACO marketing communication materials must be filed with
CMS. After five days, if CMS has not disapproved the materials, ACOs are permitted to use
them. However, CMS can still disapprove the marketing materials at any time and require that
they be withdrawn, even after the five-day period.

ACOs must also certify in advance that any marketing materials they use comply with the
applicable marketing requirements. In addition to avoiding the concerns discussed above, these
requirements include using template language supplied by CMS whenever available and being
clear, concise, and well-organized in compliance with the Plain Writing Act of 2010. Failure to
comply will render the ACO not in compliance with patient-centeredness requirements and result
in it being placed on a corrective action plan.

REQUIREMENTS FOR AN ACO TO COMMIT TO A THREE-YEAR
PARTICIPATION AGREEMENT

By statute, ACOs must agree to participate in the Shared Savings Program for at least three
years. According to the final rule, for applications that are approved to participate in 2012, the
start date will be either April 1, 2012, or July 1, 2012. The first performance period for ACOs
that begin in 2012 will be from their start date through December 31, 2013. The following two
performance periods will be on a calendar-year basis, extending through December 31, 2015
(Exhibit 1).

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For applications approved for 2013 and subsequent years, the start date will be January 1st of
that year and the term of the agreement will be three years, with the performance period on a
calendar-year basis.

New Program Standards Established During the Three-Year Agreement Period
It is likely that CMS will make changes to the ACO regulations in future rules. During the three-
year contract, ACOs will be subject to all regulation changes with the exception of eligibility
requirements concerning the governance of ACOs, the calculation of the sharing rate, and
beneficiary assignment. Thus, ACOs would have to comply with any changes related to quality-
performance standards. For these and other required changes, ACOs would have to submit a
supplement to their original application explaining how they would address them or would face a
corrective action plan and potential termination. ACOs will also have the option of voluntarily
terminating their agreement without penalty.

Managing Significant Changes to the ACO During the Agreement Period
ACOs may initiate changes during the three-year contract period. Changes to ACO provider
composition are of particular concern. ACOs may be allowed to add or subtract providers during
the three-year agreement, but must notify CMS within 30 days of the change. More generally, an
ACO must notify CMS within 30 days of any event that would result in it being unable to meet
eligibility or program requirements. These changes could result in adjustments to the ACO’s
benchmark or risk-adjustment calculations, but continue to allow the ACO to participate in the
Medicare Shared Savings Program. However, some changes may result in a termination of

PY#1#for#ACOs#star.ng#4/1/12##
(21#months)###

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(12#months)#

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(12#months)#

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7/1/12#

(18#months)#

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(12#months)#

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Note:!PY!=!performance!year.!

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agreement, such as losing a primary care practice that would cause the ACO’s assigned patient
population to dip below the minimum requirement of 5,000 Medicare beneficiaries.

DATA SHARING

ACOs will be required to submit TINs and national provider identification numbers for each
participating provider. This information will support beneficiary assignment and allow CMS to
create data reports tailored to ACO-specific populations.

CMS will make available aggregated data reports on the ACO populations at the beginning of
the first performance period and then on a quarterly basis. It will do this in conjunction with
yearly financial and quality reports used to assess performance. In addition, CMS will make
available limited beneficiary identifiable data (name, date of birth, sex, and health insurance
claim number). This information can be very useful to ACOs for planning how to target their
resources to improve care.

ACOs will also be able to receive claims data on assigned beneficiaries on a monthly basis. This
data would cover Medicare Part A, B, and D costs and utilization, and would come in a
standardized format that is limited to the minimum information required to meet the ACO’s
needs. The ACO will be required to explain how it intends to use data to evaluate the
performance of its providers, conduct quality assessment and improvement activities, and
conduct population-based activities to improve the health of its assigned beneficiaries. In
addition, the ACO will need to sign a data-use agreement and give beneficiaries a chance to opt
out of having their data shared. However, even if beneficiaries opt out, it will not impact their
assignment to an ACO.

METHODOLOGY FOR ASSIGNING BENEFICIARIES TO AN ACO AND
PATIENT NOTIFICATION

Medicare beneficiaries will be assigned to ACOs based on where they receive specified
evaluation and management (i.e., primary care and preventive) services for the most recent

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months.3 CMS will assign beneficiaries to ACOs that serve the plurality of the beneficiaries’
primary care services. The plurality of allowed charges—as opposed to the volume of services—
will be used for this purpose.

CMS will use a two-step process to make beneficiary assignments. In the first step, beneficiaries
will be assigned based on their visits to primary care physicians (specified as general practice,
family practice, internal medicine, and geriatric medicine physicians). A beneficiary is assigned
to an ACO if the primary care physicians in that ACO account for the largest amount of total
Medicare allowable charges for that beneficiary’s primary and preventive services in comparison
with primary care physicians in any other ACOs or all those not participating with any ACO.

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In the second step, CMS will review the claims for the remaining, unassigned beneficiaries who
have had at least one primary or preventive service by a provider, regardless of specialty, in an
ACO. This excludes all beneficiaries who had any primary and preventive services from primary
care physicians, whether in or out of any ACO. This step recognizes that many Medicare
beneficiaries may get their primary and preventive care from specialists and other providers
aside from primary care physicians (i.e., specialist physicians, as well as nurse practitioners,
physician assistants, and clinical nurse specialists). CMS will assign beneficiaries to ACOs
whose professionals (regardless of specialty) account for the largest total amount of Medicare
allowed charges for primary care and preventive services in comparison with professionals in
any other ACO or all professionals unaffiliated with an ACO.

It should be noted that any providers used for assignment must be exclusive to the ACO. Other
ACO participants who are not used for assignment need not be exclusive.

For each performance period, CMS will use a preliminary prospective assignment methodology
with a final retrospective reconciliation. This means that ACOs will receive a preliminary list of
assigned beneficiaries before each performance year using the most recent 12 months of claims
data. During the performance period, CMS will update the list quarterly using a rolling 12-month
claims history. A final reconciliation will be conducted at the end of the performance year using
the claims incurred during the performance period.

The initial list should help ACOs in identifying opportunities to improve care and enable ACOs
to provide beneficiaries with advance notification of their participation in the Medicare Shared
Savings Program and their intention to request beneficiary-identifiable data. The quarterly lists
will allow the ACO to track newly assigned beneficiaries, as well as those who leave the ACO.
Savings and losses will be based on the final reconciliation.

In terms of patient notification, the final rule requires ACO participants to post signs in their
facilities indicating participation in the Shared Savings Program and to make standardized
written information available in all settings where primary care services will be delivered to
traditional Medicare FFS beneficiaries. The written notification will cover the patient’s potential
participation in the Shared Savings Program along with data sharing. A form will accompany the
written notification for beneficiaries who want to opt out of data sharing.

QUALITY MEASURES AND THE METHODOLOGY FOR MEASURING
ACO PERFORMANCE

ACOs participating in the shared-savings-only payment model (i.e., the one-sided model) will be
able to share in up to 50 percent of their achieved savings, depending on how well they exceed
minimum quality performance standards. For ACOs sharing in the losses as well as savings, the
percentage is 60 percent. Any shared-savings payment is contingent on meeting quality
performance standards, regardless of the amount of cost reduction. Before describing how the

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shared savings will be determined, the following section describes the measures that will be used
to gauge ACO performance and how they will be scored.

Measures
CMS will require ACOs to report on 33 measures in performance year 1. (See Appendix for a
complete list.) The measure set includes process, outcome, and patient experiences-of-care
measures. Measures are grouped into the following four domains: patient/caregiver experience
(seven measures); care coordination/patient safety (six measures); preventive health (eight
measures); at-risk population (12 measures).

CMS is working with the measure development community to ensure specifications are as up-to-
date as possible. Because the measures are frequently updated by their developers (such as the
National Quality Forum) to take into account evolving clinical guidelines and best practices,
CMS expects to release the specifications for performance year 1 for most of the measures in the
fourth quarter of 2011 or the first quarter of 2012. The specifications for the CAHPS survey
measures will be released later in 2012. For future years, CMS will add and remove measures as
appropriate through the rule-making process.

Data Sources
CMS lists data sources for these measures as survey instruments (7), claims (3), electronic health
record (EHR) incentive program data (1), and the Web interface for the Group Practice
Reporting Option (GPRO) data collection tool (22). The GPRO tool is based on the data
collection tool currently used in the Physician Quality Reporting System (PQRS) and Physician
Group Practice (PGP) demonstration. In fact, CMS will allow ACOs to qualify for the PQRS
incentive payment on behalf of all of its providers (not just those used for assignment), which
could alleviate some of the burden of reporting requirements for ACO providers. The payment
incentive is equal to 0.5 percent of the ACO’s eligible providers’ total estimated Medicare Part B
physician fee schedule charges during the performance year. The PQRS bonus for ACO
providers is not contingent on meeting the ACO’s requirements for shared savings.

CMS will supply all the claims data, fund the survey for the first two performance years, and will
make the GPRO tool available to all ACOs. The GPRO tool will be used for enhanced claims
data (e.g., from electronic medical records and registries) and will require a random sample of
assigned beneficiaries for each measure domain of at least the minimum of 411, or 100 percent
of the assigned beneficiaries. CMS plans on auditing this data.

Scoring and Standards
According to the final rule, the first year will essentially be a pay-for-reporting arrangement in
order to allow ACOs an opportunity to ramp up and CMS an opportunity to learn about the
process and establish improvement targets. Thus, ACOs will be eligible for shared savings if
they report accurately on 100 percent of the measures, regardless of their actual performance.

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After the first performance period, most of the measures will begin to be used on a pay-for-
performance basis. In performance period 2, 25 of the 33 measures will be based on actual
performance, with the other eight continuing to be on a pay-for-reporting basis. In performance
period 3, 32 measures will be based on actual performance and one measure—the health
status/functional status survey-based measure—will continue to be on a pay-for-reporting basis.
(See Appendix for more details on when each measure moves to pay-for-performance status.)

After the first performance period, a scoring system will be used to determine how much of the
50 percent (or 60 percent for ACOs with two-sided risk models) in shared savings ACOs will
receive. With the exception of the EHR measure, each measure within a domain would be worth
a maximum of two points and a minimum of zero. The EHR measure is double-weighted to
signal the importance of EHR adoption for ACO success. However, the final rule diverges from
the proposed rule by not requiring meaningful use of EHRs by a majority of providers in the
ACO. An ACO would get a single score for the domain based on the percentage of total points it
achieved. The average of the four domain scores would be the overall score, which determines
the percentage of shared savings ACOs receive.

The measure-specific benchmarks ACOs must achieve for scoring purposes will be made known
prior to the second performance year and will be mostly based on national FFS and Medicare
Advantage (MA) performance levels. Exhibit 2 describes the basis of the scoring system CMS
plans on using after the first performance year.

Exhibit
 2.
 ACO
 Scoring
 System
 for
 Quality
 Measures
 

ACO
 Performance
 Level
 

Quality
 Points
 
(all
 measures
 
except
 EHR)
 

90+
 percentile
 FFS/MA
 Rate
 or
 90+
 percent
  2
 points
 

80+
 percentile
 FFS/MA
 Rate
 or
 80+
 percent
  1.85
 points
 

70+
 percentile
 FFS/MA
 Rate
 or
 70+
 percent
  1.7
 points
 

60+
 percentile
 FFS/MA
 Rate
 or
 60+
 percent
  1.55
 points
 

50+
 percentile
 FFS/MA
 Rate
 or
 50+
 percent
  1.4
 points
 

40+
 percentile
 FFS/MA
 Rate
 or
 40+
 percent
  1.25
 points
 

30+
 percentile
 FFS/MA
 Rate
 or
 30+
 percent
  1.10
 point
 

<30  percentile  FFS/MA  Rate  or  <30  percent   No  points  

Source:
 Centers
 for
 Medicare
 and
 Medicaid
 Services,
 Medicare
 Shared
 Savings
 Program
 Final
 Rule,
 
CMS–1345–F.
 

According to the scoring system, performing above the 90th percentile of the MA or FFS for a
measure will result in the full two points for that measure. CMS considers the 30th percentile of
the MA or FFS rate as the minimum attainment level.

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Note that only 23 measures will be scored in this way, as the patient experience survey measures
will be scored as one measure and the two composite measures (for diabetes and coronary artery
disease) will be scored as all-or-nothing measures (i.e., not on a sliding scale).

Public Reporting
Public reporting is important for holding ACO providers accountable for high-value care. Each
ACO will be responsible for making organizational information available, including a list of all
participants and members of the governing body, as well as a primary contact. In addition,
quality performance scores and shared savings or losses paid must be reported. The information
will need to be publicly available in a standardized format. In an attempt to align performance
measurement activities across programs, the final policies on how to report the Shared Savings
Program measures are pending final policies regarding how measures in other programs (e.g.,
Physician Compare and PQRI) will be reported. Thus, CMS still needs to issue guidance on
public reporting of the Shared Savings Program quality measures.

SHARED SAVINGS PAYMENT METHODOLOGY

ACOs will be able to choose between two payment model tracks. Under track 1, shared savings
would be reconciled using a one-sided approach (i.e., a shared-savings-only model) for the full
duration of the contract. That is, ACOs would share in any savings (i.e., receive bonus payments
from CMS) if the ACO reduced Medicare expenditures below target amounts. Under track 2, the
ACO would participate in a two-sided model, in which case the ACO shares in costs in excess of
spending targets, as well as any savings when Medicare expenditures are reduced below target
amounts. Participation under a one-sided model is limited to one contract term, after which the
ACO must renew with a two-sided model to continue participating in the Shared Savings
Program. Either track will require the development of baseline expenditure estimates to project
spending benchmarks that will be used to determine shared savings.

Developing the Expenditure Baseline
For the purpose of developing an expenditure baseline, CMS will use the spending data from
Medicare beneficiaries that would have been assigned to the ACO in the most recent available
three-year historical period. The assignment methodology would be applied to each of the
three years.

CMS will use the CMS–Hierarchical Condition Category (CMS–HCC) methodology to adjust
for variation in beneficiary health status. Also, to minimize variation from catastrophically large
claims, per capita expenditures will be truncated at the 99th percentile for each benchmark year.
Moreover, CMS will calculate benchmark expenditures separately for certain cohorts of
beneficiaries based on the following characteristics: end-stage renal disease, disability, aged and
dually eligible for Medicare and Medicare, and aged and not dually eligible. Beneficiaries will be
categorized based on the order of the characteristics listed.

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The three years used for the expenditure baseline will be indexed to the most recent benchmark
year using Medicare growth rates estimated by CMS’s Office of the Actuary. The growth rates
will be based on national spending growth levels, as opposed to local or ACO-specific levels of
growth. Moving toward a national standard baseline was a major consideration for the use of
national growth levels.

CMS will use a weighted average of the risk and time trend adjusted historical spending
amounts. The three years of data will be combined by weighting the most recent year at 60
percent, the middle year at 30 percent, and the oldest year at 10 percent.

CMS also intends to reset the expenditure baseline only at the beginning of each contract period
(e.g., after the third performance year for ACOs that plan to renew their contract). This will help
account for changes in an ACO’s assigned population over time, as turnover in the ACO
assigned population has been estimated to reach about 25 percent per year.

Using the Baseline to Develop Spending Benchmarks
To generate any savings, ACOs must reduce spending below their benchmark amount. By
statute, benchmark spending amounts are calculated by updating costs in the baseline period by
the projected absolute growth in national per capita expenditures (expressed in absolute dollars)
for Part A and B services under the original Medicare FFS program.

CMS will use national growth without any locality adjustments; however, CMS will make some
adjustments for potential changes in health status over time of an ACO’s assigned population. As
with the baseline calculations, risk scores (calculated by using CMS-HCCs, the model currently
applied to private plan payment rates under the MA program) will be used to control for
variations in health status.

For newly assigned beneficiaries (i.e., beneficiaries assigned for the current performance year,
but not assigned in previous years), CMS will update the ACO’s risk score to account for the fact
that the new enrollees may be sicker or healthier than the continuously enrolled population.

For the continuously enrolled population, unless their CMS–HCC risk scores decline, CMS will
use only demographic factors (e.g., age and sex) to adjust for severity and case mix relative to
the historical benchmark period. This approach will help avoid concerns of upcoding.4 CMS
intends to monitor and evaluate the adjustments used for case mix and severity for future rule-
making and to use an auditing process to ensure the appropriateness of ACO coding practices
that could influence the risk scores of the assigned populations.

Geographic and Other Payment Policy Adjustments
CMS will exclude from both the benchmark and performance year calculations payments that are
made to providers through indirect medical education (IME) adjustments to teaching hospitals
and disproportionate share hospital (DSH) adjustments to hospitals that treat a disproportionate

14

share of poor patients to avoid unintended consequences that could disadvantage those hospitals.
For example, ACOs could be motivated to redirect referrals away from hospitals that receive
IME or DSH payments if those payments were counted as higher performance costs in the
determination of shared savings.

Also excluded from the benchmark and performance spending estimates will be any incentive
payments made outside the Medicare Part A and Part B payment systems (and not captured by
claims data), such as those authorized under the Health Information Technology for Economic
and Clinical Health Act, such as PQRS and electronic prescribing incentives.

Other incentives and payment adjustments that are captured by the claims data, such as hospital
inpatient value-based purchasing incentives and geographic adjustments to provider payment
rates to reflect geographic differences in input prices, will be included in the calculations. CMS
does not believe that those adjustments would result in significant incentives to steer patients
away from particular providers.

Minimum Savings Rates and Estimating Shared Savings
A certain degree of year-to-year variation in actual ACO spending amounts might be expected
regardless of any innovations that ACOs undertake to improve health care. Consequently, the
Affordable Care Act mandated that CMS include a minimum savings rate (MSR) to help ensure
that costs below the benchmark are likely to reflect improved performance and not simply
random fluctuations. That is, ACOs would need to reduce spending below the MSR before being
eligible for any shared savings. This is particularly important because of the availability of the
one-sided risk model, in which the opportunity of potential rewards for an ACO’s costs below its
target is not offset by the risk of penalty for excess costs.

For ACOs participating in the one-sided risk model, CMS will set the MSR as a function of both
the number of assigned beneficiaries and a chosen confidence interval. Higher numbers of
assigned beneficiaries will result in lower MSR thresholds, as the greater sample size will make
it easier to attain a given level of confidence that the observed spending levels are an accurate
depiction of the ACOs’ ability to affect costs.

Although the MSRs for smaller ACOs are higher than for larger ACOs, they were adjusted
somewhat to recognize the greater difficulty that smaller ACOs may face in revamping their
infrastructures to better coordinate and manage care. The resulting MSRs are in Exhibit 3. An
ACO with 5,000 assigned Medicare beneficiaries will need to achieve 3.9 percent in savings
before it can share in savings, while an ACO with 60,000 assigned Medicare beneficiaries will
need to achieve 2 percent in savings before it can receive any shared-savings payments.

15

Exhibit
 3.
 Minimum
 Savings
 Rates
 and
 Confidence
 Interval
 by
 Number
 of
 
 
Assigned
 Beneficiaries
 for
 ACOs
 Participating
 in
 the
 One
 Sided-­‐Model
 

Number
 of
 
Beneficiaries
 

MSR
 (low
 end
 of
 
 
assigned
 beneficiaries)
 

MSR
 (high
 end
 of
 
 
assigned
 beneficiaries)
 

5,000–5,999
  3.9%
  3.6%
 

6,000–6,999
  3.6%
  3.4%
 

7,000–7,999
  3.4%
  3.2%
 

8,000–8,999
  3.2%
  3.1%
 

9,000–9,999
  3.1%
  3.0%
 

10,000–14,999
  3.0%
  2.7%
 

15,000–19,999
  2.7%
  2.5%
 

20,000–49,999
  2.5%
  2.2%
 

50,000–59,999
  2.2%
  2.0%
 

60,000
 +
  2.0%
  2.0%
 

MSR
 =
 minimum
 savings
 rate.
 
Source:
 Centers
 for
 Medicare
 and
 Medicaid
 Services,
 Medicare
 Shared
 Savings
 Program
 Final
 Rule,
 
CMS–1345–F.
 

ACOs in the two-sided risk model will have a flat 2.0 percent MSR, as the risk of rewarding
reductions in costs not due to improved performance is somewhat mitigated by the fact that
ACOs will also share in the excess costs.

As described above, ACOs can become eligible for shared savings if they successfully control
spending by more than the MSR amount. However, ACOs under both the one-sided and two-
sided models will be able to share in all of the savings on a first-dollar basis if the MSR is met or
exceeded. For example, an ACO with 5,000 assigned Medicare beneficiaries that achieves 3.9
percent in savings relative to its target will be eligible to share in all of those savings (including
the initial 3.9 percent).

Shared Savings and Losses Percentage for the ACO
As mentioned above, ACOs participating in a one-sided model can receive up to 50 percent of
the shared savings, whereas ACOs with two-sided models can receive up to 60 percent of the
shared savings. It should be noted that ACOs will not be able to receive additional bonuses or
higher shared-savings rates for care of dual eligible beneficiaries or other factors related to the
composition of the ACO (e.g., inclusion of an RHC or FQHC) or its activities.

The final shared savings rates are determined by the performance measurement scores (see
section above on Scoring and Standards). As an example, if an ACO achieves between the 30th
and 40th percentile on all applicable measures and maximizes the all-or-nothing measures, the
ACO will share in up to 54 percent of the allowed percentage of shared savings if it is able to
reduce costs below the applicable spending targets (Exhibit 4). This amounts to 27 percent

16

(0.54 x 0.50) of the shared savings for ACOs participating in a one-sided model and 32 percent
(0.54 x 0.60) for ACOs under a two-sided model.

Exhibit
 4.
 Example
 of
 Using
 Performance
 Measurement
 Scoring
 to
 Determine
 Final
 Shared
 Savings
 or
 Losses
 

Domain
 Name
 
Total
 Measures
 
 

(33
 total)
 

Total
 Measures
 for
 
Scoring
 Purposes
 

(23
 total)
 

Total
 
Points
 
Possible
 

Points
 Scored,
 
 
if
 ACO
 Attains
 

Between
 
 
30th
 and
 40th
 
Percentile*
 

Domain
 
Percentage
 

Patient/Caregiver
 
Experience
 
Measures
 

7
 

1
 measure
 with
 6
 survey
 
module
 measures
 
combined,
 plus
 1
 
individual
 measure
 

4
  2
  50%
 

Care
 
Coordination/
 
Patient
 Safety
 

6
 
6
 measures,
 with
 EHR
 
measure
 double
 weighted
 

14
  7
  50%
 

Preventive
 
 
Health
 

8
  8
 measures
  16
  8
  50%
 

At-­‐Risk
 
Population/
 
Frail
 Elderly
 
Health
 

12
 

7
 measures,
 2
 of
 which
 
 
are
 composites
 (diabetes
 
composite
 has
 5
 separate
 
measures,
 coronary
 artery
 
disease
 composite
 has
 2)
 

14
  9
  64%
 

 
 

Average
 percentage
 across
 four
 domains
 used
 to
 calculate
 final
 shared
 savings
 or
 losses
 
 
(domain
 percentages
 are
 equally
 weighted)
 

54%
 

*
 Assumes
 that
 full
 scoring
 is
 reached
 for
 all-­‐or-­‐nothing
 measures.
 
Source:
 Centers
 for
 Medicare
 and
 Medicaid
 Services,
 Medicare
 Shared
 Savings
 Program
 Final
 Rule,
 CMS–1345–F.
 

Scoring on performance measurement will also determine the shared-loss percentage for ACOs
exceeding the spending target under a two-sided payment model. The shared-loss percentage is
determined as the inverse of the would-be final sharing rate, as described above (i.e., 1 minus the
final sharing rate), with an upper limit of 60 percent. Thus, in the example above with the ACO
performing around the 30th to 40th percentile for all measures, the ACO would be responsible
for 60 percent of the losses (1 – 0.32 = 0.68, which gets capped at 0.60). An ACO that
maximizes its performance score (and hence its shared-savings rate) would be responsible for
only 40 percent of the shared losses (1 – 0.60 = 0.40), if it exceeds the spending targets.

Cap on Shared Savings and Losses
There are caps to the amount of savings that can be shared with ACOs, with a cap of 10 percent
for ACOs using one-sided models and 15 percent for ACOs with two-sided models. The higher
cap in the two-sided risk model is intended to help offset the greater risk. CMS will also have a
cap on shared losses that will gradually increase from 5 percent in the first performance period to
7.5 percent in the second and 10 percent in the third.

17

Timing and Process for Evaluating Shared Savings
There will be at least a several month delay between the end of the performance period and
payments for shared savings or shared losses, as CMS will need to use a three-month run-out of
claims (after the end of the performance period) to make the final determination of shared
savings.

Distribution of Shared Savings
CMS will pay the shared savings directly to the ACO based on the TIN, which CMS notes could
pose integrity problems because sending payments to non-Medicare providers could make it
more difficult to recoup these payments later on. In addition, although CMS will not specify how
ACOs distribute the shared savings, ACOs will be required to provide a description in the
application of how they will use the shared savings to meet the goals of the program. The intent
is to guard against improper incentives and ensure appropriate beneficiary protections.

ACOs with start dates of April 1 and July 1, 2012, will have the option for an interim payment
calculation to determine shared savings or losses at the end of their first 12 months of program
participation. This can allow some ACOs to make better use of the shared savings in terms of
supporting a quicker return on investment, which can help with ongoing operational costs. A
final reconciliation will be calculated for the first performance year encompassing the full

21

months (for those starting on April 1) or 18 months (for those starting on July 1).

Repaying Shared Losses
ACOs must establish a self-executing method for repaying losses to the Medicare program. This
can include indicating funds that may be recouped from Medicare payments to its providers,
reinsurance, surety bonds, a line of credit, or some other payment mechanism such as a withhold
of a portion of any previous shared savings achieved. ACOs must provide documentation,
annually, of the ability to repay up to 1 percent of per capita expenditures of its assigned
beneficiaries from the most recent year available or the expenditures used to establish the
benchmark. This requirement applies to ACOs under the two-sided model and one-sided model
ACOs requesting interim payments.

ACOs will be notified about shared losses in writing and are required to make payments within
90 days. CMS will calculate the shared losses or savings, but the ACO will be required to certify
the accuracy of the information, as well as to submit a written request to CMS for the shared-
savings payment. ACOs that generate shared losses under the interim payment calculation must
also repay the losses within 90 days. In addition, any money determined to be owed by an ACO
after the first performance year reconciliation, whether as a result of additional shared losses
or an overpayment of shared savings (from the interim payment), must be paid to CMS within
90 days.

18

DIFFERENCES BETWEEN THE ONE-SIDED AND TWO-SIDED MODELS

Exhibit 5 summarizes the key differences in the ACO program under the one-sided and two-
sided models. For the most part, there are no differences in the eligibility requirements. The two
models both include the same patient notification requirements. The same quality performance
requirements apply, although there is a greater emphasis on quality in the two-sided model
(i.e., 60 percent quality sharing rate instead of 50 percent) to help protect against incentives to
stint on care.

Exhibit
 5.
 One-­‐Sided
 and
 Two-­‐Sided
 Models
 in
 the
 Medicare
 Shared
 Savings
 Program
 
Design
 Element
  One-­‐Sided
 Model
  Two-­‐Sided
 Model
 

Maximum
 Sharing
 
Rate
 

Up
 to
 50%
  Up
 to
 60%
 

Quality
 Scoring
 
Up
 to
 50%
 of
 shared
 savings
 is
 
conditional
 on
 quality
 performance
 

Up
 to
 60%
 of
 shared
 savings
 is
 conditional
 
on
 quality
 performance
 

Minimum
 Savings
 
Rate
 (MSR)
 

Varies
 by
 population
 size
  Flat
 2%
 regardless
 of
 size
 

Minimum
 Loss
 Rate
 
(MLR)
 

Not
 applicable
  Flat
 2%
 regardless
 of
 size
 

Maximum
 Sharing
 Cap
 
Payment
 capped
 at
 10%
 of
 ACO’s
 
benchmark
 

Payment
 capped
 at
 15%
 of
 ACO’s
 
benchmark
 

Shared
 Savings
 
First-­‐dollar
 sharing
 once
 MSR
 is
 met
 
or
 exceeded
 

First-­‐dollar
 sharing
 once
 MSR
 is
 met
 or
 
exceeded
 

Shared
 Losses
  None
 
One
 minus
 final
 sharing
 rate
 applied
 to
 first
 
dollar
 losses
 once
 MLR
 is
 met
 or
 exceeded;
 
shared-­‐loss
 rate
 not
 to
 exceed
 60%
 

Loss
 Sharing
 Limit
  None
 
Cap
 on
 the
 amount
 of
 losses
 to
 be
 shared
 is
 
phased
 in
 over
 three
 years
 starting
 at
 5%
 in
 
year
 1,
 7.5%
 in
 year
 2,
 and
 10%
 in
 year
 3
 

Source:
 Centers
 for
 Medicare
 and
 Medicaid
 Services,
 Medicare
 Shared
 Savings
 Program
 Final
 Rule,
 CMS–1345–F.
 

MONITORING ACO PERFORMANCE AND GROUNDS AND PROCEDURES FOR
TERMINATING AGREEMENTS

The Centers for Medicare and Medicaid Services will be using many methods to monitor and
assess accountable care organizations for noncompliance with statutory and regulatory eligibility
and other program requirements. The methods include the collection of beneficiary complaints,
analysis of quality data, site visits, and audits.

ACOs, including their providers, suppliers, and contracted entities, will be required to give the
federal government the right to inspect all books, contracts, records, documents, and other
evidence, including data related to Medicare utilization and costs, quality performance measures,
shared-savings distributions, and other financial arrangements related to ACO activities. This

19

includes materials needed to allow for an audit, evaluation, and inspection of the ACO’s
compliance with Medicare Shared Savings Program requirements and the ACO’s right to any
shared-savings payment. ACOs will need to maintain such evidence for 10 years from the end of
the agreement period or from the date of completion of audits, evaluations, or inspections,
whichever is later. CMS will be monitoring the ACO’s impact on at-risk beneficiaries in
particular, which will start with analysis of trends in claims data.5

ACOs found to be in noncompliance can be given a warning, be put on under a corrective action
plan, or be placed on a special monitoring plan. CMS will terminate an agreement with an ACO
before the end of the three-year agreement period for any of the following reasons:

• noncompliance with eligibility and other requirements, such as avoidance of at-risk
beneficiaries and failure to meet the Shared Savings Program’s quality performance
standard;

• the imposition of sanctions or other actions taken against the ACO by an accrediting
organization or state, federal, or local government agency that leads to inability of the
ACO to comply with the requirements of the Shared Savings Program; or

• violation of the physician self-referral prohibition, civil monetary penalty laws, anti-
kickback statute, other antifraud laws, antitrust laws, or other applicable Medicare laws,
rules, or regulations that are relevant to ACO operations.

An ACO can even be terminated immediately in appropriate cases.

Future Participation of Previously Terminated Program Participants
ACO providers that were previously expelled from the program can reapply as their own ACO or
as part of another ACO, but will need to wait until the end of the original three-year period. The
application must also note the reason for the termination and the safeguards implemented to
address the shortcomings. An ACO that has terminated less than halfway through its agreement
under the one-sided model will be allowed to reenter the one-sided model at the conclusion of
the original agreement. ACOs that were terminated more than half way through will only have
the option of the two-sided model.

Reconsideration Review Process
By statute, there will be no administrative or judicial review of patient assignment, criteria for
quality performance standards, and assessments made with regard to quality standards or shared-
savings amounts, including termination of ACOs for failure to meet quality performance
standards and determination of shared savings paid to ACOs or shared losses owed to CMS.

The statute is silent regarding the right of ACOs to contest decisions on eligibility to participate
or termination for reasons other than those specified by statute (e.g., avoidance of at-risk
beneficiaries). Accordingly, CMS has set up an administrative process to allow ACOs to request
reviews of these decisions.

20

WORKING WITH OTHER AGENCIES TO ENSURE COORDINATION
AND ALIGNMENT

Fraud and Abuse Waivers
A joint CMS and Department of Health and Human Services/Office of the Inspector General
document, released in conjunction with the final rule, establishes five fraud and abuse waivers
for ACOs that participate in the Medicare Shared Savings Program. These waivers protect
providers against the application of certain civil monetary policy law provisions, the federal anti-
kickback statute, and the physician self-referral law (known as the Stark law). These waivers
include:

1) an “ACO pre-participation” waiver that is available for a limited duration to cover start-
up arrangements between providers in anticipation of participation in the Shared Savings
Program;

2) an “ACO participation” waiver that extends for the term of participation in the Shared
Savings Program as well as a six-month period after expiration or termination;

3) a “shared-savings distribution” waiver that applies to distributions of shared-savings
payments and their uses;

4) a “compliance with the Physician Self-Referral Law” waiver that is applicable to ACO
arrangements implicating the Physician Self-Referral Law meeting an existing Stark
exemption; and

5) a “patient incentive” waiver that will allow ACOs to offer incentives to beneficiaries to
encourage preventive care and compliance with treatment regimens.

While these waivers are still open to comments and further revision, they will be applied as final
waivers on an interim basis. The waivers apply uniformly to ACOs and their participants in the
Medicare Shared Savings Program.

Guidance for Tax-Exempt ACO Participants
Also in conjunction with the final rule, the Internal Revenue Service (IRS) updated its guidance
for charitable (i.e., tax-exempt) organizations, including tax-exempt hospitals, participating in
the Shared Savings Program. The IRS will review ACO arrangements on a case-by-case basis,
but, in general, is likely to view ACO participation (even with participation outside of the
Medicare Shared Savings Program) as consistent with charitable purposes. The IRS also states
that tax-exempt participants in an ACO need not necessarily have control over the ACO in order
to ensure that its participation furthers its charitable purpose.

Antitrust Guidelines
The Federal Trade Commission and Department of Justice issued a final statement, also released
in conjunction with the final rule, which describes the characteristics that would cause antitrust

21

challenges for ACOs. The statement applies to all ACOs, not just those formed after March 23,
2010. This allows preexisting and otherwise independent providers, such as independent practice
associations or physician–hospital organizations, to rely on the statement to establish antitrust
compliance.

Also, the agencies note that ACOs meeting the CMS eligibility criteria will also meet the criteria
to conduct negotiations with private-sector payers, as long as the ACO uses the same governance
and leadership structures, in addition to the same clinical and administrative processes it uses in
the Shared Savings Program.

Perhaps the most important guidance in the final statement is that no antitrust review is required
to participate in the Shared Savings Program. From a time perspective, this will help interested
provider groups join the Medicare Shared Savings Program in 2012, as it could take months to
conduct the review. Not mandating reviews also creates a less prescriptive framework for
antitrust enforcement in connection with ACO formation and operation. However, newly formed
ACOs can obtain a voluntary expedited (90 days) antitrust review. This process will be useful
for provider groups who have not jointly negotiated contracts with private payers prior to March
23, 2010.

Also, a “safety zone” is specified for ACOs that have providers with a combined market share of
30 percent or less of each “common service” in their primary service area (PSA). The federal
antitrust agencies will not challenge ACOs in the safety zone, absent extraordinary
circumstances. The “service” is based on each primary specialty of the providers in the service
area. The PSA is defined as the lowest number of contiguous postal zip codes from which the
ACO draws at least 75 percent of its patients for that service.

ACOs in rural areas may qualify for the safety zone even with PSA shares greater than 30
percent. This will allow ACOs in isolated rural areas to have at least one relevant provider in
each common service category without breaching the safety zone. An exception is also allowed
for dominant providers (defined as a provider with over 50% market share) to participate in an
ACO, as long as it is on a nonexclusive basis, and still be eligible for the safety zone.

An ACO outside the safety zone is not inherently illegal, but as the PSA share for any common
service increases so does the risk of antitrust action. The agencies identify types of conduct to
avoid to reduce the likelihood of antitrust enforcement action. In general, these include anything
that might facilitate collusion and reduce competition in the provision of services outside of the
ACO, leading to increased prices or reduced quality or availability of services. Such conduct
includes the following:

• sharing competitively sensitive information (e.g., exchanging pricing information)
among the ACO’s participants that could be used to set prices or other terms for services
provided outside the ACO;

22

• preventing private payers from directing their patients to certain providers, even if they
are outside the ACO network;

• tying sales of the ACO’s services to a private payer’s purchase of other services from
providers outside the ACO (like affiliates of a hospital);

• contracting on an exclusive basis with physicians, hospitals, or other providers, thereby
preventing those providers from contracting with private payers outside the ACO; and

• restricting a private payer’s ability to provide cost, quality, efficiency, and performance
information to its enrollees to aid in evaluating and selecting providers in the health plan,
if the information is similar to measures used in the Shared Savings Program.

CMS will work with the other regulatory agencies to identify potential anticompetitive harm
and adjust these policies accordingly as experience is gained with the Medicare Shared
Savings Program.

Overlap in Medicare Programs and the Impact on Shared Savings Program Participants
The statute precludes duplication in participation in Shared Savings Programs. At this point,
CMS deems the following programs as duplicative:

• Independence at Home Medical Practice Demonstration;

• Medicare Health Care Quality Demonstration for the Indiana Health Information
Exchange and North Carolina Community Care Network sites;

• any Multi-Payer Advanced Primary Care Practice Demonstration sites involving shared
savings

• Physician Group Practice (PGP) Transition demonstration;

• Care Management for High-Cost Beneficiaries demonstration; and

• the Pioneer ACO model.

ACOs may not participate in the Medicare Shared Savings program if any of its participants
participates in the programs listed above. This list may be updated as future programs are
created. The limitation only applies to Medicare Shared Savings Programs, so ACOs could
participate in the Medicare Shared Savings Program and state initiatives, such as the program to
establish community health teams to support patient-centered medical homes under section 3502
of the Affordable Care Act.

Since, providers can be linked to multiple TINs in different Shared Savings Programs or with
multiple ACOs, CMS will work with the developers of other demonstration initiatives to ensure
that a provider operating under multiple TINs is not receiving shared-savings payments for the
same Medicare beneficiaries.

23

REGULATORY IMPACT ANALYSIS

In the final rule, CMS actuaries provide estimates for the expected net savings to the Medicare
program and costs to ACOs (Exhibit 6). The estimates for net savings take into account actual
Medicare expenditures for more efficient care, shared savings payments to ACOs, and payments
to CMS for shared losses. CMS estimates a range of $0 (10th percentile) to $940 million (90th
percentile) in net savings over the first three performance years of the program, assuming
participation of 50 to 270 ACOs. The estimates assume that 1 million to 5 million beneficiaries
are aligned with a participating ACO during this time period. The wide range in the estimates is
due to the large degree of uncertainty involved with implementing a new program with new
types of providers.

Exhibit
 6.
 Estimated
 Net
 Federal
 Savings
 and
 ACO
 

Costs
 

  Performance
 Year
 1
  Performance
 
Year
 2,
 
2014
 

Performance
 
Year
 3,
 
2015
 

Total
 
(2012–2015)
 

  2012
  2013
 

New
 Federal
 Savings
 (in
 millions)
 

10th
 percentile
  –$30
  –$20
  $10
  $0
  $0
 

Median
  $20
  $90
  $160
  $190
  $470
 

90th
 percentile
  $70
  $210
  $320
  $370
  $940
 

ACO
 Bonus
 Payments
 (in
 millions)
 

10th
 percentile
  $60
  $180
  $280
  $360
  $890
 

Median
  $100
  $280
  $410
  $520
  $1,310
 

90th
 percentile
  $170
  $420
  $600
  $740
  $1,900
 

Costs
 

The
 estimated
 start-­‐up
 investment
 costs
 for
 participating
 ACOs
 range
 from
 
 
$29
 million
 to
 $157
 million,
 with
 annual
 ongoing
 costs
 ranging
 from
 $63
 million
 
to
 $342
 million,
 for
 the
 anticipated
 range
 of
 50
 to
 270
 participating
 ACOs.
 With
 
the
 mean
 participation
 of
 ACOs,
 the
 estimated
 aggregate
 average
 start-­‐up
 
investment
 and
 four-­‐year
 operating
 costs
 is
 $451
 million.
 

Source:
 Centers
 for
 Medicare
 and
 Medicaid
 Services,
 Medicare
 Shared
 Savings
 Program
 Final
 Rule,
 CMS–1345–F.
 

24

Appendix.
 Quality
 Performance
 Measures
 ACOs
 Must
 Meet
 for
 Shared
 Savings
 

Measure
 Title
 and
 Description
  Domain
 

Method
 
 
of
 Data
 

Submission
 
Measure
 
Type
 

Pay-­‐for-­‐Performance
 (P)
 
or
 Pay-­‐for-­‐Reporting
 (R)
 

Status
 
Year
 1
  Year
 2
  Year
 3
 

Getting
 timely
 care,
 appointments,
 
 
and
 information
 

Patient/
 
caregiver
 
experience
 

Survey
 
(CAHPS)
 

Patient
 
experience
 
of
 care
 

R
  P
  P
 

How
 well
 your
 doctors
 communicate
 
Patient/
 
caregiver
 
experience
 

Survey
 
(CAHPS)
 
Patient
 
experience
 
of
 care
 
R
  P
  P
 

Access
 to
 specialists
 
Patient/
 
caregiver
 
experience
 

Survey
 
(CAHPS)
 
Patient
 
experience
 
of
 care
 
R
  P
  P
 

Patients’
 rating
 of
 doctor
 
Patient/
 
caregiver
 
experience
 

Survey
 
(CAHPS)
 
Patient
 
experience
 
of
 care
 
R
  P
  P
 

Health
 promotion
 and
 education
 
Patient/
 
caregiver
 
experience
 

Survey
 
(CAHPS)
 
Patient
 
experience
 
of
 care
 
R
  P
  P
 

Shared
 decision-­‐making
 
Patient/
 
caregiver
 
experience
 

Survey
 
(CAHPS)
 
Patient
 
experience
 
of
 care
 
R
  P
  P
 

Health
 status/functional
 status
 
Patient/
 
caregiver
 
experience
 

Survey
 
(CAHPS)
 
Patient
 
experience
 
of
 care
 

R
  R
  R
 

Risk-­‐standardized,
 all-­‐condition
 
readmission
 
The
 rate
 of
 readmissions
 within
 30
 days
 of
 
discharge
 from
 an
 acute
 care
 hospital
 for
 
assigned
 ACO
 beneficiary
 population
 

Care
 
coordination/
 
patient
 safety
 

Claims
  Outcome
 

R
  R
  P
 

Ambulatory
 sensitive
 conditions
 
admissions:
 chronic
 obstructive
 
pulmonary
 disease
 
(AHRQ
 prevention
 quality
 indicator
 #5)
 
All
 discharges
 of
 age
 18+
 with
 ICD–9–CM
 
principal
 diagnosis
 code
 for
 COPD,
 
 
per
 100,000
 population
 

Care
 
coordination/
 
patient
 safety
 

Claims
 

Outcome
  R
  P
  P
 

Ambulatory
 sensitive
 conditions
 
admissions:
 congestive
 heart
 failure
 
(AHRQ
 prevention
 quality
 indicator
 #8
 )
 
All
 discharges
 of
 age
 18+
 with
 ICD–9–CM
 
principal
 diagnosis
 code
 for
 CHF,
 per
 
100,000
 population
 

Care
 
coordination/
 
patient
 safety
 
Claims
  Outcome
  R
  P
  P
 

Percent
 of
 all
 primary
 care
 providers
 who
 
qualify
 for
 an
 electronic
 health
 record
 
(EHR)
 incentive
 program
 payment
 
 

Care
 
coordination/
 
patient
 safety
 

EHR
 incentive
 
plan
 
reporting
 

Process
  R
  P
  P
 

25

Measure
 Title
 and
 Description
  Domain
 
Method
 
 
of
 Data
 
Submission
 
Measure
 
Type
 
Pay-­‐for-­‐Performance
 (P)
 
or
 Pay-­‐for-­‐Reporting
 (R)
 
Status
 
Year
 1
  Year
 2
  Year
 3
 

Medication
 reconciliation—
 
reconciliation
 after
 discharge
 from
 an
 
inpatient
 facility
 

 
Percentage
 of
 patients
 age
 65+
 discharged
 
from
 any
 inpatient
 facility
 and
 seen
 within
 
60
 days
 following
 discharge
 in
 the
 office
 by
 
the
 physician
 providing
 ongoing
 care
 who
 
had
 a
 reconciliation
 of
 the
 discharge
 
medications
 with
 the
 current
 medication
 
list
 in
 the
 medical
 record
 documented
 

Care
 
coordination/
 
patient
 safety
 

GPRO
 Web
 
interface
 

Process
  R
  P
  P
 

Screening
 for
 fall
 risk
 
Percentage
 of
 patients
 age
 65+
 who
 were
 
screened
 for
 fall
 risk
 at
 least
 once
 within
 
 
12
 months
 

Care
 
coordination/
 
patient
 safety
 
GPRO
 Web
 
interface
 
Process
  R
  P
  P
 

Influenza
 immunization
 
Percentage
 of
 patients
 age
 50+
 who
 
received
 an
 influenza
 immunization
 during
 
the
 flu
 season
 (September–February)
 

Preventive
 
health
 

GPRO
 Web
 
interface
 
Process
  R
  P
  P
 

Pneumococcal
 vaccination
 
Percentage
 of
 patients
 age
 65+
 who
 have
 
ever
 received
 a
 pneumococcal
 vaccine
 

Preventive
 
health
 
GPRO
 Web
 
interface
 
Process
  R
  P
  P
 

Adult
 weight
 screening
 and
 follow-­‐up
 
Percentage
 of
 patients
 age
 18+
 with
 a
 
calculated
 BMI
 in
 the
 past
 six
 months
 or
 
during
 the
 current
 visit
 documented
 in
 
 
the
 medical
 record
 AND
 if
 the
 most
 recent
 
BMI
 is
 outside
 parameters,
 a
 follow-­‐up
 
plan
 is
 documented.
 
Parameters:
 
Age
 65+
 BMI
 ≥g30
 or
 <22;   Ages  18–64  BMI  ≥g25  or  <18.5  

Preventive
 
health
 
GPRO
 Web
 
interface
 
Process
  R
  P
  P
 

Tobacco
 use
 assessment
 and
 tobacco
 
cessation
 intervention:
 
Percentage
 of
 patients
 who
 were
 queried
 
about
 tobacco
 use;
 percentage
 of
 patients
 
identified
 as
 tobacco
 users
 who
 received
 
cessation
 intervention
 

Preventive
 
health
 
GPRO
 Web
 
interface
 
Process
  R
  P
  P
 

Depression
 screening:
 
Percentage
 of
 patients
 age
 18+
 screened
 
for
 clinical
 depression
 using
 a
 standardized
 
tool
 and
 follow
 up
 plan
 documented
 

Preventive
 
health
 
GPRO
 Web
 
interface
 
Process
  R
  P
  P
 

Colorectal
 cancer
 screening:
 
Percentage
 of
 patients
 ages
 50–75
 who
 
received
 appropriate
 colorectal
 cancer
 screening
 

Preventive
 
health
 
GPRO
 Web
 
interface
 

Process
  R
  R
  P
 

26

Measure
 Title
 and
 Description
  Domain
 
Method
 
 
of
 Data
 
Submission
 
Measure
 
Type
 
Pay-­‐for-­‐Performance
 (P)
 
or
 Pay-­‐for-­‐Reporting
 (R)
 
Status
 
Year
 1
  Year
 2
  Year
 3
 

Mammography
 screening:
 
Percentage
 of
 women
 ages
 40–69
 who
 had
 
a
 mammogram
 to
 screen
 for
 breast
 cancer
 
within
 24
 months
 

Preventive
 
health
 
GPRO
 Web
 
interface
 

Process
  R
  R
  P
 

Proportion
 of
 adults
 age
 18+
 who
 had
 
blood
 pressure
 measured
 in
 past
 2
 years
 

Preventive
 
health
 
GPRO
 Web
 
interface
 
Process
  R
  R
  P
 

Diabetes
 composite
 (all-­‐or-­‐nothing
 scoring):
 
• hemoglobin
 A1c
 control
 (<8%)   • low  density  lipoprotein  (<100)   • blood  pressure  <140/90   • tobacco  non-­‐use   • aspirin  use  

At-­‐risk
 
population—
 
diabetes
 

GPRO
 Web
 
interface
 

Process
 
and
 
outcome
 

R
  P
  P
 

Diabetes
 mellitus:
 hemoglobin
 A1c
 
 
poor
 control
 (>9%)
 

At-­‐risk
 
population—
diabetes
 

GPRO
 Web
 
interface
 
Outcome
  R
  P
  P
 

Hypertension:
 blood
 pressure
 control
 
Percentage
 of
 patients
 with
 last
 BP
 
 
<140/90  mmHg  

At-­‐risk
 
population—
hypertension
 

GPRO
 Web
 
interface
 
Outcome
  R
  P
  P
 

Ischemic
 vascular
 disease:
 compete
 lipid
 
profile
 and
 LDL
 control
 <100  mg/dl  

At-­‐risk
 
population—
 
ischemic
 
vascular
 
disease
 

GPRO
 Web
 
interface
 
Outcome
  R
  P
  P
 

Ischemic
 vascular
 disease:
 use
 of
 aspirin
 
or
 another
 antibiotic
 
 

At-­‐risk
 
population—
 
ischemic
 
vascular
 
disease
 
GPRO
 Web
 
interface
 
Process
  R
  P
  P
 

Heart
 failure:
 beta
 blocker
 therapy
 for
 left
 
ventricular
 systolic
 dysfunction
 (LVSD)
 
Percentage
 of
 patients
 age
 18+
 with
 a
 
diagnosis
 of
 heart
 failure
 who
 also
 have
 
LVSD
 (LVEF
 <40%)  and  who  were   prescribed  beta  blocker  therapy  

At-­‐risk
 
population—
 
heart
 failure
 

GPRO
 Web
 
interface
 
Process
  R
  R
  P
 

Coronary
 artery
 disease
 (CAD)
 composite
 
(all-­‐or-­‐nothing
 scoring)
 
• drug
 therapy
 for
 lowering
 LDL
 cholesterol
 
• angiotensin-­‐converting
 enzyme
 (ACE)
 
inhibitor
 or
 angiotensin
 receptor
 blocker
 
(ARB)
 therapy
 for
 patients
 with
 CAD
 and
 
diabetes
 and/or
 LVSD
 

At-­‐risk
 
population—
coronary
 
artery
 
disease
 

GPRO
 Web
 
interface
 
Process
 
and
 
outcome
 
R
  R
  P
 

Notes:
 CAHPS
 =
 Consumer
 Assessment
 of
 Healthcare
 Providers
 and
 Systems;
 AHRQ
 =
 Agency
 for
 Healthcare
 Research
 and
 Quality;
 
GPRO
 =
 Group
 Practice
 Reporting
 Option.
 
Source:
 Centers
 for
 Medicare
 and
 Medicaid
 Services,
 Medicare
 Shared
 Savings
 Program
 Final
 Rule,
 CMS–1345–F.

27

NOTES

 
1 Department of Health and Human Services, Centers for Medicare and Medicaid Services, Medicare
Program; Medicare Shared Savings Program: Accountable Care Organizations, Proposed Rule, Federal
Register, April 7, 2011 76(67):19528–654, http://www.gpoaccess.gov/fr/.
2 Department of Health and Human Services, Centers for Medicare and Medicaid Services, Medicare
Program; Medicare Shared Savings Program: Accountable Care Organizations, Final Rule, Federal
Register, Nov. 2, 2011 76(212):67802–990, http://www.gpoaccess.gov/fr/.
3 The specified services are identified using evaluation and management services as identified by
Healthcare Common Procedure Coding System (HCPCS) codes 99201 through 99215; 99304 through
99340; and 99341 through 99350, as well as code G0402 for the “Welcome to Medicare” visit and G0438
and G0439 for annual wellness visits. The services are based upon a list in section 5501 of the Affordable
Care Act that makes incentive payments to certain primary care providers. In addition, since HCPCS
codes are not available in federally qualified health center and rural health clinic billing claims, certain
revenue center codes will be used as a proxy for the primary care and preventive services in order to make
assignments to federally qualified health center and rural health clinics.
4 Upcoding refers to the notion that providers may have more incentive to code more comprehensively
when risk scores based on diagnosis and procedure codes (such as with the Center for Medicare and
Medicaid Services Hierarchical Condition Categories approach) are used for payment purposes. When
this happens, the higher risk scores may be indicative of changes to diagnosis and procedure coding
practices, rather than changes to the relative risk characteristics of their patients. In the case of ACOs,
higher risk scores can result in more shared-savings payments, as they will result in lower observed costs
in the performance period relative to a baseline that did not reflect these upcoding efforts. Demographic
factors such as age and gender are not susceptible to biases from changing coding practices, but still
provide some indication of a patient population’s severity and case mix.
5 At-risk beneficiary is defined in the final rule as a beneficiary who: has a high risk score in the Center
for Medicare and Medicaid Services Hierarchical Condition Categories risk adjustment model; has had
two or more hospitalizations or emergency room visits each year; is dually eligible for Medicare and
Medicaid; has a high utilization pattern; has one or more chronic conditions; has had a recent diagnosis
that is expected to result in increased cost; is entitled to Medicaid because of disability; or is diagnosed
with a mental health or substance abuse disorder.
 

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