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From Health Law Daily, June 7, 2016

New ACO benchmarks to take effect in 2017

By Sarah E. Baumann, J.D.

CMS will incorporate regional fee-for-service (FFS) expenditures into its methodology for establishing, adjusting, and updating benchmarks for accountable care organizations (ACOs) participating in the Medicare Shared Savings Program (MSSP) established by section 3022 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). A Final rule incorporates benchmarking provisions of the Proposed rule (81 FR 5823), with some modifications (see Accountable care rule would rework benchmarks, make regional adjustments, February 3, 2016). The Final rule, which will publish in the Federal Register on June 10, 2016, also allows ACOs to extend participation in a risk-free track for one year prior to entering a risk-based track and defines timeframes and other criteria for reopening determinations of shared savings or losses.

Benchmarks: initial agreement periods. Beginning in 2017, CMS will adjust historical benchmarks for ACOs entering, or in the midst of, initial three-year agreement periods. The agency will continue to establish historical benchmarks based on Medicare Parts A and B FFS expenditures for beneficiaries who would have been assigned to the ACO in each of the three years prior to the start of the agreement period. However, it will begin to make calculations using assignable Medicare FFS beneficiaries—identified based on the 12-month period corresponding to the calendar year for which the calculation is being made—instead of all FFS beneficiaries. CMS will continue to make adjustments based on participant list changes, departing from its proposal to make program-wide adjustments using an expenditure ratio based on a single reference year and opting instead to continue to analyze the plan.

Benchmarks: subsequent agreement periods. The Final rule replaces the national trend factor with regional trend factors to establish a rebased historical benchmark for ACOs entering subsequent agreement periods in 2017 and beyond, and makes adjustments on an annual basis. It also removes the adjustment to account for savings in a prior agreement period. ACOs that entered a second agreement period in 2016 will not be subject to that methodology until 2019.

Pursuant to the rule, CMS will make an adjustment to reflect a percentage of the difference between the regional FFS expenditures in the ACO’s regional service area and the ACO’s historical expenditures. After considering comments regarding ACOs that had higher spending than the rest of their region, the agency decided to implement a phased transition to a higher weight in calculating the regional adjustment. In the first agreement period during which the regional adjustment applies, higher-spending ACOS will have a 25-percent weight placed on the regional adjustment, compared to a 35-percent weight for other ACOs; in the second adjustment, a weight of 50 percent, compared to 70 percent; and in the third agreement period, a 70-percent weight. CMS will update the adjustment annually to account for regional, rather than national, spending.

A regional service area will be defined to include any county where one or more assigned beneficiaries reside. Although the agency suggested applying state-level data to the end-stage renal disease (ESRD) population in the Proposed rule, commenters advocated a county-level approach. As a result, CMS will apply county-level data across the assignable ESRD beneficiary population, as well as the disabled, aged/dual eligible Medicare and Medicaid beneficiary, and aged/non-dual eligible beneficiary populations.

Assumption of risk. Currently, ACOs participating in the non-risk-based Track 1 may renew Track 1 participation for an additional three years or renew participation in risk-based Tracks 2 or 3. To encourage the earlier assumption of risk, the Final rule allows Track 1 ACOs to renew participation in Tracks 2 or 3, but extend participation in the initial agreement period for a fourth year and defer benchmark rebasing.

Reopening determinations. The Final rule limits re-opening determinations of shared savings or losses to no more than four years after the date of the notification to the ACO of the initial determination of shared savings or shared losses for the performance year for good cause, allowing them more freedom to reinvest savings in infrastructure and performance improvement costs (see Will new benchmarks draw new ACOs? CMS hopes so, March 15, 2016). The Final rule reserves CMS’ right to reopen a payment determination at any time in a case related to fraud or similar fault.

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