CMS Proposes Overhaul to ACO Program

WASHINGTON, D.C. (August 10, 2018)—The Centers for Medicare & Medicaid Services (CMS) has released a proposed rule to overhaul the Medicare Shared Savings Program. The program was established under the Affordable Care Act and launched in 2012. The majority of Medicare’s Accountable Care Organizations (ACOs) operate under the program. 

ACOs are groups of health care providers that agree to take responsibility for the cost and quality of care for their patients. In return, ACOs receive a portion of the savings they achieve, and CMS provides them with regulatory waivers needed to innovate. Some 10.5 million beneficiaries in fee-for-service Medicare (of the 38 million total fee-for-service beneficiaries) are in a Shared Savings Program ACO. 

“After six years of experience, the time has come to put real accountability in Accountable Care Organizations. Medicare cannot afford to support programs with weak incentives that do not deliver value,” said CMS Administrator Seema Verma in a press release. “ACOs can be an important component of a system that increases the quality of care while decreasing costs; however, most Medicare ACOs do not currently face any financial consequences when costs go up, and this has to change.”

CMS proposes a six-month extension for current ACO agreements that will expire at the end of 2018. There will be a special one-time July 1, 2019, start date that will have a spring 2019 application period for new participation options. The new proposed program is called “Pathways to Success.”

The Pathways to Success program was developed based on a comprehensive analysis of the performance of ACOs to date. Despite the program’s intent, the Shared Savings Program has shown increases in net spending for CMS and taxpayers, in part because the majority of ACOs—82 percent of all ACOs in the Shared Savings Program in 2018—are not taking on risk for increases in costs. Data on ACO performance to date has shown that ACOs that are not at risk for cost increases end up increasing Medicare spending in aggregate. Pathways to Success is designed to move in a new direction and advance five goals:  accountability, competition, engagement, integrity and quality.

The projected financial impact of the proposal would be savings to Medicare of $2.2 billion over 10 years.

Under the current program, ACOs are not required to pay back taxpayers when costs are high and can wait up to six years before taking a financial risk. In response to President Trump’s Executive Order Promoting Healthcare Choice and Competition and in order to drive value, CMS proposes reducing the amount of time that an ACO can remain in the program without taking on risk down to, at most, two years.

In order to improve beneficiary engagement, CMS is proposing that beneficiaries receive a notification at their first primary care visit of the year that they are in an ACO and what that means for their care. CMS also proposes that providers in certain performance-based ACOs provide incentive payments to patients for taking steps to achieve good health.

In taking steps to improve quality and accountability, the Pathways to Success program rewards providers who increase their flexibility. ACOs that take on risk to provide and receive payment for telehealth services are rewarded. As part of the MyHealthEData initiative, interoperability and patient control of data are emphasized in the proposed rule.

Finally, CMS intends to ensure that ACO spending targets accurately reflect spending levels and growth rates in their local market. Pathways to Success proposes incorporating regional spending into ACO targets earlier, starting during an ACO’s first agreement period. In addition, the proposal would authorize termination of ACOs with multiple years of poor financial performance.

Read the full proposed rule (CMS-1701-P) on the Federal Register.