2023 Medicare PFS Proposed Rulemaking Contains Major Updates for ACOs

The 2023 Medicare Physician Fee Schedule (PFS) Notice of Proposed Rulemaking was released by the Centers for Medicare & Medicaid Services (CMS) on July 7, 2022. In addition to the typical annual updates to Medicare Part B payment policies, the Proposed Rule includes significant changes to the Medicare Shared Savings Program (MSSP) for the 2023 performance year and beyond.

New Incentives for ACOs

New benefits have been added to allow accountable care organizations (ACOs) to remain at a lower risk level to incentivize participation of underserved ACOs and to promote inclusion of marginalized groups.

Participants Can Freeze at the Current Risk Level

In 2019, the MSSP commenced a new paradigm dubbed Pathways to Success that requires participants to automatically advance to a higher level of downside risk and upside reward each year. The automatic advancements have largely been on pause due to the COVID-19 pandemic, but many Medicare ACOs were slated to move into a downside risk arrangement for the first time in 2023.

The Proposed Rule would allow ACOs currently participating in Level A or B with 0% downside risk to stay at this level for the remainder of their five-year contract with CMS, exempting them from the automatic advancement to Level C in 2023. ACOs currently in the application process, who will start at Level A or B in 2023, can also spend the entirety of their contract at this no-risk level. ACOs must indicate their interest in remaining at Level A or B by September 9, 2022, at 12:00 p.m. ET.

Advance Investment Payments to Promote Equity

To promote equity and inclusion of disadvantaged populations and Medicare beneficiaries of color, CMS proposed providing advance shared savings payments—referred to as advance investment payments—to ACOs that are:

  • Low revenue: CMS distinguishes between low revenue and high revenue ACOs by calculating the total Medicare Part A and B revenue for the ACO for all Medicare lives, divided by the Part A and B expenditures for the ACO’s assigned beneficiaries at all locations, both within and outside the ACO. If this ratio is greater than 35%, the ACO is considered high revenue; typically, these ACOs include a hospital
  • Inexperienced with performance-based risk: the majority of ACO participants haven’t previously participated in a risk-bearing level of the MSSP or other Medicare program
  • New to the MSSP: the ACO entity is not renewing or re-entering the MSSP
  • Attributed underserved populations

Qualifying ACOs may receive a one-time fixed payment of $250,000 and quarterly payments for the first two years of the five-year agreement period. The quarterly payments would increase based on the number of assigned beneficiaries dually eligible for Medicare and Medicaid, or who live in areas with high deprivation.

These funds must be used to improve health care provider infrastructure, increase staffing, or provide accountable care for underserved beneficiaries, which may include addressing social needs. The payments would be recouped once the ACO begins to achieve shared savings, but wouldn’t be recouped if it doesn’t. If approved in the final PFS rule, the application for advance investment payments would occur in 2023, for a January 1, 2024, start date.

More Time at Low Risk

CMS’s stated goal is to support organizations new to accountable care by providing greater flexibility and more time to transition to performance-based risk. They propose ACOs that are inexperienced with performance-based risk will be able to participate in the program for five years with no downside-risk (Level A), and may be eligible for an additional two years in their second agreement period—for a total of seven years.

Additionally, beginning in 2024, ACOs can remain in Level E, the highest level of the BASIC track, if desired. They wouldn’t automatically advance to the ENHANCED track.

These adjustments are intended to encourage participation and remove barriers for ACOs that serve small, rural, and otherwise underserved settings, by providing additional time to transition to two-sided risk.

Benchmarking Adjustments

CMS proposes modifications to the MSSP benchmarking strategy taking effect in 2024. CMS’s stated goal is to incentivize ACOs to remain in the program for multiple agreement periods, revising the current methodology that penalizes successful ACOs by lowering their benchmarks in subsequent periods.

The following proposed changes are intended to strengthen financial incentives for long-term participation and to incentivize ACOs serving high-risk and dual eligible populations.

Accountable Care Prospective Trend

The benchmark would incorporate a new, prospectively-set five-year growth factor called Accountable Care Prospective Trend (ACPT) that would blend with the current national and regional growth factors. The ACPT would mitigate adverse effects of the COVID-19 pandemic on historical benchmarks and potentially protect against variation that might be caused by future pandemics.

Prior Savings Adjustment

CMS will reduce the impacts of an ACOs’ own historical performance on its benchmark through a prior savings adjustment. CMS is seeking public comment on this proposal.

Regional Expenditures

CMS will also reduce market penetration impacts on regional expenditures which are used to adjust and update benchmarks.

Benchmarking Timeframe

CMS is adjusting the timeframe of the benchmarking methodology to align with the assignment methodology to mitigate bias in regional expenditure calculations that currently benefit ACOs electing prospective assignment.

HCC Risk Score Growth Calculation

CMS is modifying the calculation of the 3% cap on HCC risk score growth to be determined for the beneficiaries in aggregate, rather than by the type of beneficiary. This could positively impact ACOs with higher proportions of dual-eligible, disabled, and end-stage renal disease (ESRD) patients.

Other Proposed Actions

CMS proposed other changes intended to simplify or streamline processes, and to provide incentives for Medicare ACOs to join or remain in the program.

Shared Savings Below the Minimum Savings Rate

CMS also proposed allowing low revenue ACOs participating in the BASIC track to share in savings generated, even if they don’t meet the minimum savings rate (MSR) starting in 2024.

The savings rate would be half of the maximum sharing rate for their level of participation—meaning 20% instead of 40% under Levels A and B, and 25% instead of 50% under Levels C, D, and E—and would be modified by the ACO’s quality performance. The aim is to benefit small and rural ACOs that tend to be less capitalized to invest in population health initiatives.

Changes to the Quality Reporting and the Quality Performance Requirements

CMS proposed reinstitution of a sliding scale reflecting an ACO’s quality performance for use in determining shared savings, instead of an all-or-nothing threshold. Beginning with performance year 2023 and for subsequent performance years, if an ACO fails to meet the existing criteria to qualify for the maximum sharing rate—currently 30th–40th percentile performance—but achieves a score of at minimum the 10th percentile on one of the four outcome measures, then the ACO would still share in savings, but at a lower rate.

Electronic Reporting Incentive

CMS proposed extending the incentive for reporting all-payer electronic clinical quality measures (eCQMs) and Merit-Based Incentive Payment System (MIPS) CQMs through performance year 2024 to align with the sunsetting of the CMS Web Interface reporting option, and allow ACOs to gauge their performance in anticipation of eCQM reporting becoming mandatory in 2025.

During the transition years, an ACO can report via both eCQMs and the traditional CMS Web Interface method and receive the higher of the two scores. The extended incentive is now having to achieve a quality performance score equivalent to the 30th percentile benchmark on only one eCQM measure, as opposed to having to achieve a 30th percentile score across all MIPS quality categories when reporting through the traditional Web Interface.

Health Equity Adjustment

CMS proposed implementing a health equity adjustment of up to 10 bonus points to an ACO’s MIPS quality performance category score when reporting via all-payer eCQMs or MIPS CQMs to recognize high quality performance by ACOs with high underserved populations.

Outcome-Oriented Measures

CMS also has a request for information on the use of two social determinants of health (SDOH) eCQM and MIPS CQM outcome-oriented measures for ACOs, which would assess providers on the percentage of individuals screened for social needs, as well as inclusion of Consumer Assessment of Healthcare Providers and Systems (CAHPS) survey questions specific to discrimination and price transparency. These SDOH eCQM and MIPS CQMs are aligned with the Inpatient Prospective Payment System (IPPS) Proposed Rule for Hospital Inpatient Quality Reporting (IQR).

Reduce Administrative Burden

CMS proposed eliminating the requirement for an ACO to submit marketing materials to CMS for review and approval prior to disseminating. The marketing requirements would still be applicable, and CMS would retain its ability to review materials upon request and issue compliance actions, as applicable.

Beneficiary Notification Requirements

CMS proposed modifications to the beneficiary notification requirements. This includes reducing the frequency with which beneficiary information notices are provided to beneficiaries from annually to a minimum of once per agreement period, with a proposed follow-up beneficiary communication within 180 days of the first notification, serving to promote beneficiary comprehension of the standardized written notice. CMS states they’ll clarify the current in-office beneficiary notification poster requirements, and is seeking comments on whether the proposed adjustments would effectively reduce administrative burden and mitigate beneficiary confusion.

SNF Three-Day Rule Waiver Application Process

CMS is attempting to streamline the skilled nursing facility (SNF) three-day rule waiver application process by eliminating the requirement to submit various narratives, and instead simply require ACOs to attest that they have established the relevant plans.

Data Sharing

Further, CMS proposed updating data sharing regulations to add that ACOs acting as organized health care agreements (OHCAs) may request aggregate reports and beneficiary-identifiable claims data from CMS starting in 2023. ACOs may choose to structure themselves as OHCAs to reduce burden with reporting eCQMs and MIPS CQMs.

Public Comments

Public comments are due no later than 5:00 p.m. ET on September 6, 2022. Official comments must be submitted in one of the following ways:

  • Electronically through the website
  • Regular mail
  • Express or overnight mail

Refer to file code CMS-1770-P.

We’re Here to Help

Establishing a new ACO or updating your ACO’s existing operations can be a complex and time-consuming process. For more information about the MSSP, the PFS Proposed Rule and how to succeed in value-based arrangements, contact your Moss Adams professional. You can also visit our Health Care Consulting Practice webpage.

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