New CMS Policies Position the MSSP for Expansion and Increased Savings

Firm Publication

New policies tucked into the Centers for Medicare and Medicaid Services’ (CMS) 2025 Medicare Physician Fee Schedule Rule (Final Rule) will likely spur increased Accountable Care Organization (ACO) participation in the Medicare Shared Savings Program (MSSP or Program), in part due to the potential for ACOs to earn more savings and access savings sooner. The Final Rule, effective January 1, 2025, establishes a new prepaid shared savings option, expands the set of primary care services that trigger beneficiary alignment, creates a health equity benchmark adjustment, and institutes a new process to adjust financial calculations for improper payments outside of an ACO’s control.

CMS’ new policies aiming to expand the MSSP are a testament to the Program’s success. Since its inception, the MSSP has yielded billions of dollars in healthcare cost savings, with more than $2.1 billion in savings generated in 2023 alone.  By introducing new policies aimed at leveling the playing field for ACOs in underserved communities, CMS seeks to generate further interest in the Program, advancing its goal of having 100% of Medicare Part A and B beneficiaries in an accountable care relationship by 2030.

Prepaid Shared Savings

Recognizing cash flow concerns stemming from the fact that the Program does not distribute savings payments until October or November of the calendar year after the Performance Year (PY) in which they are generated, the Final Rule introduces a new “prepaid shared savings” (PSS) option. PSS will be an advance on shared savings earned during a PY and be paid in quarterly installments, allowing eligible ACOs to make upfront investments in staffing, healthcare infrastructure, and direct beneficiary services. PSS payments will be distinct from the advance investment payments available to new MSSP ACOs and from advance payments available to low-revenue ACOs participating in the ACO Primary Care Flex Model.

Eligible ACOs

PSS payments will be available to renewing ACOs that take on downside risk, have a history of earning shared savings, and do not have outstanding amounts due to CMS under the MSSP.  ACOs must apply for PSS during the renewal application process, which will require the submission of a “spend plan” outlining how an ACO proposes to use the PSS payments.

Allowable and Prohibited PSS Uses

In the final rule, CMS outlines the requirements that ACOs will need to meet for using PSS, as well as prohibited uses:

  • CMS requires that ACOs spend at least 50% of PSS on “direct beneficiary services,” i.e., in-kind items or services that are not covered by Medicare Parts A/B and are evidence-based and medically appropriate based on clinical and social risk factors. Examples include cost-sharing support for Parts A/B beneficiaries; certain vision, hearing and dental services; beneficiary meals; nutrition support; caregiver support services; home visits; and transportation services. In determining their PSS uses, ACOs and their participants may want to design the direct beneficiary services to meet the CMS-sponsored model patient incentives federal Anti-Kickback Statute safe harbor, which will be available to protect direct beneficiary services that satisfy all safe harbor elements.
  • CMS permits ACOs to spend up to 50% prepaid shared savings on staffing (e.g., hiring physicians or mid-level providers or staff education) and healthcare infrastructure investments (e.g., improving practice management or electronic health record systems).
  • CMS prohibits ACOs from using prepaid shared savings for management company or parent company profit; performance bonuses; provision of medical services covered by Parts A/B Medicare; cash or cash equivalent payments to beneficiaries; and items or activities unrelated to ACO management and operations or beneficiary care.

In order to ensure payments are being used appropriately, CMS will require ACOs to publicly report the total amount of PSS received, the ACO’s spend plan, and an itemization of how PSS were spent during the PY.  ACOs will be subject to CMS oversight to ensure compliance.

PSS Payment Amounts

CMS will calculate an ACO’s maximum quarterly PSS payment amounts based on a pro-rated, adjusted, and capped “prepaid shared savings multiplier,” i.e., the average per capita savings generated during an ACO’s two most recent PYs reconciled at the time of the ACO’s renewal application disposition.  ACOs may elect to receive less than the full amount available to them and can request CMS withdraw (and later resume) such payments, though no catch-up payments may be made.

Other Key Terms
  • CMS will make the first PSS payments in PY 2026. CMS expects to release additional guidance, including guidance regarding permitted uses, before the application cycle for PY 2026.
  • Because PSS payments will be an “advance” on shared savings, PSS will be covered under the Shared Savings Distribution Waiver. However, if an ACO does not earn sufficient shared savings in the PY to offset the PSS payments received in that PY, CMS may recoup funding from an ACO’s existing repayment mechanism, withhold amounts from future payments owed to an ACO, or terminate an ACO’s PSS payments.

Beneficiary Assignment Methodology

The Final Rule revises the definition of “primary care services” to include additional HCPCS and CPT codes to determine the MSSP ACO beneficiary assignment for PY 2025 and subsequent PYs. The additions include services and codes involving safety planning interventions; virtual check-in service; post-discharge telephonic follow-up interventions; direct caregiver training; cardiovascular risk assessment and management services; and other services. In particular, the expanded list updated by CMS includes new advanced primary care management service codes. However, CMS opted not to include interprofessional consultation services, recognizing that such codes involve services from consultative specialists rather than the treating primary care provider.

In the Final Rule, CMS also broadens an exception to the MSSP voluntary alignment mechanism involving entities participating in a Center for Medicare and Medicaid Innovation (CMMI) disease- or condition-specific model, including models involving kidney or cancer care. Specifically, claims-based attribution methodology in a disease- or condition-specific CMMI model will take precedence over a beneficiary opting to voluntarily align to an MSSP ACO. Despite most commentators expressing opposition to the change, CMS reasoned that assignment to an entity participating in a CMMI model tailored to the needs of a beneficiary’s specific disease or condition far outweighs any cost to the MSSP and ACOs. CMS anticipates that the number of beneficiaries impacted by this change would be less than 1% of all MSSP beneficiaries who voluntarily align to an ACO.

Health Equity Benchmark Adjustment

The Final Rule adds a health equity benchmark adjustment (HEBA) into CMS’ shared savings methodology beginning on January 1, 2025. The goal of the HEBA is to ensure benchmarks continue to serve as a reasonable baseline for ACOs that serve a high proportion of beneficiaries from underserved communities, thereby bolstering the ACOs’ ability to earn shared savings when serving higher-risk beneficiaries.

The HEBA, which is modeled after a similar adjustment under the ACO REACH Model, will be available to ACOs with at least 15% of their assigned beneficiaries who are either enrolled in the Medicare Part D low-income subsidy or dually eligible for Medicare and Medicaid. Unlike the ACO REACH Model HEBA, however, the MSSP HEBA would result in an upward adjustment to an ACO’s historical benchmark only.  Upon calculating the HEBA, an ACO would typically receive the highest of a positive regional adjustment, a prior savings adjustment, or the HEBA.

APM Performance Pathway Plus Quality Measure Set, Scoring Methodology, and Incentives to Report via Electronic Clinical Quality Measures

CMS is finalizing a modified proposal to update quality reporting and quality performance measures for the Alternative Payment Model (APM) Performance Pathway (APP) set. These changes aim to promote alignment with CMS’ quality programs and adoption of the “Universal Foundation” measure set.

For 2025 and subsequent PYs, MSSP ACOs will need to report using the APP Plus quality measure set and remove the current APP quality measure set as a reporting option. Recognizing challenges faced by ACOs and stakeholders in aggregating and submitting data as part of existing APP measure sets, including reporting on the three all payer/all patient Electronic Clinical Quality Measures (eCQMs)/Merit-Based Incentive Payment System (MIPS) CQMs, CMS finalized a modified proposal that incrementally phases-in additional quality measures between 2025 and 2028.

CMS also revises rules used to calculate MIPS scores for ACOs reporting the ACO Plus quality measure set for 2025 and subsequent years, including adopting flat benchmarks for the measures’ first two performance periods in MIPS for Medicare CQMs. In order to incentivize eCQM reporting, CMS is also finalizing an extension of reporting incentives to ACOs reporting MIPS CQMs in 2025 and 2026.

SAHS and Reopening ACO Payment Determinations

The Final Rule also aims to prevent and address “significant, anomalous, and highly suspect” (SAHS) billing activity impacting ACOs. Building upon other rulemaking issued earlier this year that insulated ACOs from SAHS billing practices involving urinary catheters, CMS reiterated that suspect billing activity can negatively distort the calculation of an ACO’s shared savings and shared losses.

The Final Rule provides CMS more discretion to identify and address SAHS billing activity occurring in 2024 and beyond. Specifically, CMS will have the ability to remove any billing codes and implement adjustments to MSSP calculations based on SAHS billing activity. CMS anticipates adjustments involving SAHS billing activity will be a rare occurrence largely limited to situations involving increased claims on a national or regional scale that disproportionality involve Medicare providers and result in MSSP payment inaccuracies or inequities.

In addition to CMS’ ability to take broader action to address SAHS billing activity, the Final Rule gives CMS additional discretion to reopen payment determinations on an ACO-by-ACO basis to account for the impact of improper payments when good cause exists, including to address fraud or errors. When reopening payment determinations, CMS will have the ability to apply adjustments to relevant calculations and methodology, including expenditures, benchmarks, and related determinations for shared savings or shared losses.

CMS cautioned ACOs that the impact of reopening initial payment determinations for a specific PY could go either way – increasing or decreasing an ACO’s shared savings payments or loss repayment obligations. However, CMS will not always reopen initial determinations, in part, to strike a balance between improving the adequacy of calculations and preserving stakeholders’ interest in the administrative finality of payment determinations.

CMS will evaluate a variety of factors in determining whether to reopen an ACO’s payment determination amount, including:

  • The dollar value of improper payments and the number of impacted claims.
  • How any related impact on expenditures compare to the impact on the ACO’s benchmarks.
  • The timing of reopening and recalculating the payment determination.
  • Whether improper payments originate inside the ACO versus outside the ACO.

ACOs may request the reopening of an initial or final agency determination of shared savings or shared losses by providing detailed information.  However, the request must be made within four years except in the case of fraud or similar fault. CMS notes that solely reporting potential fraud or abuse to CMS does not constitute a reopening request under the MSSP, though CMS encourages ACOs to report such information to CMS or the Office of Inspector General. If CMS decides to reopen a determination, it will aim to do so within a timeframe that aligns with the annual reconciliation, payment, and recoupment period.

Beneficiary Notification

The Final Rule revises MSSP policies on providing follow-up communications to beneficiaries. ACOs are currently required to provide follow-up communication to beneficiaries before a beneficiary’s next primary care visit or 180 days from the initial notification, whichever occurs earlier. Recognizing the administrative difficulties this creates for ACOs, the Final Rule modifies this policy to uniformly require all ACOs to provide follow-up communication within 180 days from the date of the initial notification.

In order to reduce beneficiary confusion and burdens for ACOs, the Final Rule also modifies beneficiary notification requirements for ACOs selecting preliminary prospective assignment with retrospective reconciliation to only require notice for beneficiaries that are likely to be assigned to the ACO. Specifically, starting in 2025, the notice obligation will be narrowed to beneficiaries who receive at least one primary care service during the applicable assignment window for such ACOs, as opposed to requiring notice for all Medicare fee-for-service beneficiaries.

Beneficiary Minimums

The Final Rule will eliminate the requirement for CMS to terminate, after a failed corrective action plan (CAP), ACOs that fail to maintain at least 5,000 assigned beneficiaries during each PY (Beneficiary Minimum).

Recognizing that, if given additional time, more ACOs may be able to increase their beneficiary assignment, CMS will instead have discretion to allow an ACO that fails to meet the Beneficiary Minimum during a PY to continue Program participation. Importantly, however, the Final Rule will not modify the requirement that ACOs have 5,000 assigned beneficiaries at other critical times, such as when applying to the MSSP and when renewing Program participation.  In addition, CMS will retain the discretion to impose compliance actions when working with ACOs to meet the Beneficiary Minimum.

If you have questions regarding the Final Rule or its impact on your organization, please contact the authors.

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Firm Publication

New policies tucked into the Centers for Medicare and Medicaid Services’ (CMS) 2025 Medicare Physician Fee Schedule Rule (Final Rule) will likely spur increased Accountable Care Organization (ACO) participation in the Medicare Shared Savings Program (MSSP or Program), in part due to the potential for ACOs to earn more savings and access savings sooner. The Final Rule, effective January 1, 2025, establishes a new prepaid shared savings option, expands the set of primary care services that trigger beneficiary alignment, creates a health equity benchmark adjustment, and institutes a new process to adjust financial calculations for improper payments outside of an ACO’s control.

CMS’ new policies aiming to expand the MSSP are a testament to the Program’s success. Since its inception, the MSSP has yielded billions of dollars in healthcare cost savings, with more than $2.1 billion in savings generated in 2023 alone.  By introducing new policies aimed at leveling the playing field for ACOs in underserved communities, CMS seeks to generate further interest in the Program, advancing its goal of having 100% of Medicare Part A and B beneficiaries in an accountable care relationship by 2030.

Prepaid Shared Savings

Recognizing cash flow concerns stemming from the fact that the Program does not distribute savings payments until October or November of the calendar year after the Performance Year (PY) in which they are generated, the Final Rule introduces a new “prepaid shared savings” (PSS) option. PSS will be an advance on shared savings earned during a PY and be paid in quarterly installments, allowing eligible ACOs to make upfront investments in staffing, healthcare infrastructure, and direct beneficiary services. PSS payments will be distinct from the advance investment payments available to new MSSP ACOs and from advance payments available to low-revenue ACOs participating in the ACO Primary Care Flex Model.

Eligible ACOs

PSS payments will be available to renewing ACOs that take on downside risk, have a history of earning shared savings, and do not have outstanding amounts due to CMS under the MSSP.  ACOs must apply for PSS during the renewal application process, which will require the submission of a “spend plan” outlining how an ACO proposes to use the PSS payments.

Allowable and Prohibited PSS Uses

In the final rule, CMS outlines the requirements that ACOs will need to meet for using PSS, as well as prohibited uses:

  • CMS requires that ACOs spend at least 50% of PSS on “direct beneficiary services,” i.e., in-kind items or services that are not covered by Medicare Parts A/B and are evidence-based and medically appropriate based on clinical and social risk factors. Examples include cost-sharing support for Parts A/B beneficiaries; certain vision, hearing and dental services; beneficiary meals; nutrition support; caregiver support services; home visits; and transportation services. In determining their PSS uses, ACOs and their participants may want to design the direct beneficiary services to meet the CMS-sponsored model patient incentives federal Anti-Kickback Statute safe harbor, which will be available to protect direct beneficiary services that satisfy all safe harbor elements.
  • CMS permits ACOs to spend up to 50% prepaid shared savings on staffing (e.g., hiring physicians or mid-level providers or staff education) and healthcare infrastructure investments (e.g., improving practice management or electronic health record systems).
  • CMS prohibits ACOs from using prepaid shared savings for management company or parent company profit; performance bonuses; provision of medical services covered by Parts A/B Medicare; cash or cash equivalent payments to beneficiaries; and items or activities unrelated to ACO management and operations or beneficiary care.

In order to ensure payments are being used appropriately, CMS will require ACOs to publicly report the total amount of PSS received, the ACO’s spend plan, and an itemization of how PSS were spent during the PY.  ACOs will be subject to CMS oversight to ensure compliance.

PSS Payment Amounts

CMS will calculate an ACO’s maximum quarterly PSS payment amounts based on a pro-rated, adjusted, and capped “prepaid shared savings multiplier,” i.e., the average per capita savings generated during an ACO’s two most recent PYs reconciled at the time of the ACO’s renewal application disposition.  ACOs may elect to receive less than the full amount available to them and can request CMS withdraw (and later resume) such payments, though no catch-up payments may be made.

Other Key Terms
  • CMS will make the first PSS payments in PY 2026. CMS expects to release additional guidance, including guidance regarding permitted uses, before the application cycle for PY 2026.
  • Because PSS payments will be an “advance” on shared savings, PSS will be covered under the Shared Savings Distribution Waiver. However, if an ACO does not earn sufficient shared savings in the PY to offset the PSS payments received in that PY, CMS may recoup funding from an ACO’s existing repayment mechanism, withhold amounts from future payments owed to an ACO, or terminate an ACO’s PSS payments.

Beneficiary Assignment Methodology

The Final Rule revises the definition of “primary care services” to include additional HCPCS and CPT codes to determine the MSSP ACO beneficiary assignment for PY 2025 and subsequent PYs. The additions include services and codes involving safety planning interventions; virtual check-in service; post-discharge telephonic follow-up interventions; direct caregiver training; cardiovascular risk assessment and management services; and other services. In particular, the expanded list updated by CMS includes new advanced primary care management service codes. However, CMS opted not to include interprofessional consultation services, recognizing that such codes involve services from consultative specialists rather than the treating primary care provider.

In the Final Rule, CMS also broadens an exception to the MSSP voluntary alignment mechanism involving entities participating in a Center for Medicare and Medicaid Innovation (CMMI) disease- or condition-specific model, including models involving kidney or cancer care. Specifically, claims-based attribution methodology in a disease- or condition-specific CMMI model will take precedence over a beneficiary opting to voluntarily align to an MSSP ACO. Despite most commentators expressing opposition to the change, CMS reasoned that assignment to an entity participating in a CMMI model tailored to the needs of a beneficiary’s specific disease or condition far outweighs any cost to the MSSP and ACOs. CMS anticipates that the number of beneficiaries impacted by this change would be less than 1% of all MSSP beneficiaries who voluntarily align to an ACO.

Health Equity Benchmark Adjustment

The Final Rule adds a health equity benchmark adjustment (HEBA) into CMS’ shared savings methodology beginning on January 1, 2025. The goal of the HEBA is to ensure benchmarks continue to serve as a reasonable baseline for ACOs that serve a high proportion of beneficiaries from underserved communities, thereby bolstering the ACOs’ ability to earn shared savings when serving higher-risk beneficiaries.

The HEBA, which is modeled after a similar adjustment under the ACO REACH Model, will be available to ACOs with at least 15% of their assigned beneficiaries who are either enrolled in the Medicare Part D low-income subsidy or dually eligible for Medicare and Medicaid. Unlike the ACO REACH Model HEBA, however, the MSSP HEBA would result in an upward adjustment to an ACO’s historical benchmark only.  Upon calculating the HEBA, an ACO would typically receive the highest of a positive regional adjustment, a prior savings adjustment, or the HEBA.

APM Performance Pathway Plus Quality Measure Set, Scoring Methodology, and Incentives to Report via Electronic Clinical Quality Measures

CMS is finalizing a modified proposal to update quality reporting and quality performance measures for the Alternative Payment Model (APM) Performance Pathway (APP) set. These changes aim to promote alignment with CMS’ quality programs and adoption of the “Universal Foundation” measure set.

For 2025 and subsequent PYs, MSSP ACOs will need to report using the APP Plus quality measure set and remove the current APP quality measure set as a reporting option. Recognizing challenges faced by ACOs and stakeholders in aggregating and submitting data as part of existing APP measure sets, including reporting on the three all payer/all patient Electronic Clinical Quality Measures (eCQMs)/Merit-Based Incentive Payment System (MIPS) CQMs, CMS finalized a modified proposal that incrementally phases-in additional quality measures between 2025 and 2028.

CMS also revises rules used to calculate MIPS scores for ACOs reporting the ACO Plus quality measure set for 2025 and subsequent years, including adopting flat benchmarks for the measures’ first two performance periods in MIPS for Medicare CQMs. In order to incentivize eCQM reporting, CMS is also finalizing an extension of reporting incentives to ACOs reporting MIPS CQMs in 2025 and 2026.

SAHS and Reopening ACO Payment Determinations

The Final Rule also aims to prevent and address “significant, anomalous, and highly suspect” (SAHS) billing activity impacting ACOs. Building upon other rulemaking issued earlier this year that insulated ACOs from SAHS billing practices involving urinary catheters, CMS reiterated that suspect billing activity can negatively distort the calculation of an ACO’s shared savings and shared losses.

The Final Rule provides CMS more discretion to identify and address SAHS billing activity occurring in 2024 and beyond. Specifically, CMS will have the ability to remove any billing codes and implement adjustments to MSSP calculations based on SAHS billing activity. CMS anticipates adjustments involving SAHS billing activity will be a rare occurrence largely limited to situations involving increased claims on a national or regional scale that disproportionality involve Medicare providers and result in MSSP payment inaccuracies or inequities.

In addition to CMS’ ability to take broader action to address SAHS billing activity, the Final Rule gives CMS additional discretion to reopen payment determinations on an ACO-by-ACO basis to account for the impact of improper payments when good cause exists, including to address fraud or errors. When reopening payment determinations, CMS will have the ability to apply adjustments to relevant calculations and methodology, including expenditures, benchmarks, and related determinations for shared savings or shared losses.

CMS cautioned ACOs that the impact of reopening initial payment determinations for a specific PY could go either way – increasing or decreasing an ACO’s shared savings payments or loss repayment obligations. However, CMS will not always reopen initial determinations, in part, to strike a balance between improving the adequacy of calculations and preserving stakeholders’ interest in the administrative finality of payment determinations.

CMS will evaluate a variety of factors in determining whether to reopen an ACO’s payment determination amount, including:

  • The dollar value of improper payments and the number of impacted claims.
  • How any related impact on expenditures compare to the impact on the ACO’s benchmarks.
  • The timing of reopening and recalculating the payment determination.
  • Whether improper payments originate inside the ACO versus outside the ACO.

ACOs may request the reopening of an initial or final agency determination of shared savings or shared losses by providing detailed information.  However, the request must be made within four years except in the case of fraud or similar fault. CMS notes that solely reporting potential fraud or abuse to CMS does not constitute a reopening request under the MSSP, though CMS encourages ACOs to report such information to CMS or the Office of Inspector General. If CMS decides to reopen a determination, it will aim to do so within a timeframe that aligns with the annual reconciliation, payment, and recoupment period.

Beneficiary Notification

The Final Rule revises MSSP policies on providing follow-up communications to beneficiaries. ACOs are currently required to provide follow-up communication to beneficiaries before a beneficiary’s next primary care visit or 180 days from the initial notification, whichever occurs earlier. Recognizing the administrative difficulties this creates for ACOs, the Final Rule modifies this policy to uniformly require all ACOs to provide follow-up communication within 180 days from the date of the initial notification.

In order to reduce beneficiary confusion and burdens for ACOs, the Final Rule also modifies beneficiary notification requirements for ACOs selecting preliminary prospective assignment with retrospective reconciliation to only require notice for beneficiaries that are likely to be assigned to the ACO. Specifically, starting in 2025, the notice obligation will be narrowed to beneficiaries who receive at least one primary care service during the applicable assignment window for such ACOs, as opposed to requiring notice for all Medicare fee-for-service beneficiaries.

Beneficiary Minimums

The Final Rule will eliminate the requirement for CMS to terminate, after a failed corrective action plan (CAP), ACOs that fail to maintain at least 5,000 assigned beneficiaries during each PY (Beneficiary Minimum).

Recognizing that, if given additional time, more ACOs may be able to increase their beneficiary assignment, CMS will instead have discretion to allow an ACO that fails to meet the Beneficiary Minimum during a PY to continue Program participation. Importantly, however, the Final Rule will not modify the requirement that ACOs have 5,000 assigned beneficiaries at other critical times, such as when applying to the MSSP and when renewing Program participation.  In addition, CMS will retain the discretion to impose compliance actions when working with ACOs to meet the Beneficiary Minimum.

If you have questions regarding the Final Rule or its impact on your organization, please contact the authors.

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