Summary of Final MSSP Benchmarking Rule

Prepared by NAACOS on June 10, 2016 

Overview 

The Centers for Medicare & Medicaid Services (CMS) released a final rule and related factsheet, finalizing changes to the Medicare Shared Savings Program (MSSP) benchmarking methodology among other MSSP changes. CMS finalized most of the proposals it issued earlier this year and this resource details key elements of the revised MSSP benchmarking methodology. CMS is maintaining its approach for establishing the benchmark for an ACO’s first agreement period based on the historical expenditures for beneficiaries assigned to the ACO with no adjustment for expenditures in the ACO’s region. The new benchmarking methodology gradually phases in the use of regional expenditure data over the course of multiple three-year ACO agreement periods. The transition to the new methodology varies for ACOs based on the year they began MSSP participation and on whether the ACO’s spending is higher or lower than that of its region. 

In general, NAACOS supports shifting ACO financial benchmarks from being solely based on historical ACO spending to being based on a combination of ACO historical and regional spending. While we are pleased with the general direction of this final rule, we are disappointed that CMS did not accept some of our recommendations, such as removing ACO beneficiaries from the regional reference population and accounting for ACO savings in rebased benchmarks. 

This summary reviews key elements of the final rule, such as CMS’s decisions to:

•       Gradually incorporate regional expenditure data into rebased benchmarks over multiple agreement periods.

•       Treat ACOs differently depending on whether they have spending higher or lower than that of their region. All benchmarks eventually incorporate 70 percent regional expenditure data.

•       Define regional service areas used to calculate rebased benchmarks based on all counties where one or more beneficiaries assigned to the ACO reside.

•       Include ACO-assigned beneficiaries in the regional population used to calculate regional expenditure data.

•       Calculate regional expenditure data for the four beneficiary categories (end stage renal disease [ESRD], disabled, aged/dual eligible, aged/non-dual eligible) at the county level and not use statewide averages for ESRD, as proposed.

•       Apply a methodology for risk adjustment to account for the health status of the ACO’s assigned population in relation to fee for service (FFS) beneficiaries in the ACO’s region in determining the regional adjustment applied to the ACO’s rebased historical benchmark.

•       No longer adjust subsequent benchmarks to account for savings in prior agreement periods

•       Change historical benchmark trend factors and benchmark updates for growth in FFS spending from being based on national data to being based on regional data.

•       Establish limited circumstances under which CMS may reopen decisions related to shared savings or losses.

•       Allow ACOs that are selected to transition to a two-sided ACO risk model to have an additional fourth year Track 1.

Calculating Regional Beneficiary Cost Data 

Definition of “Region”

To incorporate benchmark factors based on regional costs, CMS considered a few ways to define “region,” such as by state, metropolitan statistical area, or Medicare geographic practice cost indices. However, CMS finalized its proposal to use a “regional service area” for each ACO, which the agency defines as all counties where one or more beneficiaries assigned to the ACO reside. CMS states that using county-level data will allow for more customized regional definitions for each ACO. 

Beneficiary Population for Regional Expenditure Data

CMS finalized its proposal to use all “assignable beneficiaries,” including ACO-assigned beneficiaries, in determining expenditures for the ACO’s regional service area in an effort to ensure sufficiently stable regional mean expenditures. CMS defines an assignable beneficiary as a Medicare FFS beneficiary who receives at least one primary care service with a date of service during a specified 12-month assignment window from a Medicare-enrolled physician who is a primary care physician or who has one of the specialty designations included in §425.402(c). Therefore, if a FFS beneficiary gets at least one primary care service from any Medicare-enrolled physician who is a primary care physician or who has one of the primary specialty designations used for purposes of MSSP assignment, the beneficiary would be included in the population used to calculate expenditures for the ACO’s regional service area. 

Weighting the Regional Population by County

Because the regional service area is defined to include any county where one or more ACO assigned beneficiaries reside, CMS must account for the geographic spread of an ACO’s assigned population. They will do this by weighting an ACO’s regional expenditures relative to the proportion of the ACO’s assigned beneficiaries in each county relative to the ACO’s total number of assigned beneficiaries. CMS states it believes that weighting county-level FFS expenditures by the proportion of assigned beneficiaries in each county will accurately reflect expenditure levels in the ACO’s market in regional FFS expenditure calculations. 

Calculating Regional Average Expenditures

CMS finalized its proposed methodology for calculating county FFS expenditures with one modification. They will use county-level data to determine regional FFS expenditures for the assignable beneficiary population in the ACO’s regional service area, adjusting expenditures for changes in severity and case mix using prospective hierarchical condition categories (HCC) risk scores. CMS will perform these calculations separately according to the following populations of beneficiaries (identified by Medicare enrollment type): ESRD, disabled, aged/dual eligible, aged/nondual eligible. 

However, due to concerns raised by NAACOS and other commenters, CMS did not finalize its proposal to aggregate the expenditures for the ESRD population at the state level and to apply that value consistently to each county within the state. Instead, CMS will calculate expenditures for the ESRD population at the county level. CMS will calculate county FFS expenditures in the same way it calculates ACO expenditures in order to assure parity with the calculation of ACO benchmark and performance year expenditures. CMS will weight county-level expenditures by the ACO’s proportion of beneficiaries by Medicare enrollment type (ESRD, disabled, aged/dual eligible, aged/non-dual eligible) in each county for purposes of determining the ACO’s regional expenditures. 

CMS will utilize a three-month claims run out with a completion factor for calculating the regional expenditures, and the calculations would continue to exclude payments related to indirect medical expenses and disproportionate share hospital payments. After calculating these expenditures, CMS will apply this adjustment to the ACO’s rebased historical benchmark. 

Modifying Use of FFS Expenditures for Truncation Thresholds, Trending and Updates

CMS finalized changes to benchmark methodologies related to trending, updating and truncating expenditure data. 

Truncating Expenditures

In order to minimize the variation from catastrophically large claims, CMS truncates expenditures and finalized the following related changes: 

• For agreement periods beginning before 2017, CMS will truncate an assigned beneficiary's total annual Parts A and B FFS per capita expenditures at the 99th percentile of national Medicare FFS expenditures as determined for each benchmark year.
• For the 2017 performance year and any subsequent performance years in agreement periods beginning in 2014, 2015 and 2016, the benchmark is adjusted to reflect the use of assignable beneficiaries in determining the 99th percentile of Medicare FFS expenditures for purposes of truncating expenditures for assigned beneficiaries during each benchmark year.
• For agreement periods beginning in 2017 and subsequent years, CMS will truncate an assigned beneficiary's total annual Parts A and B FFS per capita expenditures at the 99th percentile of national Medicare FFS expenditures for assignable beneficiaries identified for the 12-month calendar year corresponding to each benchmark year.

 Trending Forward Benchmark Expenditures

In calculating an ACO’s rebased historical benchmark, CMS currently trends the first two benchmark years’ per capita expenditures ahead to the third benchmark year by using the national growth rate for spending on Medicare Part A and B services. For ACOs in initial agreement periods beginning with performance year 2017, CMS will trend forward the benchmark using national Medicare expenditure data for national assignable, rather than all FFS beneficiaries. For 2012/2013 ACOs, CMS will continue to use a national trend factor until the start of their third agreement in 2019. 

For ACOs entering into subsequent agreements with rebased benchmarks in 2017 and beyond, CMS will replace the national trend factor with regional trend factors derived from a weighted average of risk adjusted FFS expenditures in the counties where the ACO’s assigned beneficiaries reside. The agency will calculate and apply the trend factors for each of the following populations of beneficiaries: ESRD, disabled, aged/dual eligible, aged/non-dual eligible. 

Update Factor to Account for Expenditure Growth

CMS updates benchmarks by the projected absolute amount of growth in national per capita expenditures for Parts A and B services to account for change in FFS growth that are not the result of inflation (which is accounted for in the trending calculation). For ACOs in initial agreement periods, beginning with the performance year 2017, CMS will update the historical benchmark annually each year based on the flat dollar equivalent of the projected absolute amount of growth in national per capita expenditures for Parts A and B services for assignable beneficiaries identified for the 12-month calendar year corresponding to the year for which the update is calculated. This policy also applies to 2012/2013 ACOs until the start of their third agreement periods in 2019. 

For benchmarks in subsequent agreement periods beginning in 2017 or later, benchmarks are rebased with regional expenditures. CMS will calculate the update factor using regional, rather than national FFS expenditures. This is an effort to better capture the cost experience in the ACO’s region, including the health status and socioeconomic dynamics of the regional population and location-specific Medicare payments. The annual update to the benchmark will be calculated as a growth rate that reflects growth in risk adjusted regional per beneficiary FFS spending for the ACO’s regional service area, for each of the following populations of beneficiaries: ESRD, disabled, aged/dual eligible, aged/non-dual eligible. 

Risk Adjusting in Determining Regional Adjustments to ACO’s Rebased Benchmark

CMS finalized its proposal for risk adjustment. For each Medicare enrollment type, CMS will compute a measure of risk-adjusted regional expenditures to account for differences in health status, as identified by HCC risk scores, of the ACO’s assigned beneficiaries and the average HCC risk score in the regional service area. Under this approach if an ACO’s population is healthier than the assignable beneficiaries in the ACO’s regional service area with lower average risk scores for the relevant period, then the risk adjustment would reduce the amount of the regional FFS adjustment. Similarly, if the ACO’s assigned beneficiary population is comparably sicker than the assignable beneficiaries in the ACO’s regional service area with higher average risk scores for the relevant period, then the risk adjustment would increase the amount of the regional FFS adjustment. 

No Longer Accounting for Savings in Rebased Benchmarks

Under a policy CMS finalized in a June 2015 final MSSP rule, CMS accounts for the average per capita amount of savings generated during the ACO’s previous agreement period by adding a portion of the savings into the rebased benchmark (only for ACOs that have net per capita savings across the three performance years). For ACOs beginning second and subsequent agreement periods in 2017 and beyond, CMS finalized a new policy to no longer account for savings in the previous agreement period when calculating the rebased benchmark for a new three-year agreement. The agency argues that transitioning to a benchmark methodology that incorporates an adjustment for regional FFS expenditures mitigates the impact of no longer accounting for savings in subsequent agreement periods. It is important to note that 2012/2013 ACOs that began new agreements in 2016 will have the savings accounted for during their second agreement period before they move to the new rebasing methodology in 2019. 

Timeline for Transitioning to Benchmarks with Regional Cost Data 

CMS finalized an approach to determine the weight used in calculating the benchmark adjustment for regional spending applying a lower weight the first and second time the ACO’s benchmark is rebased using the regional adjustment if the ACO is determined to have spending higher than its region. 

Percentage Weight Applied in Calculating the Regional FFS Adjustment 

If CMS adjusts the ACO’s benchmark during the term of the agreement period to reflect the addition or removal of ACO participants or ACO providers/suppliers, CMS will re-determine whether the ACO is considered to have lower spending or higher spending compared to the ACO’s regional service area for purposes of determining the percentage to be used in calculating the regional adjustment. 

ACOs that began the MSSP in 2014 will be the first group affected by the revised rebasing methodology when they begin new agreement periods in 2017. These ACOs will also be the first to shift to the 70 percent regional adjustment, beginning with their third agreement period starting in 2020. ACOs that began the MSSP in 2012 and 2013 and began new agreement periods in 2016 will not have regional expenditure data incorporated until their next agreement period begins in 2019. 

Benchmark Changes Resulting from ACO Participant TIN Modifications 

ACOs are required to alert CMS of changes in the composition of their ACO participants and ACO providers/suppliers. ACOs may delete participant tax identification numbers (TINs) during the performance year. Annually an ACO may add participant TINs, resulting in a certified ACO participant list that is the basis for beneficiary assignment and operations for the ACO’s next performance year. This certified participant list is utilized in a number of ways, such as to recalculate the ACO’s historical benchmark based on the three years prior to the start of its agreement period, to determine performance year expenditures, and to determine quality measurement and sampling. 

Due to the frequency of changes to participant TINs, CMS proposed to adjust an ACO’s historical benchmark for changes in participant TIN composition using an expenditure ratio calculated for a single year that accounts for differences in the ACO’s assigned population determined based on its prior and current participant composition. This proposal was designed to simplify the approach for adjusting benchmarks to account for participant list changes by basing it on a single reference year and would be administratively easier for CMS than the current methodology. However, CMS did not provide any data to allow NAACOS and other interested stakeholders to model the proposed changes, which we objected to in our comment letter. In response to concerns over the lack of transparency related to this proposal and an inability to model its potential effects, CMS is not finalizing this policy. The agency states that it anticipates revisiting this issue in future rulemaking. 

Extended Track 1 Participation Option

CMS finalized its proposal to add a participation option to allow eligible Track 1 ACOs to defer their entrance into a two-sided risk ACO model (Track 2 or 3) by extending their first agreement period under Track 1 for a fourth performance year. This option is only for ACOs that are eligible for a second agreement period under Track 1 but instead apply for and are accepted to participate in a two-sided risk model. Only after being accepted in Track 2 or 3, could the eligible ACO elect to continue under Track 1 for an additional year. The terms of the initial three-year agreement remain in place for the additional fourth year. The new agreement period in Track 2 or 3 is still three years. This option is available for ACOs that started the MSSP in 2014 or later. 

Reopening ACO Shared Savings/Loss Determinations 

The determination of whether an ACO is eligible for shared savings and the amount of such shared savings, as well as the underlying financial calculations, are not appealable and are precluded from administrative and judicial review. In this rule, the agency finalized circumstances under which it would consider reopening a payment determination after financial calculations are performed and shared savings/losses determined. Under the revised policy, CMS will use its discretion to reopen a payment determination within four years after the notification of the initial determination if there is “good cause,” which would exist as a result of new and/or material evidence not available or known at the time of the payment determination. The agency will have sole discretion to determine whether good cause exists. Further, CMS established a materiality threshold of three percent for reopening determinations that result from technical errors by the agency, such as CMS computational errors. It is important to note that the materiality threshold is based on a percent of the total amount of net shared savings/losses for all MSSP ACOs for a performance year. CMS will also have discretion to reopen a payment determination at any time in the case of fraud or “similar fault.” 

CMS notes that this change does not establish an appeal process for individual ACOs to submit information regarding errors they believe were made in the financial reconciliation calculation or in determining the amount of shared savings earned by the ACO. Therefore, despite calls to do so by NAACOS and others, CMS will not apply the materiality threshold to individual ACOs, will not allow ACOs to appeal redetermination decisions they believe were made in error, and will not hold ACOs harmless for errors the agency makes in the payment determination process. 

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