Proposed Changes to Medicare’s Shared Savings Program

By David J. Andrzejewski, Paul L. Hannah, and Jay Sutton
| 6/2/2015

On Dec. 1, 2014, the Centers for Medicare & Medicaid Services (CMS) released a long-awaited proposed rule (79 FR 72760-72872) that updates final regulations published in November 2011 governing the Medicare Shared Savings Program. In an effort to improve the Shared Savings Program and encourage participation in Accountable Care Organizations (ACOs), CMS proposes a number of changes that affect both new ACOs and those renewing their initial three-year agreement. 200247278-001_7-250x260

Shared Savings Program Shows Positive Results

CMS recently released financial and quality performance data for the first performance year of the Shared Savings Program and the second performance year of the Pioneer ACO Model. ACOs in both programs together generated more than $417 million in savings for the Medicare program, while receiving incentive payments of more than $460 million.

Incentives for Increased Participation

The Shared Savings Program includes a one-sided model (Track 1) under which the ACO is eligible to receive only shared savings generated for the term of the first agreement period, as well as a two-sided model (Track 2) where the ACO shares in both the savings and losses for the term of the agreement period. Under current regulations, ACOs in Track 1 are required to transition to the two-sided risk model after completing the first agreement period. To encourage continued participation in Track 1, CMS proposes to remove this requirement for ACOs that meet certain standards, allowing them to remain in Track 1 for one additional agreement period. The quality-sharing rate for ACOs that opt to remain in Track 1 would be reduced by 10 percent from the previous agreement period maximum of 50 percent.

Based on feedback from stakeholders, CMS proposes to increase participation in the two-sided model by making changes to Track 2, adding a new risk-based option (Track 3), and relaxing certain Medicare payment rules and program requirements for Tracks 2 and 3.

  • For Track 2, CMS proposes to replace the current minimum savings-and-loss rate from a fixed 2 percent to a variable rate ranging from 2 percent to 3.9 percent, depending on the number of beneficiaries assigned to the ACO. For example, ACOs with fewer than 6,000 beneficiaries would have a minimum savings-and-loss rate of 3.9 percent, while ACOs with more than 60,000 patients would have a minimum rate of 2 percent.
  • CMS proposes to add a new Track 3 option, which would differ from Track 2 as follows:
    • Beneficiary assignment – Beneficiaries would be assigned prospectively at the start of the performance year and would be removed only at the time of retrospective reconciliation if determined to no longer be eligible.
    • Minimum savings-and-loss rate – The minimum savings-and-loss rate would be fixed at 2 percent.
    • Quality-sharing rate and performance payment limit – The quality-sharing rate would be increased from 60 percent in Track 2 to a maximum of 75 percent in Track3. The performance payment limit also would be increased from 15 percent in Track 2 to 20 percent in Track 3.
  • CMS proposes to waive certain Medicare fee-for-service payment rules and program requirements for ACOs participating in Tracks 2 and 3, including the three-day qualifying inpatient hospital stay for coverage of skilled nursing facility care, certain requirements for payment of telehealth services, the homebound requirement for payment of home health services, and qualifications for hospital referrals to post-acute care settings.

Other Recommendations

CMS also recommends a number of other changes to the Shared Savings Program, such as revisions to its policy regarding the sharing of beneficiary claims data with ACOs, modifications to the ACO eligibility and monitoring requirements, and revisions to the beneficiary assignment process that would consider primary care services provided by nurse practitioners, physician assistants, and clinical nurse specialists in the assignment methodology.


  • ACOs must be aware of the proposed changes to the Shared Savings Program and understand how these revisions might affect their organizations.
  • ACOs should analyze the different shared savings-and-loss risk models to determine which structure is best for their respective organizations.

A version of this article, which was developed by Crowe and Helena Lefkow, Metropolitan Chicago Healthcare Council, originally appeared in MCHC’s “Reimbursement E-Brief,” January 2015.


    Contact us

    Dave Andrzejewski
    Paul Hannah
    Jay Sutton - social
    Jay Sutton