With the publication of the Pathways to Success final rule, we are exploring the most important changes for Medicare Shared Savings Program ACOs. Today we discuss the new distinction between high and low revenue ACOs. Starting later this year, CMS will categorize all new and renewing ACOs in the new Basic and Enhanced tracks as high or low revenue according to the share of attributed beneficiaries’ Medicare costs that the ACO can control.  

CMS introduced this change to give low revenue providers more time before progressing to full two-sided risk. CMS considers low revenue ACOs (those that generally include physician groups and rural hospitals) to have shown stronger results than high revenue ACOs (ACOs that include larger hospital systems). The rules are structured to encourage a swifter transition to performance-based risk for those ACOs that can bear it while providing more time to entities with less control over Medicare costs. 


How does CMS determine which ACOs are low revenue? 

CMS identifies low revenue ACOs as those typically made up of physician practices and rural hospitals and high revenue ACOs as those that typically include hospitals. While CMS states this intention, the actual determination is not made according to provider type or size.  

With Medicare fee-for-service (traditional Medicare), beneficiaries can see their choice of providers, inside and outside of the ACO, for different services. CMS will calculate the share of fee-for-service Medicare costs that stayed inside the ACO’s provider network to determine high or low revenue status. ACOs that have control over less than 35 percent of total Medicare fee-for-service costs are low revenue – all other ACOs are high revenue. The threshold originally proposed in August was 25 percent of total Medicare costs. CMS raised the limit to 35 percent in response to public comments.  

What flexibilities are available to low revenue ACOs? 

In general, low revenue ACOs can spend more time in a lower risk arrangement than their high revenue counterparts. Low revenue ACOs that are new or have no experience with downside risk will be able to spend an additional year in the Basic track, level B with no downside risk. If the ACO takes that extra year at level B, afterward they will have to move to level E, the highest level of risk in the Basic track, for the remaining years of that first agreement period.  

If a low revenue ACO has experience with downside risk (from previous ACO participation), the first agreement period in the Basic track will be entirely at level E. Any low revenue ACOs may opt for a second five-year agreement period in the Basic track, all at level E. High revenue ACOs can only spend a single agreement period in the Basic track before advancing to the Enhanced track.  

What does the high or low revenue designation mean for my ACO? 

The new high and low revenue distinction does not apply to those ACOs that started in Track 1, 1+, 2, or 3 in 2017 or 2018. Those ACOs can finish the remaining years of that agreement period under the old rules.  

ACOs participating in the new Basic or Enhanced tracks, the first of which will start in July 2019, will be assigned either high or low revenue status based on the percent of beneficiaries’ Medicare costs under the control of the ACO. Unfortunately, there is no way for an ACO to be certain of high or low revenue status at the time of application. The determination will be made after the ACO begins operation according to where the beneficiaries get their care.  

Read our full FAQ document here 


Caravan Health is here to help 

Caravan Health can  work with you to figure out the best way to move forward under the new rules. Get in touch with us at info@caravanhealth.com for more information.   

More to come about the options under the final rule 

There are a lot more details in the final rule to explore. Next week, we will dig into the new risk based elective options for certain ACOs, including the 3-day SNF waiver and the Beneficiary Incentive Program.    

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