The proposed rule changes for the Medicare Shared Savings Program (MSSP), published in 2024 Medicare Physician Fee Schedule (MPFS) Update on July 14, 2023, by the Centers for Medicare and Medicaid Services (CMS)¹ look to build on major rule changes introduced in last year’s MPFS update.

In this rule, CMS proposes the implementation of V28 of the CMS-Hierarchical Condition Categories (HCC) Risk Score Model into the program effective January 1, 2024 (to be phased in over multiple years). The V28 CMS-HCC Risk Score Model was first introduced as part of CMS’s 2024 Medicare Advantage (MA) Advanced Notice (and then confirmed in CMS’ 2024 MA Rate Announcement) and represents a significant change in the hierarchical condition categories (HCC) underlying the risk score calculation and models that are currently being used in the MSSP model (V22 and V24). Because of this, every accountable care organization (ACO) in the MSSP model would be directly affected by these proposed risk score model changes starting in performance year (PY) 2024.

Additionally, to support its goal of having 100% of Medicare beneficiaries in accountable care entities by 2030, CMS proposes an expansion in the scope of attribution as well as reduced barriers of entry for ACO’s serving the highest-needs, most complex populations, among other changes.² CMS estimates that in total the proposed rule changes will result in growth of MSSP participation between 10% and 20%.

We summarize notable changes related to risk scores, the financial benchmark calculation, and assignment methodology below. We do not cover all proposed rule changes, nor do we touch on many of the proposed quality and operational changes. The rulings discussed below are not yet final and may be subject to change. ACOs should review the fee schedule update proposals closely to assess the implications for their specific circumstances.

Risk Score Model³

For agreement periods beginning before January 1, 2024

Proposed change: Risk scores for 2024 and all future performance years (PYs) would be calculated using the same blend of V24 and V28 that is being used in the MA model (33% V28 in 2024, 66% V28 in 2025, 100% V28 in 2026). The risk scores for the benchmark years will continue to be calculated based on the risk score model in place for those years, consistent with the current methodology.

Potential implications: Given the meaningful changes introduced in the V28 risk model, calculating a PY risk score using V28 while using a different model for the benchmark years will introduce significant shifts in normalized risk scores (and thus the benchmark) for some ACOs. CMS’ simulations on ACOs in PY 2021 estimate the impact on shared savings will be between -1.4% and 0.9% for the 10th and 90th percentiles, respectively.

For agreement periods beginning on or after January 1, 2024

Proposed change: Risk scores for 2024 and all future PYs would be calculated using the same blend of V24 and V28 that is being used in the MA model (33% V28 in 2024, 66% V28 in 2025, 100% V28 in 2026). The risk scores for all of the benchmark years will be calculated using the same blend of risk score models that is used for the PY.

Potential implications: Historical shifts (during the benchmark years) in normalized risk scores using older risk score models (V22 and V24) may be significantly different from shifts observed using the new blending of the V28 risk model. However, we anticipate less disruption under this approach than for ACOs subject to differing risk score models across benchmark and performance years. CMS’ simulations on ACOs in PY 2021 estimate the impact on shared savings will be between -0.4% and 0.6% for the 10th and 90th percentiles, respectively.

Financial Benchmark

Apply a cap on regional risk score growth between BY3 and the PY for agreement periods beginning on or after January 1, 2024

Proposed change: When calculating the update factor (trend factor) between BY3 and the PY, the risk adjustment process will only recognize the region’s risk score growth up to a cap calculated based on:

• +3% in excess of the change in demographic risk score
• A market share adjustment that increases the cap on regional risk score growth for ACOs with larger market share

Potential implications: While most ACOs will not be impacted by this change, some ACOs will see their regional update factor increase if they have observed significant risk score growth in their region since BY3. This rule change is expected to affect more ACOs as the average gap increases between benchmark years and performance years. CMS’ simulation on PY 2021 ACOs found that approximately 11% of ACOs would have been subject to the cap.

Remove the downside impact of regional adjustment for agreement periods beginning on or after January 1, 2024

Proposed change: If an ACO has a negative single per-capita regional adjustment (after the application of the -1.5% cap and offset factor), then the ACO will not be subject to a negative regional adjustment for any enrollment type and would still be eligible to receive a prior savings adjustment without any offsetting reduction for the negative regional adjustment.

Potential implications: In PY 2022, approximately 14% of ACOs did not have a positive regional adjustment. For ACOs with a negative regional adjustment, this change will benefit some ACOs materially through an increase to their financial benchmark. In our experience, this will include ACOs focused on higher risk populations where the risk-adjusted regional benchmark does not fully capture the populations’ expected cost level.

Assignment Methodology

Added Step 3 to assignment which includes an expanded assignment window (for new and continuing ACOs), effective January 1, 2025

Proposed change: Introduction of a Step 3 to the assignment methodology which examines a 24-month window (instead of the 12-month window used for Steps 1 and 2) to identify additional beneficiaries for assignment that may have not seen a physician in the past 12 months.

Potential implications: This change will act to increase attribution for most ACOs and will have the biggest impact on ACOs focused on populations that often receive care from nurse practitioners, physician assistants, and clinical nurse specialists. CMS estimates the historical impact of this change would have been an increase of nearly 2.9% to the national assignable population.

Conclusion

In the proposed rule, CMS also requested comments on a few potential future changes to the MSSP program including (but not limited to):

1. Adding a new track that is higher risk/higher reward than the ENHANCED track
   1. This may be driven by feedback from ACOs that are looking for an option similar to the Global track of the ACO Realizing Equity, Access, and Community Health (REACH) model which includes 100% upside and downside risk along with a discount applied to the benchmark. However, ACO REACH Global does not offer 100% of savings as it applies a discount to the benchmark ensuring first dollar savings go to CMS.
2. Modifying the regional adjustment calculations for ACOs receiving a positive adjustment to reduce the possibility of ”inflating the benchmark”
3. Refinements to the accountable care prospective trend (ACPT) and three-way blended benchmark update factor over time to mitigate the potential ratchet effects within the update factor.

This whitepaper presents the authors’ preliminary thoughts on the proposed rule and not those of Milliman. The commentary presented within this paper is based on the proposed CMS 2024 Medicare Physician Fee Schedule Update; the ruling is not final and may have further changes. ACOs should not rely on this information for decision making in PY2024 but consider it as they read the proposed ruling and reflect on the potential impact to their specific circumstances.

As part of the proposed rule, CMS is initiating a 60-day comment period that will end on September 11, 2023.

¹ The proposed (unpublished) fee schedule update is available at https://public-inspection.federalregister.gov/2023-14624.pdf. See also the CMS Fact Sheet: https://www.cms.gov/newsroom/fact-sheets/calendar-year-cy-2024-medicare-physician-fee-schedule-proposed-rule-medicare-shared-savings-program.

² CMS (June 9, 2023). The CMS Innovation Center’s Strategy to Support High-quality Primary Care. Retrieved July 23, 2023, from https://www.cms.gov/blog/cms-innovation-centers-strategy-support-high-quality-primary-care#:~:text=CMS%20has%20set%20a%20goal,mechanism%20for%20achieving%20this%20goal.

³ While the impacts to renormalized risk scores may be large or small, what matters most for ACO financials is the change in the Benchmark Year 3 to Performance Year risk ratios.