The final rule on the Medicare Shared Savings Program

The Affordable Care Act (ACA) includes a provision for the Centers for Medicare & Medicaid Services (CMS) to create the Medicare Shared Savings Program (MSSP). This program would establish a payment structure for accountable care organizations (ACOs), which would be responsible for the quality, cost, and overall care of Medicare beneficiaries.

CMS issued a final rule on June 4 updating regulations that govern the MSSP, and most of the mandates went into effect in August. The final rule incorporates feedback that the American College of Surgeons (ACS) provided when CMS released a proposed rule in February. This column offers an overview of ACOs, summarizes highlights from the final rule, and provides an update on surgeons’ involvement in the MSSP.

What is an ACO?

An ACO is a group of physicians, hospitals, and/or other health care professionals and facilities that comes together voluntarily to offer coordinated, high-quality, and cost-effective care to Medicare patients. ACOs that successfully meet quality metrics and reduce health care costs can share in any Medicare program savings. As Table 1 indicates, an ACO is composed of ACO participants, which are recognized by a Medicare-enrolled billing tax identification number (TIN) used to bill Medicare.1

Table 1. Common ACO structure


  • Legal entity

ACO participants

  • TINs
  • Examples: acute care hospitals, solo practice, group practice, critical access hospital, pharmacy, skilled nursing facility, and so on

ACO providers/suppliers

  • National Provider Identifiers that bill through ACO participant
  • Examples: surgeons, nurse practicitioners, pharmacists, physician assistants, and so on

Source: Centers for Medicare & Medicaid Services


To qualify for the MSSP, an ACO must agree to participate in the program for at least three years, comprise a sufficient number of primary care professionals and at least 5,000 Medicare beneficiaries, and have a formal legal structure to receive and distribute payments. As of June, the MSSP encompassed more than 400 ACOs, 170,000 Medicare-enrolled practitioners, and served approximately one in six Medicare beneficiaries.2

What are key highlights of the final rule?

The final rule eliminates exclusivity requirements for general surgery and other specialties, extends the amount of time an ACO may remain in the shared savings-only track of the program, creates an additional payment model, and makes improvements to the benchmarking methodology. Following are details on each of these topics.

Elimination of exclusivity requirements

The final rule eliminates exclusivity requirements for several physician specialties, including general surgery. This provision is significant because it means that going forward general surgeons can participate in more than one ACO and share in additional savings. In a letter to CMS before release of the rule, the College supported the exclusion of general surgeons from participating in only one ACO, citing the effect of enhancing patient access to a variety of providers and ultimately improving quality of care.

CMS assigns Medicare beneficiaries to an ACO using a two-step process focused on their previous primary care services. CMS first identifies all patients who received primary care services from an ACO health care professional in a process known as the pre-step. Within this group of patients, CMS then considers the primary care services provided by primary care physicians or nonphysician practitioners and assigns the Medicare beneficiary to those health care providers.3 The rule indicates that approximately 92 percent of beneficiaries are assigned to an ACO in this step. If beneficiaries did not receive their primary care services from either of these groups but instead from a specialist, CMS assigns the Medicare beneficiary to the specialist. ACO participants who are part of the assignment process cannot participate in more than one ACO. The final rule clarifies that general surgeons are excluded from the beneficiary assignment process and may thereby participate in more than one ACO.

Shared savings-only program

The final rule enables ACOs currently in the shared savings-only program, referred to as Track 1, to remain in this program for three additional years. The ACS supported this change, citing past concerns about the prospect of financial penalties after just three years in the MSSP. The College did not support CMS’ proposal to lower the maximum amount of savings ACOs can retain for those that remain in the shared savings-only model for an extra three years. Specifically, the ACS told CMS that the MSSP is relatively new and requires heavy investment; lowering the amount of savings may serve as a disincentive for providers who would otherwise participate in the program. To date, 99 percent of ACOs in the MSSP are in the shared savings-only track.4 CMS followed the College’s recommendations and did not lower the shared savings rate.

Creation of a shared savings and losses payment model

The final rule creates a shared savings and losses payment model, referred to as Track 3. This new payment model increases the shared savings and losses rates, prospectively assigns beneficiaries to an ACO, provides a waiver of the CMS rule requiring a three-day inpatient stay for coverage of a skilled nursing facility (beginning in 2017), and provides new care coordination tools.

In its comment letter to CMS, the ACS expressed support for a third payment track for ACOs who feel they are ready to take on more risk and be eligible to earn greater savings, citing the positive effect of increased flexibility for ACOs. The College further supported waiving the requirement for a prior three-day qualifying inpatient hospital stay and urged CMS to consider extending this waiver to ACO participants across all three tracks. Nonetheless, CMS finalized this waiver only for ACOs participating in Track 3.

Improvements to the benchmarking methodology

CMS refined its policies for resetting ACO benchmarks and announced its intent to propose further improvements to the benchmarking methodology. CMS establishes benchmarks by considering historical costs of Medicare patients assigned to the ACO. The benchmarks are reset at the start of each three-year agreement period, based on the previous period; they are adjusted to account for growth in national Medicare fee-for-service (FFS) spending and to adequately represent newly aligned beneficiaries.

Under current benchmarking rules, an ACO is in competition with its own previous performance and must meet increasingly stringent benchmarks every year to continue to receive savings. This system results in an increasingly high bar for ACOs that have been the most successful at controlling costs, since they are already doing well. At the same time, more inefficient ACOs have a greater chance of qualifying for shared savings because their qualifying benchmarks are lower. In its comment letter to CMS, the ACS supported moving toward a system that rewards improvement among low performers and recognizes and rewards historically high performers.

What role has general surgery played in ACOs?

A recent analysis of the early experiences of 59 ACOs via case studies and a survey found that these ACOs devoted little attention to surgeons.5 These ACOs emphasized coordinating care for patients with chronic conditions and reducing unnecessary hospital readmissions and emergency department visits.

The success of an ACO depends not only on the participation of qualified primary care physicians, but also on specialists, who will be crucial to the improvement of quality of care. The average American undergoes nine surgeries in his or her lifetime. Nationally, surgery represents approximately 50 percent of hospital expenditures and accounts for an estimated 30 percent of total health care costs.5 The ACO concept of coordinated multiple levels of care with a regionalized structure is not new to surgery. Surgical care has been organized into regional coordinated systems integrated into clinical institutions by way of trauma care networks since the 1970s. As ACOs evolve, the ACS anticipates that they will pay more attention to surgical quality, the appropriateness of surgery, and surgical outcomes.


This column is not intended to serve as a comprehensive guide or framework for how surgeons can participate in an ACO or build their role in an ACO. The content is intended to provide general information on ACO policies.


  1. Centers for Medicare & Medicaid Services. Medicare Shared Savings Program—agreement guidance. Available at: Accessed July 15, 2015.
  2. McClellan MB, Kocot SL, White R. Changes needed to fulfill the potential of Medicare’s ACO program. Brookings. Available at: Accessed June 10, 2015.
  3. Centers for Medicare & Medicaid Services. Medicare Shared Savings Program: Accountable Care Organizations Final Rule. Federal Register. Available at: Accessed June 10, 2015.
  4. Centers for Medicare & Medicaid Services. Fast Facts—All Medicare shared savings program ACOs. Available at: Accessed July 15, 2015.
  5. Dupree JM, Patel K, Singer SJ, et al. Attention to surgeons and surgical care is largely missing from early Medicare accountable care organizations. Health Affairs. 2014:33(6):972-979.

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