1. (a) General. An ACO's financial and quality performance for a 6-month performance year during 2019 are determined as described in this section.

2. (b) January 2019 through June 2019. For ACOs participating in a 6-month performance year from January 1, 2019, through June 30, 2019, under § 425.200(b)(2)(ii)(B) and for ACOs eligible for pro-rated shared savings or liable for pro-rated shared losses in accordance with § 425.221(b)(3)(i) for the performance period from January 1, 2019, through June 30, 2019, CMS reconciles the ACO for the period from January 1, 2019, through June 30, 2019, after the conclusion of CY 2019, based on the 12-month calendar year and pro-rates shared savings or shared losses to reflect the ACO's participation from January 1, 2019, through June 30, 2019. CMS does all of the following to determine financial and quality performance:

   1. (1) Uses the ACO participant list in effect for the performance year beginning January 1, 2019, to determine beneficiary assignment, using claims for the entire calendar year, as specified in §§ 425.402 and 425.404, and according to the ACO's track as specified in § 425.400.

      1. (i) For ACOs under preliminary prospective assignment with retrospective reconciliation the assignment window is CY 2019.

      2. (ii) For ACOs under prospective assignment—

         1. (A) Medicare fee-for-service beneficiaries are prospectively assigned to the ACO based on the beneficiary's use of primary care services in the most recent 12 months for which data are available; and
         2. (B) Beneficiaries remain prospectively assigned to the ACO at the end of CY 2019 if they do not meet any of the exclusion criteria under § 425.401(b) during the calendar year.

   2. (2) Uses the ACO's quality performance for the 2019 reporting period to determine the ACO's quality performance score as specified in § 425.502.

      1. (i) The ACO participant list finalized for the first performance year of the ACO's agreement period beginning on July 1, 2019, is used to determine the quality reporting samples for the 2019 reporting year for the following ACOs:

         1. (A) An ACO that extends its participation agreement for a 6-month performance year from January 1, 2019, through June 30, 2019, under § 425.200(b)(2)(ii)(B), and enters a new agreement period beginning on July 1, 2019.
         2. (B) An ACO that participates in the program for the first 6 months of a 12-month performance year during 2019 and is eligible for pro-rated shared savings or liable for pro-rated shared losses in accordance with § 425.221(b)(3)(i).
      2. (ii) The ACO's latest certified ACO participant list is used to determine the quality reporting samples for the 2019 reporting year for an ACO that extends its participation agreement for the 6-month performance year from January 1, 2019, through June 30, 2019, under § 425.200(b)(2)(ii)(B), and does not enter a new agreement period beginning on July 1, 2019.

   3. (3) Uses the methodology for calculating shared savings or shared losses applicable to the ACO under the terms of the participation agreement that was in effect on January 1, 2019.

      1. (i) The ACO's historical benchmark is determined according to either § 425.602 (first agreement period) or § 425.603 (second agreement period) except as follows:

         1. (A) The benchmark is adjusted for changes in severity and case mix between BY3 and CY 2019 using the methodology that accounts separately for newly and continuously assigned beneficiaries using prospective HCC risk scores and demographic factors as described under §§ 425.604(a)(1) through (3), 425.606(a)(1) through (3), and 425.610(a)(1) through (3).
         2. (B) The benchmark is updated to CY 2019 according to the methodology described under § 425.602(b), § 425.603(b), or § 425.603(d), based on whether the ACO is in its first or second agreement period, and for an ACO in a second agreement period, the date on which that agreement period began.

      2. (ii) The ACO's financial performance is determined based on the track the ACO is participating under during the performance year starting on January 1, 2019 (§ 425.604, § 425.606 or § 425.610), unless otherwise specified. In determining ACO financial performance, CMS does all of the following:

         1. (A) Average per capita Medicare Parts A and B fee-for-service expenditures for CY 2019 are calculated for the ACO's performance year assigned beneficiary population identified in paragraph (b)(1) of this section.
         2. (B) Expenditures calculated in paragraph (b)(3)(ii)(A) of this section are compared to the ACO's updated benchmark determined according to paragraph (b)(3)(i) of this section.

         3. (C) (1) The ACO's performance year assigned beneficiary population identified in paragraph (b)(1) of this section is used to determine the MSR for Track 1 ACOs and the variable MSR/MLR for ACOs in a two-sided model that selected this option at the start of their agreement period. For two-sided model ACOs that selected a fixed MSR/MLR at the start of the ACO's agreement period, this fixed MSR/MLR is applied. In the event an ACO's performance year assigned population identified in paragraph (b)(1) of this section is below 5,000 beneficiaries, the MSR/MLR is determined according to § 425.110(b).

            (2) To qualify for shared savings an ACO must do all of the following:

            (i) Have average per capita Medicare Parts A and B fee-for-service expenditures for its assigned beneficiary population for CY 2019 below its updated benchmark costs for the year by at least the MSR established for the ACO based on the track the ACO is participating under during the performance year starting on January 1, 2019 (§ 425.604, § 425.606 or § 425.610) and paragraph (b)(3)(ii)(C)(1) of this section.

            (ii) Meet the minimum quality performance standards established under § 425.502 and according to paragraph (b)(2) of this section.

            (iii) Otherwise maintain its eligibility to participate in the Shared Savings Program under this part.

            (3) To be responsible for sharing losses with the Medicare program, an ACO's average per capita Medicare Parts A and B fee-for-service expenditures for its assigned beneficiary population for CY 2019 must be above its updated benchmark costs for the year by at least the MLR established for the ACO based on the track the ACO is participating under during the performance year starting on January 1, 2019 (§ 425.606 or § 425.610) and paragraph (b)(3)(ii)(C)(1) of this section.

         4. (D) For an ACO that meets all the requirements to receive a shared savings payment under paragraph (b)(3)(ii)(C)(2) of this section—

            (1) The final sharing rate, determined based on the track the ACO is participating under during the performance year starting on January 1, 2019 (§ 425.604, § 425.606 or § 425.610), is applied to all savings under the updated benchmark specified under paragraph (b)(3)(i) of this section, not to exceed the performance payment limit for the ACO based on its track; and

            (2) After applying the applicable performance payment limit, CMS pro-rates any shared savings amount determined under paragraph (b)(3)(ii)(D)(1) of this section by multiplying the amount by one-half, which represents the fraction of the calendar year covered by the period from January 1, 2019, through June 30, 2019.

         5. (E) For an ACO responsible for shared losses under paragraph (b)(3)(ii)(C)(3) of this section—

            (1) The shared loss rate, determined based on the track the ACO is participating under during the performance year starting on January 1, 2019 (§ 425.606 or § 425.610), is applied to all losses under the updated benchmark specified under paragraph (b)(3)(i) of this section, not to exceed the loss recoupment limit for the ACO based on its track; and

            (2) After applying the applicable loss recoupment limit, CMS pro-rates any shared losses amount determined under paragraph (b)(3)(ii)(E)(1) of this section by multiplying the amount by one-half, which represents the fraction of the calendar year covered by the period from January 1, 2019, through June 30, 2019.

3. (c) July 2019 through December 2019. For ACOs entering an agreement period beginning on July 1, 2019, the ACO's first performance year is from July 1, 2019, through December 31, 2019, as specified in § 425.200(c)(3). CMS reconciles the ACO for the period from July 1, 2019, through December 31, 2019, after the conclusion of CY 2019, based on the 12-month calendar year and pro-rates shared savings or shared losses to reflect the ACO's participation from July 1, 2019, through December 31, 2019. CMS does all of the following to determine financial and quality performance:

   1. (1) Uses the ACO participant list in effect for the performance year beginning on July 1, 2019, to determine beneficiary assignment, using claims for the entire calendar year, consistent with the methodology the ACO selected at the start of its agreement period under § 425.400(a)(4)(ii).

      1. (i) For ACOs under preliminary prospective assignment with retrospective reconciliation the assignment window is CY 2019.

      2. (ii) For ACOs under prospective assignment—

         1. (A) The assignment window is the same as the assignment window that applies under paragraph (b)(1)(ii)(A) of this section for ACOs under prospective assignment for the 6-month performance year from January 1, 2019, through June 30, 2019; and
         2. (B) Beneficiaries remain prospectively assigned to the ACO at the end of CY 2019 if they do not meet any of the exclusion criteria under § 425.401(b) during the calendar year.
   2. (2) Uses the ACO's quality performance for the 2019 reporting period to determine the ACO's quality performance score as specified in § 425.502. The ACO participant list finalized for the first performance year of the ACO's agreement period beginning on July 1, 2019, is used to determine the quality reporting samples for the 2019 reporting year for all ACOs.

   3. (3) Uses the methodology for calculating shared savings or shared loses applicable to the ACO for its first performance year under its agreement period beginning on July 1, 2019.

      1. (i) The ACO's historical benchmark is determined according to § 425.601 except as follows:

         1. (A) The benchmark is adjusted for changes in severity and case mix between BY3 and CY 2019 based on growth in prospective HCC risk scores, subject to a cap of positive 3 percent as described under § 425.605(a)(1) or § 425.610(a)(2).
         2. (B) The benchmark is updated to CY 2019 according to the methodology described under § 425.601(b).

      2. (ii) The ACO's financial performance is determined based on the track the ACO is participating under during the performance year starting on July 1, 2019 (§ 425.605 (BASIC track) or § 425.610 (ENHANCED track)), unless otherwise specified. In determining ACO financial performance, CMS does all of the following:

         1. (A) Average per capita Medicare Parts A and B fee-for-service expenditures for CY 2019 are calculated for the ACO's performance year assigned beneficiary population identified in paragraph (c)(1) of this section.
         2. (B) Expenditures calculated in paragraph (c)(3)(ii)(A) of this section are compared to the ACO's updated benchmark determined according to paragraph (c)(3)(i) of this section.

         3. (C) (1) The ACO's performance year assigned beneficiary population identified in paragraph (c)(1) of this section is used to determine the MSR for ACOs in BASIC track Level A or Level B, and the variable MSR/MLR for ACOs in a two-sided model that selected this option at the start of their agreement period. In the event a two-sided model ACO selected a fixed MSR/MLR at the start of its agreement period, and the ACO's performance year assigned population identified in paragraph (c)(1) of this section is below 5,000 beneficiaries, the MSR/MLR is determined based on the number of assigned beneficiaries as specified in § 425.110(b)(3)(iii).

            (2) To qualify for shared savings an ACO must do all of the following:

            (i) Have average per capita Medicare Parts A and B fee-for-service expenditures for its assigned beneficiary population for CY 2019 below its updated benchmark costs for the year by at least the MSR established for the ACO based on the track the ACO is participating under during the performance year starting on July 1, 2019 (§ 425.605 or § 425.610) and paragraph (c)(3)(ii)(C)(1) of this section.

            (ii) Meet the minimum quality performance standards established under § 425.502 and according to paragraph (c)(2) of this section.

            (iii) Otherwise maintain its eligibility to participate in the Shared Savings Program under this part.

            (3) To be responsible for sharing losses with the Medicare program, an ACO's average per capita Medicare Parts A and B fee-for-service expenditures for its assigned beneficiary population for CY 2019 must be above its updated benchmark costs for the year by at least the MLR established for the ACO based on the track the ACO is participating under during the performance year starting on July 1, 2019 (§ 425.605 or § 425.610) and paragraph (c)(3)(ii)(C)(1) of this section.

         4. (D) For an ACO that meets all the requirements to receive a shared savings payment under paragraph (c)(3)(ii)(C)(2) of this section—

            (1) The final sharing rate, determined based on the track the ACO is participating under during the performance year starting on July 1, 2019 (§ 425.605 or § 425.610), is applied to all savings under the updated benchmark specified under paragraph (c)(3)(i) of this section, not to exceed the performance payment limit for the ACO based on its track; and

            (2) After applying the applicable performance payment limit, CMS pro-rates any shared savings amount determined under paragraph (c)(3)(ii)(D)(1) of this section by multiplying the amount by one-half, which represents the fraction of the calendar year covered by the July 1, 2019 through December 31, 2019 performance year.

         5. (E) For an ACO responsible for shared losses under paragraph (c)(3)(ii)(C)(3) of this section—

            (1) The shared loss rate, determined based on the track the ACO is participating under during the performance year starting on July 1, 2019 (§ 425.605 or § 425.610), is applied to all losses under the updated benchmark specified under paragraph (c)(3)(i) of this section, not to exceed the loss recoupment limit for the ACO based on its track; and

            (2) After applying the applicable loss recoupment limit, CMS pro-rates any shared losses amount determined under paragraph (c)(3)(ii)(E)(1) of this section by multiplying the amount by one-half, which represents the fraction of the calendar year covered by the July 1, 2019 through December 31, 2019 performance year.

4. (d) Extreme and uncontrollable circumstances. For ACOs affected by extreme and uncontrollable circumstances during CY 2019—

   1. (1) In calculating the amount of shared losses owed, CMS makes adjustments to the amount determined in paragraph (b)(3)(ii)(E)(1) or (c)(3)(ii)(E)(1) of this section, as specified in § 425.605(f), § 425.606(i), or § 425.610(i), as applicable; and
   2. (2) In determining the ACO's quality performance score for the 2019 quality reporting period, CMS uses the alternative scoring methodology specified in § 425.502(f).

5. (e) Notification of savings and losses.

   1. (1) CMS notifies the ACO of shared savings or shared losses separately for the January 1, 2019 through June 30, 2019 performance year (or performance period) and the July 1, 2019 through December 31, 2019 performance year, consistent with the notification requirements specified in §§ 425.604(f), 425.605(e), 425.606(h), and 425.610(h), as applicable:

      1. (i) CMS notifies an ACO in writing regarding whether the ACO qualifies for a shared savings payment, and if so, the amount of the payment due.
      2. (ii) CMS provides written notification to an ACO of the amount of shared losses, if any, that it must repay to the program.
      3. (iii) If an ACO has shared losses, the ACO must make payment in full to CMS within 90 days of receipt of notification.

   2. (2) If an ACO is reconciled for both the January 1, 2019 through June 30, 2019 performance year (or performance period) and the July 1, 2019 through December 31, 2019 performance year, CMS issues a separate notice of shared savings or shared losses for each performance year (or performance period), and if the ACO has shared savings for one performance year (or performance period) and shared losses for the other performance year (or performance period), CMS reduces the amount of shared savings by the amount of shared losses.

      1. (i) If any amount of shared savings remains after completely repaying the amount of shared losses owed, the ACO is eligible to receive payment for the remainder of the shared savings.
      2. (ii) If the amount of shared losses owed exceeds the amount of shared savings earned, the ACO is accountable for payment of the remaining balance of shared losses in full.

[83 FR 60094, Nov. 23, 2018, as amended at 83 FR 68078, Dec. 31, 2018]