Medicare and Medicaid Programs; CY 2026 Payment Policies Under the Physician Fee Schedule and Other Changes to Part B Payment and Coverage Policies; Medicare Shared Savings Program Requirements; and Medicare Prescription Drug Inflation Rebate Program

1. Executive Summary and Background a. Purpose

As we stated in the CY 2026 PFS proposed rule (90 FR 32645), as of January 1, 2025, the Medicare Shared Savings Program (Shared Savings Program) has 477 accountable care organizations (ACOs) with over 650,000 healthcare providers and organizations providing care to over 11.2 million assigned beneficiaries.\367\ Eligible groups of providers and suppliers, such as physicians, hospitals, and other healthcare providers, may participate in the Shared Savings Program by forming or joining an ACO and in so doing agree to become accountable for the total cost and quality of care provided under Traditional Medicare to an assigned population of Medicare FFS beneficiaries. Under the Shared Savings Program, providers and suppliers that participate in an ACO continue to receive Traditional Medicare FFS payments under Parts A and B, and the ACO may be eligible to receive a shared savings payment if it meets specified quality and savings requirements, and in some instances may be required to share in losses if it increases healthcare spending.

\367\ See “Shared Savings Program Fast Facts--As of January 1, 2025”, available at https://www.cms.gov/files/document/2025-shared-savings-program-fast-facts.pdf.

We continue to gain experience with and observe the impact of changes to the Shared Savings Program's quality performance standard and other quality reporting requirements, financial methodology, beneficiary assignment methodology, participation options, and availability of new payment options, among other changes, finalized in recent years through the annual PFS rulemaking process.\368\ We proposed changes to the Shared Savings Program regulations to allow for timely improvements to program policies and operations, as described in section III.F. of the CY 2026 PFS proposed rule (90 FR 32645 through 32694).\369\ We sought public comments which we summarize and respond to in sections III.F.2. through III.F.9. of this final rule. In section III.F.1.c of this final rule, we provide a summary of the changes we are finalizing to the Shared Savings Program.

\368\ Refer to the CY 2023 PFS final rule (87 FR 69777 through 69979), CY 2024 PFS final rule (88 FR 79093 through 79232), and CY 2025 PFS final rule (89 FR 98081 through 98213).

\369\ In the August 14, 2025, Federal Register (90 FR 39155 through 39161), we issued a document that corrects typographical and technical errors in the CY 2026 PFS proposed rule, including corrections to Shared Savings Program content in section III.F and section V.B.5 of the CY 2026 PFS proposed rule.

On March 23, 2010, the Patient Protection and Affordable Care Act (Pub. L. 111-148) was enacted, followed by enactment of the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152) on March 30, 2010, which amended certain provisions of the Patient Protection and Affordable Care Act (hereinafter collectively referred to as “the Affordable Care Act”). Section 3022 of the Affordable Care Act amended Title XVIII of the Act (42 U.S.C. 1395 et seq.) by adding section 1899 of the Act to establish the Medicare Shared Savings Program to

facilitate coordination and cooperation among healthcare providers to improve the quality of care for Medicare FFS beneficiaries and reduce the rate of growth in expenditures under Medicare Parts A and B. (See 42 U.S.C. 1395jjj.)

Section 1899 of the Act has been amended through subsequent legislation. The requirements for assignment of Medicare FFS beneficiaries to ACOs participating under the program were amended by the 21st Century Cures Act (the Cures Act) (Pub. L. 114-255). The Bipartisan Budget Act of 2018 (Pub. L. 115-123), further amended section 1899 of the Act to provide for the following: expanded use of telehealth services by physicians or practitioners participating in an applicable ACO to furnish services to prospectively assigned beneficiaries; greater flexibility in the assignment of Medicare FFS beneficiaries to ACOs by allowing ACOs in tracks under retrospective beneficiary assignment a choice of prospective assignment for the agreement period; permitting Medicare FFS beneficiaries to voluntarily identify an ACO professional as their primary care provider and requiring that such beneficiaries be notified of the ability to make and change such identification, and mandating that any such voluntary identification will supersede claims-based assignment; and allowing ACOs under certain two-sided models to establish CMS-approved beneficiary incentive programs.

The Shared Savings Program regulations are codified at 42 CFR part 425. The final rule establishing the Shared Savings Program appeared in the November 2, 2011, Federal Register (Medicare Program; Medicare Shared Savings Program: Accountable Care Organizations; final rule (76 FR 67802) (hereinafter referred to as the “November 2011 final rule”)). A subsequent update to the program rules appeared in the June 9, 2015, Federal Register (Medicare Program; Medicare Shared Savings Program: Accountable Care Organizations; final rule (80 FR 32692) (hereinafter referred to as the “June 2015 final rule”)). The final rule entitled “Medicare Program; Medicare Shared Savings Program; Accountable Care Organizations--Revised Benchmark Rebasing Methodology, Facilitating Transition to Performance-Based Risk, and Administrative Finality of Financial Calculations,” which addressed changes related to the program's financial benchmark methodology, appeared in the June 10, 2016, Federal Register (81 FR 37950) (hereinafter referred to as the “June 2016 final rule”). A final rule, “Medicare Program; Revisions to Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2019; Medicare Shared Savings Program Requirements; Quality Payment Program; Medicaid Promoting Interoperability Program; Quality Payment Program--Extreme and Uncontrollable Circumstance Policy for the 2019 MIPS Payment Year; Provisions From the Medicare Shared Savings Program--Accountable Care Organizations--Pathways to Success; and Expanding the Use of Telehealth Services for the Treatment of Opioid Use Disorder Under the Substance Use-Disorder Prevention That Promotes Opioid Recovery and Treatment (SUPPORT) for Patients and Communities Act,” appeared in the November 23, 2018, Federal Register (83 FR 59452) (hereinafter referred to as the “November 2018 final rule” or the “CY 2019 PFS final rule”). In the November 2018 final rule, we finalized a voluntary 6-month extension for existing ACOs whose participation agreements would otherwise expire on December 31, 2018; allowed beneficiaries greater flexibility in designating their primary care provider and in the use of that designation for purposes of assigning the beneficiary to an ACO if the clinician they align with is participating in an ACO; revised the definition of primary care services used in beneficiary assignment; provided relief for ACOs and their clinicians impacted by extreme and uncontrollable circumstances in performance year 2018 and subsequent years; established a new Certified Electronic Health Record Technology (CEHRT) use threshold requirement; and reduced the Shared Savings Program quality measure set from 31 to 23 measures (83 FR 59940 through 59990 and 59707 through 59715).

A final rule redesigning the Shared Savings Program appeared in the December 31, 2018, Federal Register (Medicare Program: Medicare Shared Savings Program; Accountable Care Organizations--Pathways to Success and Extreme and Uncontrollable Circumstances Policies for Performance Year 2017; final rule (83 FR 67816) (hereinafter referred to as the “December 2018 final rule”)). In the December 2018 final rule, we finalized a number of policies for the Shared Savings Program, including a redesign of the participation options available under the program to encourage ACOs to transition to two-sided models; new tools to support coordination of care across settings and strengthen beneficiary engagement; and revisions to ensure rigorous benchmarking.

In the interim final rule with comment period (IFC) entitled “Medicare and Medicaid Programs; Policy and Regulatory Revisions in Response to the COVID-19 Public Health Emergency,” which was effective on the March 31, 2020 date of display and appeared in the April 6, 2020, Federal Register (85 FR 19230) (hereinafter referred to as the “March 31, 2020 COVID-19 IFC”), we removed the restriction that prevented the application of the Shared Savings Program extreme and uncontrollable circumstances policy for disasters that occur during the quality reporting period if the reporting period is extended to offer relief under the Shared Savings Program to all ACOs that may be unable to completely and accurately report quality data for 2019 due to the public health emergency (PHE) for coronavirus disease 2019 (COVID-19) (85 FR 19267 and 19268).

In the IFC titled “Medicare and Medicaid Programs; Basic Health Program, and Exchanges; Additional Policy and Regulatory Revisions in Response to the COVID-19 Public Health Emergency and Delay of Certain Reporting Requirements for the Skilled Nursing Facility Quality Reporting Program,” which was effective on May 8, 2020, and appeared in the May 8, 2020, Federal Register (85 FR 27573 through 27587) (hereinafter referred to as the “May 8, 2020 COVID-19 IFC”), we modified Shared Savings Program policies to: (1) allow ACOs whose agreement periods expired on December 31, 2020, the option to extend their existing agreement period by 1-year, and allow ACOs in the BASIC track's glide path the option to elect to maintain their current level of participation for performance year 2021; (2) adjust program calculations to remove payment amounts for episodes of care for treatment of COVID-19; and (3) expand the definition of primary care services for purposes of determining beneficiary assignment to include telehealth codes for virtual check-ins, e-visits, and telephonic communication. We also clarified the applicability of the program's extreme and uncontrollable circumstances policy to mitigate shared losses for the period of the PHE for COVID-19 starting in January 2020.

We have also made use of the annual CY PFS rules to address quality reporting for the Shared Savings Program and certain other issues. For summaries of certain policies finalized in prior PFS rules, refer to the CY 2020 PFS proposed rule (84 FR 40705), the CY 2021 PFS final rule (85 FR 84717), the CY 2022 PFS final rule (86 FR 65253 and 65254), the CY 2023 PFS final rule

(87 FR 69779 and 69780), the CY 2024 PFS final rule (88 FR 79094 and 79095) and the CY 2025 PFS final rule (89 FR 98082 and 98083). In the CY 2025 PFS final rule (89 FR 98081 through 98213), we finalized changes to Shared Savings Program policies, including to: sunset a requirement under which CMS would terminate an ACO's participation agreement, under certain circumstances, if it failed to maintain at least 5,000 assigned beneficiaries during an agreement period; revise the requirement that newly formed ACOs must agree to allow CMS to share a copy of their application with the Antitrust Agencies; update the definition of primary care services used in beneficiary assignment; revise the Shared Savings Program regulations to broaden a limited exception to the program's voluntary alignment policy; make changes to the quality performance standard and other quality reporting requirements, including to: (1) require Shared Savings Program ACOs to report the Alternative Payment Model (APM) Performance Pathway (APP Plus) quality measure set beginning in performance year 2025 and for subsequent performance years; (2) focus the collection types available to Shared Savings Program ACOs for reporting the APP Plus quality measure set to electronic clinical quality measures (eCQMs) and Medicare Clinical Quality Measures for Accountable Care Organizations Participating in the Medicare Shared Savings Program (Medicare CQMs) by performance year 2027 and make Merit-based Incentive Payment System clinical quality measures (MIPS CQMs) available in performance years 2025 and 2026; (3) establish a Complex Organization Adjustment for Virtual Groups and APM Entities, including Shared Savings Program ACOs, when reporting eCQMs; score measures of the Medicare CQM collection type using flat benchmarks for their first two performance periods in MIPS; and (4) extend the eCQM/MIPS CQM reporting incentive for meeting the Shared Savings Program quality performance standard to performance years 2025 and 2026 and extend the eCQM reporting incentive for performance year 2027 and subsequent performance years; allow ACOs receiving advance investment payments to voluntarily terminate from the payment option while remaining in the Shared Savings Program; codify a policy for recouping advance investment payments from ACOs whose participation agreements are terminated by CMS; make modifications to the Shared Savings Program's financial methodology, including to (1) establish a third possible upward adjustment to an ACO's historical benchmark--the health equity benchmark adjustment--based on the number of beneficiaries the ACO serves who are dually eligible or enrolled in the Medicare Part D low-income subsidy (LIS); (2) establish a calculation methodology to account for the impact of improper payments in recalculating expenditures and payment amounts used in Shared Savings Program financial calculations upon reopening a payment determination; (3) establish a methodology for excluding payment amounts for Healthcare Common Procedure Coding System (HCPCS) and Current Procedural Terminology (CPT) codes exhibiting significant, anomalous, and highly suspect (SAHS) billing activity during CY 2024 or subsequent calendar years that warrant adjustment; and (4) make technical changes in provisions of the Shared Savings Program regulations on financial calculations, to align and clarify the language used to describe weights applied to the growth in ACO and regional risk scores for each Medicare enrollment type, as part of the calculation for capping ACO and regional risk score growth; and modify beneficiary notification requirements.

In a final rule entitled “Medicare Program: Mitigating the Impact of Significant, Anomalous, and Highly Suspect Billing Activity on Medicare Shared Savings Program Financial Calculations in Calendar Year 2023,” which was effective on October 15, 2024, and appeared in the September 27, 2024, Federal Register (89 FR 79152) (hereinafter referred to as the “SAHS billing activity final rule”), we finalized an approach to address the SAHS billing activity CMS identified for CY 2023 to protect the accuracy, fairness, and integrity of Shared Savings Program financial calculations.

Policies applicable to Shared Savings Program ACOs for purposes of quality reporting for other programs have also continued to evolve based on changes in statute, such as the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (Pub. L. 114-10), which established the Quality Payment Program. In the CY 2017 Quality Payment Program final rule with comment period (81 FR 77008), we established regulations for the MIPS and Advanced APMs and related policies applicable to eligible clinicians who participate in APMs, including the Shared Savings Program. We have also made updates to policies under the Quality Payment Program through the annual CY PFS rules. c. Summary of Shared Savings Program Provisions

In sections III.F.2. through III.F.9. of this final rule, we summarize and respond to public comments received on the proposed modifications to the Shared Savings Program's policies discussed in section III.F. of the CY 2026 PFS proposed rule (90 FR 32645 through 32694) and any related corrections specified in the CY 2026 PFS proposed rule correction notice (90 FR 39155 through 39161). Some commenters' suggestions for modifications to Shared Savings Program policies went beyond the scope of the proposals discussed in section III.F. of the CY 2026 PFS proposed rule and will not be addressed in this section of this final rule. As a general summary, we are finalizing the following changes to Shared Savings Program policies to:

Modify requirements for determining an ACO's eligibility for Shared Savings Program participation options, for agreement periods beginning on or after January 1, 2027, to limit participation in a one- sided model to an ACO's first agreement period under the BASIC track's glide path (if eligible), and require ACOs inexperienced with performance-based risk Medicare ACO initiatives (defined at Sec. 425.20) to progress more rapidly to higher levels of risk and potential reward under Level E of the BASIC track or the ENHANCED track (subject to the exception prohibiting ACOs with fewer than 5,000 assigned beneficiaries in benchmark year (BY) 1, BY2, or both, from participating in the ENHANCED track under the provisions discussed in section III.F.4.b.(2).(b). of this final rule), compared to existing policies (section III.F.2 of this final rule).

Modify Shared Savings Program eligibility requirements to require ACOs to make certain changes to their ACO participant list when an ACO participant experiences a change of ownership (CHOW) where the surviving Taxpayer Identification Number (TIN) is newly enrolled in the Provider Enrollment, Chain, and Ownership System (PECOS) with no prior Medicare billing claims history, during the performance year and outside of the annual change request cycle, and similarly allow for changes during the performance year to the ACO's Skilled Nursing Facility (SNF) affiliate list if a SNF affiliate undergoes a CHOW resulting in change to the Medicare enrolled TIN (section III.F.3. of this final rule).

Modify the Shared Savings Program eligibility requirements and financial reconciliation requirements in

connection with the statutory requirement that ACOs have at least 5,000 assigned Medicare FFS beneficiaries to:

++ Require ACOs applying to enter a new agreement period to have at least 5,000 assigned beneficiaries in BY3, while allowing the ACO to have fewer than 5,000 assigned beneficiaries in BY1, BY2, or both (section III.F.4.b.(2)(a) of this final rule).

++ Require ACOs that enter a new agreement period with fewer than 5,000 assigned beneficiaries in BY1, BY2, or both to enter the BASIC track (section III.F.4.b.(2).(b). of this final rule).

++ Cap shared savings and shared losses at a lesser amount for ACOs with fewer than 5,000 assigned beneficiaries in any of the three BYs, to help ensure the amounts reflect the ACO's performance in the program rather than normal variation in expenditures (section III.F.4.c.(1). of this final rule).

++ Exclude ACOs that fall below 5,000 assigned beneficiaries in any benchmark year from being eligible to leverage existing policies that provide certain low revenue ACOs participating in the BASIC track with increased opportunities to share in savings (section III.F.4.c.(2). of this final rule).

Update the definition of primary care services used in beneficiary assignment at Sec. 425.400(c) (section III.F.5. of this final rule).

Revise the quality performance standard and other quality reporting requirements, including the following (section III.F.6. of this final rule):

++ Revise the definition of a beneficiary eligible for Medicare CQMs at Sec. 425.20 for performance year 2025 and subsequent performance years so that the population identified for reporting within the Medicare CQM collection type would have greater overlap with the beneficiaries that are assignable to an ACO (section III.F.6.b. of this final rule).

++ Remove the health equity adjustment applied to an ACO's quality score beginning in performance year 2026 and revise the terminology used to describe the health equity adjustment and other related terms for performance years 2023 through 2025 (section III.F.6.c. of this final rule).

++ Update the APP Plus quality measure set for Shared Savings Program ACOs including the removal of Quality ID: 487 Screening for Social Drivers of Health (section III.F.6.d. of this final rule).

++ Require CMS-approved survey vendors to administer the CAHPS for MIPS Survey via a web-mail-phone protocol beginning with 2027 (section III.F.6.e. of this final rule).

Expand the application of the Shared Savings Program quality and finance extreme and uncontrollable circumstances (EUC) policies to an ACO that is affected by an EUC due to a cyberattack, including ransomware/malware, as determined by the Quality Payment Program, for performance year 2025 and subsequent performance years (section III.F.7. of this final rule).

Revise the Shared Savings Program regulations for performance year 2025 and subsequent performance years to rename the “health equity benchmark adjustment” to the “population adjustment” (section III.F.8. of this final rule).

Modify the Shared Savings Program quality reporting monitoring requirements at Sec. 425.316 to specify for performance years beginning on or after January 1, 2026, requirements to monitor ACOs for failure to meet both the quality performance standard and the alternative quality performance standard, the latter of which (established in the CY 2023 PFS final rule) was inadvertently omitted from the existing framework. Similarly, modify Sec. 425.224(b)(1)(ii)(A) related to reviewing applications for renewing and re-entering ACOs with a demonstrated pattern of failure to meet both the quality performance standard and the alternative quality performance standard (section III.F.9 of this final rule).

Taken together, the policies we are adopting for the Shared Savings Program in this final rule are anticipated to reduce program spending by $20 million in total through the end of the 10-year period 2026 through 2035, ranging from approximately $590 million lower spending at the 10th percentile to $670 million higher spending at the 90th percentile (as described in the Regulatory Impact Analysis in section VI. of this final rule).

Certain policies, including both existing policies and the new policies adopted in this final rule, rely upon the authority granted in section 1899(i)(3) of the Act to use other payment models that the Secretary determines will improve the quality and efficiency of items and services furnished under the Medicare program, and that do not result in program expenditures greater than those that would result under the statutory payment model. The following policies require the use of our authority under section 1899(i) of the Act: changes to the requirements for ACOs' progression to performance-based risk under the program's participation options (described in section III.F.2 of this final rule); potentially applying an alternative loss recoupment limit, in conducting financial reconciliation for each performance year, for an ACO with fewer than 5,000 assigned beneficiaries in any BY, for agreement periods beginning on or after January 1, 2027 (described in section III.F.4.c of this final rule); excluding ACOs that fall below 5,000 assigned beneficiaries in any BY from being eligible to benefit from the policies providing certain low revenue ACOs participating in the BASIC track with additional opportunities to share in savings, for agreement periods beginning on or after January 1, 2027 (described in section III.F.4.c of this final rule); and mitigating shared losses for an ACO determined to be affected by an EUC due to a cyberattack, including ransomware/malware, as determined by the Quality Payment Program, for performance year 2025 and subsequent performance years (described in section III.F.7.c of this final rule). As described in the Regulatory Impact Analysis in section VI. and elsewhere in this final rule, these changes to our payment methodology are expected to improve the quality and efficiency of care and are not expected to result in a situation in which the payment methodology under the Shared Savings Program, including all policies we have adopted under the authority of section 1899(i) of the Act, results in more spending under the program than would have resulted under the statutory payment methodology in section 1899(d) of the Act.

We will continue to reexamine this projection in the future to ensure that an alternative payment model does not result in additional program expenditures and so continues to satisfy the requirement under section 1899(i)(3)(B) of the Act. If we later determine that the payment model that includes policies established under section 1899(i)(3) of the Act no longer meets this requirement, we will undertake notice and comment rulemaking to adjust the payment model to ensure continued compliance with the statutory requirements. 2. Shared Savings Program Participation Options Under the BASIC Track a. Background on Shared Savings Program Participation Options

Section 1899(d) of the Act establishes the general requirements for shared savings payments to participating ACOs. Specifically, section 1899(d)(1)(A) of the Act specifies that providers of services and suppliers participating in an ACO will continue to receive payments under the original Medicare FFS program under Parts A and B in the same manner

as would otherwise be made, and that an ACO is eligible to receive payment for a portion of savings generated for Medicare provided that the ACO meets both the quality performance standards established by the Secretary and achieves savings against its benchmark. Additionally, section 1899(i)(3) of the Act authorizes the Secretary to use other payment models rather than the one-sided model described in section 1899(d) of the Act, as long as the Secretary determines that the other payment model will improve the quality and efficiency of items and services furnished to Medicare beneficiaries without additional program expenditures.

Since its inception in 2012, the Shared Savings Program has included both one-sided shared savings only models incorporating the statutory payment methodology under section 1899(d) of the Act, and two-sided shared savings and losses models that were also based on the payment methodology under section 1899(d) of the Act but incorporated performance-based risk using the authority under section 1899(i)(3) of the Act to use other payment models.\370\ Under the Shared Savings Program regulations at Sec. 425.20, we defined a one-sided model to mean a model under which the ACO may share savings with the Medicare program, if it meets the requirements for doing so, but is not liable for sharing any losses incurred under 42 CFR part 425 subpart G. At Sec. 425.20, we defined a two-sided model to mean a model under which an ACO may share savings with the Medicare program, if it meets the requirements for doing so, and is also liable for sharing any losses incurred under subpart G. Subpart G of the program's regulations includes provisions on the calculation of shared savings and losses (as applicable) under the program's tracks, or levels of participation, among other policies.

\370\ For additional background, we refer readers to the CY 2023 PFS final rule (87 FR 69805 and 69806) for a summary of changes to the program's financial models, or “tracks,” over time.

At Sec. 425.600, we describe the options for an ACO's selection of a risk model. This section includes the criteria used by CMS to determine an ACO's eligibility to participate under the program's tracks, or levels of participation, as well as limitations on the amount of time an ACO may participate under a one-sided model, options and requirements for an ACO to participate under a two-sided model, and provisions governing the progression from a one-sided model to higher levels of risk and potential reward under a two-sided model (as applicable).

Over time, we have modified the available financial models under the Shared Savings Program, and approaches to determining an ACO's eligibility to participate under these financial models, which we refer to as the ACO's participation options. For additional information on the changes to the Shared Savings Program's available financial models, including finalization of the existing policies and background on earlier requirements, we refer readers to the discussion in the CY 2023 PFS final rule (87 FR 69805 through 69821).

As finalized with the December 2018 final rule (83 FR 67831 through 67841), for agreement periods beginning on July 1, 2019, and in subsequent years, eligible ACOs enter into an agreement period of not less than 5 years under one of two tracks of the Shared Savings Program, either the BASIC track (see Sec. Sec. 425.600(a)(4) and 425.605) or the ENHANCED track (see Sec. Sec. 425.600(a)(3) and 425.610). The BASIC track includes a glide path from one-sided model Levels A and B \371\ to incrementally higher levels of performance- based risk under Levels C, D, and E.\372\ The ENHANCED track offers the highest level of risk and potential reward under the Shared Savings Program. Level E of the BASIC track and the ENHANCED track each qualify as an Advanced APM under the Quality Payment Program.\373\

\371\ For details on the Level A financial model, see Sec. Sec. 425.600(a)(4)(i)(A)(1) and 425.605(d)(1)(i). For details on the Level B financial model see Sec. Sec. 425.600(a)(4)(i)(A)(2) and 425.605(d)(1)(ii).

\372\ For details on the Level C financial model, see Sec. Sec. 425.600(a)(4)(i)(A)(3) and 425.605(d)(1)(iii). For details on the Level D financial model, see Sec. Sec. 425.600(a)(4)(i)(A)(4) and 425.605(d)(1)(iv). For details on the Level E financial model, see Sec. Sec. 425.600(a)(4)(i)(A)(5) and 425.605(d)(1)(v).

\373\ For related information, on Advanced APM status under the Quality Payment Program for each track/level, see the December 2018 final rule, Table 3 “Comparison of Risk and Reward Under BASIC Track and ENHANCED Track”, and table notes at 83 FR 67852 and 67853.

In rulemaking following the December 2018 final rule, we modified the approach for determining an ACO's eligibility for participation options in the BASIC track and ENHANCED track, along with the number of performance years an ACO may remain under a one-sided model of the BASIC track's glide path.\374\ As finalized with the CY 2023 PFS final rule (87 FR 69805 through 69821), for agreement periods beginning on or after January 1, 2024, Sec. 425.600(g) specifies the criteria CMS uses to determine an ACO's eligibility to enter an agreement period under the BASIC track's glide path, Level E of the BASIC track, or the ENHANCED track. Under these policies, CMS determines an ACO's eligibility for participation options in the BASIC track and ENHANCED track based on the ACO's experience and its ACO participants' experience with the Shared Savings Program and other performance-based risk Medicare ACO initiatives.\375\ In accordance with Sec. 425.600(g), we use the following approach:

\374\ We refer readers to discussions in earlier rulemaking, including: December 2018 final rule (83 FR 67863 through 67922); May 8, 2020 COVID-19 IFC (85 FR 27575 and 27576) and CY 2021 PFS final rule (85 FR 84767 through 84769); Fiscal Year (FY) 2022 Medicare Hospital Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital (LTCH) Prospective Payment System (PPS) final rule (86 FR 45502 through 45506); and CY 2023 PFS final rule (87 FR 69805 through 69821).

\375\ See the definitions of “experienced with performance- based risk Medicare ACO initiatives,” “inexperienced with performance-based risk Medicare ACO initiatives,” and “performance-based risk Medicare ACO initiative” under Sec. 425.20.

If an ACO is determined to be inexperienced with performance-based risk Medicare ACO initiatives (as defined at Sec. 425.20),\376\ the ACO may enter either the BASIC track's glide path at any of the levels of risk and potential reward (Levels A through E), or the ENHANCED track. In accordance with Sec. 425.600(g)(1)(i) through (iii), an ACO that is inexperienced with performance-based risk Medicare ACO initiatives may participate under the BASIC track's glide path for a maximum of two agreement periods:

\376\ In accordance with Sec. 425.20 “inexperienced with performance-based risk Medicare ACO initiatives” means an ACO that CMS determines meets all of the following: (1) the ACO is a legal entity that has not participated in any performance-based risk Medicare ACO initiative as defined at Sec. 425.20, and has not deferred its entry into a second Shared Savings Program agreement period under a two-sided model at Sec. 425.200(e); and (2) less than 40 percent of the ACO's ACO participants participated in a performance-based risk Medicare ACO initiative, or in an ACO that deferred its entry into a second Shared Savings Program agreement period under a two-sided model at Sec. 425.200(e), in each of the 5 most recent performance years. An ACO participant is considered to have participated in a performance-based risk Medicare ACO initiative if the ACO participant TIN was or will be included in financial reconciliation for one or more performance years under such initiative during any of the 5 most recent performance years. For brevity, we sometimes refer to such ACOs as “inexperienced with performance-based risk” or “inexperienced with risk.”

++ An ACO that enters an agreement under the BASIC track's glide path at either Level A or Level B is deemed to have completed one agreement under the BASIC track's glide path and is only eligible to enter a second agreement under the BASIC track's glide path if the ACO continues to meet the definition of inexperienced with performance- based risk Medicare ACO initiatives and satisfies either of the following: (A) the ACO is the same legal entity as a current

or previous ACO that previously entered into a participation agreement for participation in the BASIC track's glide path only one time; or (B) for a new ACO identified as a re-entering ACO, the ACO in which the majority of the new ACO's participants were participating previously entered into a participation agreement for participation in the BASIC track's glide path only one time.

++ An ACO that is determined to be inexperienced with performance- based risk Medicare ACO initiatives but is not eligible to enter the BASIC track's glide path may enter either the BASIC track Level E for all performance years of the agreement period, or the ENHANCED track.

If an ACO is determined to be experienced with performance-based risk Medicare ACO initiatives (as defined at Sec. 425.20), the ACO may enter either the BASIC track Level E for all performance years of the agreement period, or the ENHANCED track.

Section 425.600(a)(4)(i)(C) specifies glide path progression for agreement periods beginning on or after January 1, 2024. Under these requirements, an ACO eligible to enter the BASIC track's glide path may elect to enter its agreement period at any of the levels of risk and potential reward available under Levels A through E. An ACO is automatically advanced to the next level of the BASIC track's glide path at the start of each subsequent performance year of the agreement period, if a higher level of risk and potential reward is available under the BASIC track, except in the following circumstances: (1) the ACO elects to transition to a higher level of risk and potential reward within the BASIC track's glide path as provided at Sec. 425.226(a)(2)(i); (2) the ACO elects to maintain its level of participation as provided at Sec. 425.600(a)(4)(i)(C)(3); \377\ or (3) the ACO elected to participate under a one-sided model, but is determined to be experienced with performance-based risk Medicare ACO initiatives and will be automatically advanced to Level E within the BASIC track at the start of the next performance year and will remain in Level E for all subsequent performance years of the agreement period, in accordance with Sec. 425.600(h)(2)(i).\378\

\377\ In accordance with Sec. 425.600(a)(4)(i)(C)(3), a new ACO (not a renewing ACO or re-entering ACO as defined at Sec. 425.20) participating in its first agreement period under the BASIC track that enters the glide path at Level A may elect to remain under Level A for all subsequent performance years of the agreement period. As described in the CY 2023 PFS final rule (87 FR 69809), an ACO must make this election prior to its automatic advancement to Level B for performance year 2 of its agreement period under the BASIC track's glide path.

\378\ We refer readers to the CY 2023 PFS final rule (87 FR 69811 and 69812), in which we finalized the approach to monitoring of risk experience for agreement periods under Level A of the BASIC track, for performance years beginning on or after January 1, 2024, for a detailed explanation and examples of the approach.

Under our existing policies, new ACOs inexperienced with performance-based risk Medicare ACO initiatives may participate in a BASIC track one-sided model for up to 7 performance years before being required to transition to performance-based risk. For example, an eligible ACO may enter a first BASIC track agreement period in the glide path and elect to remain under Level A for all 5 performance years of this agreement period. If the ACO is eligible to enter a second BASIC track agreement period in the glide path and enters at Level A for its first performance year, the ACO would be automatically advanced to Level B in its second performance year, respectively its sixth and seventh cumulative performance years under a one-sided model. The ACO would participate under performance-based risk for the third and subsequent performance years of its second agreement period under the BASIC track, either by being automatically advanced to Level C, D and E for each of the 3 remaining performance years of its second agreement period under the glide path, or electing to advance more rapidly to higher levels of risk and reward along the glide path.

ACOs that initially elect to remain in Level A of the BASIC track for all 5 performance years for their first agreement period under the BASIC track have the option to subsequently elect to transition to performance-based risk during this agreement period in accordance with Sec. 425.226(a)(2)(i) and Sec. 425.600(a)(4)(i)(C)(3)(iii), and (a)(4)(i)(C)(4) to (6). For example, an ACO inexperienced with performance-based risk Medicare ACO initiatives that enters an agreement period under the BASIC track at Level A and elects to maintain participation at Level A for the second and subsequent performance years of this agreement period may subsequently elect to advance to a two-sided model along the BASIC track's glide path (Level C, D or E) for performance year 3, 4 or 5 of this agreement period. In such a case, in accordance with Sec. 425.600(a)(4)(i)(C)(6), when an ACO elects to transition to a higher level of risk and reward available under the BASIC track's glide path, the ACO would be automatically advanced to the next level of the BASIC track's glide path at the start of each subsequent performance year of the agreement period, if a higher level of risk and potential reward is available. Further, in progressing to performance-based risk in the BASIC track's glide path, the ACO would be considered experienced with performance-based risk Medicare ACO initiatives for purposes of determining the ACO's participation options for a future agreement period, and therefore eligible to enter either the BASIC track Level E for all performance years or the ENHANCED track in accordance with Sec. 425.600(g)(2).

CMS accepts applications for ACOs to participate in the Shared Savings Program annually. Applicant ACOs are required to make a track selection when submitting their application, which is reviewed by CMS to determine the ACO's eligibility for the selected option.\379\ During the annual change request cycle, for ACOs currently participating in the program, ACOs participating in the BASIC track's glide path have the opportunity to submit participation options change requests, in connection with their level of participation, among other change requests, prior to the start of the next performance year in the program. For instance, ACOs participating in the BASIC track's glide path may elect to remain in Level A (if participation in Level A was previously elected), or to advance to higher levels of risk and reward along the glide path.\380\ The timing of the annual application cycle and change request cycle typically coincide, and span a period from Spring through Fall in advance of the start of the upcoming performance year beginning on January 1st.\381\ During the application and change request cycles, CMS communicates information about an ACO's experience with performance-based risk Medicare ACO initiatives, and track/level eligibility, among other information, at standardized intervals,

to applicant ACOs and currently participating ACOs.

\379\ See Medicare Shared Savings Program, Application Reference Manual (April 2025, version 7), available at https://www.cms.gov/medicare/medicare-fee-for-service-payment/sharedsavingsprogram/downloads/ssp-application-reference-manual.pdf.

\380\ See Medicare Shared Savings Program, Managing Program Participation Guidance (April 2025, version 2), available at https://www.cms.gov/files/document/managing-program-participation-guidance.pdf.

\381\ For resources and information on the Shared Savings Program application and change request cycles, refer to the Shared Savings Program website at https://www.cms.gov/medicare/payment/fee-for-service-providers/shared-savings-program-ssp-acos (including the Application Types & Timelines web page, and Application Toolkit web page).