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

In the CY 2026 PFS proposed rule (see 90 FR 32650 and 32651), we explained our belief, including as described in earlier rulemaking, that financial models under which ACOs bear a degree of financial risk have potential to induce more meaningful systematic change in providers' and suppliers' behavior towards meeting the Shared Savings Program's goals, compared to one-sided models (see for example, 76 FR 67904 through 67909, 80 FR 32758 through 32760, and 83 FR 67967 through 67968). As described in the CY 2026 PFS proposed rule (90 FR 32648 through 32650), our policies on the amount of time an ACO can participate under a one-sided model of the Shared Savings Program, and progression to two-sided risk, have varied over time, including as a result of changes finalized with the CY 2023 PFS final rule (see 87 FR 69805 through 69818). In the CY 2023 PFS final rule (87 FR 69808), we explained our ongoing consideration for how long ACOs should be allowed to participate under a one-sided model. In explaining what has contributed to this consideration, we identified the importance of balancing our goal of driving the greatest possible shift to high-value care delivery, which we believe may be incentivized most effectively under a two-sided model, with a concern that requiring ACOs to take on too much downside risk too quickly may disincentivize program participation and reduce the program's potential to positively affect the quality and cost of care furnished to beneficiaries. As described in the CY 2023 PFS final rule, a number of factors informed our proposal and decision to finalize the current approach that allows eligible ACOs to participate for a 5-year agreement period under Level A of the BASIC track with the opportunity to enter a second agreement period under the BASIC track's glide path beginning under a one-sided model. In the CY 2026 PFS proposed rule, we summarized the considerations discussed in the CY 2023 PFS final rule.

In the CY 2023 PFS final rule (see 87 FR 69806 and 69807), we provided background on comments summarized in the December 2018 final rule, which finalized our proposal to limit ACOs to two performance years under a one-sided model (or three performance years for eligible low revenue ACOs).\382\ We explained that most commenters on that proposal recommended that CMS extend the time any ACO can participate in a one-sided model to 3 performance years, as opposed to the 2 performance years proposed for ACOs eligible to participate under the BASIC track with participation agreements beginning on or after January 1, 2020 that do not qualify for a third year under the one-sided model under the exception at Sec. 425.600(a)(4)(i)(B)(2)(ii), stating that it takes longer than 2 performance years to implement meaningful changes in a healthcare delivery model and among healthcare provider and patient populations. Other commenters believed that the progression to two-sided risk that we proposed and ultimately finalized was far too aggressive and would deter participation. These commenters generally suggested allowing for 4 or 5 performance years (or a full agreement period) under a one-sided model. Some commenters suggested that rural ACOs should be allowed at least two, 5-year agreement periods under a one-sided model (83 FR 67847).

\382\ See Sec. 425.600(a)(4)(i)(B)(2)(i)-(ii) for provisions on automatic advancement along the BASIC track's glide path. Note that ACOs with an agreement period beginning on July 1, 2019, could participate under a one-sided model for up to 3 performance years under the exception to automatic advancement along the BASIC track's glide path in accordance with Sec. 425.600(a)(4)(i)(B)(2)(i), or for four performance years under the exception for eligible low revenue ACOs in accordance with Sec. 425.600(a)(4)(i)(B)(2)(ii).

In the CY 2023 PFS final rule (87 FR 69807 and 69808), we described participation trends for PY 2022 and explained that while many ACOs had agreed to participate under a two-sided model, not all ACOs appeared to be ready to take on performance-based risk. In particular, we described our experience with policies finalized in connection with the PHE for COVID-19, in which ACOs participating in the BASIC track's glide path could forgo automatic advancement and “freeze” their participation for PY 2021 and PY 2022 at their PY 2020 and PY 2021 levels, respectively.\383\ We observed that when given the opportunity to freeze at the ACO's current BASIC track level of the glide path, most eligible ACOs under a one-sided model (Level A or Level B) chose to remain in a one-sided model. More generally, we explained that although we continued to believe there are stronger incentives for increased efficiency when ACOs are in a two-sided risk track, ACOs had continued to report that they were constrained by the participation options finalized with the December 2018 final rule, and needed more time to invest in infrastructure and redesigned care processes for high quality and efficient healthcare service delivery before transitioning to performance-based risk. See 87 FR 69808.

\383\ The PHE for COVID-19 was in effect starting in January 2020, and ongoing at the time of the CY 2023 PFS rulemaking during 2022 and expired on May 11, 2023. See for example, U.S. Department of Health and Human Services website, COVID-19 Public Health Emergency web page, available at https://www.hhs.gov/coronavirus/covid-19-public-health-emergency/index.html.

We noted our determination that allowing a maximum of 7 years under the one-sided model, as finalized in the CY 2023 PFS final rule, would strike a more appropriate balance within the structure of 5 performance year agreement periods, than only allowing for 2 years under a one- sided model. See 87 FR 46114; see also 87 FR 69809. We also noted that giving ACOs longer than 7 years or potentially unlimited time under a one-sided model would dilute the program's ability to meaningfully influence expenditures and quality through the incentives provided by ACO risk assumption. Moreover, we explained that the approach that would extend the time an eligible ACO could participate under a one- sided model to 7 years would allow ACOs more time to make investments in care improvement and to capitalize on these investments, while still working to lower costs and improve the quality of care for their assigned beneficiaries. 87 FR 69809. We also recognized that ACOs are best able to select their participation options to meet the needs of their organizations, including when to time their transition to performance-based risk, including within an agreement period. Id. We also explained our intention with these changes was to provide ACOs with a more gradual “on-ramp” to taking on two-sided risk and to allow them the flexibility to best ensure their readiness to take on two-sided risk, and our belief that the approach would encourage more ACOs to form and join the program, as well as encourage currently participating ACOs to remain in the program. See 87 FR 69812, and 69816.

In the CY 2023 PFS final rule, we also recognized differing potential barriers to program participation by low revenue ACOs, and high spending ACOs, among other ACOs with particular characteristics or compositions. For instance, we recognized the importance of finalizing the participation option under which an eligible ACO may stay in a one- sided model of the BASIC track for the full 5-year agreement period for growing participation in the Shared Savings Program by eligible ACOs serving higher spending populations,

particularly low revenue, physician-led ACOs. See 87 FR 70195. In combination with the expanded time under a one-sided model, policies finalized with the CY 2023 PFS final rule to allow the option for eligible new, low revenue ACOs inexperienced with risk to receive advance investment payments (see Sec. 425.630), and expanded opportunities for certain low revenue ACOs participating in the BASIC track to share in savings even if they do not meet the MSR (see Sec. 425.605(h)), were designed to support program participation by low revenue ACOs. See 87 FR 70195. Additionally, in the CY 2023 PFS final rule (87 FR 70192), we explained that in combination with modifications to the benchmarking methodology to reduce the impact of the negative regional adjustment also being finalized in that rule, offering eligible ACOs a shared savings-only BASIC track participation option for a full 5-year agreement period, was expected to significantly re- engage participation for ACOs serving higher cost beneficiaries. We also explained our belief that flexibility with respect to the timeline for progression to two-sided risk would be important in the Shared Savings Program to encourage small, rural, safety-net providers to form ACOs or to join larger, more urban practices to share resources, which among other factors could help provide high need beneficiaries served by small, rural, safety-net providers with the resources to better coordinate their care and improve outcomes. See 87 FR 69809, and 69813.

As discussed in the CY 2026 PFS proposed rule (90 FR 32652), CMS has announced a vision to Make America Healthy Again.\384\ Relatedly, the Innovation Center announced a strategy to focus on testing models that transform the U.S. health system into one that builds healthier lives through prevention, individual empowerment, and choice and competition, under which people achieve their health goals and the providers caring for them are directly accountable for their health outcomes and the costs of their care.\385\ This strategy includes, among other measures to protect Federal taxpayers, requiring all models to have downside financial risk and requiring providers to assume some of the financial risk. Similarly, with the Shared Savings Program, we are examining approaches to encourage ACO participation under two-sided models.

\384\ See CMS Press Release, “Dr. Mehmet Oz Shares Vision for CMS”, April 10, 2025, available at https://www.cms.gov/newsroom/press-releases/dr-mehmet-oz-shares-vision-cms (explaining CMS will work to modernize Medicare, the Marketplaces and Medicaid, so Americans get the care that they want, need, and deserve, including by holding healthcare providers accountable for health outcomes).

\385\ See Sutton, Abe, White Paper “CMS Innovation Center Strategy to Make America Healthy Again”, May 13, 2025, available at https://www.cms.gov/priorities/innovation/about/cms-innovation-center-strategy-make-america-healthy-again.

In the CY 2026 PFS proposed rule (90 FR 32652), we specified that in light of CMS' current vision and strategic direction, we are revisiting Shared Savings Program policies on the amount of time an ACO can remain under a one-sided model, and the progression to performance- based risk, and in particular the current policy that allows ACOs to participate for up to 7 performance years under a one-sided model. Specifically, we stated that we are considering the effectiveness of the current requirements for determining an ACO's participation options, finalized with the December 2018 final rule, and modified through subsequent rulemaking, including the CY 2023 PFS final rule, in achieving a balance between encouraging transition to two-sided risk and a concern that requiring ACOs to take on too much downside risk too quickly may disincentivize program participation. In a discussion in the CY 2026 PFS proposed rule (90 FR 32652 through 32655), we described more recent trends in ACO participation in the Shared Savings Program (including as a result of changes to program requirements through rulemaking) and ACO financial performance, which inform our consideration of our current policies on ACOs' progression to performance-based risk under the Shared Savings Program. This discussion focuses on Shared Savings Program participation trends in general between PY 2018 and PY 2025; participation trends among new, low revenue ACOs inexperienced with performance-based risk Medicare ACO initiatives, and ACOs serving medically complex, high-cost populations, for which we have finalized policies to facilitate program participation through CY 2023, 2024, and 2025 PFS rulemaking; our experience with the timing of ACO progression to performance-based risk under participation options that allow an eligible ACO to participate for up to 7 performance years under a one-sided model; and financial performance trends for recent performance years, among ACOs transitioning from one-sided to two-sided levels of the BASIC track, or remaining under the BASIC track's two-sided model levels. In this final rule, we restate this discussion from the CY 2026 PFS proposed rule, with certain updated statistics, as noted.

The redesign of participation options with the December 2018 final rule greatly increased ACO participation in two-sided models.\386\ For PY 2018, 82 percent of ACOs were participating under a one-sided model, and 18 percent of ACOs were participating under a two-sided model.\387\ For PY 2025, 29 percent of ACOs are participating under a one-sided model, and 71 percent of ACOs are participating under a two-sided model.\388\ With respect to recent trends, Table B-G1 shows the number of ACOs participating in the BASIC track (by Level) and ENHANCED track for PYs 2022 through 2025.\389\ As shown in Table B-G1, participation in one-sided models is lower in PY 2025 (29 percent of ACOs) compared to PY 2022 (41 percent of ACOs), and PY 2023 and PY 2024 (33 percent of ACOs for each PY). Further, from program participation for PYs 2022 through 2025, we have observed that when ACOs participate under two- sided risk they opt for higher levels of risk and reward. Very few ACOs are participating under Levels C or D of the BASIC track's glide path, compared to participation in Level E of the BASIC track or the ENHANCED track. Among ACOs participating under two-sided risk, more ACOs are participating under the highest level of risk and potential reward offered by the

ENHANCED track than in Levels C, D and E of the BASIC track combined.

\386\ For data on ACO participation in the Shared Savings Program by track/level and performance year, see Shared Savings Program “Fast Facts” available through the Medicare Shared Savings Program website, Program Data web page at https://www.cms.gov/medicare/payment/fee-for-service-providers/shared-savings-program-ssp-acos/data (including the “Fast Facts Archives” (zip file), available at https://www.cms.gov/media/638196). See also, Data.CMS.gov, Medicare Shared Savings Program, Accountable Care Organizations, Public Use File (by performance year), available at https://data.cms.gov/medicare-shared-savings-program/accountable-care-organizations. We note that some observations described in the CY 2026 PFS proposed rule (90 FR 32648 through 32659) as restated in this section of this final rule, particularly for PY 2025 data, are based on internal analysis.

\387\ See “Medicare Shared Savings Program Fast Facts (January 2018)”, within “Fast Facts Archives”, available at https://www.cms.gov/media/638196.

\388\ 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.

\389\ 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. See also, “Shared Savings Program Fast Facts--As of January 1, 2022,” “Shared Savings Program Fast Facts--As of January 1, 2023,” and “Shared Savings Program Fast Facts--As of January 1, 2024”, within “Fast Facts Archives”, available at https://www.cms.gov/media/638196. [GRAPHIC] [TIFF OMITTED] TR05NO25.120

Shared Savings Program participation with the two most recent start dates shows that nearly one-half of new ACOs are entering a one-sided model of the BASIC track, while the vast majority of ACOs continuing their participation in the program are participating under a two-sided model. Among the 140 ACOs entering a new agreement period for the January 1, 2024, start date, 51.6 percent (or 31 of 60) of ACOs participating in their first agreement period entered the BASIC track at Level A, while 2.5 percent (or 2 of 80) of ACOs participating in their second or subsequent agreement period entered the BASIC track at Level A. Among the 229 ACOs entering a new agreement period for the January 1, 2025 start date, 45.9 percent (or 17 of 37) of ACOs participating in their first agreement period entered the BASIC track at Level A or B, while 17.7 percent (or 34 of 192) of ACOs participating in their second or subsequent agreement period entered the BASIC track at Level A.

We have gained experience with ACOs' participation under changes to the Shared Savings Program policies more recently finalized with CY 2023, 2024 and 2025 PFS rulemakings, which include policies to encourage participation by new, low revenue ACOs, such as through the availability of a payment option for eligible ACOs to receive advance investment payments, and ACOs serving medically complex, high-cost patient populations, such as through changes to the program's benchmarking methodology. Our initial experience with ACOs entering agreement periods beginning on January 1, 2024 and January 1, 2025, offers insight into participation among such ACOs.

For agreement periods beginning on January 1, 2024, and subsequent years, eligible new, low revenue ACOs inexperienced with performance- based risk Medicare ACO initiatives may receive advance shared savings payments in the form of advance investment payments designed to assist ACOs that face difficulty funding the start-up costs for forming ACOs, caring for beneficiaries in underserved communities, and achieving long term success in the Shared Savings Program (see 87 FR 69782 through 69806). To be eligible to receive advance investment payments for the first two performance years of the ACO's agreement period, the ACO must enter the program under BASIC track Level A and remain under a one- sided model level of the BASIC track's glide path (Level A or B) for its second performance year, among other requirements specified at Sec. 425.630(b). Among the new, low revenue ACOs inexperienced with performance-based risk Medicare ACO initiatives recently entering a first agreement period in the Shared Savings Program under a one-sided model, 19 of 21 of these new, low revenue ACOs inexperienced with performance-based risk entering an agreement period beginning on January 1, 2024 opted to receive advance investment payments for at least one performance year, while 10 of 12 of these new, low revenue ACOs inexperienced with performance-based risk entering an agreement period beginning on January 1, 2025 are receiving advance investment payments for PY 2025.\390\

\390\ See Medicare Shared Savings Program, Accountable Care Organizations, Public Use Files, for PY 2024 and PY 2025, available at https://data.cms.gov/medicare-shared-savings-program/accountable-care-organizations. We note that one ACO that began receiving advance investment payments in PY 2024 is no longer receiving these payments in PY 2025.

Further, through recent rulemaking, we have refined the Shared Savings Program's financial benchmarking methodology to support participation by ACOs serving medically complex, high-cost populations. For instance, with the CY 2025 PFS final rule (89 FR 98155 through 98166), we established an approach applicable for agreement periods beginning on January 1, 2025, and in subsequent years, under which we adjust an ACO's historical benchmark based on the highest of three positive adjustments for which it is eligible, either the regional adjustment, prior savings adjustment, or health equity benchmark adjustment, in accordance with Sec. 425.652(a)(8)(ii). As we explained in the CY 2025 PFS final rule (see 89 FR 98157), the health equity benchmark adjustment (HEBA), was designed to encourage new participation from ACOs serving medically complex, high-cost populations that are receiving lower regional adjustments or lower prior savings adjustments or receiving neither adjustment. As described in the CY 2025 PFS final rule (89 FR 98523 and 98524), increased program participation by these ACOs as a result of these benchmark changes are expected to generate $260 million greater net savings for Medicare over 10 years.

Based on early experience with program participation for the January 1, 2025 agreement period start date, the HEBA (which we are renaming the “population adjustment,” as described in section III.F.8 of this final rule) is anticipated to provide an upward adjustment to ACO historical benchmarks for 16 of 229 ACOs that began a new agreement period for the 2025 start date (which includes new, renewing and re- entering ACOs and is approximately 7 percent of ACOs beginning a new agreement period with a January 1, 2025 start date). From an internal analysis of PY 2025 final historical benchmarks for ACOs entering an agreement period beginning on January 1, 2025, we estimate that among the 16 ACOs that are anticipated to receive a HEBA to their historical benchmark, 8 are new ACOs participating in their first agreement period and would otherwise not have received a positive adjustment to the benchmark, 5 are in a one-sided model, and 3 are in a two-sided model.\391\

While we are still gaining experience with the impact of the HEBA on ACO benchmarks and ACO participation, these findings suggest that the HEBA may incentivize participation in the Shared Savings Program from ACOs serving high spending and high-risk populations, including encouraging participation in two-sided models.

\391\ Final calculations for the population adjustment include use of the ACO's PY 2025 assigned beneficiary population, in accordance with Sec. 425.662(b)(4), determined at the time of financial reconciliation. Following the publication of the CY 2026 PFS proposed rule, we have updated the values referenced in this discussion, which tracks discussion in the proposed rule (90 FR 32653), using more updated data.

More generally, we considered participation trends among ACOs that are higher spending compared to their regional service area, which would have a negative regional adjustment value, and ACOs with lower spending compared to their regional service area, which would have a positive regional adjustment value (see Sec. Sec. 425.601(f)(5) and 425.656(e)(5)). Based on internal analysis, among both groups of ACOs-- higher spending or lower spending compared to their regional service area--entering the program for an initial agreement period with the 2022, 2023, 2024 or 2025 start date, either an equal number of ACOs, or more ACOs, entered two-sided models compared to one-sided models. We also observe that the number of ACOs with higher spending compared to their regional service area that are entering the program for an initial agreement period has generally increased with recent start dates, with 6 of such ACOs entering in 2022, 9 of such ACOs entering in 2023, 17 of such ACOs entering in 2024, and approximately 18 of such ACOs entering in 2025.\392\ These trends suggest that the policies adopted in CY 2023, 2024, and 2025 PFS rulemaking cycles, applicable for the January 1, 2024 and January 1, 2025 start dates, are encouraging participation from ACOs serving high spending and high risk populations. As a more general consideration, we continue to recognize there are ACOs that may need time to gain experience with the Shared Savings Program by participating in a one-sided model prior to transitioning to two-sided risk, which may be indicated by entry of some higher spending ACOs in the Shared Savings Program under a one- sided model for their first agreement period.

\392\ Figures are restated from the CY 2026 PFS proposed rule (90 FR 32654), with an update to the PY 2024 and PY 2025 values based on more recently available data.

Additionally, the experience of new ACOs entering the program with July 1, 2019 or January 1, 2020 agreement period start dates provides insight into participation options in which ACOs are allowed to participate for a first agreement period in the BASIC track's glide path under a one-sided model and renew their participation agreements to continue their participation in the glide path.\393\ We analyzed program participation by ACOs that entered a first agreement period beginning on July 1, 2019 or January 1, 2020,\394\ and renewed to continue their participation in the Shared Savings Program for a second or subsequent agreement period, for trends in whether ACOs have chosen to enter and remain in a one-sided model (if eligible) or progress to performance-based risk. For July 1, 2019 starters, our observations span a period of 7 performance years (the 6-month performance year from July 1, 2019 through December 31, 2024, and PYs 2020 through 2025). For 2020 starters, our observations span a period of 6 performance years (PYs 2020 through 2025). As shown in Table B-G2, many ACOs appear prepared to participate under two-sided risk after 5 or fewer years under a one-sided model. Approximately 16 percent (or 4 of 25) of July 1, 2019 starters, and 10.5 percent (or 2 of 19) of 2020 starters chose to enter and remain under one-sided for their first agreement period and upon renewal in a second agreement period of the BASIC track's glide path, while the vast majority of ACOs elected to participate under performance-based risk either during their first agreement period or upon renewal.

\393\ Eligible ACOs that participated under the BASIC track's glide path for an agreement period beginning on July 1, 2019, or January 1, 2020, and entered in Level A or Level B, were allowed to elect to continue their participation in a one-sided model for the duration of their agreement period, as a result of a series of policy changes. See Sec. 425.600(a)(4)(i)(B)(1), (a)(4)(i)(B)(2)(i), (a)(4)(i)(B)(2)(iii)-(iv) and (a)(4)(i)(B)(2)(vi). If eligible, these ACOs could enter a second agreement period under the BASIC track's glide path in accordance with Sec. 425.600(g)(1).

\394\ The agreement period from July 1, 2019, through December 31, 2024, spanned 5 years and 6 months, across 6 performance years, in accordance with Sec. 425.200(b)(4)(ii) and (c)(3). The agreement period from January 1, 2020, through December 31, 2024, spanned 5 years, in accordance with Sec. 425.200(b)(5).

Note: The total number of ACOs excludes ACOs with a participation agreement effective termination date prior to January 1, 2025: 19 ACOs with a July 1, 2019 start date of which 13 ACOs were participating in a one-sided model; and 17 ACOs with a 2020 start date of which 10 ACOs were participating under a one-sided model. [GRAPHIC] [TIFF OMITTED] TR05NO25.121

As described in the Regulatory Impact Analysis in the CY 2026 PFS proposed rule (see 90 FR 32815), we analyzed the financial performance of groups of ACOs that participated in both PYs 2022 and 2023. Cohorts were assembled based on the track/level of participation of the ACOs in PY 2022 and PY 2023. This analysis shows the highest rates of average net savings among the following groups: (1) ACOs remaining in two-sided models of the BASIC track (Levels C, D or E) over the 2-year period; and (2) ACOs moving from a one-sided model of the BASIC track (Level A or B) to a two-sided model of the BASIC track (Level C, D or E) over PY 2022 to PY 2023. These cohorts also demonstrated the lowest average unadjusted per capita spending growth rates over this 2-year period. These findings suggest that ACOs transitioning to or remaining in two- sided model levels of the BASIC track outperform ACOs remaining in one- sided models of the BASIC track.

To follow is a summary of the key points from our observations previously described in the CY 2026 PFS proposed rule and restated in this section of this final rule. Based on early experience with ACO participation under policies applicable with agreement periods beginning on January 1, 2024, or January 1, 2025, and subsequent years, the option for ACOs to enter a one-sided model for a first agreement period in the BASIC track appears to be an important pathway for attracting new ACOs to enter the Shared Savings Program, including new, low revenue ACOs, particularly in combination with the option to receive advance investment payments, and ACOs serving higher spending populations, particularly in combination with the benchmarking methodology applicable for agreement periods beginning on January 1, 2025, and subsequent years, under which an ACO may receive an upward adjustment to its benchmark through the application of the HEBA. From participation trends of ACOs entering the Shared Savings Program for a first agreement period beginning on July 1, 2019 or January 1, 2020, few ACOs choose to remain under a one-sided model beyond an initial agreement period under the BASIC track's glide path, and many more ACOs were prepared to participate under a two-sided model either during their first agreement period or upon renewal. Further, based on participation data from PYs 2022 through 2025, ACOs are tending to enter the program's two-sided models under the highest levels of risk and potential reward, under Level E of the BASIC track or the ENHANCED track. Additionally, ACOs transitioning from one-sided to two-sided levels of the BASIC track, or remaining under the BASIC track's two- sided model levels, are anticipated to generate higher levels of average net savings compared to ACOs that remain in a one-sided model of the BASIC track, based on internal analysis of PY 2022 and PY 2023 financial performance. c. Limiting Participation in a One-Sided Model to an ACO's First Agreement Period Under the BASIC Track's Glide Path

As discussed in the CY 2026 PFS proposed rule (90 FR 32655 through 32659), we believe that an approach under which we limit the amount of time an ACO can remain under a one-sided model of the Shared Savings Program and thereby encourage ACOs to transition to performance-based risk, would align with our current strategic direction, as part of achieving CMS' vision to Make America Healthy Again. We explained that, in light of the findings we described from our experience with ACOs' participation in the Shared Savings Program under agreement periods beginning on or after July 1, 2019 through January 1, 2025 (see 90 FR 32650 through 32655), we believe that allowing eligible ACOs inexperienced with performance-based risk Medicare ACO initiatives to participate for a 5-year agreement period under the BASIC track's glide path, in which they could elect to remain under a one-sided model for 5 years, remains an important option to attract participation by ACOs that may need to gain experience with the accountable care model and invest in infrastructure and redesigned care processes for high quality and efficient healthcare service delivery before transitioning to performance-based risk. In particular, we continue to believe that this participation option serves as an important pathway for program entry and participation by eligible new, low revenue ACOs inexperienced with performance-based risk Medicare ACO initiatives, particularly in combination with the option to receive advance investment payments, and by eligible ACOs serving medically complex, high-cost populations, in combination with the program's current benchmarking methodology. We also believe that this participation option would remain important for attracting small, rural, safety-net providers to join or form ACOs.

However, as a departure from our position as described in CY 2023 PFS rulemaking, we are concerned that the current participation option permitting eligible ACOs to extend participation under the BASIC track's glide path to a second agreement period, in which they can participate under a one-sided model for the first two performance years (thereby allowing eligible ACOs to remain under a one-sided model for up to 7 performance years) prior to progressing to two-sided risk, may weaken the incentives for ACOs to transition to two-sided risk, and for ACOs to make more meaningful changes to healthcare delivery during their first 5-year agreement period, or at the start of their second agreement period. Based on our experience with participation by ACOs that entered a first agreement period beginning on July 1, 2019 or January 1, 2020, and renewed to continue their participation in the Shared Savings Program for a second or subsequent agreement (see 90 FR 32654), ACOs tend to accept performance-based risk by their sixth performance year in the program, suggesting that one 5-year agreement period under a one-sided model would be sufficient for eligible ACOs to gain experience with the Shared Savings Program prior to accepting performance-based risk. Permitting ACOs to participate for longer periods under a one-sided model could impede CMS' achievement of the Shared Savings Program's goals. Alternatively, disallowing a second agreement period under the BASIC track's glide path, thereby requiring an ACO to enter Level E or the ENHANCED track by their second agreement period, would create greater incentives for ACOs to make the most meaningful changes in healthcare delivery, and in turn cost and quality improvements, for their assigned Medicare FFS beneficiary population.

Therefore, we proposed to use our authority under section 1899(i)(3) of the Act to limit the amount of time an ACO may participate in the Shared Savings Program under a one-sided model and require ACOs to more rapidly progress to higher levels of risk and potential reward under a two-sided model. We proposed that for agreement periods beginning on or after January 1, 2027, an ACO that is inexperienced with performance-based risk Medicare ACO initiatives entering the BASIC track's glide path at Level A may continue to elect to remain under a one-sided model for all subsequent performance years of its first 5-year agreement period. However, we proposed such an ACO must enter its second or subsequent agreement period under Level E of the BASIC track or the ENHANCED track (subject to the proposed exception prohibiting ACOs with fewer than 5,000

assigned beneficiaries in BY1, BY2, or both, from participating in the ENHANCED track under the proposals at section III.F.4.b.(2).(b) of the CY 2026 PFS proposed rule). In so doing, this proposal limits the amount of time an ACO can participate under the BASIC track's glide path to one agreement period and also limits the amount of time under a one-sided model to, at most, 5 performance years.

As we explained in the CY 2026 PFS proposed rule (90 FR 32656), we believe this proposed approach strikes a balance between (1) policies that support growth of the Shared Savings Program by allowing for participation under a one-sided model for up to the entirety of an eligible ACO's first agreement period, and (2) policies encouraging participation in performance-based risk which we believe have the potential for increased effectiveness towards meeting the program's goals. This proposed approach retains an option for ACOs inexperienced with performance-based risk Medicare ACO initiatives, and that have no prior participation in the Shared Savings Program, to participate for their first agreement period under the BASIC track's glide path, with the option for ACOs to elect to remain under a one-sided model for this 5-year agreement period, or to advance along the glide path to higher levels of risk and potential reward. We recognized that commenters in earlier rulemaking have made various suggestions for the amount of time an ACO should be allowed to remain under a one-sided model, including 4 or 5 performance years or a full agreement period (as described in the CY 2026 PFS proposed rule at 90 FR 32651 citing 87 FR 69806 through 69807; 83 FR 67847). We explained that we prefer an approach that continues to allow eligible ACOs to participate for up to 5 performance years (the duration of such ACOs' first 5-year agreement period) under a one-sided model, which we believe is effective in attracting new ACOs to enter the Shared Savings Program, based on our analysis of participation trends. Additionally, using an approach that leverages the existing structure of the regulations for how we identify participation options for an ACO inexperienced with performance-based risk Medicare ACO initiatives entering a first agreement period reduces complexity in the program's policies, thereby facilitating ACOs' ability to ascertain the available participation options and allowing CMS to more readily implement the proposed approach to determining ACO eligibility for participation options. This proposed approach would also encourage ACOs inexperienced with performance-based risk Medicare ACO initiatives participating in the BASIC track's glide path for a first agreement period to prepare to take on two-sided risk no later than the start of their next 5-year agreement period in the Shared Savings Program, and thereby more quickly make meaningful changes to healthcare delivery, than the current approach.

To create the most meaningful incentive to change healthcare delivery and based on our experience with ACOs' selection of participation options, we believe it is appropriate to require ACOs to transition to participation in Level E of the BASIC track or the ENHANCED track after no more than 1 agreement period under the BASIC track's glide path, which could include up to 5 performance years of participation under a one-sided model (for eligible ACOs). A number of factors informed our consideration of this approach. For one, under the benchmarking methodology applicable to agreement periods beginning on January 1, 2025, and in subsequent years, in accordance with Sec. 425.652(a)(8)(ii), we adjust an ACO's historical benchmark based on the highest of three positive adjustments for which it is eligible, either the regional adjustment, prior savings adjustment, or HEBA. This approach to upwardly adjusting the benchmark could bolster the value of the rebased benchmark, calculated at Sec. 425.652(c), for the ACO's second and subsequent agreement period. The potential upward adjustment to an ACO's benchmark through a regional adjustment, prior savings adjustment or HEBA, in combination with other policies under the existing financial methodology specified in subpart G, could help ensure there is sufficient incentive for ACOs to continue to participate in the program under higher levels of risk and potential reward.

Additionally, although we recognize participation in Level C and Level D may serve as a means for some ACOs to gain experience with performance-based risk, we believe the relatively low interest in participation in these financial models suggests it would be sufficient to only allow for participation in these lower levels of risk within the ACO's first agreement period under the BASIC track's glide path. As discussed in the CY 2026 PFS proposed rule (see 90 FR 32652 and 32653), in recent performance years (PY 2023 through 2025) there has been limited and declining participation in Level C and Level D of the BASIC track's glide path. Further, as we have observed based on more recent participation trends, once ACOs progress to performance-based risk, most ACOs do so by participating under Level E of the BASIC track, or the ENHANCED track. We believe that limiting additional participation in Levels C and D of the BASIC track to an ACO's first and only agreement period in the glide path (if eligible) will support our programmatic goals by facilitating ACOs' transition to two-sided models under which they have greater potential for risk and reward, and make more meaningful changes to healthcare delivery, and in turn cost and quality improvements, for their assigned Medicare FFS beneficiary population.

We proposed to specify related requirements in amendments to the Shared Savings Program regulations at Sec. 425.600 and proposed technical and conforming changes elsewhere within Sec. 425.600 and at Sec. 425.605. We proposed to amend Sec. 425.600(g) introductory text, to limit the applicability of the requirements in this paragraph for determining an ACO's eligibility for the Shared Savings Program participation options to agreement periods beginning on or after January 1, 2024, and before January 1, 2027.

At Sec. 425.600, we proposed to redesignate paragraph (h) as paragraph (i), and proposed to add a new paragraph (h) that specifies the requirements CMS would use to determine an ACO's eligibility for Shared Savings Program participation options for agreement periods beginning on or after January 1, 2027, as described in further detail in the discussion that follows. Additionally, as we described in section III.F.4.b.(2).(b) of the CY 2026 PFS proposed rule (90 FR 32666 and 32667) and in greater detail in the discussion that follows, Sec. 425.600(h)(3) includes a limited proposed exception for participation in the ENHANCED track by ACOs with less than 5,000 assigned beneficiaries in certain benchmark years. This limited proposed exception reflects our proposal that for agreement periods beginning on or after January 1, 2027, an ACO with fewer than 5,000 assigned beneficiaries in benchmark year (BY) 1, BY2, or both may only enter the BASIC track.

We proposed to specify in new Sec. 425.600(h)(1) how CMS determines an ACO's eligibility for participation options, for agreement periods beginning on or after January 1, 2027, if an ACO is determined to be inexperienced with performance-based risk Medicare ACO initiatives (as defined at Sec. 425.20). We proposed to specify at Sec. 425.600(h)(1) introductory text that if an ACO is determined to be inexperienced with performance-based

risk Medicare ACO initiatives, 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, subject to the proposed exception prohibiting ACOs with fewer than 5,000 assigned beneficiaries in BY1, BY2, or both, from participating in the ENHANCED track specified in new Sec. 425.600(h)(3) (described in section III.F.4.b.(2).(b) of the CY 2026 PFS proposed rule).

We proposed to specify under new Sec. 425.600(h)(1)(i) that, for agreement periods beginning on or after January 1, 2027, 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 one agreement period, and for which the progression along the glide path is specified at Sec. 425.600(a)(4)(i)(C). We proposed to specify under new Sec. 425.600(h)(1)(ii) that an ACO that enters an agreement period under the BASIC track's glide path at any of the levels of risk and potential reward, Levels A through E, would be deemed to have completed one agreement period under the BASIC track's glide path. For the purpose of determining the ACO's prior participation in the BASIC track's glide path, we would consider whether the ACO 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; or (B) for a new ACO identified as a re-entering ACO (as defined at Sec. 425.20), 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.

We proposed to specify under new Sec. 425.600(h)(1)(iii) that an ACO determined to be inexperienced with performance-based risk Medicare ACO initiatives but which is not eligible to enter the BASIC track's glide path, in accordance with the provisions of Sec. 425.600(h)(1), may enter BASIC track Level E for all performance years of the agreement period, or the ENHANCED track, subject to the proposed exception prohibiting ACOs with fewer than 5,000 assigned beneficiaries in BY1, BY2, or both, from participating in the ENHANCED track specified in new Sec. 425.600(h)(3) (described in section III.F.4.b.(2).(b) of the CY 2026 PFS proposed rule).

We proposed to adopt an approach similar to our existing requirements for determining the participation options of an ACO that is experienced with performance-based risk Medicare ACO initiatives (as defined at Sec. 425.20). We proposed to specify in new Sec. 425.600(h)(2), for agreement periods beginning on or after January 1, 2027, if an ACO is determined to be experienced with performance-based risk Medicare ACO initiatives, the ACO may enter either the BASIC track Level E for all performance years of the agreement period, or the ENHANCED track, subject to the proposed exception prohibiting ACOs with fewer than 5,000 assigned beneficiaries in BY1, BY2, or both, from participating in the ENHANCED track specified in new Sec. 425.600(h)(3) (described in section III.F.4.b.(2).(b) of the CY 2026 PFS proposed rule).

Additionally, we proposed at Sec. 425.600(h)(3) to require, for agreement periods beginning on or after January 1, 2027, that if an ACO is determined to have fewer than 5,000 assigned beneficiaries in either the first benchmark year, second benchmark year, or both, in accordance with Sec. 425.110(a)(3), the ACO may only enter the BASIC track. Under this approach, an ACO prohibited from participating in the ENHANCED track because it has fewer than 5,000 assigned beneficiaries in BY1, BY2, or both, may enter an agreement period beginning on or after January 1, 2027, in the BASIC track, at a level of risk and potential reward otherwise determined in accordance with the proposed requirements of new Sec. 425.600(h), as follows:

An ACO determined to be inexperienced with performance- based risk Medicare ACO initiatives may enter the BASIC track's glide path at any of the levels of risk and potential reward, Levels A through E (if eligible in accordance with the proposed requirements at new Sec. 425.600(h)(1)), or BASIC track Level E for all performance years of the agreement period.

An ACO determined to be experienced with performance-based risk Medicare ACO initiatives may enter BASIC track Level E for all performance years of the agreement period.

We proposed to apply this modified approach in determining ACOs' participation options for agreement periods beginning on or after January 1, 2027, since the application cycle for the January 1, 2027 start date (anticipated to occur in CY 2026) would be the next cycle following the anticipated effective date for the CY 2026 PFS final rule of January 1, 2026. We explained in the CY 2026 PFS proposed rule that the majority of the application cycle for the January 1, 2026 start date, spanning Spring-Fall 2025, would occur before this rule could be finalized.

As we described in the CY 2026 PFS proposed rule (90 FR 32657), the criteria CMS used to determine an ACO's eligibility to enter an agreement period, at Sec. 425.600(g), that were applied in determining participation options for ACOs entering an agreement period beginning on January 1, 2024 or January 1, 2025, would also be applied in determining participation options for ACOs entering an agreement period beginning on January 1, 2026. We explained that, if finalized, the proposed criteria to determine an ACO's eligibility to enter an agreement period, specified under new Sec. 425.600(h), would be applied in determining participation options for ACOs entering an agreement period beginning on or after January 1, 2027. That is, we would apply the modified approach (if finalized) consistently across new ACO applicants, renewing ACOs (as defined at Sec. 425.20) and re- entering ACOs (as defined at Sec. 425.20) in determining ACO participation options for agreement periods beginning on or after January 1, 2027.

We recognized that with the changes in the program's policies over time, there are currently ACOs participating in agreement periods, to which different requirements apply for determining the ACO's participation options, in accordance with Sec. 425.600. As we explained in the CY 2026 PFS proposed rule (90 FR 32657 and 32658), this approach would change how we determine an ACO's eligibility for Shared Savings Program participation options, program wide. If we finalized the proposed approach, ACOs currently participating in a first agreement period under the BASIC track's glide path (with 2022, 2023, 2024, and 2025 start dates) and ACOs entering a first agreement period in the BASIC track's glide path with the January 1, 2026 start date, would be ineligible to enter a subsequent agreement period under the BASIC track's glide path, with a start date on or after January 1, 2027. Instead, such ACOs, should they continue their participation in the Shared Savings Program for a second or subsequent agreement period, could only select to participate in Level E of the BASIC track or the ENHANCED track (subject to the exception prohibiting ACOs with fewer than 5,000 assigned beneficiaries in BY1, BY2, or both, from participating in the ENHANCED track). Based on the number of ACOs currently participating in a first agreement period under a one-sided model of the BASIC track's glide path, we anticipate the approach could impact 57 ACOs currently participating in Level A of the BASIC track (7 ACOs

that are 2022 starters, 7 ACOs that are 2023 starters, 26 ACOs that are 2024 starters, and 17 ACOs that are 2025 starters) where these ACOs could participate in a one-sided model for a maximum of 5 performance years (instead of 7 performance years).\395\ We explained that, at the time of the CY 2026 PFS proposed rule, the number of eligible 2026 starters that may enter the BASIC track's glide path at Level A is yet to be determined.

\395\ Total count of ACOs participating in Level A of the BASIC track, among ACOs entering a first agreement period in the Shared Savings Program by start date, as of performance year 2025. See Data.CMS.gov, Medicare Shared Savings Program, Accountable Care Organizations, Public Use File (by performance year, for PY 2025), available at https://data.cms.gov/medicare-shared-savings-program/accountable-care-organizations.

In the CY 2026 PFS proposed rule (90 FR 32658), we acknowledged that ACOs currently participating in Level A of the BASIC track may have joined or remained in the Shared Savings Program relying on the availability of participation options established with the CY 2023 PFS final rule. We further acknowledge that the proposed modifications to limit participation in the BASIC track's glide path and the amount of time an ACO may remain under a one-sided model, if finalized, may alter the ACOs' incentives to remain in the Shared Savings Program. As discussed in the Regulatory Impact Analysis of the CY 2026 PFS proposed rule (90 FR 32816), we project that discontinuing the option for ACOs to participate under a second agreement period in the BASIC track's glide path may create potential uncertainty for some ACOs on continuing in the program. We further explain that, notwithstanding this uncertainty for some ACOs, the proposed changes have the potential to improve care management and increase savings from other ACOs that successfully manage the transition to performance-based risk earlier than they would have. We explained that we did not find the concern about the potential attrition by ACOs unwilling to transition to performance-based risk a compelling reason to forgo the proposed changes to the Shared Savings Program's participation options. We explained our belief that the program's benchmarking methodology includes sufficient incentive for ACOs to continue to participate in the program. Additionally, based on trends in program participation, we anticipate that at least some of the ACOs currently participating under Level A of the BASIC track may elect to transition to a two-sided model level of the BASIC track during the remaining performance years of their current agreement period or would transition to a two-sided risk model at the beginning of their next agreement period notwithstanding the proposed change. We stated, more generally, our belief that the concern about potential for loss of participation by ACOs unwilling to progress to two-sided risk with their second agreement period is balanced against, and outweighed by, the potential for increased effectiveness from other ACOs that continue to participate and successfully manage an earlier transition to performance-based risk, and establishing a policy that we believe will further advance the program's goals.

In the CY 2026 PFS proposed rule (90 FR 32658), we provided several examples, to illustrate how the proposed policies for determining ACO participation options would apply. Take for example a new ACO inexperienced with performance-based risk Medicare ACO initiatives that enters the BASIC track's glide path at Level A for an agreement period beginning on January 1, 2027, and concluding December 31, 2031, based on the criteria used to determine ACO participation options specified under new Sec. 425.600(h) (as proposed). Under this example, the ACO would be able to elect to remain under Level A for all subsequent performance years of its agreement period (performance years 2028 through 2031) in accordance with Sec. 425.600(a)(4)(i)(C)(3). Assume for this example the ACO chooses to remain under Level A for the duration of its first agreement period and applies to renew to continue its participation in the Shared Savings Program for a new agreement period beginning on January 1, 2032. Under the proposed approach, the ACO would be considered inexperienced with performance-based risk Medicare ACO initiatives and would be identified by CMS as having previously entered an agreement period under the BASIC track's glide path and deemed to have completed one agreement period under the BASIC track's glide path. As a result, the ACO would be ineligible to enter the BASIC track's glide path and would be limited to participating under Level E of the BASIC track, or the ENHANCED track (subject to the proposed exception prohibiting ACOs with fewer than 5,000 assigned beneficiaries in BY1, BY2, or both, from participating in the ENHANCED track) for its second agreement period beginning on January 1, 2032, or a subsequent agreement period.

As another example, consider a new ACO inexperienced with performance-based risk Medicare ACO initiatives that enters the BASIC track's glide path at Level A for an agreement period beginning on January 1, 2026, based on the criteria used to determine ACO participation options specified at Sec. 425.600(g). Under this example, the ACO elects to remain under Level A for all subsequent performance years of its agreement period in accordance with Sec. 425.600(a)(4)(i)(C)(3). If the ACO applies to renew to continue its participation in the Shared Savings Program for a new agreement period, beginning on January 1, 2031, under the proposed approach, the ACO would be considered inexperienced with performance-based risk Medicare ACO initiatives, and would be identified by CMS as having previously entered an agreement period under the BASIC track's glide path and deemed to have completed one agreement period under the BASIC track's glide path. As a result, the ACO would be ineligible to enter the BASIC track's glide path and would be limited to participating under Level E of the BASIC track, or the ENHANCED track (subject to the proposed exception prohibiting ACOs with fewer than 5,000 assigned beneficiaries in BY1, BY2, or both, from participating in the ENHANCED track) for its second agreement period beginning on January 1, 2031, or a subsequent agreement period. Similarly situated ACOs that entered an agreement period beginning on January 1, 2022, January 1, 2023, January 1, 2024, or January 1, 2025 that elected to remain under a one-sided model of the BASIC track's glide path for the duration of their 5-year agreement period, and are applying to renew to continue their participation in the program for a new agreement period, would have the same participation options as the ACO in this example.

As described in the CY 2026 PFS proposed rule (90 FR 32658 and 32659), we proposed to use our authority under section 1899(i)(3) of the Act to change the requirements for ACOs' progression to performance-based risk under the program's participation options. To adopt requirements in connection with participation under a two-sided model of the Shared Savings Program under section 1899(i)(3) of the Act, we must determine that doing so will improve the quality and efficiency of items and services furnished to Medicare beneficiaries, without resulting in additional program expenditures. As we have discussed in earlier rulemaking, in connection with the use of this authority for establishing the program's

participation options (see 76 FR 67904 through 67909, 80 FR 32771 and 32772, 83 FR 67834 through 67841), the program's two-sided models provide an additional opportunity for ACOs to enter a risk-sharing arrangement and accept greater responsibility for beneficiary care. Under the proposed approach we would modify the Shared Savings Program participation options to reduce the maximum amount of time an ACO may participate under the BASIC track's glide path from two agreement periods to one agreement period, thereby limiting the amount of time an ACO may remain under a one-sided model to at most 5 performance years. We would also require ACOs inexperienced with performance-based risk Medicare ACO initiatives to progress more rapidly to higher levels of risk and potential reward under Level E of the BASIC track or the ENHANCED track, compared to the current requirements. Under the proposed approach, ACOs entering and continuing their participation in the Shared Savings Program would continue working towards meeting the program's goals of lowering growth in Medicare FFS expenditures and improving the quality of care furnished to Medicare beneficiaries. In the CY 2026 PFS proposed rule, we described our belief that requiring ACOs to more quickly progress to performance-based risk would create incentives for ACOs to make more meaningful changes to healthcare delivery, and in turn cost and quality improvements, for their assigned Medicare FFS beneficiary population. As discussed in the Regulatory Impact Analysis of the CY 2026 PFS proposed rule (see 90 FR 32817 and 32818), we project that the proposed changes in participation options, in combination with other proposed changes to the statutory payment model in the CY 2026 PFS proposed rule, as well as current policies we have adopted under the authority of section 1899(i)(3) of the Act, are expected to improve the quality and efficiency of items and services furnished under the Medicare program, and would not be expected to increase program expenditures relative to those of the statutory payment model.

We stated that we will continue to reexamine this projection 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 determined that the payment model that includes policies established under section 1899(i)(3) of the Act no longer meets this requirement, we would undertake notice and comment rulemaking to adjust the payment model to ensure continued compliance with the statutory requirements.

Additionally, we proposed to make the following technical and conforming changes, for completeness and clarity, to reflect our proposals to redesignate existing Sec. 425.600(h) as paragraph (i), and to specify in a newly added paragraph (h) of Sec. 425.600 the requirements for determining an ACO's eligibility for Shared Savings Program participation options for agreement periods beginning on or after January 1, 2027.

Amending a cross-reference within Sec. 425.600(a)(4)(i)(C)(1) to include a reference to proposed new paragraph (h)(1) at Sec. 425.600.

Amending cross-references within Sec. 425.600(a)(4)(ii) and Sec. 425.605(d)(1) introductory text to include a reference to proposed new paragraph (h) at Sec. 425.600.

Amending cross-references within Sec. 425.600(a)(4)(i)(C)(2)(iii) and Sec. 425.605(b)(2)(ii)(E) to refer to provisions within proposed newly redesignated paragraph (i) at Sec. 425.600 instead of existing paragraph (h).

Revising Sec. 425.605(d)(2), describing the level of risk and reward specified for Level E of the BASIC track. Currently this paragraph specifies Level E risk and reward at Sec. 425.605(d)(1)(v) applies to an ACO eligible to enter the BASIC track that is determined to be experienced with performance-based risk Medicare ACO initiatives as specified at Sec. 425.600(d) or Sec. 425.600(g). We proposed to amend this provision for greater consistency with the proposed approach to determining participation options and new Sec. 425.600(h)(1)(iii) and (h)(2), under which for agreement periods beginning on or after January 1, 2027, an ACO determined to be inexperienced with performance-based risk Medicare ACO initiatives that is not eligible to enter the BASIC track's glide path, or an ACO that is determined to be experienced with performance-based risk Medicare ACO initiatives may enter either the BASIC track Level E for all performance years of the agreement period (among other participation options). Therefore, in the CY 2026 PFS proposed rule, we proposed to revise Sec. 425.605(d)(2) to state more generally the following (restated in this final rule with minor corrections for clarity): if the ACO enters the BASIC track at Level E as specified under Sec. 425.600(d), (g), or (h), the level of risk and reward specified in Sec. 425.605(d)(1)(v) applies to all performance years of an ACO's agreement period.

We solicited comments on these proposals. The following is a summary of the comments we received and our responses.

Comment: Many commenters supported the proposal to decrease the amount of time an ACO can participate under a one-sided model under the BASIC track's glide path from 7 to 5 years. Several commenters supported CMS' goal of moving ACOs towards higher levels of accountability. Many commenters agreed that upside-only performance tracks are necessary but advancement into two-sided risk tracks is essential for incentivizing care improvements and reducing healthcare spending. A commenter supported the proposal for faster transitions to two-sided risk, noting that Shared Savings Program results continue to underscore that significant savings come from two-sided risk arrangements. Some commenters who supported the proposed changes also recommended that the number of performance years within a one-sided model is not lowered any further than 5 years.

Response: We appreciate commenters' support for the proposed policy and their acknowledgement that ACO participation under two-sided risk models continues to generate savings for the Medicare program. For the reasons stated earlier in this section of this final rule, we continue to believe that the proposed approach strikes a balance between (1) policies that support growth of the Shared Savings Program by allowing for participation under a one-sided model for up to the entirety of an eligible ACO's first agreement period, and (2) policies encouraging participation in performance-based risk which we believe have the potential for increased effectiveness towards meeting the program's goals. In response to commenters urging that CMS not further reduce the number of performance years an ACO may remain under a one-sided model to be less than 5 years, we note that we continue to believe that maintaining a participation option for eligible ACOs inexperienced with performance-based risk Medicare ACO initiatives to enter and remain under a one-sided model for 5 years, is an important means for attracting participation by ACOs that may need to gain experience with the accountable care model. As reflected in the commenters' remarks, we also agree that ACO advancement into performance-based risk is essential for incentivizing care improvements for beneficiaries and reducing Medicare spending.

Comment: Many commenters who supported the proposed changes also encouraged CMS to maintain the

existing policy for ACOs currently participating in their first agreement period under BASIC track Level A and ACOs entering their first agreement period with a January 1, 2026 start date. Some of these commenters also recommended delaying the proposed policy by two years for ACOs that joined the Shared Savings Program in performance year (PY) 2022 and to allow these ACOs to transition to higher-risk arrangements according to the participation options that were in effect when they signed their original participation agreement.

Another commenter supported the proposal but recommended that CMS allow ACOs to maintain participation in the BASIC track's Level C and Level D during their second agreement period prior to being required to participate in BASIC track Level E or the ENHANCED track. Some commenters noted that requiring renewing ACOs to move into downside risk before they are ready could destabilize the Shared Savings Program, and an exception to the proposed policy (requiring participation in Level E of subsequent BASIC track agreements) would ensure that the ACOs assume risk after 7 years as originally anticipated, albeit a lower level of risk. Another commenter suggested CMS “maintain the existing policy for ACOs entering their first agreement period with a January 1, 2026 start date (that is, those ACOs should remain eligible for an additional two years under a one-sided model upon entering their second agreement period).” A few commenters expressed a similar sentiment, suggesting that CMS apply the proposed policy only to new ACOs as currently participating ACOs entered the Shared Savings Program under the existing glide path and have been using shared savings to build infrastructure and capabilities necessary for risk-bearing arrangements. Similarly, another commenter stated that CMS should not require participants to advance into downside financial risk too quickly as there is no ability to move back to one-sided risk in future years due to extenuating circumstances. More generally, a commenter noted that ACOs transitioning from one-sided to two-sided risk levels, or remaining under two-sided risk in the BASIC track, generate higher levels of average net savings compared to those that remain in one-sided risk, because there is an inherent difference between these ACOs as ACOs that progress to two-sided risk are confident in their ability to succeed and earn shared savings.

Response: We continue to believe that decreasing the maximum amount of time an ACO can participate in one-sided risk under the BASIC track from 7 to 5 years will promote direct accountability for health outcomes and the costs of beneficiary care, while improving the quality of care for Medicare beneficiaries. We disagree with commenters' suggestions to allow all ACOs or select ACOs (for example, based on their initial agreement start date) to remain under the one-sided model for 7 years. We believe such a policy design would, at best, maintain the status quo of the program, and therefore continue a pattern where ACOs are allowed to remain under the one-sided model for a significant number of years without added incentives to become accountable for the cost and quality of care for their assigned populations. As described in the CY 2026 PFS proposed rule (90 FR 32652 and 32653) and restated elsewhere in this section of this final rule, in recent performance years we have observed that fewer ACOs are entering and participating under a one-sided model compared to two-sided models. Specifically, participation in one-sided models is lower in PY 2025 (29 percent of ACOs) compared to PY 2022 (41 percent of ACOs), and PY 2023 and PY 2024 (33 percent of ACOs for each PY).

Further, from program participation for PYs 2022 through 2025, we have observed that when ACOs participate under two-sided risk, they opt for higher levels of risk and reward; relatively few ACOs participate under Level C or Level D of the BASIC track's glide path, compared to participation in Level E of the BASIC track or the ENHANCED track. Additionally, among ACOs participating under two-sided risk, more ACOs are participating under the highest level of risk and potential reward offered by the ENHANCED track than in Levels C, D and E of the BASIC track combined. It does not appear that ACOs necessarily need to progress along the glide path in their second agreement period as the participation trends suggest ACOs are ready to assume higher levels of risk and reward once they begin participating under a risk arrangement. As explained in the CY 2026 PFS proposed rule (90 FR 23656), we believe that limiting additional participation in Levels C and D of the BASIC track to an ACO's first and only agreement period in the glide path (if eligible) will support our programmatic goals by facilitating ACOs' transition to two-sided models under which they have greater potential for risk and reward, and make more meaningful changes to healthcare delivery, and in turn cost and quality improvements, for their assigned Medicare FFS beneficiary population.

We understand the commenters' view that ACOs may have planned investments into their infrastructure and operational processes based upon the participation options codified at the time they began participating in the program. However, the data we have detailed in the CY 2026 PFS proposed rule, and reiterated in this final rule, does not suggest ACOs require 7 years to successfully transition to performance- based risk. We believe the historical success demonstrated by ACOs participating under a two-sided model is significant enough to apply the proposed policy to all eligible ACOs and not provide exceptions for any subset of ACOs.

Comment: Some commenters agreed with the move to more quickly transition ACOs to downside risk to ensure ACOs have greater incentives to generate savings for the Medicare program. However, several of these commenters expressed concerns regarding program attrition, stating an accelerated timeline for making the transition to two-sided risk will drive ACOs to exit the Shared Savings Program, potentially outweighing the efficiencies that could be gained. One commenter stated increased risk should be balanced against sufficient participation incentives and strong program design given that the Shared Savings Program is a voluntary program and recommended that CMS monitor participation trends for program attrition. The commenter did not provide specific examples or suggestions for participation incentives and strong program design. Another commenter recommended CMS focus additional ACO support resources on those ACOs transitioning from their first to second agreement period.

Response: We thank commenters for their support and agree that increased risk should be balanced against sufficient participation incentives and strong program design. As demonstrated throughout this final rule, CMS monitors the participation trends of ACOs, including attrition rates, when developing and implementing regulatory changes particularly policies impacting participation options. Particularly in light of program goals to grow provider participation in the Shared Savings Program and to increase participation in two-sided risk models, we will continue to monitor such trends and identify ways to encourage participation, incentivize care improvements for beneficiaries and reduce Medicare spending.

Additionally, with more recent rulemaking we have modified the Shared Savings Program to include participation and payment options intended to support ACOs progressing to performance-based risk. For example, healthcare providers have reported they require upfront capital to make the necessary investments to succeed in accountable care; therefore with the CY 2023 PFS final rule (87 FR 69782 through 69805), we finalized the availability of Advance Investment Payments (AIP) for eligible ACOs entering agreement periods beginning on or after January 1, 2024 (as specified under Sec. 425.630). Under this payment option, eligible low revenue ACOs inexperienced with performance-based risk Medicare ACO initiatives and that are new to the Shared Savings Program (that is, not a renewing or re-entering ACO) may receive a one-time fixed payment and per beneficiary quarterly payments for the first 2 performance years of their 5-year agreement period. With the CY 2025 PFS final rule (89 FR 98132 through 98153), we established the option for eligible renewing ACOs to receive prepaid shared savings, starting with the performance year beginning on January 1, 2026 (as specified under Sec. 425.640), to provide an additional cash flow option to ACOs with an established history of earning shared savings that will encourage their investment in activities that reduce costs for the Medicare program and improve the quality of care provided to their assigned beneficiaries. This in turn may enable ACOs to increase their shared savings as they make investments in direct beneficiary services to improve care coordination and quality through staffing or health care infrastructure.

CMS also provides participating ACOs with annual and quarterly expenditure and utilization reports (see Sec. 425.702) and beneficiary identifiable claims data (see Sec. 425.704) for supporting beneficiary care coordination. The more recent payment options, and the program's data sharing policies, are just a few examples of program operations we have implemented in support of ACOs in achieving the Shared Savings Program's goals.

As we gain experience with the modified participation options we are finalizing with this final rule, and our other program policies, we will continue to explore opportunities to support participation by ACOs, including with the transition to performance-based risk. Should we decide that additional modifications to the program's policies are needed, we would propose such changes through future notice and comment rulemaking.

Comment: Several commenters opposed the proposed policy, with the majority of those commenters expressing the need for additional participation options for certain types of providers and ACOs, including rural and safety net providers, community health center-led ACOs, physician-led ACOs, and federally qualified health centers (FQHCs), to continue participating under a one-sided model for a longer period of time. These commenters suggested CMS continue to monitor and refine the program's participation options to ensure that participation by these types of ACOs is not disproportionately impacted by the proposal. Some commenters stated that the proposed changes create a financial and operational risk that many ACOs cannot realistically adopt in such a short period of time, as smaller, more rural, and specialty-specific ACOs often lack the resources and infrastructure available to large, well-integrated healthcare systems. Similarly, a commenter stated that a 5-year one-sided risk glidepath is too short and overly aggressive for FQHCs. Some commenters suggested that CMS “consider rural-specific flexibilities and support mechanisms to safeguard access”, suggesting ACOs with large rural beneficiary populations should be measured by improvements in access to care, not just financial outcomes. Some commenters suggested modifying existing APMs to provide “a set of waivers specific to safety-net providers in APMs”, develop new ACO tracks/total cost of care models focused solely on rural and underserved populations, or global budgets, prospective payments, or lower the minimum savings rate for ACOs participating in a two-sided model. Some commenters noted that providing an exception to allow certain ACOs to remain under one-sided risk for longer could entice more community health centers to participate in the Shared Savings Program and look further into adopting VBC models. These commenters expressed that ACOs with community health centers (CHCs) “served more beneficiaries with lower incomes, those with disabilities, or those with racial differences, while simultaneously increasing several quality measure outcomes related to the delivery of preventive care, compared to ACOs without CHC participation.”

Response: Since the inception of the Shared Savings Program, we have encouraged participation by ACOs composed of various providers/ suppliers, including Critical Access Hospitals (CAHs), Rural Health Clinics (RHCs), and FQHCs,\396\ and have over time considered the timing of transition to risk by small, rural ACOs and ACOs comprised of safety net providers, among others. Historically, we have observed that ACOs in performance-based risk tracks have better financial performance than ACOs in shared savings only tracks, and that low revenue ACOs (which tend to be small, physician-only and rural ACOs) have better financial performance than high revenue ACOs (whose compositions often include institutional providers, particularly hospitals and health systems) (see 83 FR 67820 and 67921). As described elsewhere in this section of this final rule, we believe we have enough evidence to show that 5 years under a one-sided model is enough time for ACOs to successfully transition to performance-based risk. We proposed to apply this modified approach in determining ACOs' participation options for new agreement periods beginning on or after January 1, 2027, and we believe this proposed timing of applicability provides currently participating ACOs sufficient time to strategize the operational changes necessary to support their transition to performance-based risk.

\396\ Section 425.102 describes providers and suppliers eligible to form or participate in a Shared Savings Program ACO.

We believe the Shared Savings Program offers sufficient incentives that encourage and support safety-net providers to participate in ACOs as evidenced by our participation trends. We have seen an increase in program participation from safety net providers, particularly in ACOs participating under agreement periods beginning on or after July 1, 2019, following the changes to the Shared Savings Program finalized with the December 2018 final rule. For example, during the PY beginning on July 1, 2019, 2,358 FQHCs, 1,324 RHCs, and 435 CAHs participated in the Shared Savings Program.\397\ In PY 2025, we have 7,036 FQHCs, 2,872 RHCs, and 547 CAHs participating in the Shared Savings Program.\398\ As evidenced by this participation data, we continue to see participation among safety net providers increase as CMS has finalized changes to policies around the progression to performance-based risk in the Shared Savings Program, including requirements for ACOs to

transition more rapidly to higher levels of risk and potential reward.

\397\ See “Shared Savings Program Fast Facts--As of July 1, 2019”, within “Fast Facts Archives”, available at https://www.cms.gov/media/638196.

\398\ 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.

While reviewing these comments we further investigated participation data for ACOs which have at least one FQHC, RHC, or CAH participating in their ACO. Among ACOs that entered a one-sided model of the BASIC track's glide path, for a first agreement period beginning on July 1, 2019 or January 1, 2020 (a subset of ACOs described in the CY 2026 PFS proposed rule at 90 FR 32654 and 32655), we identified 15 ACOs that included one or more FQHC, RHC, or CAH and have remained in the Shared Savings Program until PY 2025. Of these 15 ACOs, 10 ACOs progressed into a two-sided model prior to PY 2025 or within their initial 5-year agreement period. Additionally, we found that ACOs comprised of CAHs, RHCs and FQHCs have performed well under a two-sided model. We did an internal analysis of all two-sided ACOs included in PY 2024 financial reconciliation. We identified 185 ACOs which included at least one FQHC, RHC, or CAH among their ACO providers/suppliers. Of the 185 ACOs, 155 ACOs (84 percent) earned shared savings. Additionally, of these 155 ACOs the average number of CAHs, RHCs and FQHCs participating in the ACOs was 38. We also looked into the 9 two-sided ACOs with at least one FQHC, RHC, or CAH among their ACO providers/suppliers who had shared losses, and among these 9 ACOs, the average number of CAHs, RHCs and FQHCs was 11. This data suggests ACOs that have CAHs, RHCs and FQHCs participants are able to successfully participate in the Shared Savings Program and earn shared savings under a two-sided model. We do not believe it is necessary to provide special exceptions to our proposed policy for ACOs that include FQHCs, RHCs, or CAHs among their ACO providers/suppliers. We will continue to monitor participation trends and explore ways to encourage participation of CAHs, RHCs and FQHCs in the Shared Savings Program and consider policies for future rulemaking as appropriate.

We also note that we created the AIP payment option and believe it can be a very helpful resource for the community health center-led ACOs. AIPs are designed to provide upfront funding to assist new, low revenue ACOs inexperienced with performance-based risk Medicare ACO initiatives establish their ACOs and succeed in the Shared Savings Program. We believe this type of upfront funding aids ACOs in their development such that they could take on downside risk more quickly.

Comment: A commenter did not agree with CMS' analysis regarding ACOs inexperienced with performance-based risk, stating that the data does not conclude that, absent the 7-year horizon to transition to full risk-sharing, a high percentage of ACOs would still enter the program. Another commenter opposed to the proposed changes noted that many ACOs are moving to risk before the current regulation requires them to and many ACOs are progressing directly to BASIC track Level E or the ENHANCED track and bypassing BASIC track Levels C and D, therefore they expressed these regulatory changes are unnecessary because many ACOs are already exhibiting the behavior we proposed to require. Another commenter suggested that ACOs participating under a one-sided model are more efficient than ACOs participating under a two-sided model and that ACOs can achieve Medicare beneficiary expenditure reduction through efficiency improvements such as improved care management and coordination without switching to a two-sided model.

Response: We acknowledge that it is difficult to know how many, if any, ACOs joined the Shared Savings Program specifically because they intended to participate for a full 7 years under a one-sided model. As described in the CY 2026 PFS proposed rule (90 FR 32658), elsewhere in this section of this final rule, and in the Regulatory Impact Analysis of this final rule, we project that discontinuing the option for ACOs to participate under a second agreement period in the BASIC track's glide path may create potential uncertainty for some ACOs on continuing in the program. We continue to believe that the loss of participation by ACOs unwilling to progress to two-sided risk with their second agreement period is balanced against, and outweighed by, the potential for increased effectiveness from other ACOs that continue to participate and successfully manage an earlier transition to performance-based risk, and establishing a policy that we believe will further advance the program's goals.

We disagree with the commenter suggesting the proposed policy is unnecessary because many ACOs have already moved to a two-sided model. We also acknowledge ACOs under one-sided models also achieve expenditure reductions through efficiency improvements. However, our analysis shows that ACOs under two-sided models have demonstrated greater effectiveness in implementing efficiencies. We believe this approach is appropriate to support our programmatic goals by facilitating more ACOs' transitions to two-sided models under which they have greater potential for risk and reward, and make more meaningful changes to healthcare delivery, and in turn cost and quality improvements, for their assigned Medicare FFS beneficiary population.

Our data suggests that ACOs transitioning to or remaining in two- sided model levels of the BASIC track outperform ACOs remaining in one- sided models of the BASIC track. As described previously in this section, we analyzed the financial performance of groups of ACOs that participated in both PYs 2022 and 2023. Cohorts were assembled based on ACO track/level of participation in PY 2022 and PY 2023. This analysis shows the highest rates of average net savings among the following groups: (1) ACOs remaining in two-sided models of the BASIC track (Levels C, D or E) over the 2-year period; and (2) ACOs moving from a one-sided model of the BASIC track (Level A or B) to a two-sided model of the BASIC track (Levels C, D or E) over PY 2022 to PY 2023. These cohorts also demonstrated the lowest average unadjusted per capita spending growth rates over this 2-year period. These findings suggest that ACOs transitioning to or remaining in two-sided model levels of the BASIC track outperform ACOs remaining in one-sided models of the BASIC track, and we refer commenters to discussion in the Regulatory Impact Analysis of this final rule for a more detailed explanation of the analysis underlying these findings.

After consideration of public comments, we are finalizing our proposal. For agreement periods beginning on or after January 1, 2027, an ACO identified as inexperienced with performance-based risk Medicare ACO initiatives (defined in Sec. 425.20) may participate in the Shared Savings Program under a one-sided model for up to 5 performance years under the ACO's first agreement period in the BASIC track's glide path (if eligible). This modifies the current policy allowing a maximum of 7 performance years spanning two agreement periods in the BASIC track's glide path. We will also require ACOs inexperienced with performance- based risk Medicare ACO initiatives to progress more rapidly to higher levels of risk and potential reward under a two-sided model by their second agreement period, by requiring them to participate under Level E of the BASIC track or the ENHANCED track. BASIC track Level E and the ENHANCED track each qualify as an Advanced Alternative Payment Model (APM) under the Quality Payment Program.

Specifically, we will amend Sec. 425.600 to redesignate paragraph (h) as paragraph (i) and add a new paragraph (h) that specifies the requirements CMS would use to determine an ACO's eligibility for Shared Savings Program participation options for agreement periods beginning on or after January 1, 2027. Additionally, Sec. 425.600(h)(3) will include a limited exception for participation in the ENHANCED track by ACOs with less than 5,000 assigned beneficiaries in certain benchmark years. This limited exception reflects the requirement that for agreement periods beginning on or after January 1, 2027, an ACO with fewer than 5,000 assigned beneficiaries in benchmark year (BY) 1, BY2, or both may only enter the BASIC track.

We will specify in new Sec. 425.600(h)(1) how CMS determines an ACO's eligibility for participation options for agreement periods beginning on or after January 1, 2027, if an ACO is determined to be inexperienced with performance-based risk Medicare ACO initiatives (as defined at Sec. 425.20). Section 425.600(h)(1) will provide that if an ACO is determined to be inexperienced with performance-based risk Medicare ACO initiatives, 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, subject to the exception prohibiting ACOs with fewer than 5,000 assigned beneficiaries in BY1, BY2, or both, from participating in the ENHANCED track, specified in new Sec. 425.600(h)(3) (described in section III.F.4.b.(2).(b) of this final rule).

We will specify under new Sec. 425.600(h)(1)(i) that, for agreement periods beginning on or after January 1, 2027, 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 one agreement period, and for which the progression along the glide path is specified at Sec. 425.600(a)(4)(i)(C). We will specify under new Sec. 425.600(h)(1)(ii) that an ACO that enters an agreement period under the BASIC track's glide path at any of the levels of risk and potential reward, Levels A through E, would be deemed to have completed one agreement period under the BASIC track's glide path. For the purpose of determining the ACO's prior participation in the BASIC track's glide path, we will consider whether the ACO satisfies either of the following criteria: (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; or (B) for a new ACO identified as a re-entering ACO (as defined at Sec. 425.20), 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.

Finally, we will specify under new Sec. 425.600(h)(1)(iii) that an ACO determined to be inexperienced with performance-based risk Medicare ACO initiatives but which is not eligible to enter the BASIC track's glide path, in accordance with Sec. 425.600(h)(1), may enter BASIC track Level E for all performance years of the agreement period, or the ENHANCED track, subject to the exception prohibiting ACOs with fewer than 5,000 assigned beneficiaries in BY1, BY2, or both, from participating in the ENHANCED track, specified in new Sec. 425.600(h)(3). 3. Eligibility Requirements a. ACO Participant Change of Ownership (CHOW) Scenarios (1) Background

In the June 2015 final rule (80 FR 32707 through 32712), we added Sec. 425.118(a) and (b) to establish requirements for maintaining, updating, and submitting to CMS an accurate and complete ACO participant list.

Section 425.118(a) includes requirements for ACOs to submit and certify their ACO participant lists before the start of each agreement period and each performance year thereafter, as well as at other times. Section 425.118(b)(1) and (2) authorize ACOs to make additions or deletions to their ACO participant lists, and Sec. 425.118(b)(3) authorizes CMS to make annual adjustments based upon ACO participant list additions or deletions for purposes of the ACO's assignment, historical benchmark, financial calculations, and quality reporting. Additionally, CMS has the authority at Sec. 425.305(a) to screen ACOs, ACO participants, and ACO providers/suppliers for program integrity purposes, as well to impose safeguards where negative program integrity history is present.

To be eligible to participate in the Shared Savings Program, as specified at Sec. 425.118(a)(1), an ACO must maintain, update, and submit to CMS an accurate and complete ACO participant list. The ACO participant list identifies each ACO participant by its Medicare- enrolled TIN and legal business name (LBN). ACO participant agreements must require an ACO participant to report changes in enrollment information to the ACO within 30 days of the change (Sec. 425.116(a)(6)) and in accordance with Shared Savings Program requirements (Sec. 425.116(a)(3)).

CMS uses the certified ACO participant list to conduct critical oversight functions of the Shared Savings Program for downstream operations, such as establishing historical benchmarks; data sharing; financial performance; quality reporting; public reporting; and program eligibility. Changes to the certified ACO participant list can impact an ACO's overall eligibility to participate in the Shared Savings Program. For example, removing an ACO participant could drop the ACO's overall number of assigned Medicare fee-for-service beneficiaries below the 5,000 minimum required for participation in the Shared Savings Program (Sec. 425.110(a)(1)). Additionally, modifications to the certified ACO participant list can affect whether an ACO is determined to be a “low revenue ACO” or “high revenue ACO,” as well as CMS' determination regarding whether an ACO is “experienced with performance-based risk Medicare ACO initiatives” or “inexperienced with performance-based risk Medicare ACO initiatives,” as defined in Sec. 425.20. Because the ACO participant list has downstream effects on an ACO's participation in the Shared Savings Program, changes to the certified ACO participant list are only permitted during the annual Shared Savings Program change request cycle. Absent unusual circumstances, CMS does not make adjustments during the performance year to the ACO's assignment, historical benchmark, performance year financial calculations, the quality reporting sample, or the obligation of the ACO to report on behalf of eligible professionals that bill under the TIN of an ACO participant for certain CMS quality initiatives to reflect the addition or deletion of entities from the ACO participant list that become effective during the performance year (Sec. 425.118(b)(3)(ii)). Limiting additions of new ACO participants or revisions to an existing ACO participant on an ACO's participant list to one annual change request cycle ensures the integrity of program operations for both CMS and ACOs. CMS has sole discretion to determine whether unusual circumstances exist that warrant such adjustments (Sec. 425.118(b)(3)(ii)).

Before the start of an agreement period, before each performance year thereafter, and at such other times as specified by CMS, the ACO must submit to CMS an ACO participant list (Sec. 425.118(a)(2)). As operationalized, ACOs are able to add an entity to their

previously certified ACO participant list according to the form and manner specified by CMS (Sec. 425.118(b)(1)). To add a new ACO participant TIN, an ACO must submit a change request by the final deadline established by CMS (Sec. 425.118(b)(1)). Currently, change requests are only accepted by CMS during the change request cycle. All additions to the ACO participant list approved by CMS during the change request cycle are effective on January 1 of the next performance year (Sec. 425.118(b)(1)(ii)).

A change of ownership (CHOW) can occur when an ACO participant is purchased (or leased) by another organization. In such a case, the CHOW often results in the transfer of the previous owner's Medicare Identification Number and provider agreement (including the previous owner's outstanding Medicare debts) to the new owner. (See generally, Sec. 489.18(c)). If the purchaser or lessee elects not to accept a transfer of the provider agreement, then the old agreement should be terminated, and the purchaser or lessee is considered a new applicant and must initially enroll in Medicare.\399\

\399\ See generally Paper Enrollment Applications at https://www.cms.gov/medicare/enrollment-renewal/providers-suppliers/chain-ownership-system-pecos/enrollment-applications.

To notify CMS of the CHOW, an ACO participant submits the appropriate Medicare Enrollment Application form to their Medicare Administrative Contractor (MAC) or in the Provider Enrollment, Chain, and Ownership System (PECOS).\400\ The MAC uses the forms and required supporting documentation to document and identify changes in ownership and/or subsequent changes in TINs and Medicare Identification Numbers. When an ACO participant undergoes a CHOW resulting in a change to the TIN used for the Shared Savings Program, the ACO must provide documentation of the CHOW in a new change request to add the surviving Medicare enrolled TIN with no prior Medicare billing claims history to its ACO participant list. This allows CMS to appropriately track eligibility and other program requirements as well as perform other program operations such as beneficiary assignment, benchmark and performance year expenditure calculations, and determinations of shared savings and losses for ACOs with ACO participants that have undergone a CHOW.

\400\ Medicare providers and suppliers can enroll using the PECOS. PECOS is a web-based platform managed by CMS that facilitates the enrollment process for Medicare providers and suppliers. See CMS.gov website, Medicare Enrollment for Providers & Suppliers web page, at https://www.cms.gov/medicare/enrollment-renewal/providers-suppliers/chain-ownership-system-pecos. See also, PECOS, Medicare Enrollment for Providers and Suppliers, at https://pecos.cms.hhs.gov/pecos/help-main/faq.jsp (with Frequently Asked Questions including information on CHOW).

In some circumstances, an ACO participant CHOW could result in one Medicare-enrolled TIN being absorbed into an existing Medicare-enrolled TIN. This would mean the surviving ACO participant TIN would have Medicare billing claims history or other factors affecting an ACO's overall performance or benchmarking. Under this scenario, the surviving TIN could have a patient population and providers and suppliers who were not accounted for when CMS established the ACO's benchmarks. Such a scenario could lead to variation in the patient population seen during the performance year compared to the ACO's historical benchmark.

In a dynamic healthcare environment, ACO participants may experience CHOWs and/or subsequent TIN changes during the performance year that affect their ability to continue in the Shared Savings Program. ACOs and ACO participants have requested that we establish a process whereby an ACO participant \401\ that experiences a CHOW resulting in a surviving Medicare enrolled TIN with no prior Medicare billing claims history can be submitted by the ACO for CMS to review during the performance year.

\401\ A “certified ACO participant” means “an ACO participant that an ACO has listed on the ACO's certified ACO participant list.” See 425.118(a)(3): “The ACO must certify the submitted lists in accordance with Sec. 425.302(a)(2).”

As of January 1, 2025, there are 477 ACOs participating in the Shared Savings Program with more than 15,000 ACO participant TINs and 650,000 ACO providers and suppliers who have agreed to participate in ACOs. Due to the volume of data that we utilize to operationalize the Shared Savings Program, allowing for frequent or high volumes of changes to occur to an ACO's certified participant list during a performance year can increase the risk of errors, as well as uncertainty surrounding what data is utilized to produce a report. Additionally, it is important to ensure a degree of finality to reports for CMS and for ACOs to use during their participation in the Shared Savings Program and not allow data to constantly change. Therefore, it is important to limit the circumstances in which we allow ACOs to modify their certified ACO participant lists during a performance year, as well as the operational processes we allow to account for changes to occur during the performance year. (2) Allow Modifications to the Certified ACO Participant List for ACO Participant CHOWs During a Performance Year

As we described in the CY 2026 PFS proposed rule (90 FR 32660 through 32661), we recognize that requiring ACOs to wait until the upcoming change request cycle each performance year to update their certified ACO participant list to reflect an ACO participant's CHOW can, in some cases, present operational difficulties for ACOs. This gap may interfere with an ACO's ability to provide coordinated care to an ACO participant's patient population and negatively impact the ACO's participation in the Shared Savings Program. To account for such scenarios and to support ACOs' participation, effective January 1, 2026, we proposed ACOs that experience certain ACO participant CHOWs outside of the change request cycle must update their certified ACO participant list to reflect such ACO participant's CHOW. We proposed that this would apply to instances in which an ACO participant has undergone a CHOW resulting in a change to its Medicare enrolled TIN whereby the surviving Medicare enrolled TIN has no Medicare billing claims history. We explained that without the ability to report an ACO participant's CHOW and effectuate a change in the ACO's participant list during the performance year, the ACO may be unable to provide coordinated care to an ACO participant's patient population, which may cause the ACO's beneficiary count to fall below 5,000. An ACO participant change in ownership that reduces the ACO's number of assigned beneficiaries could constitute a significant change (as described at Sec. 425.214) for the ACO, adversely affecting the ACO's participant agreement and jeopardizing the ACO's continued participation in the Shared Savings Program. We noted that, as described at Sec. 425.214(a)(3), a significant change occurs when an ACO is no longer able to meet the eligibility or requirements of the Shared Savings Program.

To avoid confusion for ACOs and their ACO participants as well as to establish a clear and consistent process for the recognition of claims billed by the TIN of an ACO participant that has recently experienced a CHOW, we proposed to add new paragraph Sec. 425.118(b)(3) to require an ACO to submit to CMS for review an ACO participant change request for a CHOW resulting in a change to the ACO participant's Medicare enrolled TIN whereby the surviving Medicare

enrolled TIN has no Medicare billing claims history in a form and manner set by CMS. We proposed to require an ACO to submit an ACO participant change request for a CHOW resulting in a change to the TIN throughout the performance year, no later than 30 days after the CHOW and outside of the change request cycle. We proposed that this requirement be limited to instances where the surviving TIN is newly enrolled in PECOS with no prior Medicare billing claims history to limit program disruption such as adversely affecting quality performance. We proposed at Sec. 425.118(b)(3) that if CMS approves the change request containing a new ACO participant TIN, the ACO participant list would be updated in the form and manner specified by CMS. We proposed that CMS would have sole discretion whether to approve the ACO participant change request for a CHOW.

In alignment with proposed Sec. 425.118(b)(3) and (b)(4)(iii) and upon CMS approval of the change request submitted with the TIN, we would adjust the ACO's assignment, performance year financial calculations, and the requirement that the ACO must submit quality data as described at Sec. Sec. 425.508 and 425.510 for the applicable performance year on behalf of eligible professionals that bill under the TIN of an ACO participant. We would process these adjustments during the applicable Quality Payment Program (QPP) snapshot dates for the relevant Performance Period. The adjustments would reflect the addition, to the ACO participant list, of the surviving Medicare enrolled TIN with no prior Medicare billing claims history as a result of a CHOW. The adjustment would reflect the addition as the changes become effective during the performance year.

While we considered proposing to allow ACOs to submit all change of ownership requests outside of the change request cycle, we proposed limiting the out-of-cycle change of ownership requests to those ACO participant TINs without a prior Medicare billing claims history to avoid large discrepancies between the benchmark year patient population and the performance year patient population. To mitigate any disruptions in program calculations, we proposed to require that the surviving Medicare enrolled TIN have no Medicare billing claims history, meaning that the TIN does not have any paid claims for prior benchmark or performance years. We noted that this proposed change would not apply to a CHOW in which a TIN is absorbed into an existing TIN and the surviving TIN has prior Medicare billing claims history. Approval of the change request would not allow prior claims from the certified ACO participant TIN to be reprocessed under the surviving ACO participant TIN. Additionally, we noted that this proposal would mitigate operational impacts, including determining expenditures used in financial reconciliation, determining an ACO's quality sample, and producing quarterly and annual reports.

We proposed to incorporate the ACO participants' surviving Medicare enrolled TINs with no prior Medicare billing claims history into the ACO's assignment, historical benchmark, performance year financial calculations, or the obligation of the ACO to report quality data on behalf of eligible professionals that bill under the TIN of an ACO participant, when processed during applicable QPP snapshot dates for the relevant Performance Period, during the performance year in which they are approved (Sec. 425.118(b)(4)(iii)). Effectuating an ACO participant change request for a CHOW resulting in a surviving Medicare-enrolled TIN with no prior Medicare billing claims history during the performance year could prevent an ACO participant from losing their status to participate in an ACO. We explained that this proposal, if finalized, would support such ACO participant's ability to retain its assigned beneficiaries and facilitate the provision of high- quality, value-based, evidence-based care.

In the CY 2026 PFS proposed rule (90 FR 32661 through 32662), we described our consideration of the operational impact of our proposal at Sec. 425.118(b)(4)(iii). For example, the Quality Payment Program (QPP) updates eligibility data at multiple points throughout the year to assist ACOs in planning their Shared Savings Program participation. The QPP updates are based on past and current Medicare Part B claims and PECOS data. The Shared Savings Program sends ACO participant files to QPP, which then applies specific criteria to inform ACO eligibility reports. We review Alternative Payment Model (APM) participation four times for every performance year for clinicians and practices that are members of APMs (each review is called a “snapshot”). The first three snapshots are processed using the most current data available at the time. For CMS to meet operational processes such as QPP Determinations and APM Incentive Payments, ACOs would need to submit a change request in sufficient time for CMS to review, approve, and the ACO to certify, the revised ACO participant list without affecting annual adjustments under proposed Sec. 425.118(b)(4)(iii). We noted that we will make available the operational considerations each PY to ensure ACOs are aware of the schedule considerations impacting the QPP Determination and APM Incentive Payments schedule.

Additionally, we noted that under proposed Sec. 425.118(b)(4)(iii), CMS would then adjust the ACO's assignment, financial calculations, and the requirement for submission of quality data at Sec. 425.508 and Sec. 425.510 on behalf of eligible professionals that bill under the TIN of an ACO participant to reflect the addition of entities to the ACO participant list as they become effective during the performance year. This would be accomplished by providing ACOs with a mechanism to report an ACO participant CHOW that resulted in a new ACO participant TIN with no prior claims history on their certified ACO participant list and requiring that ACOs submit supporting documentation in the form and manner specified by CMS under proposed Sec. 425.118(b)(3).

As described in the CY 2026 PFS proposed rule (90 FR 32662), we proposed to redesignate the current Sec. 425.118(b)(3) as Sec. 425.118(b)(4) and add a new Sec. 425.118(b)(3) and (b)(4)(iii). We proposed to add new Sec. 425.118(b)(3) to require an ACO to submit notice and supporting documentation according to the form and manner specified by CMS to demonstrate that a CHOW resulting in a change to the Medicare enrolled TIN has taken place. This supporting documentation would include information and material currently collected by CMS during the annual change request cycle when an ACO participant has merged with or been acquired by another entity.

We explained that should we finalize our proposals for Sec. 425.118(b)(3) and (b)(4)(iii), we would provide additional guidance on the types of documentation that would suffice to meet the form and manner requirements. We noted that this supporting documentation could include a bill of sale, joinder agreement, or other legal document demonstrating a CHOW resulting in a new Medicare-enrolled TIN. Documentation demonstrating the surviving Medicare enrolled TIN with no prior Medicare billing claims history could also include documentation from the Internal Revenue Service (IRS) or from a state's Secretary of State (for example, IRS W-9, Employer Identification Number registration, or TIN assignment notice), or an affidavit explaining the CHOW resulting in the surviving Medicare enrolled TIN and confirming reassignment from the original ACO participant TIN to the surviving ACO

participant TIN. We explained that this could include an attestation from the ACO that all the providers and suppliers that previously assigned their right to receive Medicare payment to the original ACO participant entity's TIN have reassigned such right to the surviving Medicare enrolled TIN with no prior Medicare billing claims history for the identified ACO participant and will be added to the ACO provider/ supplier list within 30 days in accordance with Sec. 425.118(a)(4).

We proposed that the change have an effective date of January 1, 2026. We explained that we anticipate this approach would allow some ACOs to remain in the Shared Savings Program without interruption by continuing to utilize ACO participants who may have experienced a CHOW resulting in a surviving Medicare enrolled TIN with no prior Medicare billing claims history.

We sought comments on this proposal.

We received public comments on these proposals. The following is a summary of the comments we received and our responses.

Comment: All commenters expressed broad support--or general support with additional recommendations--for the proposal to require an ACO to submit a change request to CMS and update the ACO participant list outside of the annual change request cycle when an ACO participant undergoes a CHOW that results in a surviving Medicare enrolled TIN with no prior Medicare billing claims history. Many commenters appreciated the flexibility the new provisions would provide and agreed that they would allow ACO participants to continue participating in the ACO without interruption, ultimately retaining attribution and continuity of care for beneficiaries when ACO participants' TINs change outside of the annual change request cycle. Several commenters encouraged CMS to ensure reporting requirements are easy to complete to limit any added burden on providers and staff, particularly for low-revenue ACOs.

Response: We appreciate the commenters' support for this proposal. CMS intends to develop a process for reporting a CHOW that meets program requirements while limiting operational burden for ACOs and providers.

Comment: A few commenters recommended that CMS extend the time period in which ACOs must notify CMS of CHOWs from 30 days to 45 or 60 days, stating that it might be difficult for an ACO participant to notify an ACO of a CHOW and for the ACO to then notify CMS of the CHOW. Commenters stated extending the notice window would ensure that any potential changes or modifications could be made without disruption to the ACO.

Response: We understand that ACOs must rely on ACO participants to report CHOWs before the ACO can report them to CMS. However, we believe ACOs should be communicating regularly with their ACO participants and should generally be aware of an ACO participant's potential CHOW prior to the CHOW occurring. Additionally, we believe 30 days is important to help support ACO participants to continue participating in the ACO without interruption, ultimately retaining attribution and continuity of care for beneficiaries. We believe that 30 days is adequate time for an ACO to notify CMS once an ACO participant's CHOW has occurred and will maintain the 30-day requirement, which is consistent with existing reporting requirements in Sec. 425.118(c).

Comment: A few commenters recommended that the changes be expanded to allow newly enrolled TINs owned by an existing ACO participant and/ or the parent company of the ACO to be added outside of the change request cycle. The commenters suggested CMS leverage an ownership check of TINs when an ACO is flagged as merged or acquired. Another commenter suggested expanding the policy to also apply to CHOWs where there is no change in TIN.

Response: We must balance providing ACOs with additional flexibilities and maintaining operational stability of the program. At this time, we are limiting mid-year changes to the ACO participant list to changes stemming from an ACO participant's CHOW that has resulted in a change to its Medicare enrolled TIN, whereby the surviving TIN has no prior Medicare billing claims history, to avoid negative impacts to program operations, including assignment and benchmarking. For situations where there is no change in TIN, the relevant TIN remains on the ACO participant list and any additional changes can continue to be reported through the annual change request cycle.

After consideration of public comments, we are finalizing our proposals beginning January 1, 2026. Specifically, we are redesignating the current Sec. 425.118(b)(3) as Sec. 425.118(b)(4) and adding a new Sec. 425.118(b)(3) and (b)(4)(iii). We are adding new Sec. 425.118(b)(3) to require that no later than 30 days after an ACO participant has undergone a CHOW that has resulted in a change to its Medicare enrolled TIN, whereby the surviving Medicare enrolled TIN has no Medicare billing claims history, the ACO must submit a change request to CMS. This will allow ACOs to update their certified ACO participant list with a TIN newly enrolled in PECOS with no prior Medicare billing claims history, for an ACO participant that experiences a CHOW during the performance year and outside of the annual change request cycle. We are adding new Sec. 425.118(b)(3)(i) to require an ACO to submit the change request and supporting documentation according to the form and manner specified by CMS. We reiterate that we will provide guidance on the types of supporting documentation that will suffice. We are adding new Sec. 425.118(b)(3)(ii), under which CMS has sole discretion to approve the change request, and if CMS approves the change request, the ACO participant TIN is updated in the ACO participant list in the form and manner specified by CMS. In alignment with changes approved under new paragraph (b)(3), we are adding new Sec. 425.118(b)(4)(iii), under which CMS will adjust the ACO's assignment, performance year financial calculations, and the requirement that the ACO submit quality data under Sec. 425.508 and Sec. 425.510 on behalf of eligible professionals that bill under the TIN of an ACO participant. When processed during applicable Quality Payment Program snapshot dates for the relevant Performance Period, the adjustment includes the surviving Medicare enrolled TIN with no Medicare billing claims history on the ACO participant list as the change becomes effective during the performance year. b. SNF Affiliate Change of Ownership (CHOW) Scenarios (1) Background

The Medicare Skilled Nursing Facility (SNF) benefit applies to beneficiaries who require a short-term intensive stay in a SNF and skilled nursing and/or skilled rehabilitation care. Pursuant to section 1861(i) of the Act, beneficiaries must have a prior inpatient hospital stay of no fewer than three consecutive days to be eligible for Medicare coverage of inpatient SNF care. This requirement is referred to as the SNF 3-Day Rule. Section 1899(f) of the Act permits the Secretary to waive certain payment or other program requirements necessary to carry out the Shared Savings Program. Specifically, CMS has used the authority under section 1899(f) to waive section 1861(i) of the Act to allow coverage of certain SNF services that are not preceded by a qualifying 3-day inpatient hospital stay. The Shared Savings Program's SNF 3-day rule

waiver waives the requirement for a 3-day inpatient hospital stay prior to a Medicare-covered, post-hospital, extended-care service for eligible beneficiaries if certain conditions are met.

The SNF 3-day rule waiver at Sec. 425.612(a)(1) allows for Medicare payment for otherwise covered SNF services when ACO providers/ suppliers participating in ACOs participating under a two-sided model admit eligible beneficiaries, or certain excluded beneficiaries during a grace period, to an eligible SNF affiliate without a 3-day prior inpatient hospitalization. All other provisions of section 1861(i) of the Act and regulations regarding Medicare Part A post-hospital extended care services continue to apply. This waiver became available starting January 1, 2017, and all ACOs participating under, or that apply to participate under, Levels C-E of the BASIC track or under the ENHANCED track are eligible to apply for the waiver.

As we explained in the CY 2026 PFS proposed rule (90 FR 32662), it is important to note that the Shared Savings Program SNF 3-day rule waiver does not create a new benefit or extend Medicare SNF coverage to patients who could be treated in outpatient settings or who require long-term custodial care. Also, the SNF 3-day rule waiver does not restrict a beneficiary's choice of provider or supplier. A beneficiary continues to have the option to seek care from any Medicare FFS provider or supplier, including from a SNF or other facility that is not an affiliate of an ACO participating in the Shared Savings Program. If a beneficiary that is assigned to an ACO chooses to receive care from a SNF or other facility that is not an affiliate of the ACO, normal Medicare requirements apply, including the requirement for a 3- day inpatient hospitalization. The SNF 3-day rule waiver is intended to provide ACOs that are participating in certain performance-based risk tracks with additional flexibility to increase quality and decrease costs. As described at Sec. 425.612(d)(2), CMS monitors and audits the use of the SNF 3-day rule waiver in accordance with Sec. 425.316.

As part of the 3-day rule waiver supplemental application information requirements, at Sec. 425.612(a)(1)(i)(B), ACOs must provide to CMS the list of SNFs with whom the ACO will partner along with executed SNF affiliate agreements between the ACO and each listed SNF. The SNF affiliate agreement with the ACO includes all individual SNFs identified by a CMS Certification Number (CCN) under the Medicare- enrolled SNF TIN that agree to partner with the ACO for purposes of a SNF 3-day rule waiver. The SNF 3-day rule waiver enables eligible SNFs to admit eligible beneficiaries to their SNF without a prior 3-day inpatient hospitalization. To identify an eligible SNF for purposes of a SNF 3-day rule waiver, the SNF's Medicare enrolled TIN and CCN must appear on the SNF affiliate list.

To have and maintain a SNF 3-day rule waiver, an ACO must have at least one approved SNF on its SNF affiliate list to meet the requirements of Sec. 425.612(a)(1)(i)(B). Similar to the certified ACO participant list, ACOs can submit modifications to their SNF affiliate list in the form and manner specified by CMS (currently submitted during the annual change request cycle), and approved additions to the list become effective on January 1 of the following performance year.

Operationally, the Shared Savings Program does not provide a mechanism by which an ACO can add a new TIN to its SNF affiliate list outside of the annual change request cycle, including in situations where a SNF affiliate experiences a CHOW resulting in a change to the Medicare-enrolled TIN. ACOs and SNF affiliates may encounter the same CHOW scenario as described in section III.F.3.a. of this final rule for ACO participants. If a SNF affiliate experiences a CHOW resulting in a change to the Medicare-enrolled TIN, it can no longer admit eligible beneficiaries without a prior 3-day inpatient hospitalization due to the change in Medicare enrollment and our current operational processes for receiving and reviewing SNF affiliate list modifications on an annual basis. (2) Allow Modifications to the SNF Affiliate List for SNF Affiliate CHOWs During a Performance Year

As we described in the CY 2026 PFS proposed rule (90 FR 32663), ACOs have requested that we establish a mechanism to report a CHOW which results in a change in the Medicare-enrolled TIN for an approved SNF affiliate, which can be reviewed and effectuated by CMS during the performance year. This would enable the SNF affiliate to continue to participate with the ACO in the SNF 3-day rule waiver during the performance year and not have to wait until the next change request cycle to notify CMS of the change to the Medicare-enrolled TIN for the approved SNF affiliate.

As we explained in the CY 2026 PFS proposed rule, we recognize that requiring ACOs to wait until the upcoming change request cycle each performance year to update their SNF affiliate list to reflect an SNF affiliate's CHOW can interrupt ACO operations. This gap may prevent an ACO from utilizing a SNF affiliate that has undergone a CHOW resulting in a change in Medicare-enrolled TIN for the approved SNF affiliate under the SNF 3-day rule waiver. Therefore, we proposed to amend Sec. 425.612(a)(1)(i)(B) by moving the text to Sec. 425.612(a)(1)(i)(B)(1) and revising it to specify that the list of SNFs must include the Medicare enrolled TIN and the CCN of each SNF with whom the ACO will partner, along with executed written SNF affiliate agreements between the ACO and each listed SNF. We proposed this revision to ensure that we can link the SNF CCN with the correct Medicare enrolled TIN. We also proposed adding Sec. 425.612(a)(1)(i)(B)(2) to require ACOs to notify CMS no later than 30 days after the change of ownership of a SNF affiliate, identified in accordance with paragraph (a)(1)(i)(B)(1), that has resulted in a change to the Medicare enrolled TIN of the SNF affiliate in the form and manner specified by CMS.

We proposed to require an ACO to submit such a notification at any point during the performance year that is 30 days after the change in ownership, which would include times outside of the change request cycle. This proposed change is limited to a change of ownership of a SNF affiliate that has resulted in a change to the Medicare-enrolled TIN, as the CHOW affects the SNF affiliate's ability to participate under the 3-day rule waiver. This proposed change would not allow an ACO to add a new SNF affiliate as the result of a CHOW. Additionally, we proposed to require an ACO to submit supporting documentation demonstrating the change in SNF affiliate TIN similar to that described for an ACO participant TIN CHOW (see section III.F.3.a. of this final rule), and in accordance with the form and manner specified by CMS. Supporting documentation could include information from the Internal Revenue Service (IRS) or the State's Secretary of State, IRS W-9, Employer Identification Number registration, TIN assignment notice, or an affidavit explaining the TIN change and confirming reassignment from the original SNF affiliate TIN to the new SNF affiliate TIN.

As we described in the proposed rule (90 FR 32663), following CMS approval of the ACO's change request under proposed Sec. 425.612(a)(1)(i)(B), we would send an updated list of approved SNF affiliates to the Medicare Administrative Contractor (MAC). The

MAC would process the change; however, an ACO would still need to confirm with its MAC that the change has been fully effectuated. We explained that our proposal does not impact assignment of beneficiaries to an ACO and therefore would not impact the ACO beneficiaries eligible for the SNF 3-day rule waiver. It would only impact the SNFs that are approved as affiliates to provide care without the required three-day inpatient hospital stay.

A recent report released by the Assistant Secretary for Planning and Evaluation (ASPE) found frequent changes of ownership in hospitals and SNFs between 2016 and 2021, reporting that more than 3,200 SNFs experienced a CHOW.\402\ Requiring an ACO to submit updates to its SNF affiliate list during the performance year if one of its SNF affiliates experiences a CHOW requires clear policies and procedures associated with such changes. It is important to avoid a scenario where CMS or an ACO is unclear whether a SNF is approved to use the SNF 3-day rule waiver and when that information has been shared with the MAC for proper claims processing. Therefore, it is important to limit the circumstances which allow for ACOs to modify their SNF affiliate lists during a performance year outside of the scenario of a CHOW.

\402\ ASPE, Research Brief, Changes in Ownership of Skilled Nursing Facilities from 2016 to 2021: Variations by Size, Occupancy Rate, Penalty Amount, and Type of Ownership (May 10, 2024), available at https://aspe.hhs.gov/sites/default/files/documents/9c4c5c8f2d48309c83e87f544b1aed90/snf-ownership-changes-variations.pdf.

We explained that overall, the proposal to allow modifications to the SNF affiliate list for SNF affiliate CHOWs resulting in a change to the TIN would benefit CMS, ACOs and their SNF affiliates, and beneficiaries. This change would support continuous operations that improve access to quality care and care coordination as beneficiaries transition to a SNF. Historically, SNFs that undergo a CHOW that result in a change to the TIN have been unable to continue participation in the SNF 3-day rule waiver until the next change request cycle. Our proposal, if finalized, would ensure more timely access to skilled nursing care for Medicare beneficiaries.

We proposed that the change have an effective date of January 1, 2026. We explained that we anticipate this approach would provide ACOs the flexibility to continue to utilize the SNF 3-day rule waiver for SNF affiliates who may have experienced a CHOW resulting in a change to the TIN.

We sought comments on our proposal.

We received public comments on these proposals. The following is a summary of the comments we received and our responses.

Comment: Most commenters expressed broad support--or general support with additional recommendations--for the proposal to require an ACO to notify CMS no later than 30 days after a SNF affiliate's CHOW when the CHOW results in a change to the SNF affiliate's Medicare enrolled TIN. Commenters noted that the flexibility permitted by this policy would improve beneficiary care by maintaining access to the 3- day SNF waiver. Several commenters encouraged CMS to ensure reporting requirements are easy to complete, to limit any added burden on providers and staff.

Response: We appreciate the commenters' support of this proposal. CMS intends to develop a process for reporting SNF affiliate CHOWs that meets program requirements while limiting operational burden for ACOs and SNFs.

Comment: A few commenters recommended that CMS extend the time period in which ACOs must notify CMS of SNF affiliate CHOWs from 30 days to 45, 60, or 90 days, stating that it might be difficult for a SNF affiliate to notify an ACO of a CHOW and for the ACO to then notify CMS of the CHOW within the 30-day period. Commenters stated extending the notice window would ensure that any potential changes or modifications could be made without disruption to the ACO and improve continuity of care.

Response: We understand that ACOs must rely on SNF affiliates to report CHOWs before the ACOs are able to report to CMS. However, we believe ACOs should be communicating regularly with their SNF affiliates and should generally be aware of a potential SNF affiliate CHOW prior to the CHOW occurring. We believe that 30 days is adequate to notify CMS once the CHOW has occurred and will maintain the 30-day requirement, which is consistent with other time periods for ACOs to notify CMS of changes to the ACO provider/supplier list in Sec. 425.118(c).

Comment: A commenter raised a concern about the use of the term “CHOW,” believing that it only applies in situations where no TIN change occurs, citing the regulation at 42 CFR 489.18(c), which states: “When there is a change of ownership as specified in paragraph (a) of this section, the existing provider agreement will automatically be assigned to the new owner.” \403\

\403\ See 42 CFR 489.18(c).

Response: We appreciate this commenter's concern. However, while the regulation states the existing provider agreement will “automatically” be assigned to the new owner, this does not mean that it is required to be assigned to the new owner. If the purchaser elects not to accept a transfer of the provider agreement, then the old agreement should be terminated, and the purchaser is considered a new applicant.\404\ The CHOW term applies in these scenarios.

\404\ State Operations Manual (V 202) (June 2020), Sec. 3210.5A, “New Owner Refuses to Accept Assignment of the Previous Owner's Provider Agreement”, available at https://www.cms.gov/regulations-and-guidance/guidance/manuals/downloads/som107c03pdf.pdf.

Comment: A commenter opposed the change, stating that the current requirement protects beneficiaries, as nursing home ownership and operations can impact quality of care. They believe that the elimination of this requirement would undo, to some extent, the limited but significant progress made by CMS' final rule addressing nursing home ownership and disclosable parties. They believe CMS' current requirement for ACOs to await the change request cycle each performance year to update an ACO's SNF affiliate list serves an important protective role for Medicare beneficiaries.

Response: We appreciate this commenter's concern regarding beneficiary quality of care and SNF ownership. However, we do not believe that our proposal regarding mid-year updates to the SNF affiliate list significantly impacts decision making when organizations undergo a CHOW. Our process also does not impact any recent CMS regulation related to mergers, acquisitions, consolidations, and changes of ownership for hospitals and nursing homes enrolled in Medicare. Our policy simply requires the ACO to update its SNF affiliate list after a SNF affiliate CHOW occurs. We believe this ultimately will improve continuity of care, as beneficiaries will maintain access to the SNF 3-day rule waiver.

After consideration of public comments, we are finalizing our proposal beginning January 1, 2026 to require ACOs to report certain changes that occur during the performance year to SNF affiliates on the ACO's SNF affiliate list. Specifically, we are finalizing a requirement for ACOs to notify CMS no later than 30 days after a SNF affiliate's CHOW if the CHOW resulted in a change to the SNF affiliate's Medicare enrolled TIN. We are amending Sec. 425.612(a)(1)(i)(B) by moving the text to

Sec. 425.612(a)(1)(i)(B)(1) and revising it to specify that the list of SNFs must include the Medicare-enrolled TIN and the CCN of the SNFs with whom the ACO will partner along with executed written SNF affiliate agreements between the ACO and each listed SNF. We are also adding Sec. 425.612(a)(1)(i)(B)(2) to require ACOs to notify CMS no later than 30 days after the change of ownership of a SNF affiliate, identified in accordance with paragraph (a)(1)(i)(B)(1), that has resulted in a change to the Medicare enrolled TIN of the SNF affiliate in the form and manner specified by CMS. We are also finalizing the requirement, in Sec. 425.612(a)(1)(i)(B)(2), that such notice and supporting documentation must be submitted in the form and manner specified by CMS. 4. ACO Eligibility and Related Financial Reconciliation Requirements a. Overview

As we described in the CY 2026 PFS proposed rule (90 FR 32663), under the Shared Savings Program regulations, CMS “deems” an ACO to have initially satisfied the statutory requirement to have at least 5,000 assigned Medicare FFS beneficiaries (section 1899(b)(2)(D) of the Act), if 5,000 or more beneficiaries are historically assigned to the ACO participants in each of the three historical benchmark years as defined at Sec. 425.110(a)(2). Since the start of the Shared Savings Program, we have denied the applications of ACOs applying to participate in the program if the number of assigned beneficiaries was below 5,000 beneficiaries in any historical benchmark year. This policy was established to align with the statutory requirement and to ensure CMS is able to reliably and accurately assess ACO financial and quality performance. The purpose of the historical benchmark is to establish a fair and reliable baseline to compare with performance year expenditures in the calculation of an ACO's shared savings or losses. As an ACO's assigned beneficiary population decreases, the ability of CMS to reliably and accurately assess ACO financial and quality performance also decreases. In the November 2011 final rule (76 FR 67807 and 67808), we expressed the benefit of a 5,000-beneficiary minimum to maintain program eligibility and allow CMS to assess ACO financial and quality performance, while also planning a course of action for when an ACO falls below the 5,000-beneficiary minimum.

Furthermore, as we explained in the CY 2026 PFS proposed rule (90 FR 32664), CMS finalized the minimum savings rate (MSR) for ACOs with at least 5,000 assigned beneficiaries such that the MSR for each ACO would be based on increasing confidence intervals as the number of assigned beneficiaries increases (76 FR 67928 and 67929). At the same time, CMS recognized the higher uncertainty regarding expenditures for smaller ACOs and CMS' desire to encourage program participation by smaller ACOs. Accordingly, CMS set the confidence interval at 90 percent for ACOs with 5,000 beneficiaries assigned, resulting in an MSR of 3.9 percent for those ACOs. For ACOs with 20,000 and 50,000 assigned beneficiaries, CMS set the confidence interval at 95 percent and 99 percent, respectively, for those ACOs, resulting in MSRs of 2.5 percent and 2.2 percent (76 FR 67928). As ACO size increases from 5,000 to 20,000 assigned beneficiaries (or similarly from 20,000 to 50,000), CMS blends the MSRs between the two neighboring confidence intervals, resulting in the MSRs as shown in Table 6 of the November 2011 final rule (76 FR 67928).

Building on the November 2011 final rule, in the December 2018 final rule, CMS finalized a variable MSR and Minimum Loss Rate (MLR) for ACOs that fall below 5,000 beneficiaries in the performance year according to assigned beneficiary ranges and based on a confidence interval of 90 precent, as a way to better ensure that the program is rewarding or holding accountable ACOs for actual performance, not normal expenditure fluctuations (83 FR 67927) (Sec. Sec. 425.605 and 425.610).

Although most ACOs are able to reach the 5,000 beneficiaries assigned minimum, we recognized that this requirement does prevent some applicants from participating in the Shared Savings Program. Since the inception of the program, we have gained additional experience with the requirement to have 5,000 beneficiaries assigned in each benchmark year, and experience with how this requirement relates to the integrity and stability of financial performance calculations. This experience has provided additional information that shows we can both retain the financial integrity of benchmark calculations and ensure CMS can reliably and accurately assess ACO financial and quality performance while allowing for ACOs that have fewer than 5,000 beneficiaries assigned in their benchmark years to enter the program, if we implement additional safeguards that protect ACOs and the Trust Funds. As described in the CY 2026 PFS proposed rule (90 FR 32666), we proposed changes to the Shared Savings Program eligibility requirements to allow for participation by ACOs with a minimum of 5,000 assigned beneficiaries in their third benchmark year, even if the ACO has fewer than 5,000 assigned beneficiaries in benchmark year (BY) 1, BY2, or both. Further, we proposed safeguards to limit ACOs entering a new agreement period with fewer than 5,000 assigned beneficiaries in BY1, BY2, or both, at the time of application, to participate in the BASIC track (90 FR 32666 and 32667). We also proposed additional safeguards for ACOs with fewer than 5,000 assigned beneficiaries in any of their benchmark years, by applying an alternative performance payment limit and loss recoupment limit for these ACOs (90 FR 32667 through 32671) and excluding these ACOs from leveraging policies providing certain low revenue ACOs participating in the BASIC track with additional opportunities to share in savings (90 FR 32671). b. ACO Eligibility Requirement (1) Background (a) Background on Assigned Beneficiary Minimum Requirement

Section 1899(b)(2)(D) of the Act requires participating ACOs to include primary care ACO professionals that are sufficient for the number of Medicare FFS beneficiaries assigned to the ACO and that, at a minimum, the ACO shall have at least 5,000 such beneficiaries assigned to it under section 1899(c) of the Act in order to be eligible to participate in the Shared Savings Program.

In the November 2011 final rule (76 FR 67808), in alignment with the statutory requirement at section 1899(b)(2)(D) of the Act, CMS established that for an ACO to satisfy the requirement to have at least 5,000 assigned beneficiaries, the ACO must have 5,000 or more beneficiaries historically assigned to the ACO participants in each of the 3 benchmark years. See Sec. 425.110(a)(2). We described the importance of maintaining at least 5,000 assigned beneficiaries with respect to both the eligibility of the ACO to participate in the program and the ability of CMS to reliably and accurately assess ACO financial and quality performance. However, we also noted in that rule (76 FR 67807) that we understood circumstances may change during an ACO's agreement period, and that an ACO's assigned population may vary accordingly, and if the ACO falls below 5,000 beneficiaries during the agreement period, the ACO will be subject to compliance actions (described at Sec. Sec. 425.216 and 425.218).

Additionally, in the November 2011 final rule (76 FR 67929), we finalized the MSR/MLR with a sliding scale that varies based on the number of beneficiaries assigned to the ACO from 5,000 up to 60,000. The largest ACOs with over 50,000 assigned beneficiaries had 99 percent confidence intervals. At the same time, CMS also recognized ACOs with the minimum 5,000 assigned beneficiaries must meet a higher MSR of 3.9 percent to be eligible for shared savings payments, based on a confidence interval of 90 percent (76 FR 67927).

In the CY 2025 PFS final rule (89 FR 98085 through 98086), we finalized a policy to sunset the requirement at Sec. 425.110(b)(2) that CMS will terminate an ACO's participation agreement and determine that an ACO is not eligible to share in savings for that performance year if an ACO's assigned beneficiary population is not at least 5,000 by the end of the performance year specified by CMS in its request for a corrective action plan. We explained that this requirement could be sunset because the policy finalized in the December 2018 final rule (83 FR 67925 through 67929), to use a variable MSR/MLR when performing shared savings and shared losses calculations if an ACO's assigned beneficiary population fell below 5,000 for the performance year, was effective in protecting both CMS and the ACO from inappropriate overpayments or underpayments and reduced the financial risk of allowing ACOs to continue to participate in the Shared Savings Program if they experience a reduction in assigned beneficiaries. As we have explained in prior rulemaking, the MSR/MLR protects against an ACO earning shared savings or being liable for shared losses when the change in expenditures represents normal, or random, variation rather than actual program performance (83 FR 67923 through 67926).

As we explained in the CY 2026 PFS proposed rule (90 FR 32664 and 32665), after gaining 13 years of experience administering the Shared Savings Program, including lessons learned from applying the requirement at section 1899(b)(2)(D) of the Act that “[a]t a minimum, the ACO shall have at least 5,000 such beneficiaries assigned to it [. . .] in order to be eligible to participate in the ACO program,” we have determined it is in the best interest of Medicare beneficiaries, the Trust Funds, and participating ACOs to modify the requirement at Sec. 425.110(a)(2) so that it better supports the goals of the Shared Savings Program. As the program grows in experience, the programmatic guardrails can be changed to better incentivize ACOs, especially those that have successfully participated in the program, to participate in the program while maintaining CMS' ability to reliably and accurately assess ACO financial and quality performance. Historically, the 5,000 assigned beneficiary benchmark year minimum has been implemented across all benchmark years to assess an ACO's financial and quality performance. However, after reviewing historical data and program operations, we believe the 5,000-beneficiary benchmark year minimum can be applied to BY3 only, which provides the most recent data available prior to an ACO entering an agreement period, to maximize the goals and benefits of the Shared Savings Program.

As discussed in the CY 2026 PFS proposed rule (90 FR 32665), the 5,000-beneficiary benchmark year minimum applied across all benchmark years helps to ensure that CMS is able to reliably and accurately assess ACO financial and quality performance during the Shared Savings Program application process. However, this beneficiary threshold is most critical in assessing BY3. Specifically, during the application cycle, CMS makes available to all currently participating ACOs and all applicant ACOs estimates of the number of assigned beneficiaries for each of the three benchmark years. The BY3 assignment provided is based on the most recently available 24 months of Medicare beneficiary claims data. The application cycle occurs during the calendar year that corresponds to BY3, and we run assignment based upon the 24 months prior to the end date of the most recent quarter available. Therefore, BY3 is the most current assignment run we produce during the application cycle for assessing the number of assigned beneficiaries an ACO has at the time they are applying to participate in the Shared Savings Program. (b) Background on Track Specific Requirements for Participation Options

With the December 2018 final (83 FR 67831 through 67841), we finalized the availability of participation options under the BASIC track and ENHANCED track for ACOs entering an agreement period beginning on July 1, 2019, and in subsequent years. We refer readers to the CY 2026 PFS proposed rule (90 FR 32648 through 32651) for background information on Shared Savings Program participation options. The BASIC track and the ENHANCED track offer differing levels of risk and potential reward. See Sec. Sec. 425.600(a)(3) to (4), 425.605, and 425.610. In general, an ACO that meets or exceeds its MSR, and otherwise qualifies for a shared savings payment, shares in savings at a sharing rate specified by the ACO's participation track (and level, if applicable), not to exceed a performance payment limit (a percentage of the ACO's updated historical benchmark). There is a limited exception for eligible low revenue ACOs participating under the BASIC track, under which an ACO that does not meet the MSR requirement but meets other criteria may qualify for a shared savings payment, at a lower sharing rate, in accordance with Sec. 425.605(h). An ACO under a two-sided model that meets or exceeds its MLR shares in losses at a shared loss rate specified by the ACO's participation track (and level, if applicable), not to exceed a loss recoupment limit (a percentage of the ACO's updated historical benchmark). In summary:

The BASIC track (see Sec. Sec. 425.600(a)(4) and 425.605) includes a “glide path” from one-sided model Levels A and B to incrementally higher levels of performance-based risk under Levels C, D, and E.

++ Under Levels A and B of the BASIC track, an ACO may share in savings at a sharing rate of up to 40 percent (Sec. 425.605(d)(1)(i)(A) and (d)(1)(ii)(A)), not to exceed 10 percent of updated benchmark (Sec. 425.605(d)(1)(i)(B) and (d)(1)(ii)(B)).

++ Under Level C of the BASIC track, an ACO may share in savings at a sharing rate of up to 50 percent (Sec. 425.605(d)(1)(iii)(A)), not to exceed 10 percent of updated benchmark (Sec. 425.605(d)(1)(iii)(B)), and may share in losses at a loss sharing rate of 30 percent (Sec. 425.605(d)(1)(iii)(C)), not to exceed 2 percent of total Medicare Parts A and B FFS revenue of the ACO participants in the ACO capped at 1 percent of updated benchmark (Sec. 425.605(d)(1)(iii)(D)).

++ Under Level D of the BASIC track, an ACO may share in savings at a sharing rate of up to 50 percent (Sec. 425.605(d)(1)(iv)(A)), not to exceed 10 percent of updated benchmark (Sec. 425.605(d)(1)(iv)(B)), and may share in losses at a loss sharing rate of 30 percent (Sec. 425.605(d)(1)(iv)(C)), not to exceed 4 percent of total Medicare Parts A and B FFS revenue of the ACO participants in the ACO capped at 2 percent of updated benchmark (Sec. 425.605(d)(1)(iv)(D)).

++ Under Level E of the BASIC track, an ACO may share in savings at a sharing rate of up to 50 percent (Sec. 425.605(d)(1)(v)(A)), not to exceed 10 percent of updated benchmark (Sec. 425.605(d)(1)(v)(B)), and may share in losses at a loss sharing rate of 30 percent (Sec. 425.605(d)(1)(v)(C)), not to exceed 8

percent of total Medicare Parts A and B FFS revenue of the ACO participants in the ACO capped at 4 percent of updated benchmark (Sec. 425.605(d)(1)(v)(D)). The loss recoupment limit is the percentage of revenue specified in the revenue-based nominal amount standard under the Quality Payment Program (42 CFR 414.1415(c)(3)(i)(A)) capped at 1 percentage point higher than the expenditure-based nominal risk amount (Sec. 414.1415(c)(3)(i)(B)).

Under the ENHANCED track (Sec. Sec. 425.600(a)(3) and 425.610), with the highest level of risk and potential reward under the Shared Savings Program, an ACO may share in savings at a sharing rate of up to 75 percent (Sec. 425.610(d)), not to exceed 20 percent of updated benchmark (Sec. 425.610(e)), and may share in losses at a loss sharing rate not less than 40 percent and not to exceed 75 percent (Sec. 425.610(f)), capped at 15 percent of updated benchmark (Sec. 425.610(g)).

Currently, CMS allows ACOs to choose to participate in either the BASIC track or ENHANCED track (see Sec. 425.600(a), and see also Sec. 425.226(a)), provided the ACO meets the eligibility criteria set forth in 42 CFR part 425 subpart B. An ACO must select a Shared Savings Program participation option for which CMS determines it is eligible under Sec. 425.600(g). An ACO entering the BASIC track may elect to start at any level for which it is eligible, based on its experience with performance-based risk Medicare ACO initiatives (refer to Sec. 425.600(a)(4)(i)(C)(1) and (g)). During the application cycle, CMS conducts a prescreening assessment to evaluate an ACO's eligibility for its selected level. The evaluation includes verifying whether the ACO complies with general program requirements and the ability of the ACO to take on risk (83 FR 41806). See Sec. Sec. 425.202(a) and 425.204. Also, part of this check assesses the ACO's ability to provide an adequate repayment mechanism for shared losses if the chosen track is two-sided (Sec. 425.204(f)(3)(i)). CMS may deny an ACO applicant's application if the ACO applicant fails to satisfy the requirements of the Shared Savings Program on the basis of information contained in and submitted with the application per Sec. 425.206(a)(1). (2) Revisions (a) Allow ACOs To Enter the Shared Savings Program With Fewer Than 5,000 Assigned Beneficiaries in BY1, BY2, or Both

As we described in the CY 2026 PFS proposed rule (90 FR 32665 and 32666), the requirement in Sec. 425.110(a)(2) for an applicant ACO to have at least 5,000 assigned Medicare FFS beneficiaries in each of the 3 historical benchmark years is the most common reason we deny ACO applicants' applications. In evaluating potential changes to this eligibility policy at Sec. 425.110(a), we considered ways to increase flexibility regarding the minimum number of assigned beneficiaries required in benchmark years, to continue to support new and previously successful renewing and re-entering ACOs participating in the Shared Savings Program, while minimizing adverse financial impacts to ACOs and the Shared Savings Program that may arise from program participation by ACOs with fewer than 5,000 beneficiaries assigned in one or more historical benchmark years.

Consequently, in the CY 2026 PFS proposed rule we proposed to amend our requirements at Sec. 425.110(a)(2) to specify that, for agreement periods beginning on or after January 1, 2027, ACOs applying to enter a new agreement period would be required to have at least 5,000 assigned beneficiaries in the ACO's BY3 but could be under 5,000 assigned beneficiaries in BY1, BY2, or both. Currently, on the basis of Sec. 425.110(a)(2), we deny an applicant ACO's application to enter or renew its participation in the program if the ACO would be assigned fewer than 5,000 beneficiaries in any of benchmark years 1 to 3. Under the policy we proposed, ACOs would not be prevented, on the basis of Sec. 425.110(a)(2), from entering the program if they are below 5,000 assigned beneficiaries in BY1, BY2, or both. We proposed to sunset the current policy regarding ACOs with fewer than 5,000 assigned beneficiaries in any of the benchmark years after December 31, 2026, and make this change applicable for ACOs applying to enter new agreement periods beginning January 1, 2027, and for subsequent agreement periods. We proposed to apply this modified approach for agreement periods beginning January 1, 2027, instead of January 1, 2026, because the application cycle for agreement periods starting January 1, 2026, was already underway when the CY 2026 PFS proposed rule appeared in the Federal Register, and this proposal would not be finalized until November 2025, by which point we will be preparing to grant or deny applications for agreement periods starting January 1, 2026, in early December.\405\

\405\ See Medicare Shared Savings Program, Key Application Actions and Deadlines For Agreement Period Beginning on January 1, 2026, available at https://www.cms.gov/files/document/key-application-dates-and-deadlines-2026.pdf.

We explained our belief that this proposal is consistent with the statutory requirements at section 1899(b)(2)(D) of the Act that “[a]t a minimum, the ACO shall have at least 5,000 [Medicare FFS] beneficiaries assigned to it under subsection (c) in order to be eligible to participate in the ACO program,” because the proposal requires that an ACO must meet the 5,000-beneficiary minimum before entering an agreement period (90 FR 32666). While the statute established this requirement, subsequent rulemaking defines its specific implementation parameters such as in the benchmark years. We stated that this proposed update would align with the statutory requirement at section 1899(b)(2)(D) of the Act.

We further explained that, over the last several Shared Savings Program application cycles for ACOs entering a new agreement period, about 2 percent of ACO applicants on average were denied participation in the program due to the ACOs having fewer than 5,000 assigned beneficiaries in BY1, BY2, or both, while still having more than 5,000 assigned beneficiaries in BY3 and meeting all other program eligibility requirements (90 FR 32666). Additionally, the proposed revisions would allow new, renewing, and re-entering ACOs that have been successful in the program previously and that fall under 5,000 assigned beneficiaries in BY1 and/or BY2 to continue to participate in the Shared Savings Program as long as such ACOs meet all other Shared Savings Program requirements.

We stated this proposal would provide greater flexibility on the requirement to have 5,000 assigned beneficiaries in each benchmark year, but it also could introduce risk for both the ACO and the program (90 FR 32666). For example, as an ACO's assigned beneficiary population decreases, variability in the population's expenditures increases because a few beneficiaries with unusually high or unusually low expenditures could have a substantive impact on an ACO's overall expenditures. The reduction in the size of the ACO's assigned beneficiary population in benchmark years could result in variability in benchmark calculations that could cause shared savings payments or shared losses owed to be based on normal expenditure fluctuations, rather than reflect ACO performance in the program. Accordingly, we also proposed safeguards to address variability in calculations and to protect both ACOs

and Medicare Trust Funds (90 FR 32664 through 32671).

We proposed to revise Sec. 425.110 as follows. At Sec. 425.110(a), we proposed to revise paragraph (2) by adding the introductory phrase, “For agreement periods beginning before January 1, 2027”, to limit the timing of applicability of the provision.

We proposed adding new paragraph (3) to Sec. 425.110(a) specifying that for agreement periods beginning on or after January 1, 2027, we determine whether an ACO has 5,000 or more beneficiaries historically assigned to the ACO participants in each of the 3 benchmark years, as calculated using the assignment methodology set forth in subpart E of this part. We also proposed to specify under new Sec. 425.110(a)(3) that we would use the most recent data available to estimate the number of assigned beneficiaries in the third benchmark year. Additionally, we proposed to specify in new Sec. 425.110(a)(3)(i) through (ii) the following provisions in connection with our determination of whether an ACO has 5,000 or more assigned beneficiaries in its benchmark years.

We would deem an ACO to have initially satisfied the requirement to have at least 5,000 assigned beneficiaries as specified at Sec. 425.110(a)(1) if 5,000 or more beneficiaries are historically assigned to the ACO participants in the third benchmark year.

If an ACO has fewer than 5,000 assigned beneficiaries in either the first benchmark year, the second benchmark year, or both, the ACO may only participate under the BASIC track in accordance with new Sec. 425.600(h)(3) (90 FR 32648 through 32659 and 90 FR 32666 through 32667). (b) Require an ACO With Fewer Than 5,000 Assigned Beneficiaries in BY1, BY2, or Both To Participate Only Under BASIC Track

Providing greater flexibility around the requirement to have 5,000 assigned beneficiaries in BY1, BY2, or both may introduce risk to the program. In the CY 2026 PFS proposed rule (90 FR 32666), we explained that as an ACO's assigned beneficiary population decreases, variability in the population's average expenditures increases. The reduction in the size of the ACO's assigned beneficiary population in benchmark years could result in variability in benchmark calculations that could cause shared savings payments or shared losses owed to be based on normal variation in expenditures, rather than reflect ACO performance in the program. We proposed that if an ACO, when entering a new agreement period, is under the 5,000-beneficiary minimum in BY1, BY2, or both, but meets this requirement in BY3, the ACO may only enter an agreement period in the BASIC track, to reduce the potential risk to the ACO and to the Shared Savings Program that we described elsewhere in the CY 2026 PFS proposed rule (90 FR 32666).

We explained that we allow ACOs to choose to participate in either the BASIC track or ENHANCED track, as long as they meet all applicable eligibility criteria, including the requirements to participate under performance-based risk. See Sec. 425.600(a)(4)(i)(C)(4), and (g). We apply eligibility checks for an applicant ACO's track selection during the annual application cycle and communicate track eligibility to the ACO through the Participations Options Report. Under the proposed approach, during the application cycle, we would review an ACO's track selection in combination with its number of assigned beneficiaries in each benchmark year and provide information to the ACO about its participation options. ACOs would receive an opportunity to correct deficiencies and/or make updates or modifications to the ACO's change request(s) during two rounds of RFI (Request for Information) submission periods in Phase 1 of the application cycle. We would also provide a final disposition of an ACO's eligibility for program participation, and we would deny applicants from participation in the program if they do not meet all eligibility criteria.

We proposed that this change would be applicable for ACOs applying to enter new agreement periods beginning on or after January 1, 2027.

As described in the CY 2026 PFS proposed rule (90 FR 32669), an ACO with fewer than 5,000 assigned beneficiaries in one or both of benchmark years 1 and 2 could experience variability in benchmark calculations which could cause shared savings payments or shared losses owed to be based on normal expenditure fluctuations, rather than reflect actual program performance, because a small number of beneficiaries either with unusually high or unusually low expenditures could substantially affect the variability of the benchmark calculations. This proposal to limit ACOs in this situation to the BASIC track protects these ACOs from incurring a larger shared losses rate of up to 75 percent (see Sec. 425.610(f)(4)), and it protects the Medicare Trust Funds from paying a larger shared savings rate of up to 75 percent (see Sec. 425.610(d)(4)), which could result under the ENHANCED track, attributable to variability in benchmark calculations associated with ACOs with fewer than 5,000 assigned beneficiaries in one or both of benchmark years 1 and 2 rather than actual program performance.

As described in the CY 2026 PFS proposed rule (90 FR 32666), we proposed a related provision in new Sec. 425.600(h)(3), applicable for agreement periods beginning on or after January 1, 2027, under which, if an ACO is determined to have fewer than 5,000 assigned beneficiaries in either the first benchmark year, the second benchmark year, or both, in accordance with Sec. 425.110(a)(3) (as proposed to be revised), the ACO may only enter the BASIC track. As described in further detail in the CY 2026 PFS proposed rule (90 FR 32648 through 32659), under this proposed approach, an ACO may enter a level of risk and potential reward under the BASIC track in accordance with the requirements of new Sec. 425.600(h).

We sought comments on the proposals to allow ACOs to participate in the Shared Savings Program if they have fewer than 5,000 assigned beneficiaries in BY1, BY2, or both (but have at least 5,000 assigned beneficiaries in BY3) and the requirement that these ACOs may only enter an agreement period in the BASIC track.

We received public comments on these proposals. The following is a summary of the comments we received and our responses.

Comment: Many commenters generally supported the proposed revision to allow ACOs to enter the Shared Savings Program with fewer than 5,000 assigned beneficiaries in BY1, BY2, or both. A few commenters supported the revision because it recognizes operational realities and helps ensure program stability. Another commenter appreciated these proposed changes and thought that they would streamline ACO participation and measurement. An additional commenter agreed that this revision adds flexibility for ACOs that will support continuity of care for the beneficiaries they serve.

A large number of supportive commenters stated that the policy provides flexibility that will help new ACOs join the Shared Savings Program. Many advocated that community health centers are eager to continue to enter into value-based care agreements, and this proposal will open the door to allow more to embark on this endeavor. A few commenters stated that new, re-entering, and renewing ACOs that could not participate in the Shared Savings

Program because of the requirement to have at least 5,000 assigned beneficiaries in BY1 and BY2 would now be able to begin or continue to participate in the program.

Several commenters noted that the flexibility of this policy will encourage broader participation in the Shared Savings Program, including by new entrants, by lowering barriers for Shared Savings Program entry. A commenter stated this flexibility will be important for new ACOs to join the Medicare Shared Savings Program, especially as meeting minimum beneficiary assignment thresholds may become harder as more beneficiaries move from Traditional Medicare to enrollment in a Medicare Advantage plan. Another commenter suggested that beneficiaries will benefit from this proposed change as ACOs will have greater flexibility to expand their assigned beneficiary populations and recruit clinicians to meet the needs of their beneficiaries. Some commenters mentioned that this will allow smaller ACOs with less than 5,000 assigned beneficiaries the opportunity to participate in this program and therefore participate in value-based care, enabling ACOs to build their assigned beneficiary population over time without having their participation in the program jeopardized, with a commenter recommending that CMS continue to pursue additional policies and flexibilities that allow smaller ACOs to participate in the Shared Savings Program.

Additionally, many supportive commenters believe that the policy provides flexibility that will help current participants to continue to participate successfully in the Shared Savings Program. A couple of commenters thought the policy would help avoid unnecessary ACO participation agreement terminations due to dips in beneficiary assignment counts. A commenter appreciated CMS efforts to ensure that small, low revenue, and often physician-led ACOs can continue to participate in the Shared Savings Program. Another commenter supported the proposal because it provides needed flexibility and reflects a more practical approach to the variation in beneficiary assignment counts over time, particularly for smaller ACOs and those in regions with fluctuating Medicare populations.

Lastly, some commenters appreciated how the policy has the potential to support rural ACOs that face unique challenges in growing their patient base and who may not have 5,000 assigned beneficiaries in all three benchmark years. Several commenters noted that rural ACOs will benefit from greater flexibility, and that the proposal would allow for increased participation for rural ACOs in the Shared Savings Program. Another commenter appreciated how the policy allows for meaningful engagement and accountability by long-term care providers seeking to “engage in the full healthcare experience and risk for their residents and patients while aligning with CMS' vision”.

Response: We thank commenters for their support.

Comment: Some commenters had concerns about requiring ACOs that enter the program with fewer than 5,000 assigned beneficiaries in BY1 or BY2 or both to participate in the BASIC track. A couple of the commenters described that they believed some of the requirements were “arbitrary” and would prevent smaller ACOs from participating in the ENHANCED track if they fall below 5,000 assigned beneficiaries during benchmark years 1 or 2. Further, the commenters indicated that for ACOs falling below 5,000 assigned beneficiaries in benchmark year 3, these ACOs would be unable to renew their participation agreement, and that these new restrictions would disproportionately harm rural and underserved communities, where assigned populations are smaller and more prone to year-over-year fluctuations. Additionally, these commenters stated these changes would discourage the formation of new ACOs and penalize existing ACOs for changes outside their control, undermining the goal of the Shared Savings Program to expand access to coordinated, high quality care. Finally, these commenters concluded these proposed limitations would reduce opportunities for collaboration and shared savings, ultimately harming both providers and the Medicare program.

A commenter stated that limiting track options reduces ACOs' potential return on investment, which may lead some providers-- particularly those without large beneficiary pools or financial reserves--to forgo participation altogether. The commenter stated this would be counterproductive to the agency's stated goal of broadening Shared Savings Program participation. A commenter stated they support CMS' efforts to reduce the barrier to entering the program by allowing ACOs with fewer than 5,000 beneficiaries for the first two benchmark years to participate, but the commenter urges CMS to reconsider limitations on these ACOs' participation options.

Response: We appreciate the commenters' concerns and recommendations. However, as we explained in the CY 2026 PFS proposed rule, and restated elsewhere in this section of this final rule, this proposal to limit ACOs in this situation to the BASIC track protects ACOs from incurring a larger shared losses rate of up to 75 percent (see Sec. 425.610(f)(4)), and this proposal protects the Medicare Trust Funds from paying a larger shared savings rate of up to 75 percent (see Sec. 425.610(d)(4)), which could result under the ENHANCED track. Accordingly, we believe this requirement is not arbitrary but rather reasoned. Our proposal would help mitigate the risk of paying substantial shared savings to an ACO where the savings are attributable to the variability in benchmark calculations rather than actual program performance as can be the case for ACOs with fewer than 5,000 assigned beneficiaries in one or both of benchmark years 1 and 2 that are susceptible to performance variability. We want to clarify that this provision requires ACOs with fewer than 5,000 assigned beneficiaries in one or both of benchmark years 1 and 2 to participate in the BASIC track. If those ACOs apply to renew their participation in a subsequent agreement period and have at least 5,000 assigned beneficiaries in all 3 BYs, they may be eligible to enter an agreement period under the ENHANCED track.

Additionally, we disagree with commenters that “these changes would discourage the formation of new ACOs and penalize existing ACOs for changes outside their control, undermining the goal of the Shared Savings Program to expand access to coordinated, high quality care.” Conversely, as described in the Regulatory Impact Analysis of the CY 2026 PFS proposed rule (90 FR 32816 and 32817), we estimate that this proposal is expected to marginally increase participation by ACOs that would otherwise been unable to satisfy the 5,000 assigned beneficiary minimum in BY1, BY2, or both. We believe this approach will increase participation by ACOs with smaller assigned beneficiary populations.

Comment: A commenter is concerned that if it wishes to join the Shared Savings Program and has fewer than 5,000 beneficiaries in BY1, BY2, or both, that it will not be allowed to participate under the BASIC track as CMS proposed, given its experience with performance- based risk Medicare ACO initiatives, which subsequently require its participation in the Shared Savings Program under the ENHANCED track, and thus will not be able to participate

in the Shared Savings Program at all. This commenter recommended that CMS allow ACOs with fewer than 5,000 beneficiaries in BY1, BY2, or both, to participate in the ENHANCED track.

Response: We clarify for the commenter that ACOs experienced with performance-based risk Medicare ACO initiatives and that they have fewer than 5,000 beneficiaries in BY1, BY2, or both, may participate in Level E of the BASIC track per Sec. 425.600(h)(2) and (3) (as amended by this final rule). Such organizations would not be prohibited from participation in the Shared Savings Program. Further, regarding the recommendation that CMS allow ACOs with fewer than 5,000 beneficiaries in BY1, BY2, or both, to participate in the ENHANCED track, we reiterate our earlier response in this section.

Comment: A few commenters, while supportive of this policy, recommended CMS consider reducing the 5,000-assigned beneficiary requirement in all benchmark years and performance years to encourage greater participation, similar to ACO REACH.

Response: We thank commenters for their feedback, and we point commenters to section III.F.4.b.(1)(a) of this final rule and reiterate that maintaining this 5,000-assigned beneficiary minimum for BY3 using the most recent data available prior to an ACO entering an agreement period maximizes the goals and benefit of the Shared Savings Program. Moreover, as discussed in the CY 2026 PFS proposed rule (90 FR 32664), section 1899(b)(2)(D) of the Act requires participating ACOs to include primary care ACO professionals that are sufficient for the number of Medicare FFS beneficiaries assigned to the ACO and that, at a minimum, the ACO shall have at least 5,000 such beneficiaries assigned to it under section 1899(c) of the Act in order to be eligible to participate in the Shared Savings Program. ACO REACH, on the other hand, is a model tested by the CMS Innovation Center using CMS' authority under section 1115A of the Social Security Act and does not have this statutory requirement of a beneficiary minimum in any benchmark year. Further, there are fundamental differences between the Shared Savings Program benchmarking methodology compared to the ACO REACH benchmarking methodology that warrant this requirement for 5,000 assigned beneficiaries in BY3 for the Shared Savings Program. For example, ACO REACH Standard ACOs are required to have at least 3,000 beneficiaries that would have been aligned via claims-based alignment in at least one of the three base years.\406\ Further, the Shared Savings Program uses ACO-based assignment whereas ACO REACH uses a TIN/NPI based alignment.

\406\ Centers for Medicare & Medicaid Services. (2022, April). ACO Realizing Equity, Access, and Community Health (REACH) Model: Frequently Asked Questions (Version 1). https://www.cms.gov/priorities/innovation/media/document/aco-reach-genfaqs.

Comment: A couple of commenters suggested that CMS also consider a 6-month grace period to allow an ACO to be able to reach the 5,000- assigned beneficiary minimum. Similarly, another commenter suggested an extended assignment period for beneficiaries, allowing new ACO entrants more time to meet the threshold while acknowledging that they would assume financial risk during this extended ramp-up phase.

Response: We thank commenters for their suggestions. A 6-month grace period for retroactively increasing BY3 assignment is not feasible, as the ACO would be in the first performance year of its agreement period during that same 6-month window. CMS would not be able to calculate a reliable benchmark for ACOs to be reconciled against until the performance year on which they are assessed has nearly concluded. Further, we are unsure what the commenter means by suggesting an “extended ramp-up phase,” but we interpret that the commenter means to refer to an extended assignment window similar to this 6-month grace period. We reiterate our response that this would not be feasible for the same reason.

Comment: A couple of commenters suggested CMS should still allow for prepaid shared savings for those low revenue ACOs that do not meet the minimum 5,000-beneficiary threshold.

Response: We clarify for commenters that these proposed policies do not impact the eligibility requirements for prepaid shared savings, and that whether an ACO is a low revenue ACO or a high revenue ACO does not impact eligibility for prepaid shared savings.

Comment: A commenter supported many of the proposed changes to the Shared Savings Program but was concerned that “tightened beneficiary thresholds” will limit value-based care participation opportunities for smaller Shared Savings Program participants.

Response: We clarify for this commenter that the beneficiary minimum is not being tightened, but rather, we proposed to remove the minimum for BY1 and BY2. We reiterate that we estimate the flexibility provided by this policy will increase value-based care participation opportunities for smaller Shared Savings Program participants.

Comment: A commenter stated concern about this proposal for small ACOs, suggesting that “[p]articipation for small ACOs should be voluntary, as these organizations face higher financial and operational risks.”

Response: CMS clarifies for the commenter that participation in the Shared Savings Program is voluntary, and nothing about our proposed changes affects the voluntariness of that participation.

After consideration of public comments, we are finalizing the policies discussed in this section as proposed. Specifically, we are finalizing revisions to Sec. 425.110 as follows. At Sec. 425.110(a), we are finalizing our revision to paragraph (2) by adding the introductory phrase, “For agreement periods beginning before January 1, 2027”, to limit the timing of applicability of the provision.

We are finalizing the addition of a new paragraph (3) to Sec. 425.110(a) specifying that for agreement periods beginning on or after January 1, 2027, we determine whether an ACO has 5,000 or more beneficiaries historically assigned to the ACO participants in each of the three benchmark years, as calculated using the assignment methodology set forth in subpart E of Part 425. We are also finalizing with minor modification for consistency with our existing regulation text at Sec. 425.110(a)(2) the provision under new Sec. 425.110(a)(3) that states, in the case of the third benchmark year, CMS uses the most recent data available to estimate the number of assigned beneficiaries. Additionally, we are finalizing in Sec. 425.110(a)(3)(i) through (ii) the following provisions in connection with our determination of whether an ACO has 5,000 or more assigned beneficiaries in its benchmark years.

We will deem an ACO to have initially satisfied the requirement to have at least 5,000 assigned beneficiaries as specified at Sec. 425.110(a)(1) if 5,000 or more beneficiaries are historically assigned to the ACO participants in the third benchmark year.

If an ACO has fewer than 5,000 assigned beneficiaries in either the first benchmark year, the second benchmark year, or both, the ACO may only participate under the BASIC track in accordance with new Sec. 425.600(h)(3) (as described in sections III.F.2. and III.F.4.b.(2)(b) of this final rule).

c. Calculating Shared Savings and Losses for ACOs That Fall Below 5,000 Assigned Beneficiaries (1) Apply an Alternative Performance Payment Limit and Loss Recoupment Limit During Financial Reconciliation for ACOs That Fall Below 5,000 Assigned Beneficiaries in Any Benchmark Year (a) Background

Section 1899(d)(2) of the Act addresses how payments for shared savings are to be determined and states that the Secretary shall establish limits on the total amount of shared savings that may be paid to an ACO under that provision. Section 1899(i) 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(s) will improve the quality and efficiency of items and services furnished to Medicare beneficiaries without additional program expenditures. We have used our authority under section 1899(i)(3) of the Act to establish the Shared Savings Program's two-sided payment models.\407\ Under the authority granted by sections 1899(d)(2) and 1899(i)(1) of the Act, over time we have adopted methods to determine and limit performance payments and loss recoupment. We refer readers to discussions in earlier rulemaking on establishing the performance payment limit and loss recoupment limit for Levels A through E of the BASIC track (83 FR 67842 through 67857) and the ENHANCED track, formerly named Track 3 (80 FR 32778 and 32779). The track- or level- specific caps are described in section III.F.4.b.(1)(b) of this final rule.

\407\ See earlier rulemaking establishing two-sided models, including Track 3 (subsequently renamed the ENHANCED track) (80 FR 32771 and 32772), and the BASIC track (83 FR 67834 through 67841). We also used our authority under section 1899(i)(3) of the Act to remove payment amounts for episodes of care for treatment of COVID- 19 (see Sec. 425.611(c)(3) and 85 FR 27577 through 27582), SAHS billing activity for CY 2023 (see Sec. 425.670(c)(3) and 89 FR 79161), and SAHS billing activity, from ACO participants' Medicare FFS revenue used to determine the loss recoupment limit in the two- sided models of the BASIC track for CY 2024 and subsequent calendar years (see Sec. 425.672(c)(3) and 89 FR 98199 and 98200).

When we calculate the performance payment limit, which is the maximum amount of earned shared savings an ACO can receive in a performance year, in the determination of an ACO's shared savings, we first calculate an ACO's per capita updated benchmark expenditures for the performance year and then multiply this value by the ACO's assigned beneficiary person years \408\ for the performance year, which equals their total benchmark expenditures. We then calculate the performance payment limit as a percentage of total benchmark expenditures, with the applicable percentage dependent on the ACO's track/level of participation (either 10 percent for all levels of the BASIC track, or 20 percent for the ENHANCED track). An ACO's earned shared savings payment is capped at the ACO's performance payment limit amount. See Sec. Sec. 425.600(a)(3)-(4), 425.605, and 425.610 and the discussion in section III.F.4.b.(1)(b) of this final rule.

\408\ Person years are the fraction of the year during which the beneficiary was enrolled in each Medicare enrollment type. To calculate person years: CMS sums the number of Shared Savings Program-eligible months for the beneficiary for each Medicare enrollment type; CMS then divides this number by 12 (the number of months in a calendar year).

When we calculate the benchmark-based loss recoupment limit, which is the maximum amount of losses an ACO can owe in a performance year, in the determination of an ACO's shared losses, we calculate an ACO's per capita benchmark expenditures and then multiply this value by the ACO's assigned beneficiary person years for the performance year, which equals their total benchmark expenditures. We then calculate the loss recoupment limit as a percentage of total benchmark expenditures, with the applicable percentage dependent on the ACO's track/level of participation as described at Sec. Sec. 425.600(a)(3) through (4), 425.605, and 425.610 and in section III.F.4.b.(1)(b) of this final rule: either 1 percent for Level C, 2 percent for Level D, or 4 percent for Level E of the BASIC track, or 15 percent for the ENHANCED track.

With respect to ACOs participating in two-sided model levels of the BASIC track, the loss recoupment limit is a percentage of total Medicare Parts A and B FFS revenue of the ACO participants in the ACO (revenue-based loss recoupment limit) not to exceed a percentage of the ACO's updated benchmark (benchmark-based loss recoupment limit). We calculate the revenue-based loss recoupment limit as a percentage of total Medicare Parts A and B FFS revenue of the ACO participants in the ACO. If the amount of the ACO's revenue-based loss recoupment limit exceeds the amount of the benchmark-based loss recoupment limit, we apply the benchmark-based loss recoupment limit. Refer to Sec. 425.605(d)(1)(iii)(D), (d)(1)(iv)(D), and (d)(1)(v)(D). The percentages of the revenue-based and benchmark-based loss recoupment limits vary based on the Level of the BASIC track, as described in section III.F.4.b.(1)(b) of this final rule, providing for increasing performance-based risk along the two-sided model levels of the BASIC track's glide path: 2 percent of ACO participant revenue capped at 1 percent of updated benchmark under Level C; 4 percent of ACO participant revenue capped at 2 percent of updated benchmark under Level D; and 8 percent of ACO participant revenue capped at 4 percent of updated benchmark under Level E.

We detailed how CMS calculates the benchmark-based performance payment limits and loss recoupment limits in programmatic material, including publicly available specifications documents. See, for example, Medicare Shared Savings Program, Shared Savings and Losses, Assignment and Quality Performance Standard Methodology Specifications, (June 2025, Version #13), available at https://www.cms.gov/files/document/medicare-shared-savings-program-shared-savings-and-losses-and-assignment-methodology-specifications.pdf-4 (see section 4.3 “Performance Year Financial Reconciliation Calculations” and section 3.3 “ACO Participants' Revenue”). (b) Revisions

As described in the CY 2026 PFS proposed rule (90 FR 32668 through 32671), for ACOs with fewer than 5,000 assigned beneficiaries in any benchmark year, we proposed an alternative limit to performance payments and loss recoupment applicable for these ACOs in agreement periods beginning on or after January 1, 2027. We proposed that this policy would apply during financial reconciliation for any performance year in an agreement period for which the ACO was assigned fewer than 5,000 beneficiaries in any benchmark year. These alternative caps would help to safeguard ACOs and the Medicare Trust Funds by imposing stricter limits on performance payments and loss recoupment for ACOs with fewer than 5,000 assigned beneficiaries in any of their benchmark years at the time of financial reconciliation compared to the limits on performance payments and loss recoupment under the current methodology. The proposed timing of applicability for this policy would be consistent with the timing of applicability for our proposed approach to allow participation by ACOs with 5,000 assigned beneficiaries in BY3, and fewer than 5,000 assigned beneficiaries in BY1, BY2, or both (90 FR 32665 and 32666).

We explained that there are a number of possible circumstances that could cause an ACO's assigned beneficiary population in the benchmark years to fall below 5,000 assigned beneficiaries. Under our proposal, for agreements periods beginning on or after January 1, 2027, we would allow for participation by ACOs with fewer than 5,000 assigned beneficiaries in BY1, BY2, or both (90 FR 32666 and 32667). Additionally, regardless of the number of assigned beneficiaries an ACO has at the time of program entry, the ACO's assigned population for its benchmark years may be adjusted during the course of its 5-year agreement period. For example, as described in Sec. 425.652(a)(9), an ACO may receive an adjusted historical benchmark because of changes in the ACO's assigned beneficiary population in the benchmark years of the ACO's current agreement period due to the addition and removal of ACO participants or ACO providers/suppliers in accordance with Sec. 425.118(b), a change to the ACO's beneficiary assignment methodology selection at Sec. [thinsp]425.226(a)(1), or changes to the beneficiary assignment methodology specified in 42 CFR part 425 subpart E, among other changes. Participant list changes occurring within an agreement period, for example, could result in an ACO falling below 5,000 historically assigned beneficiaries in any benchmark year, including BY3, for the purpose of the performance year financial reconciliation.

As we described in the CY 2026 PFS proposed rule (90 FR 32668), under this proposed approach, we would use an alternative calculation for the benchmark-based \409\ performance payment limits and loss recoupment limits, in which we would compute an ACO's total benchmark expenditures as the product of an ACO's per capita updated benchmark expenditures and the ACO's assigned beneficiary person years from the benchmark year with the lowest number of assigned beneficiaries. We noted that we would only use this alternative calculation if an ACO has fewer than 5,000 historically assigned beneficiaries in a benchmark year; otherwise, we would use our current performance payment limit calculation that uses the ACO's assigned beneficiary person years from benchmark year 3 (BY3). More specifically, we would multiply the person years for assigned beneficiaries for the benchmark year with the lowest number of assigned beneficiaries by the ACO's per capita benchmark expressed as a single value to get an ACO's alternative total benchmark expenditures. We would calculate the product of the track/level specific percentage used to calculate the benchmark-based performance payment limit, or loss recoupment limit, and the ACO's alternative amount of total benchmark expenditures. We would also continue to compute a benchmark-based performance payment limit and loss recoupment limit for the ACO, specified for the ACO's track/level of participation.

\409\ This proposal would not change the calculation of the revenue-based loss sharing limit.

We proposed comparing the alternative benchmark-based performance payment limit or loss recoupment limit (calculated using assigned beneficiary person years from the benchmark year with the lowest number of assigned beneficiaries) with the benchmark-based performance payment limit or loss recoupment limit calculated with assigned beneficiary person years for the performance year. We would apply the lesser of these two aforementioned amounts (in absolute value) in determining the final performance payment limit or loss recoupment limit. This approach would ensure that no ACO would receive a larger cap with the alternative performance payment limit or loss recoupment limit than it would receive under the current methodology.

We proposed to specify the proposed approach in amendments to the Shared Savings Program regulations at new Sec. 425.605(i) (BASIC track) and new Sec. 425.610(l) (ENHANCED track).

At new Sec. 425.605(i), we proposed to include provisions to codify the current approach to calculating the performance payment limit under new paragraph (i)(1)(i), and the loss recoupment limit under new paragraph (i)(2)(i). We proposed to specify under new paragraphs (i)(1)(ii) and (i)(2)(ii) of Sec. 425.605 provisions for how CMS determines whether to apply an alternative performance payment limit or loss recoupment limit (respectively), if an ACO has fewer than 5,000 assigned beneficiaries in BY1, BY2, or BY3, in conducting financial reconciliation for each performance year, for agreement periods beginning on or after January 1, 2027. At this new Sec. 425.610(l)(1) to (2), we proposed to include provisions to codify the current approach to calculating the performance payment limit, and the loss recoupment limit. We proposed to specify under new paragraph (l)(3) of Sec. 425.610 provisions for how CMS determines whether to apply an alternative performance payment limit or loss recoupment limit if an ACO has fewer than 5,000 assigned beneficiaries in BY1, BY2, or BY3, in conducting financial reconciliation for each performance year, for agreement periods beginning on or after January 1, 2027.

The proposed policies to potentially reduce the limit on performance payments and loss recoupment limit when an ACO falls below 5,000 assigned beneficiaries in any benchmark year would safeguard the overall financial integrity of the Shared Savings Program, including the Trust Funds, and protect ACOs. The proposed policies would potentially limit shared savings and shared losses in the event that a historical benchmark may be less reliable due to a smaller (fewer than 5,000) assigned beneficiary population size in any benchmark year. We also explained that, as an ACO's assigned beneficiary population decreases, variability in the population's expenditures increases. The reduction in the size of the ACO's assigned beneficiary population in benchmark years could result in variability in benchmark calculations, which could cause shared savings payments made to the ACO or shared losses owed to be based on normal expenditure fluctuations, rather than reflect actual program performance. We explained our expectation that these alternative caps would apply to ACOs rarely; when applied, we expect these alternative caps to have limited reductions to an ACO's shared savings or shared losses payments but to provide adequate protection and risk mitigation in outlier cases. In an analysis of the performance year reconciliation data for performance years 2020-2023, CMS found that on average, only 2 percent of ACOs at the time of financial reconciliation have at least one benchmark year below 5,000 assigned beneficiaries.

Tables B-G3 and B-G4 provide examples of the alternative performance payment limit and alternative loss recoupment limit calculations that would apply for an ACO with fewer than 5,000 assigned beneficiaries in at least one benchmark year under this proposal.

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In the CY 2026 PFS proposed rule (90 FR 32667), we explained that we have used our authority under section 1899(i)(3) of the Act to establish the two-sided payment models of the BASIC track and ENHANCED track, including the current approach to calculating the loss recoupment limits (based on the ACO's assigned beneficiary person years for the performance year). Therefore, we proposed to continue to use our authority under section 1899(i)(3) of the Act to implement our proposal to apply the lower of a loss recoupment limit calculated based on performance year assigned beneficiary person years, or an alternative loss recoupment limit calculated based on the ACO's assigned beneficiary person years for the benchmark year with the lowest number of assigned beneficiaries, in conducting financial reconciliation for a performance year in agreement periods beginning on or after January 1, 2027.To implement this alternative payment model under the Secretary's authority under section 1899(i) of the Act, we must determine that it would improve the quality and efficiency of items and services furnished to Medicare beneficiaries without resulting in additional program expenditures. As discussed further in the Regulatory Impact Analysis of the CY 2026 PFS proposed rule (90 FR 32814 through 32818), we projected that the proposed change to apply an alternative loss recoupment limit for ACOs with fewer than 5,000 assigned beneficiaries in any BY, in combination with other proposed changes to the statutory payment model in the CY 2026 PFS proposed rule, as well as current policies we have adopted under the authority of section 1899(i)(3) of the Act, are expected to improve the quality and efficiency of items and services furnished under the Medicare program, and would not be expected to increase program expenditures relative to those of the statutory payment model.

As described in the Regulatory Impact Analysis for the CY 2026 PFS proposed rule (90 FR 32817), by potentially reducing shared savings payments to outliers with sharp growth in beneficiary assignment during the agreement period despite benchmark year beneficiary assignments dropping below the current 5,000-beneficiary minimum, the program may see additional net savings to the Medicare Trust Funds as compared to the current policy. Meanwhile, the alternative loss recoupment limit is not expected to materially reduce shared losses collected by the program as only a few ACOs have shared losses, and those losses rarely approach the regular benchmark-based loss recoupment limit. Also, the alternative loss recoupment limit would potentially marginally increase participation in the Shared Savings Program by providing certain ACOs greater assurance that they would be protected from elevated exposure to unusually large shared loss liabilities in rare situations where their assignment counts could decrease well below 5,000 beneficiaries. Attracting additional ACOs to the Shared Savings Program

increases the number of providers and suppliers who are working together to coordinate care for beneficiaries, providing quality care at lower cost.

We sought comments on the proposals to apply an alternative performance payment limit and loss recoupment limit during financial reconciliation for ACOs that fall below 5,000 assigned beneficiaries in any benchmark year.

We received public comments on these proposals. The following is a summary of the comments we received and our responses.

Comment: Many commenters supported the proposals to calculate an alternate performance payment limit and loss recoupment limit for ACOs with fewer than 5,000 assigned beneficiaries in the benchmark years. Some commenters stated support specifically in consideration of the fact that smaller ACOs may have greater variance in savings and losses compared to larger ACOs. A couple of commenters indicated support of this policy specifically because it may discourage “gaming by ACOs.” Some commenters stated appreciation of these policies specifically as an opportunity for new, renewing or re-entering ACOs that have successfully participated in the program and were impacted by the previous policies to continue their program participation without any further disruption. A commenter specifically supported these changes and policies that will continue to support smaller ACOs and practices, and those in rural and underserved communities, to participate and succeed in the Shared Savings Program and other value-based payment models.

Response: We thank commenters for their support.

Comment: A commenter had concerns about having shared savings and losses “capped throughout the agreement period”. This commenter stated that these restrictions may discourage participation from ACOs that would otherwise qualify under the “revised threshold.” The commenter indicated that capping shared savings reduces the potential return on investment, which may lead some ACOs--particularly those without large beneficiary pools or financial reserves--to forgo participation altogether, and that this would be counterproductive to the agency's stated goal of broadening Shared Savings Program participation. This commenter urges CMS to reconsider the across-the- board cap on shared savings and losses.

Response: We do not share the commenter's concerns about potential adverse effects on Shared Savings Program participation under the proposed approach, and believe the comment indicates a potential misunderstanding of the proposal. First, we remind the commenter that this proposed approach would not permanently cap an ACO's shared savings and losses “throughout the agreement period”, but rather determines whether to apply the existing or alternative caps each performance year of the agreement period. If, for example, an ACO adds ACO participants to its ACO participant list and those changes result in the ACO meeting or exceeding 5,000 assigned beneficiaries for each of its benchmark years, the alternative caps would not apply.

As described in the Regulatory Impact Analysis of the CY 2026 PFS proposed rule (90 FR 32816 and 32817) and reiterated in the related analysis in section VI of this final rule, we anticipate the changes we are finalizing to allow for additional flexibility in eligibility requirements, in combination with the alternative caps on shared savings or shared losses, will marginally increase Shared Savings Program participation over the 10 year projection window from 2026 to 2035. Although a number of possible circumstances could cause an ACO's assigned beneficiary population in the benchmark years to fall below 5,000 assigned beneficiaries during its agreement period, the proposal to apply alternative performance payment and loss recoupment limits for ACOs with less than 5,000 assigned beneficiaries in any BY is one of several safeguards we believe is necessary to address risk to the program that result from the proposed changes to the eligibility requirements to allow for participation by ACOs that have fewer than 5,000 assigned beneficiaries in BY1, BY2, or both, which we are finalizing with this final rule (see section III.F.4.b.(2)(a) of this final rule). As discussed elsewhere in this final rule, the policy to reduce the limits on performance payments and loss recoupment when an ACO falls below 5,000 assigned beneficiaries in any benchmark year would safeguard the overall financial integrity of the Shared Savings Program, including the Medicare Trust Funds, and also protect ACOs. More specifically, application of the alternative performance payment limit would potentially reduce shared savings payments to outliers with sharp growth in beneficiary assignment during the agreement period despite benchmark year beneficiary assignments dropping below the current 5,000-beneficiary minimum, and as a result the program may see additional net savings to the Medicare Trust Funds as compared to the current policy. The alternative loss recoupment limit is not expected to materially reduce shared losses collected by the program, as based on recent experience, only a few ACOs have shared losses, and those losses rarely approach the regular benchmark-based loss recoupment limit.

In an analysis of performance year reconciliation data for performance years 2020-2024,\410\ we have found that on average, only 2 percent of ACOs at the time of financial reconciliation had at least one benchmark year below 5,000 assigned beneficiaries where the alternative cap would apply. Of these ACOs that would have had the alternative cap applied, none reached or exceeded the alternative cap, meaning none of these ACOs would have had their shared savings or losses reduced as compared to the shared savings or losses they actually experienced. Specifically, the shared savings earned by these ACOs would have to more than double on average to reach the alternative cap, which further supports our belief that the alternative cap will not result in reduced return on investment that would deter Shared Savings Program participation. While none of these ACOs would have reached or exceeded the cap in this simulation, it is important to recognize this analysis relied on ACOs that were required to have at least 5,000 beneficiaries in the benchmark years at the time of program entry. By no longer requiring ACOs to enter the program with at least 5,000 assigned beneficiaries in BY1 and BY2 the program will at least in theory be open to ACOs with very low assignment in the first two benchmark years, and thus the alternative cap will act as a safeguard against the earned performance payment or losses owed based on random variation for such outlier ACOs even if the actual number of ACOs that reach or exceed the cap remains limited in practice.

\410\ Related analysis of reconciliation data for PY 2020 through 2023 was described in the CY 2026 PFS proposed rule (90 FR 32669). Since the issuance of the CY 2026 PFS proposed rule, we completed financial reconciliation for PY 2024.

After consideration of public comments, we are finalizing the application of an alternative performance payment limit and loss recoupment limit during financial reconciliation for ACOs that fall below 5,000 assigned beneficiaries in any benchmark year as proposed. We are finalizing proposed revisions to the Shared Savings Program regulations at new Sec. 425.605(i) (BASIC track) and new Sec. 425.610(l) (ENHANCED track). At new

Sec. 425.605(i), we are finalizing our proposal to codify the existing approach to calculating the performance payment limit under new paragraph (i)(1)(i), and the loss recoupment limit under new paragraph (i)(2)(i). We are finalizing in new paragraphs (i)(1)(ii) and (i)(2)(ii) of Sec. 425.605 provisions for how CMS determines whether to apply an alternative performance payment limit or loss recoupment limit (respectively), if an ACO has fewer than 5,000 assigned beneficiaries in BY1, BY2, or BY3, in conducting financial reconciliation for each performance year, for agreement periods beginning on or after January 1, 2027. At new Sec. 425.610(l)(1) to (2), we are finalizing as proposed provisions to codify the existing approach to calculating the performance payment limit, and the loss recoupment limit. We are finalizing, with a minor modification for consistency and clarity, our proposal to specify under new paragraph (l)(3) of Sec. 425.610 provisions for how CMS determines whether to apply an alternative performance payment limit or loss recoupment limit if an ACO has fewer than 5,000 assigned beneficiaries in BY1, BY2, or BY3, in conducting financial reconciliation for each performance year, for agreement periods beginning on or after January 1, 2027. Specifically, we are finalizing a modification to the text of paragraph (l)(3)(iii) to remove the term “equal” such that the finalized regulation text at Sec. 425.610(l)(3)(iii) will read as follows, “The performance payment limit or loss recoupment limit is set to the lesser of the amount calculated under paragraph (l)(2)(ii) of this section or the alternative amount calculated under paragraph (l)(3)(ii) of this section.” (2) Exclude ACOs That Fall Below 5,000 Assigned Beneficiaries in any BY From Policies Providing Certain Low Revenue ACOs Participating in the BASIC Track Increased Opportunities To Share in Savings (a) Background

With the CY 2023 PFS final rule (87 FR 69946 through 69952), we finalized an approach, under our authority of section 1899(i)(3) of the Act,\411\ to expand the eligibility criteria to qualify for shared savings payments to enable certain low revenue ACOs participating in the BASIC track to share in savings even if the ACO does not meet the MSR as required under section 1899(d)(1)(B)(i) of the Act. In accordance with Sec. [thinsp]425.605(h), ACOs participating in the BASIC track that do not meet the MSR requirement, but that do meet the quality performance standard or the alternative quality performance standard at Sec. [thinsp]425.512 and otherwise maintain eligibility to participate in the Shared Savings Program, qualify for a shared savings payment if all the following criteria are met:

\411\ See discussion on use of our authority under section 1899(i)(3) of the Act, at 87 FR 69950.

The ACO has average per capita Medicare Parts A and B FFS expenditures for the performance year below the updated benchmark (Sec. 425.605(h)(1)(i)).

The ACO is a low revenue ACO as defined at Sec. [thinsp]425.20 as determined at the time of financial reconciliation for the performance year (Sec. 425.605(h)(1)(ii)).

The ACO has at least 5,000 assigned beneficiaries for the performance year at the time of financial reconciliation for the performance year (Sec. 425.605(h)(1)(iii)).

The ACO is participating in an agreement period beginning on January 1, 2024, or in subsequent years (Sec. 425.605(h)(1)(iv)).

Section 425.605(h)(2) specifies the sharing rate applied for ACOs that meet the aforementioned criteria, which is one-half the applicable percentage described at Sec. 425.605(d). As we explained in the CY 2023 PFS final rule (87 FR 69948 and 69949), under this approach, an eligible ACO that does not meet the MSR but meets the quality performance standard required to share in savings at the maximum sharing rate receives half of the maximum sharing rate for their level of participation (20 percent instead of 40 percent under Levels A and B, and 25 percent instead of 50 percent under Levels C, D, and E). Where an eligible ACO does not meet the MSR or the quality performance standard required to share in savings at the maximum sharing rate but meets the alternative quality performance standard, the sharing rate is further adjusted according to a sliding scale approach for determining shared savings. (b) Revisions

In the CY 2026 PFS proposed rule (90 FR 32671), we proposed to exclude ACOs that fall below 5,000 assigned beneficiaries in any benchmark year from being eligible to benefit from the policies at Sec. 425.605(h) that provide certain low revenue ACOs participating in the BASIC track with additional opportunities to share in savings. As we have explained in prior rulemaking (83 FR 67923 through 67926) and reiterated in the CY 2026 proposed rule (90 FR 32670), the MSR/MLR protects against an ACO earning shared savings or being liable for shared losses when the change in expenditures represents normal, or random, variation rather than actual program performance. ACOs with assigned beneficiary populations below 5,000 raise concerns that any shared savings payments made to the ACO would not reward true cost savings but instead would pay for normal expenditure fluctuations. To protect against issuing shared savings payments to certain low revenue ACOs participating in the BASIC track related to normal or random variation in expenditures, we proposed revising Sec. 425.605(h) to include an additional criterion that ACOs must have at least 5,000 assigned beneficiaries in all three benchmark years at the time of financial reconciliation for a performance year to qualify for a shared savings payment at Sec. 425.605(h). Specifically, we proposed to amend Sec. 425.605(h)(1) by adding new paragraph (v) that specifies: “For agreement periods beginning on or after January 1, 2027, the ACO has at least 5,000 assigned beneficiaries in each of the ACO's benchmark years.” The proposed timing of applicability for this policy would be consistent with the timing of applicability for our proposed approach to allow participation by ACOs with 5,000 assigned beneficiaries in BY3, and fewer than 5,000 assigned beneficiaries in BY1, BY2, or both.

We sought comments on the proposal to exclude ACOs that fall below 5,000 assigned beneficiaries in any benchmark year from being eligible to benefit from policies at Sec. 425.605(h) providing certain low revenue ACOs participating in the BASIC track with increased opportunities to share in savings.

We received public comments on these proposals. The following is a summary of the comments we received and our responses.

Comment: A few commenters expressed their support for the proposal to exclude ACOs with fewer than 5,000 assigned beneficiaries in the benchmark years from additional opportunities for low revenue ACOs to share in savings because this policy overall may increase participation by additional new, renewing, or re-entering ACOs.

Response: We thank commenters for their support.

Comment: Many commenters had concerns about the proposal to 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, and urged CMS to reconsider the proposal.

Specifically, commenters stated if 5,000 assigned beneficiaries in BY3 is permissible for participation in the

Shared Savings Program, it is unclear why it is necessary for these low revenue ACOs to have at least 5,000 assigned beneficiaries in all three benchmark years to receive these opportunities for shared savings. Furthermore, commenters indicated that current policies still require these ACOs to have at least 5,000 assigned beneficiaries for the performance year to be eligible for the shared savings opportunity. As a result, commenters stated this proposed change denies certain low revenue ACOs that have been accepted into the Shared Savings Program from receiving the same benefits as “similarly situated ACOs without a reasonable basis for doing so.”

A commenter expressed concerns that removing access to an existing flexibility for this group undermines the value of the proposed eligibility change. This commenter requested that CMS to preserve the current opportunities for low revenue, BASIC track ACOs regardless of the benchmark year's beneficiary counts.

Response: We decline to adopt commenters' suggestions to forgo finalization of our proposal to exclude ACOs that fall below 5,000 assigned beneficiaries in any benchmark year from being eligible to benefit from the policies at Sec. [thinsp]425.605(h) that provide certain low revenue ACOs participating in the BASIC track with additional opportunities to share in savings. As commenters point out, the current policy requires that the ACO have at least 5,000 assigned beneficiaries for the performance year at the time of financial reconciliation for the performance year (Sec. 425.605(h)(1)(iii)). We agree that this existing requirement provides a certain degree of protection against the heightened risk--absent an MSR--that any savings are the result of random variation (see 87 FR 69949; see also 90 FR 32670 and 32671). However, this existing policy leaves the Trust Funds vulnerable to paying ACOs shared savings that may reflect normal or random variation in expenditures rather than true cost savings, when the ACO's historical benchmark is calculated based on smaller populations, and specifically less than 5,000 assigned beneficiaries in one or more BYs.

Our current policy under Sec. 425.110(a), requiring ACOs to have at least 5,000 assigned beneficiaries in each benchmark year to enter an agreement period under the Shared Savings Program, helps ensure the financial integrity of benchmark calculations for ACOs. Even so, under our current policy, an ACO may continue participating in the Shared Savings Program with fewer than 5,000 assigned beneficiaries in one or more benchmark year. As a result, an ACO with fewer than 5,000 assigned beneficiaries in one or more benchmark year may be eligible for the expanded opportunities for shared savings, so long as the criteria under Sec. 425.605(h) are met. As described elsewhere in this final rule, we performed analysis of performance year reconciliation data for PYs 2020 through 2024, finding that, on average, only 2 percent of ACOs at the time of financial reconciliation had at least one benchmark year with fewer than 5,000 assigned beneficiaries. Continuing this analysis, none of the ACOs identified with fewer than 5,000 assigned beneficiaries in a benchmark year would have otherwise met the criteria for additional opportunities for low revenue ACOs to share in savings if the criteria under Sec. 425.605(h) had been applied to determining PY 2020 through 2023 financial reconciliation results. The policy for increased shared savings opportunities under Sec. 425.605(h) applies to eligible ACOs participating in agreement periods beginning on January 1, 2024, or in subsequent years. Since the issuance of the CY 2026 PFS proposed rule, we completed financial reconciliation for PY 2024. Based on PY 2024 financial reconciliation results, 13 low revenue ACOs participating in the BASIC track for an agreement period beginning on January 1, 2024 were eligible to share in savings under the existing requirements of Sec. 425.605(h), of which 1 ACO had fewer than 5,000 assigned beneficiaries in one benchmark year.\412\

\412\ See Data.CMS.gov, Medicare Shared Savings Program, Performance Year Financial and Quality Results Public Use File, PY 2024, available at https://data.cms.gov/medicare-shared-savings-program/performance-year-financial-and-quality-results.

Under the proposed approach, which we are finalizing with this final rule, where we allow for ACOs to enter agreement periods with fewer than 5,000 assigned beneficiaries in BY1, BY2 or both, there is a greater possibility for ACOs to enter and remain in the Shared Savings Program with relatively smaller assigned beneficiary populations used to establish their historical benchmarks compared to our current eligibility policies. Therefore, we have heightened concerns that the Shared Savings Program will be more vulnerable to making shared savings payments to ACOs that would not reward true cost savings but instead would pay for normal or random expenditure fluctuations when smaller populations of assigned beneficiaries are used to establish the ACO's historical benchmark as a result of the ACO having fewer than 5,000 assigned beneficiaries in a benchmark year. This concern is further increased under the policy at Sec. 425.605(h), under which certain low revenue, BASIC track ACOs may qualify for a shared savings payment when they have not met the MSR requirement.

We believe it is timely and appropriate to address the aforementioned concerns. Therefore, we are finalizing our proposal to amend Sec. [thinsp]425.605(h)(1) to include an additional criterion, applicable for agreement periods beginning on or after January 1, 2027, under which we will require an ACO to have at least 5,000 assigned beneficiaries in each of its BYs to be eligible for the increased opportunities to share in savings, under the policy established at Sec. 425.605(h).

We acknowledge that, under this final policy, there could be a difference in the eligibility of ACOs for the increased opportunities to share savings, depending on the ACO's agreement period start date in the Shared Savings Program. ACOs participating in agreement periods beginning on January 1, 2024, 2025, or 2026 may be eligible for the increased opportunities to share in savings under Sec. 425.605(h), for any performance year of their 5-year agreement period, while having fewer than 5,000 assigned beneficiaries in one or more benchmark year. In contrast, the additional criterion we are finalizing with this final rule would exclude ACOs participating in agreement periods beginning on or after January 1, 2027 from increased opportunities to share in savings under Sec. 425.605(h) if they have fewer than 5,000 assigned beneficiaries in any benchmark year. We note that this approach is consistent with our longstanding practice of applying changes to the Shared Savings Program's financial methodology on an agreement period basis. Further, we would consistently apply the relevant policies, program-wide to ACOs, based on their agreement period start date.

After consideration of public comments, we are finalizing as proposed to amend Sec. 425.605(h)(1) by adding new paragraph (v) that specifies: “For agreement periods beginning on or after January 1, 2027, the ACO has at least 5,000 assigned beneficiaries in each of the ACO's benchmark years.” With this final policy, for agreement periods beginning on or after January 1, 2027, we will exclude ACOs that fall below 5,000 assigned beneficiaries in any benchmark year from being eligible to benefit from policies at Sec. [thinsp]425.605(h) providing certain low revenue ACOs participating in the BASIC track with

increased opportunities to share in savings. 5. Revisions to the Definition of Primary Care Services Used in Shared Savings Program Beneficiary Assignment a. Background

Section 1899(c)(1) of the Act, as amended by the CURES Act and the Bipartisan Budget Act of 2018, provides that the Secretary shall determine an appropriate method to assign Medicare fee-for-service beneficiaries to an ACO based on their utilization of primary care services provided by a physician who is an ACO professional and all services furnished by Rural Health Clinics (RHCs) and Federally Qualified Health Centers (FQHCs), for performance years beginning on or after January 1, 2019. However, the statute does not specify a list of services considered to be primary care services for purposes of beneficiary assignment.

In the November 2011 final rule (76 FR 67853), we established the initial list of services, identified by Current Procedural Terminology (CPT) and Healthcare Common Procedure Coding System (HCPCS) codes, that we considered to be primary care services. In that final rule, we indicated that we intended to monitor CPT and HCPCS codes and would consider making changes to the definition of primary care services to add or delete codes used to identify primary care services if there were sufficient evidence that revisions were warranted. We have updated the list of primary care service codes in subsequent rulemaking (refer to 80 FR 32746 through 32748; 80 FR 71270 through 71273; 82 FR 53212 and 53213; 83 FR 59964 through 59968; 85 FR 27582 through 27586; 85 FR 84747 through 84756; 85 FR 84785 through 84793; 86 FR 65273 through 65279; 87 FR 69821 through 69825; 88 FR 79163 through 79174; 89 FR 98087 through 98101) to reflect additions or modifications to the codes that have been recognized for payment under the PFS and to incorporate other changes to the definition of primary care services for purposes of the Shared Savings Program. For the performance year beginning on January 1, 2025, and subsequent performance years, we defined primary care services for purposes of assigning beneficiaries to ACOs under Sec. [thinsp]425.402 at Sec. 425.400(c)(1)(ix). b. Revisions

Based on feedback from ACOs and our further review of the HCPCS and CPT codes that are currently used for payment under the PFS or that we proposed to use for payment under the PFS starting in CY 2026, we have determined it would be appropriate to amend the definition of primary care services used in the Shared Savings Program assignment methodology to include certain additional codes for the performance year starting on January 1, 2026, and subsequent performance years, in order to remain consistent with billing and coding under the PFS.

In the CY 2026 PFS proposed rule (90 FR 32671 through 32673), we proposed to specify a revised definition of primary care services used for assignment for the performance year starting on January 1, 2026, and subsequent performance years in a new provision of the Shared Savings Program at Sec. 425.400(c)(1)(x) to include the list of HCPCS and CPT codes specified at Sec. 425.400(c)(1)(ix), the addition of Enhanced Care Model Management Services (HCPCS codes (GPCM1, GPCM2, and GPCM3), and the deletion of Social Determinants of Health Risk Assessment Services (HCPCS code G0136), if finalized under Medicare FFS payment policy.

We proposed to use the new provision at Sec. 425.400(c)(1)(x) for determining beneficiary assignment for the performance year starting on January 1, 2026, and in subsequent performance years.

The following provides additional information about the CPT and HCPCS codes that we proposed adding to the definition of primary care services used for purposes of beneficiary assignment:

Enhanced Care Model Management Services (HCPCS Codes GPCM1, GPCM2, and GPCM3): In the CY 2026 PFS proposed rule (90 FR 32496 through 32502), we proposed three new add-on HCPCS codes to allow for payment under the PFS when BHI or CoCM are furnished in conjunction with APCM services for practitioners who meet the requirements to furnish both services. Specifically, we proposed to allow for payment of the following codes, discussed in more detail below, under the PFS: GPCM1, an add-on code that mirrors 99492 (CoCM initial month), GPCM2, an add- on code that mirrors 99493 (subsequent months) for CoCM services delivered to patients also receiving APCM services, and GPCM3, an add- on code for general behavioral health integration services that mirrors CPT code 99484 (20 minutes or more of BHI services) for BHI services delivered to patients also receiving APCM services.

HCPCS code GPCM1 (Initial psychiatric collaborative care management, in the first calendar month of behavioral health care manager activities, in consultation with a psychiatric consultant and directed by the treating physician or other qualified health care professional, with the following required elements: outreach to and engagement in treatment of a patient directed by the treating physician or other qualified health care professional, initial assessment of the patient, including administration of validated rating scales, with the development of an individualized treatment plan, review by the psychiatric consultant with modifications of the plan, if recommended, entering patient in a registry and tracking patient follow-up and progress using the registry, with appropriate documentation, and participation in weekly caseload consultation with the psychiatric consultant, and provision of brief interventions using evidence-based techniques such as behavioral activation, motivational interviewing, and other focused treatment strategies (list separately and in addition to the Advanced Primary Care Management code)).

HCPCS code GPCM2 (Subsequent psychiatric collaborative care management, in a subsequent month of behavioral health care manager activities, in consultation with a psychiatric consultant, and directed by the treating physician or other qualified health care professional, with the following required elements: tracking patient follow-up and progress using the registry, with appropriate documentation, participation in weekly caseload consultation with the psychiatric consultant, ongoing collaboration with and coordination of the patient's mental health care with the treating physician or other qualified health care professional and any other treating mental health providers, additional review of progress and recommendations for changes in treatment, as indicated, including medications, based on recommendations provided by the psychiatric consultant, provision of brief interventions using evidence-based techniques such as behavioral activation, motivational interviewing, and other focused treatment strategies, monitoring of patient outcomes using validated rating scales, and relapse prevention planning with patients as they achieve remission of symptoms and/or other treatment goals and are prepared for discharge from active treatment. (list separately and in addition to Advanced Primary Care Management code)).

HCPCS code GPCM3 (Care management services for behavioral

health conditions, directed by a physician or other qualified health care professional, per calendar month, with the following required elements: initial assessment or follow-up monitoring, including the use of applicable validated rating scales, behavioral health care planning in relation to behavioral/psychiatric health problems, including revision for patients who are not progressing or whose status changes, facilitating and coordinating treatment such as psychotherapy, pharmacotherapy, counseling and/or psychiatric consultation, and continuity of care with a designated member of the care team (list separately and in addition to Advanced Primary Care Management code)).

All of these codes were proposed as optional add-on codes for APCM services that would facilitate providing complementary BHI services by removing the time-based requirements and reducing documentation requirements of the existing BHI and CoCM CPT codes. In the proposed rule, we stated that we believe removing the time-based requirements and reducing the documentation requirements may make primary care practitioners more likely to offer BHI and CoCM services, which would improve access to BHI and CoCM for primary care patients and access to primary care for BHI and CoCM patients.

These new HCPCS codes are designed to allow for the payment of services that, when reported as standalone services, are currently included in the definition of primary care services used for purposes of assignment when furnished in conjunction with APCM services: BHI (CPT codes 99484, 99492, 99493 and 99494), CoCM (HCPCS code G2214), and APCM (HCPCS codes G0556, G0557, and G0558) (refer to 82 FR 53212 through 53213, 85 FR 84750 through 84755, and 89 FR 98087 through 98097, respectively).

The new HCPCS codes are also similar to CPT codes 99354 and 99355 (83 FR 59965 through 59968), which likewise are included in the definition of primary care services used for purposes of assignment. Including these new HCPCS codes for BHI and CoCM APCM add-on services into the definition of primary care services used for purposes of assignment would increase the accuracy of assignment based on the provision of primary care by ensuring that all expenditures for BHI and CoCM are used to determine beneficiary assignment.

The following provides additional information about the CPT and HCPCS codes that we proposed to remove from the definition of primary care services used for purposes of beneficiary assignment:

HCPCS code G0136 (Administration of a standardized, evidence-based social determinants of health risk assessment tool, 5-15 minutes): In the CY 2026 PFS proposed rule (90 FR 32510), we proposed to delete HCPCS code G0136 as we believed that the resource costs described by HCPCS code G0136 were already accounted for in existing codes, including but not limited to evaluation and management visits. Accordingly, we proposed not to include this HCPCS code in the definition of primary care services used for purposes of assignment, beginning January 1, 2026, and in subsequent years, if the deletion is finalized.

As part of this revised definition of primary care services used for assigning beneficiaries at Sec. 425.402, we proposed to incorporate a provision at Sec. 425.400(c)(1)(x)(C), specifying that the primary care service codes for purposes of assigning beneficiaries include a CPT code identified by CMS that directly replaces a CPT code specified at Sec. 425.400(c)(1)(x)(A) or a HCPCS code specified at Sec. 425.400(c)(1)(x)(B), when the assignment window or expanded window for assignment (as defined at Sec. 425.20) for a benchmark or performance year includes any day on or after the effective date of the replacement code for payment purposes under Medicare FFS.

We sought comments on these proposed changes to the definition of primary care services used for assigning beneficiaries at Sec. 425.400(c)(1)(x) to Shared Savings Program ACOs for the performance year starting on January 1, 2026, and subsequent performance years. We also sought comments on any other existing or new HCPCS or CPT codes that we should consider adding to the definition of primary care services for purposes of assignment in future rulemaking.

We received public comments on these proposals. The following is a summary of the comments we received and our responses.

Comment: Many commenters supported CMS' proposed revisions to the definition of primary care services used for purposes of assignment to include complementary behavioral health integration or psychiatric Collaborative Care Model services, noting that adding these codes would capture more of the services rendered by primary care physicians to beneficiaries and increase participation in the Shared Savings Program. Commenters stated that these additional service codes support the delivery of comprehensive, coordinated, whole-person care and are reflective of other primary care services CMS has used to assign beneficiaries to ACOs.

Response: We agree with commenters that the proposed revisions to include complementary behavioral health integration and psychiatric Collaborative Care Model services to the definition of primary care services will capture more of the primary care services rendered by primary care providers as a part of whole-person care and might increase participation in the Shared Savings Program by providers who wish to assume accountability for the care of beneficiaries with behavioral health needs. We also agree that the use of these additional service codes for purposes of assignment, if it leads to the inclusion of more primary care providers who are care coordinating and addressing their patients' behavioral health needs, would support the delivery of comprehensive, coordinated, whole-person care.

Comment: A commenter stated that add-on codes should not be used for beneficiary assignment, explaining that using the base procedure is sufficient and that add-on codes associated with a base procedure should not be included in the definition of primary care services for beneficiary assignment for the Shared Savings Program. The commenter described their concern about a situation where one provider who renders a primary service with three add-on services would receive priority over a different provider from whom the beneficiary received three separate primary services.

Response: The commenter may not have fully understood how claims- based beneficiary assignment occurs in the Shared Savings Program. In performing claims-based assignment, CMS determines whether allowed charges for a beneficiary's primary care services in an ACO, are greater than allowed charges for the beneficiary's primary care services in any other ACO, or other individual practitioners, or groups of practitioners identified by Medicare-enrolled billing TINs or CCNs that are not participating in the Shared Savings Program, otherwise known as plurality of primary care services. Since these are add-on services, they would be billed and furnished by the same provider that bills and furnished the base service.

As a “pre-step” in the claims-based assignment process, CMS identifies all beneficiaries who had at least one primary care service with a physician who is an ACO professional in the ACO and who is a primary care physician as defined under Sec. [thinsp]425.20 or who has one of the primary specialty designations specified in Sec. [thinsp]425.402(c). Under claims-

based assignment, CMS assigns beneficiaries to ACOs through one of three steps. Under Step 1, CMS assigns a beneficiary to a Shared Savings Program ACO when the beneficiary receives more primary care services (measured by Medicare-allowed charges) furnished by primary care physicians, nurse practitioners, physician assistants and clinical nurse specialists in the participating ACO than from the same type of providers at any other Shared Savings Program ACO, non-ACO CCN, or non- ACO individual or group TIN. Step 2 only applies to assignable beneficiaries who have not had a primary care service rendered by any primary care physician, nurse practitioner, physician assistant, or clinical nurse specialist, either inside the ACO or outside the ACO and were therefore not assigned in assignment Step 1. CMS assigns a beneficiary to a Shared Savings Program ACO in this step when the beneficiary receives more primary care services (measured by Medicare- allowed charges) furnished by physicians who are ACO professionals with specialty designations as specified in Sec. [thinsp]425.402(c) in the participating ACO than from the same type of providers at any other Shared Savings Program ACO, non-ACO CCN, or non-ACO individual or group TIN. In step three, CMS utilizes an expanded window for assignment to identify additional beneficiaries for assignment among Medicare FFS beneficiaries who were not identified under the existing pre-step. The expanded window for assignment is a 24-month period that includes the applicable 12-month assignment window and the preceding 12 months.

We expect that the assignment algorithm will ensure appropriate assignment to an ACO when using these add-on HCPCS codes, and we will monitor the billing and utilization of these codes to ensure that their inclusion in the definition of primary care services used for beneficiary assignment is appropriate, including by monitoring and evaluating place of service and provider specialty associated with billed claims for these add-on HCPCS codes. If monitoring shows that the inclusion of these services in the definition of primary care services used for beneficiary assignment is not appropriate, we will address that concern in future notice and comment rulemaking.

Since these HCPCS codes represent new add-on services to HCPCS codes that are already included in the definition of primary care services used for purposes of assignment, we continue to believe that these new procedure codes should be included in the definition of primary care services used for purposes of assignment consistent with our intent to encompass primary care and wellness services in the definition of primary care services used for purposes of beneficiary assignment.

Comment: Multiple commenters supported our proposal to remove HCPCS code G0136 from the definition of primary care services if CMS finalizes its proposal to delete HCPCS code G0136.

Response: We appreciate commenters' support for our proposal. However, we have decided not to finalize our proposal to delete HCPCS code G0136 from the HCPCS code set. As described in section II.I of this final rule, we are instead revising the code descriptor to the following text: G0136--[Administration of a standardized, evidence- based assessment of physical activity and nutrition, 5-15 minutes, not more often than every 6 months]. Since HCPCS code G0136 is not being deleted and it remains a payable service under the PFS, we are not finalizing our proposal to remove the code from the definition of primary care services for purposes of assignment. We continue to believe that G0136 should remain a part of the definition of primary care services used for purposes of assignment because, as described in the CY 2024 PFS Final Rule (88 FR 79168), these services would be provided in conjunction with professional services, such as Evaluation and Management visits, which can be provided in a primary care setting. Additionally, these are separately payable services when provided with an Annual Wellness Visit (AWV) and the AWV is included in the Shared Savings Program definition of primary care services for purposes of beneficiary assignment. Finally, these services precede the utilization of Community Health Integration, Principal Illness Navigation, and Care Management services which are currently included in the definition of primary care services used for purposes of assignment under Sec. [thinsp]425.400.

Comment: Many commenters requested that HCPCS code G0136 not be removed from the definition of primary care services for purposes of assignment if CMS finalizes its proposal to delete HCPCS code G0136. The commenters stated that they are opposed to the removal of HCPCS code G0136 from the definition of primary care services because they are more broadly opposed to the deletion of the code from HCPCS code set. The commenters requested that HCPCS code G0136 not be deleted so there will not be a need to remove HCPCS code G0136 from the definition of primary care services.

Response: As described in section II.I of this final rule, CMS has decided not to finalize our proposal to delete HCPCS code G0136. We are instead revising the code descriptor to the following text: G0136-- [Administration of a standardized, evidence-based assessment of physical activity and nutrition, 5-15 minutes, not more often than every 6 months]. Since HCPCS code G0136 is not being deleted and it remains a payable service under the PFS, we will not remove the code from the definition of primary care services used for purposes of assignment.

After consideration of public comments, we are finalizing as proposed the revised definition of primary care services used for assignment for the performance year starting on January 1, 2026, and subsequent performance years in a new provision of the Shared Savings Program at Sec. 425.400(c)(1)(x) to include the list of HCPCS and CPT codes specified at Sec. 425.400(c)(1)(ix), as well as the following additions: Enhanced Care Model Management Services (HCPCS codes (GPCM1, GPCM2, and GPCM3 which are being finalized as G0568, G0569, and G0570, respectively), and we are not finalizing the proposal to delete HCPCS code G0136 from the definition of primary care services. We are instead revising the code descriptor for HCPCS code G0136, which will describe physical activity and nutrition assessment services in the revised definition of primary care services. Additionally, we are finalizing as proposed the incorporation of a provision at Sec. 425.400(c)(1)(x)(C), specifying that primary care service codes used for purposes of assigning beneficiaries include a CPT code identified by CMS that directly replaces a CPT code specified at Sec. 425.400(c)(1)(x)(A) or a HCPCS code specified at Sec. 425.400(c)(1)(x)(B), when the assignment window or expanded window for assignment (as defined at Sec. 425.20) for a benchmark or performance year includes any day on or after the effective date of the replacement code for payment purposes under Medicare FFS.

Further, the text of the proposed regulations in the CY 2026 PFS proposed rule (90 FR 32854 through 32855) included a proposed technical modification to the introductory text in Sec. [thinsp]425.400(c)(1)(ix), to limit the applicability of that provision to the performance year starting on January 1, 2025. This change is necessary so that we can effectuate Sec. [thinsp]425.400(c)(1)(x) as explained in the proposed rule and its

regulatory text: to apply for the performance year starting on January 1, 2026, and subsequent performance years. We received no comments addressing the proposed technical modification to Sec. 425.400(c)(1)(ix), and we are finalizing this change without modification. 6. Quality Performance Standard & Other Quality Reporting Requirements a. Background

Section 1899(b)(3)(C) of the Act states that the Secretary shall establish quality performance standards to assess the quality of care furnished by ACOs and seek to improve the quality of care furnished by ACOs over time by specifying higher standards, new measures, or both for purposes of assessing such quality of care. As we stated in the November 2011 final rule establishing the Shared Savings Program (76 FR 67872), our principal goal in selecting quality measures for ACOs has been to identify measures of success in the delivery of high-quality healthcare at the individual and population levels. In the November 2011 final rule, we established a quality measure set spanning four domains: patient experience of care and wherever practicable, caregiver experience of care, care coordination/patient safety, preventative health, and at-risk population (76 FR 67872 through 67891). We have subsequently updated the measures that comprise the quality measure set for the Shared Savings Program through rulemaking in the CY 2015, 2016, 2017, 2019, 2021, 2023, 2024, and 2025 PFS final rules (79 FR 67907 through 67921, 80 FR 71263 through 71269, 81 FR 80484 through 80489, 83 FR 59708 through 59715, 85 FR 84733 through 84734, 87 FR 69860 through 69863, 88 FR 79112 through 79114, and 89 FR 98124 through 98132, respectively). b. Revising the Definition of a “Beneficiary Eligible for Medicare CQMs” (1) Background

In the CY 2026 PFS proposed rule (90 FR 32673 and 32674), we stated that in the CY 2024 PFS final rule (88 FR 79097 through 79107), for performance year 2024 and subsequent performance years, we established Medicare Clinical Quality Measures for Accountable Care Organizations Participating in the Medicare Shared Savings Program (Medicare CQMs) as a new collection type for Shared Savings Program ACOs within the APP quality measure set and for which the ACO reports quality data on beneficiaries eligible for Medicare CQMs as defined at Sec. 425.20. This option has allowed and continues to allow ACOs to develop experience aggregating data for their Medicare fee-for-service (FFS) patients across their participant TINs and provides ACOs with opportunities to develop workflows to allow them to transition to reporting quality data for their entire population through digital quality measurement.

As stated in the CY 2024 PFS final rule (88 FR 79101), Medicare CQMs have served and continue to serve as a transition collection type to help some ACOs build the infrastructure, skills, knowledge, and expertise necessary to report all payer/all patient MIPS CQMs and eCQMs by defining a population of beneficiaries that exist within the all payer/all patient MIPS CQM specifications and tethering that population to claims encounters with ACO professionals with specialties used in assignment. Specifically, Medicare CQMs addressed the concern raised by ACOs that for ACOs with a higher proportion of specialty practices, the broader all payer/all patient eligible population would capture beneficiaries with no primary care relationship to the ACO. Further, given ACOs are commonly made up of multiple practices using multiple EHRs, ACOs have been able to utilize Medicare Part A and B claims data to help identify the ACO's eligible population and validate the ACO's patient matching and deduplication efforts. We also stated that Medicare CQMs are an all-beneficiary Medicare measure (not just ACO assigned beneficiaries) and are designed to help ACOs address challenges with aggregating patient data required to report Medicare CQMs and the all payer/all patient MIPS CQMs and eCQMs in the future (88 FR 79102).

In the CY 2024 PFS final rule (88 FR 79107), we also finalized the definition of a “beneficiary eligible for Medicare CQMs” at Sec. 425.20 as a beneficiary identified for purposes of reporting Medicare CQMs for ACOs participating in the Medicare Shared Savings Program (Medicare CQMs), who is either of the following:

A Medicare FFS beneficiary (as defined at Sec. 425.20) who--

++ Meets the criteria for a beneficiary to be assigned to an ACO described at Sec. 425.401(a); and

++ Had at least one claim with a date of service during the measurement period from an ACO professional who is a primary care physician or who has one of the specialty designations included in Sec. 425.402(c), or who is a physician assistant, nurse practitioner, or clinical nurse specialist.

A Medicare FFS beneficiary who is assigned to an ACO in accordance with Sec. 425.402(e) because the beneficiary designated an ACO professional participating in an ACO as responsible for coordinating their overall care.

We discussed in the CY 2024 PFS final rule that, in response to our proposed definition of a “beneficiary eligible for Medicare CQMs” in the CY 2024 PFS proposed rule, many commenters raised questions and concerns regarding how CMS will determine the appropriate Medicare CQM population for these measures (88 FR 79102). Some commenters noted that the proposed denominator eligibility criteria are similar to, but differ in timeline from, the current assignment methodology and that this creates unnecessary complexity, potentially leading to concerns in identifying the appropriate Medicare ACO population. A few commenters suggested we combine the new Medicare CQM methodology with the existing assignment methodology, which would mitigate potential challenges and ensure a smoother implementation process. Several commenters requested that we clarify if the list of “beneficiaries eligible for Medicare CQMs” is limited to assigned beneficiaries or if it includes all assignable beneficiaries eligible for the measure.

In the CY 2024 PFS final rule (88 FR 79102), in response to commenters' suggestions to align the definition of “beneficiary eligible for Medicare CQM” with our assignment methodology, we noted that our definition of a beneficiary eligible for Medicare CQMs aims to align Medicare CQMs with the all payer/all patient measure specifications because Medicare CQMs are intended to support ACOs in the transition to all payer/all patient measures. We stated that the definition would limit Medicare CQM reporting to beneficiaries that had an encounter with an ACO professional with a specialty used in assignment or who were voluntarily assigned to the ACO. We noted that our approach would also balance our commitment to the transition to all payer/all patient measures with the need to provide additional support to some ACOs as they build the skills and infrastructure necessary to report digital quality measures.

To support ACOs in reporting Medicare CQMs, we finalized that we would provide each ACO with a list of beneficiaries eligible for Medicare CQMs each quarter throughout the performance year as part of the ACO's Quarterly Informational Reports Packages to give ACOs access to the full 12 months of encounters necessary to

report Medicare CQMs (88 FR 79104 and 79105). We stated that the list would be cumulative and updated quarterly to reflect the most recent quarter's data, and the fourth quarter list of beneficiaries eligible for Medicare CQMs would include encounters with dates of service January 1st through December 31st of the performance year. We stated that the quarterly list would include beneficiary-level age, diagnosis, encounter, and exclusion flags on the list of beneficiaries eligible for Medicare CQMs to aid ACOs in identifying the denominator eligible population for each measure to the extent that such data can be identified through claims and Medicare administrative systems. We also stated that it was important to note that these flags are meant to assist ACOs in the aggregation of data and do not replace the need for ACOs to evaluate their patient population against each Medicare CQM specification prior to submission, including determining the beneficiaries that meet the denominator criteria for the measure. We now note, by way of additional explanation, that since the list does not apply measure-specific eligibility criteria, the list may include Medicare FFS beneficiaries who are not eligible for inclusion in any of the three Medicare CQMs in the APP quality measure set.

Based on our experience with providing ACOs with the quarterly lists of beneficiaries eligible for Medicare CQMs for performance year 2024, we have learned that the complexity of the current definition of a “beneficiary eligible for Medicare CQMs” has continued to create confusion for some Shared Savings Program ACOs. Some of these ACOs have sought additional clarification and guidance from CMS. Revising the definition of a “beneficiary eligible for Medicare CQMs” would be responsive to these ACOs and other feedback from interested parties and would reduce ACOs' burden with respect to the patient matching necessary to report Medicare CQMs. Some of the ACO feedback we have received has been based on the differences between the Medicare CQM beneficiary lists that they have received from CMS and the assignable or assigned beneficiary files that ACOs also receive from CMS. Differences in the beneficiary information obtained from these files has contributed to concerns from ACOs about which beneficiaries to use for quality data reporting through Medicare CQMs.

The methodology used to generate the list of “beneficiaries eligible for Medicare CQMs” differs from the methodology described at Sec. Sec. 425.400, 425.401, 425.402, and 425.404 used to generate the list of beneficiaries assignable to an ACO, that is the universe of beneficiaries who receive at least one primary care service with a date of service during a specified 12-month assignment window from a Medicare-enrolled physician who is a primary care physician or who has one of the specialty designations included in Sec. 425.402(c). These methodologies differ in time frames and encounter codes used, which has led to inquiries by ACOs and increased burden due to marginal differences in overlapping populations that meet these criteria. Our current definition of a “beneficiary eligible for Medicare CQMs” was intended to create alignment with the all payer/all patient MIPS CQM Specifications. The use of the terms of “claim” and “measurement period” in the definition of a “beneficiary eligible for Medicare CQMs” are consistent with the application of all payer/all patient MIPS CQM Specifications. The codes designated as eligible encounters used to identify the eligible population in all payer/all patient MIPS CQM Specifications only partially overlap with the HCPCS and revenue center codes designated at Sec. 425.400(c) as primary care services for purposes of assignment under the Shared Savings Program. Similarly, the measurement period applicable to each measure in the all payer/all patient MIPS CQM Specifications only partially overlaps with the 12- month period used in assignment (88 FR 79098). These differences mean an ACO may have beneficiaries eligible for Medicare CQMs that are not part of an ACO's assigned or assignable population. For example, this may occur if the beneficiary has a claim by an ACO professional or specialty designation that is not a primary care service or a claim that occurs during the measurement period but outside the assignment window. (2) Revisions

In the CY 2026 PFS proposed rule (90 FR 32674 through 32676), we stated that considering the concerns raised by ACOs and other interested parties, and our commitment to supporting ACOs in the transition to digital quality measure reporting, we proposed to revise the definition of a “beneficiary eligible for Medicare CQMs” at Sec. 425.20 effective January 1, 2025, meaning we proposed to apply the revised definition for performance year 2025, as well as for subsequent performance years. Specifically, beginning with performance year 2025 and continuing in subsequent performance years, we proposed to revise the definition to require, in (1)(ii)(B) of the definition, “at least one primary care service with a date of service during the applicable performance year from an ACO professional who is a primary care physician or who has one of the specialty designations included in Sec. 425.402(c), or who is a physician assistant, nurse practitioner, or clinical nurse specialist.” We would redesignate the existing (1)(ii) as (1)(ii)(A). The current definition of “beneficiary eligible for Medicare CQMs” requires, in (1)(ii), “at least one claim with a date of service during the measurement period from an ACO professional who is a primary care physician or who has one of the specialty designations included in Sec. 425.402(c), or who is a physician assistant, nurse practitioner, or clinical nurse specialist.” For performance year 2025 and subsequent performance years, the revised definition we proposed in (1)(ii)(B) would align with our modifications to the stepwise assignment methodology and approach to identifying the beneficiaries assignable to an ACO, as finalized in the CY 2024 PFS final rule (88 FR 79162) and described at Sec. 425.402(a)(5), where physician assistants, nurse practitioners, and clinical nurse specialists were added to the process for identifying beneficiaries assignable to an ACO beginning in performance year 2025. Specifically, the revised definition we proposed in (1)(ii)(B) uses “primary care services” and “performance year,” instead of “claims” and “measurement period,” respectively, as used in the current definition. The proposed definition in (1)(ii)(B) would continue to align with the special assignment conditions for ACOs, including Federally Qualified Health Centers (FQHCs) and Rural Health Clinics (RHCs), as described at Sec. 425.404. We provide a list of “beneficiaries eligible for Medicare CQMs” to each ACO. We would continue to include on that list all beneficiaries for whom a service is reported on an FQHC/RHC claim. As described at Sec. 425.404, we treat a service reported on an FQHC/RHC claim as a primary care service performed by a primary care physician.

The proposal to revise the definition of a “beneficiary eligible for Medicare CQMs” would reduce ACOs' burden in the patient matching necessary to report Medicare CQMs because the list of “beneficiaries eligible for Medicare CQMs” would have greater overlap with the list of beneficiaries that are assignable to an ACO. Specifically, more closely aligning these definitions would mean that, for most ACOs, the large

majority of an ACO's beneficiaries eligible for Medicare CQMs would be part of the list of beneficiaries assignable to an ACO. Therefore, under the proposed definition of a “beneficiary eligible for Medicare CQMs,” most ACOs would have to do less patient matching than they presently do because there would be fewer differences between the definition of “beneficiary eligible for Medicare CQMs” and “assignable beneficiary.” The proposal would also help each ACO identify its eligible population and validate the ACO's patient matching and deduplication efforts because ACOs would see fewer differences between the Medicare CQM beneficiary list and the list of beneficiaries assignable to the ACO. We believe our proposal to revise the definition of a “beneficiary eligible for Medicare CQMs” would substantially address ACOs' and interested parties' concerns by better aligning the definitions and clarifying which beneficiaries' data to use for quality data reporting through Medicare CQMs.

We conducted a gap analysis using performance year 2024 data to analyze the overlap of our proposed definition of a “beneficiary eligible for Medicare CQMs” and the current performance year 2025 methodology used to identify beneficiaries assignable to an ACO. The goal of this analysis was to determine whether the proposed change in the definition of a “beneficiary eligible for Medicare CQMs” would accomplish our goal of aligning that population with the list of beneficiaries assignable to an ACO. With the addition of physician assistants, nurse practitioners, and clinical nurse specialists beginning in performance year 2025 for identifying assignable beneficiaries, as well as the proposed change to the definition of a “beneficiary eligible for Medicare CQMs” to require “primary care services,” the overlap between the Medicare CQM eligible population and the list of beneficiaries assignable to an ACO is expected to increase, on average, to 85 percent for most ACOs. We note that the amount of overlap between assignable beneficiaries and beneficiaries eligible for Medicare CQMs will vary across ACOs due to factors like different population composition and different use patterns of non- physician care codes. Overall, we believe that the proposed changes will generally help ACOs identify and collect data for the population of beneficiaries eligible for Medicare CQMs and support adoption of Medicare CQMs. Therefore, we proposed to revise the definition of a “beneficiary eligible for Medicare CQMs,” at Sec. 425.20, for performance year 2025 and subsequent performance years, to require at least one primary care service with a date of service during the applicable performance year from an ACO professional who is a primary care physician or who has one of the specialty designations included in Sec. 425.402(c), or who is a physician assistant, nurse practitioner, or clinical nurse specialist.

To support ACOs in preparing for this proposed change, we will continue to provide the quarterly list based on the definition of a “beneficiary eligible for Medicare CQMs” as finalized in the CY 2024 PFS final rule (88 FR 79097 through 79107) and will add an additional variable to the quarterly list to flag each beneficiary who had a primary care service visit, beginning with the performance year 2025 Quarter 2 list, to identify “beneficiaries eligible for Medicare CQMs” under the proposed definition. We further noted that if this proposal were to be finalized, then the quarterly list, starting with performance year 2025 Quarter 4, would be based on the finalized definition of a “beneficiary eligible for Medicare CQMs.”

In the CY 2026 PFS proposed rule (90 FR 32675), we stated that section 1871(e)(1)(A) of the Act prohibits the Secretary from applying substantive changes in regulations retroactively before the effective date of the change except where the Secretary determines, as relevant here, that failure to apply the change retroactively would be contrary to the public interest. It is in the public interest to apply our proposed changes to the definition of a “beneficiary eligible for Medicare CQMs” beginning in performance year 2025. Applying these changes starting with performance year 2025 is in the public interest because, absent the proposed changes in the definition, the current definition is an ongoing contributor to ACOs' confusion regarding which beneficiaries to use for quality data reporting through Medicare CQMs and creates burden for ACOs in patient matching and quality reporting. Minimizing this complexity through our proposed changes in definition will reduce the burden on ACOs that elect to report Medicare CQMs and better enable them to gain experience with aggregating and deduplicating data, since Medicare CQMs are intended to aid in the transition to digital quality measure reporting quality data for an ACO's entire population. The proposed changes to the definition, and resulting burden reduction, will allow ACOs to devote greater resources to improving care coordination so that they are better positioned to deliver the right care at the right time, all to the benefit of Medicare beneficiaries served by the ACO and Medicare Trust Funds. We believe the proposed changes would have minimal impact on ACOs' existing processes because the ACO would continue to apply the measure specifications to the population of beneficiaries eligible for Medicare CQMs, but the beneficiary population would be based on a list of beneficiaries that better reflects the ACO's assigned population.

We proposed to revise the definition of “Beneficiary eligible for Medicare CQMs” at Sec. 425.20, as follows:

We added a new paragraph (A) to paragraph (1)(ii) of the definition of “beneficiary eligible for Medicare CQMs” at Sec. 425.20 to establish that, in addition to the requirement in paragraph (1)(i) and for performance year 2024, a beneficiary eligible for Medicare CQMs “had at least one claim with a date of service during the measurement period from an ACO professional who is a primary care physician or who has one of the specialty designations included at Sec. 425.402(c), or who is a physician assistant, nurse practitioner, or clinical nurse specialist.” \413\ This proposal would effectively move the existing text of paragraph (1)(ii) to paragraph (1)(ii)(A) and limit the application of the existing text of paragraph (1)(ii) to performance year 2024.

\413\ In quoting the language from the proposed Sec. Sec. 425.20(1)(ii)(A) and 425.20(1)(ii)(B) respectively, we inadvertently made a typographical error in the preamble and used the term “at” instead of “in” when referring to Sec. 425.402(c). We intended for this text to mirror the text from the proposed Sec. Sec. 425.20(1)(ii)(A) and 425.20(1)(ii)(B), respectively (90 FR 32676).

We added a new paragraph (B) to paragraph (1)(ii) of the definition of “beneficiary eligible for Medicare CQMs” at Sec. 425.20 to establish that, in addition to the requirement in paragraph (1)(i) and for performance year 2025 and subsequent performance years, a beneficiary eligible for Medicare CQMs “had at least one primary care service with a date of service during the applicable performance year from an ACO professional who is a primary care physician or who has one of the specialty designations included at Sec. 425.402(c), or who is a physician assistant, nurse practitioner, or clinical nurse specialist.”

We sought public comments on the proposed changes to the definition of a “beneficiary eligible for Medicare CQMs” at Sec. 425.20.

We received public comments on these proposals. The following is a summary of the comments we received and our responses.

Comment: Most commenters supported our proposal to revise the definition of a “beneficiary eligible for Medicare CQMs” to more closely align with the definition of an “assignable beneficiary” under the Shared Savings Program. Several commenters supported that we proposed to have the changes go into effect beginning with performance year 2025, which should alleviate some of the burden ACOs face in reporting Medicare CQMs for performance year 2025.

Some commenters thanked CMS for being responsive to concerns from interested parties. Some commenters stated that the current definition of a “beneficiary eligible for Medicare CQMs” has created confusion and that the proposed changes should alleviate some of the confusion created by differences in the Medicare CQM beneficiary lists and the assignable beneficiary lists that ACOs receive from CMS. Several commenters stated the proposed changes will reduce burden for ACOs reporting Medicare CQMs, such as reducing the ACO's burden in identifying the eligible population, validating the ACO's patient matching, and deduplicating patient data, which are necessary steps to report Medicare CQMs.

A commenter supported the proposal as it addresses concerns of ACOs that have many specialists that do not provide primary care services and noted that otherwise it would be unduly burdensome to report measures that are not addressed by these specialists. Other commenters stated the proposed change helps ACOs focus on patient care and streamline reporting across various EHRs and practices and recognizes the reporting challenge ACOs have faced transitioning to eCQMs. A commenter stated that the proposed changes will enhance Fast Healthcare Interoperability Resources[supreg] (FHIR[supreg]) connectivity with practices, while another commenter stated that it will support the ACO's transition to digital quality measure reporting.

Response: We thank commenters for their support of our proposal to revise the definition of a “beneficiary eligible for Medicare CQMs” for performance year 2025 and subsequent performance years.

Comment: A commenter recommended delaying implementation of the proposed changes to the definition of a “beneficiary eligible for Medicare CQMs” until 2026 to allow sufficient time for planning and system updates.

Response: We stated in the CY 2026 PFS proposed rule (90 FR 32675 and 32676) that it is in the public interest to apply our proposed changes to the definition of a “beneficiary eligible for Medicare CQMs” beginning in performance year 2025 because, absent the proposed changes in the definition, the current definition is an ongoing contributor to ACOs' confusion regarding which beneficiaries to use for quality data reporting through Medicare CQMs and creates burden for ACOs in patient matching and quality reporting. Additionally, CMS has supported ACOs in preparing for this proposed change by adding an additional variable to the quarterly list, beginning in performance year 2025 Quarter 2, to flag each beneficiary who had a primary care service visit to identify “beneficiaries eligible for Medicare CQMs” under the proposed definition. The performance year 2025 Quarter 2 quarterly list with this additional information was shared with ACOs on August 25, 2025 to help ACOs prepare for this proposed change. The Medicare CQM quarterly list, starting no later than performance year 2025 Quarter 4, will be based on the finalized definition of a “beneficiary eligible for Medicare CQMs.” We believe the proposed changes would have minimal impact on ACOs' existing processes and will not require system updates or substantial additional planning because the ACO would continue to apply the measure specifications to the population of beneficiaries eligible for Medicare CQMs, but the beneficiary population would be based on a list of beneficiaries that better reflects the ACO's assigned population.

Comment: Several commenters supported our proposed changes to the definition of a “beneficiary eligible for Medicare CQMs” but also stated that the changes do not resolve challenges for ACOs that use preliminary prospective assignment with retrospective reconciliation. Commenters noted that these ACOs receive claims data only for their attributed population, but under CMS' proposal, they may be required to report Medicare CQMs for “attributable” beneficiaries outside of the ACO's care.

A few commenters expressed concern that ACOs would have to report on beneficiaries that are not aligned to their organization. Another commenter stated that their providers were negatively impacted by beneficiaries counting in the numerator whom they had never seen or had not seen in the performance year.

Some commenters recommended that CMS: (1) expand the claims data they share with ACOs to include “attributable” beneficiaries, regardless of attribution methodology; and/or (2) require Medicare CQMs be reported for “attributed” beneficiaries only.

Response: In response to comments that stated our proposal does not resolve challenges for ACOs that use preliminary prospective assignment with retrospective reconciliation, we note that our proposed revised definition of a “beneficiary eligible for Medicare CQMs” is the same for ACOs under preliminary prospective assignment with retrospective reconciliation and ACOs under prospective assignment. As stated in the CY 2024 PFS final rule, a Medicare CQM is essentially a MIPS CQM reported by an ACO under the APP on only the ACO's Medicare FFS beneficiaries, instead of its all payer/all patient population (88 FR 79098). In a manner that is identical to the MIPS CQM specifications, the Medicare CQM Specifications will be applied in the same way regardless of the ACO's assignment election. Medicare CQMs are designed to help ACOs address challenges with aggregating patient data required to report the all payer/all patient MIPS CQMs and eCQMs by defining a population of beneficiaries that is broader than the assigned population but exists within the all payer/all patient MIPS CQM specification (88 FR 79102). Regarding concerns that ACOs would have to report on beneficiaries not seen by their providers, we note that the Medicare CQM population is tethered to claims encounters with ACO professionals with specialties used in assignment, which limits the ACO's quality reporting to patients with a care relationship with the ACO (88 FR 79102).

We encourage ACOs to evaluate all quality reporting options to determine which collection type is most appropriate based on the ACO's unique composition and technical infrastructure.

Regarding comments suggesting that CMS expand the claims data they share with ACOs, we note that CMS provides quarterly lists for all beneficiaries eligible for Medicare CQM reporting based on available claims data. Additionally, we note that the Medicare CQM collection type allows for the use of multiple sources of data (for example, multiple EHRs, paper records, registries, patient management systems) to compile a measure's numerator and denominator. Although claims data can be helpful to ACOs, claims data does not replace medical record

documentation of care provided by the ACO or patient care coordinated by ACO providers with other providers outside the ACO at the point of care. To successfully report Medicare CQMs, ACOs need to use available documentation of care provided at the point of care and be able to provide medical record documentation that supports the quality action that was performed.

Comment: A commenter opposed the inclusion of physician assistants, nurse practitioners, and clinical nurse specialists as primary care providers to the definition of a “beneficiary eligible for Medicare CQMs”. The commenter recommended that physician assistants, nurse practitioners, and clinical nurse specialists should only be deemed a primary care provider if they deliver care in a primary care practice.

Response: As stated in the CY 2026 PFS proposed rule (90 FR 32675), for performance year 2025 and subsequent performance years, the revised definition we proposed in (1)(ii)(B) of the definition of a “beneficiary eligible for Medicare CQMs” would align with our modifications to the stepwise assignment methodology and approach to identifying the beneficiaries assignable to an ACO, as finalized in the CY 2024 PFS final rule (88 FR 79162) and described at Sec. 425.402(a)(5), where physician assistants, nurse practitioners, and clinical nurse specialists were added to the process for identifying beneficiaries assignable to an ACO beginning in performance year 2025. We clarify that the definition of a “beneficiary eligible for Medicare CQMs” currently in Sec. 425.20 already includes physician assistants, nurse practitioners, and clinical nurse specialists. Under the revised definition of a “beneficiary eligible for Medicare CQMs,” physician assistants, nurse practitioners, and clinical nurse specialists continue to be considered ACO professionals, but must have provided a primary care service. CMS did not, contrary to the commenter's understanding, propose defining or deeming them to be “primary care providers.” Additionally, the primary care services provided by physician assistants, nurse practitioners, and clinical nurse specialists have been used in the Shared Savings Program assignment methodology (Sec. 425.402) since the inception of the program. Revising the definition of a “beneficiary eligible for Medicare CQMs” to include primary care services provided by physician assistants, nurse practitioners, and clinical nurse specialists would further our intent of aligning this definition with our long-standing inclusion of these providers in the program's assignment methodology.

As discussed in the CY 2024 final rule (88 FR 79103), we recognize that care is delivered to beneficiaries by a range of clinicians. ACOs that include specialists included in the “beneficiary eligible for Medicare CQMs” definition would need to collect data from those specialists to submit true, accurate, and complete data when reporting Medicare CQMs. We will provide ACOs with a list of beneficiaries eligible for Medicare CQMs that can be used by ACOs to identify encounters with specialists that should be included in quality measure reporting and improvement.

Comment: A few commenters suggested that CMS should limit reporting of Medicare CQMs to the patients included on the Medicare CQM list issued by CMS to ACOs.

Response: The quarterly list of the ACO's beneficiaries eligible for Medicare CQMs includes Medicare FFS beneficiaries who are eligible for Medicare CQM reporting by the ACO. These files are cumulative (year to date) and updated quarterly to reflect the most recent quarter's data. For example, the list of beneficiaries eligible for Medicare CQMs for Quarter 4 of performance year 2025 will include all Medicare FFS beneficiaries who are eligible for Medicare CQM reporting, based on available claims data for encounters with dates of service from January 1 through December 31. The list will include beneficiaries that meet any of the measure-specific eligibility criteria; therefore, it may include Medicare FFS beneficiaries who are not eligible for inclusion in any of the four Medicare CQMs in the APP Plus quality measure set for performance year 2025. ACOs must determine eligibility for each Medicare CQM by applying the measure specifications to the Quarter 4 list, if they choose to use it, to ensure measure inclusion and exclusion criteria are captured accurately. We direct readers to our guidance on the submission of Medicare CQMs. Specifically, the 2025 Medicare CQM Checklist for Shared Savings Program Accountable Care Organizations, which is posted in the QPP Resource Library at https://qpp-cm-prodcontent.s3.amazonaws.com/uploads/3266/PY2025MedicareCQMChecklist%20%28002%29.pdf and the Medicare CQM Reporting by Shared Savings Program ACOs: Frequently Asked Questions, which is posted in the QPP Resource Library at https://qpp-cm-prod-content.s3.amazonaws.com/uploads/3175/Medicare-CQM-FAQs.pdf.

Comment: A commenter stated that the quarterly Medicare CQM lists are delayed, limiting ACOs' ability to guide reporting in real time and increasing the risk of inaccuracies.

Response: To support ACOs in reporting Medicare CQMs, we finalized in the CY 2024 PFS final rule (88 FR 79104 and 79105) that we will provide each ACO with a list of beneficiaries eligible for Medicare CQMs each quarter throughout the performance year as part of the ACO's Quarterly Informational Reports Packages to give ACOs access to the full 12 months of encounters necessary to report Medicare CQMs. The list will be cumulative and updated quarterly to reflect the most recent quarter's data. We note that the PY 2025 Medicare CQM quarterly lists have followed the release schedule of prior years with no delays. For example, encounters with dates of service January 1st through March 31st of the performance year are included in the Quarter 1 list. Quarter 1 report packages are typically delivered to ACOs in May of the performance year. The Quarter 2 list includes encounters with dates of service January 1st through June 30th of the performance year. Quarter 2 report packages are typically delivered to ACOs in August of the performance year. The Quarter 3 list includes encounters with dates of service January 1st through September 30th of the performance year. Quarter 3 report packages are typically delivered to ACOs in November of the performance year. Lastly, the Quarter 4 list of all of the ACO's beneficiaries eligible for Medicare CQMs includes encounters with dates of service January 1st through December 31st of the performance year. Quarter 4 report packages are typically delivered to ACOs in February of the year following the performance year. The Quarter 4 list includes all of the ACO's Medicare CQM eligible beneficiaries.

The cadence of updating the list throughout the performance year will enable ACOs to aggregate data throughout the performance year, prepare the majority of their submission data in advance of the submission period, and then use the Quarter 4 list to ensure that all beneficiaries that are eligible for Medicare CQMs are captured in the ACOs' reporting.

Comment: A commenter requested that CMS provide more robust demographics to assist with patient matching for ACOs reporting Medicare CQMs, such as patient addresses.

Response: We thank the commenter for their suggestion and may take it into consideration for future updates to the Medicare CQM quarterly lists.

Comment: A commenter requested clarification on whether ACOs have an obligation to report on beneficiaries without a PCS_Encounter field and whether beneficiaries that lacked a value for the PCS_Encounter field will be removed from the quarterly Medicare CQM list going forward.

Response: We stated in the CY 2026 PFS proposed rule (90 FR 32675) that, if this proposal is finalized, then the quarterly list, starting with performance year 2025 Quarter 4, would be based on the finalized definition of a “beneficiary eligible for Medicare CQMs.” As discussed below, we are finalizing our proposed changes to the definition of a “beneficiary eligible for Medicare CQMs” effective January 1, 2025. The ACO will not have an obligation to report on beneficiaries without a PCS_Encounter field because those beneficiaries have not had a primary care service. The Medicare CQM quarterly list, starting no later than performance year 2025 Quarter 4, will be based on the finalized definition of a “beneficiary eligible for Medicare CQMs,” including removal of the PCS_Encounter field. This means that only beneficiaries that had at least one primary care service encounter during the List Period will be included in the Medicare CQM Quarterly List.

Comment: A commenter disagreed that MIPS CQM and Medicare CQM reporting options are similar or easily interchangeable and referenced ongoing challenges ACOs encounter transitioning to Medicare CQMs. The commenter recommended that CMS extend MIPS CQM reporting past performance year 2026 and offer incentives for all payer reporting.

Response: As stated in the CY 2024 PFS final rule (88 FR 79098) and the CY 2025 PFS final rule (89 FR 98107), a Medicare CQM is essentially a MIPS CQM reported by an ACO under the APP (for performance year 2024 or earlier) or the APP Plus quality measure set, where the only difference is the patient universe. Medicare CQMs are limited to only the ACO's Medicare FFS beneficiaries (as defined at Sec. 425.20), while MIPS CQMs include all patients regardless of their payer. The Medicare CQM and MIPS CQM Specifications are otherwise identical, including their numerators, denominators, and exclusions. We anticipate that ACOs with the infrastructure to report MIPS CQMs can readily transition to report Medicare CQMs. As stated in the CY 2024 PFS final rule (88 FR 79105), in a manner identical to MIPS CQM Specifications, the Medicare CQM Specifications will allow for the use of multiple sources of data (for example, multiple EHRs, paper records, registries, patient management systems) to compile a measure's numerator and denominator. We believe that ACOs with the experience or technical infrastructure to report MIPS CQMs may employ the same processes to report Medicare CQMs so long as the Medicare CQM population meets the definition of a “beneficiary eligible for Medicare CQMs.”

Regarding the commenter's suggestion that CMS extend MIPS CQM reporting past performance year 2026, we note that we also stated that while we continue to believe that Medicare CQMs are a valuable transition step on our building-block approach for Shared Savings Program ACOs' progress to adopt digital quality measurement, under the policies we finalized in the CY 2025 PFS final rule (89 FR 98107), Shared Savings Program ACOs would continue to have the option to report the APP Plus quality measures using the MIPS CQM collection type for performance years 2025 and 2026. In addition, we extended the reporting incentive for ACOs reporting MIPS CQMs through performance year 2026. We further noted that this additional time would further allow ACOs to address challenges and burdens they may face when reporting Medicare CQMs. Therefore, for performance years 2025 and 2026, Shared Savings Program ACOs that report the APP Plus quality measure set will have the option to use any of the following collection types or a combination thereof, as applicable: Medicare CQM, MIPS CQM and eCQM. As we stated in the CY 2025 PFS final rule (89 FR 98108), the collection types available to ACOs reporting the APP Plus quality measure set for performance year 2025 and subsequent years recognize the need for some ACOs to build the infrastructure, skills, knowledge, and expertise necessary to report all payer/all patient measures while incentivizing ACOs to transition to eCQMs. We will continue to monitor ACOs' experience and uptake of collection types in the coming years.

Comment: A commenter encouraged CMS to use this opportunity to explore how digital quality measurement (dQMs) could be integrated into the existing reporting requirements for ACOs.

Response: We remain committed to the transition to dQMs. We refer readers to the CY 2026 PFS proposed rule (90 FR 32710-32715), which contains a Request for Information to gather public input on the transition to dQM for CMS programs and on our anticipated approach on the use of FHIR[supreg] standards in eCQM reporting. In that section, we described the current state and requested input on key components of the ongoing dQM transition related to FHIR[supreg]-based eCQMs for the Shared Savings Program and the MIPS quality performance category. These components include: (1) FHIR[supreg]-based eCQM conversion progress; (2) Data standardization for quality measurement and reporting; (3) The timeline under consideration for FHIR[supreg]-based eCQM reporting; (4) Measure development and reporting tools; and (5) FHIR[supreg] Reporting and Data Aggregation for ACOs.

Comment: Several commenters expressed concerns about the continued technical challenges with reporting Medicare CQMs. A commenter noted the inherent complexities with registry development and incompatible EHR systems. They further noted that reporting Medicare CQMs also adds operational burden for ACOs as many EHR systems cannot effectively identify and separate these patient groups. Another commenter noted the significant amount of resources required to transition to Medicare CQMs, vendor struggles with incorporating Medicare CQMs into their software platforms, and some vendors' inability to support Medicare CQMs in 2025.

Response: While these comments are out of scope for this final rule, we acknowledge commenters' concerns with identifying patients, operationalizing Medicare CQMs, and with having vendor issues. We will continue to support and provide guidance to ACOs reporting Medicare CQMs consistent with measure specifications. We further direct readers to our guidance on the submission of Medicare CQMs. Specifically, we direct readers to the 2025 Medicare CQM Checklist for Shared Savings Program Accountable Care Organizations, which is posted in the QPP Resource Library at https://qpp-cm-prod-content.s3.amazonaws.com/uploads/3266/PY2025MedicareCQMChecklist%20%28002%29.pdf, and the Medicare Shared Savings Program: 2024 Reporting eCQMs, MIPS CQMs, and Medicare CQMs in the APP (guidance document), which is posted in the QPP Resource Library at https://qpp-cm-prod-content.s3.amazonaws.com/uploads/3124/MSSP-2024-Reporting-eCQMs-MIPS-CQMs-and-Medicare-CQMs-in-the-APP.pdf, for resources and support for reporting eCQMs, MIPS CQMs, and Medicare CQMs. We also encourage ACOs and their vendors to participate in our monthly QCDR and Qualified Registry support calls, Learning System Webinars and to submit questions to the Shared Savings

Program helpdesk via ACO-MS, as needed.

After consideration of public comments, we are finalizing as proposed changes to the definition of a “beneficiary eligible for Medicare CQMs” at Sec. 425.20, effective January 1, 2025. Specifically, we are finalizing the following revisions to the definition of “beneficiary eligible for Medicare CQMs” at Sec. 425.20:

We are adding a new paragraph (A) to paragraph (1)(ii) of the definition of “beneficiary eligible for Medicare CQMs” at Sec. 425.20 to establish that, in addition to the requirement in paragraph (1)(i) and for performance year 2024, a beneficiary eligible for Medicare CQMs “had at least one claim with a date of service during the measurement period from an ACO professional who is a primary care physician or who has one of the specialty designations included in Sec. 425.402(c), or who is a physician assistant, nurse practitioner, or clinical nurse specialist.” This change would effectively move the existing text of paragraph (1)(ii) to paragraph (1)(ii)(A) and limit the application of the existing text of paragraph (1)(ii) to performance year 2024.

We are adding a new paragraph (B) to paragraph (1)(ii) of the definition of “beneficiary eligible for Medicare CQMs” at Sec. 425.20 to establish that, in addition to the requirement in paragraph (1)(i) and for performance year 2025 and subsequent performance years, a beneficiary eligible for Medicare CQMs “had at least one primary care service with a date of service during the applicable performance year from an ACO professional who is a primary care physician or who has one of the specialty designations included in Sec. 425.402(c), or who is a physician assistant, nurse practitioner, or clinical nurse specialist.” c. Removing the Health Equity Adjustment Applied to an ACO's Quality Score and Revising Certain Terminology in the Shared Savings Program Regulations (1) Background

In the CY 2026 PFS proposed rule (90 FR 32676 and 32677), we stated that in the CY 2023 PFS final rule (87 FR 69838 through 69857), we finalized a health equity adjustment that, for performance year 2023 and subsequent performance years, would be available to an ACO that reports the three eCQMs/MIPS CQMs in the APP quality measure set, meeting the data completeness requirement at Sec. 414.1340 for all three eCQMs/MIPS CQMs, and administers the CAHPS for MIPS survey. We finalized that such ACOs may receive up to a maximum of 10 additional points added to their MIPS quality performance category score. The level of the adjustment is based on the joint consideration of an ACO's performance on quality measures and the population served by the ACO, such that ACOs that perform well on quality measures and serve a high proportion of beneficiaries who are from underserved neighborhoods (residing in a census block group with an Area Deprivation Index (ADI) national percentile rank of at least 85); or who are eligible for the Medicare Part D Low-Income Subsidy (LIS), or are dually eligible for Medicare and Medicaid would receive a higher number of bonus points added to their MIPS quality performance category score. In the CY 2024 PFS final rule (88 FR 79110 and 79111), we finalized that ACOs reporting Medicare CQMs would be eligible for the health equity adjustment to their quality performance category score.

In the CY 2026 PFS proposed rule (90 FR 32676), we explained that the health equity adjustment was designed to further several goals, including supporting ACOs transitioning to all payer/all patient quality measure reporting, incentivizing ACOs to report eCQMs/MIPS CQMs/Medicare CQMs, improving quality, and recognizing high-performing ACOs serving underserved populations (See 87 FR 69841 and 69842; 88 FR 79097). The regulation at Sec. 425.512(b) specifies how we calculate an ACO's health equity adjusted quality performance score for performance year 2023, performance year 2024, and performance year 2025 and subsequent performance years. We noted that we had also incorporated references to an ACO's health equity adjusted quality performance score at Sec. Sec. 425.512(a), 425.512(c), 425.605(d), and 425.610(d) and (f), as applicable.

In the CY 2025 PFS final rule, we established or extended additional scoring adjustments for ACOs, such as the Complex Organization Adjustment (89 FR 98116 and 98117 and 89 FR 98105) and the eCQM/MIPS CQM reporting incentive (89 FR 98121 through 98124), respectively.

Complex Organization Adjustment: In the CY 2025 PFS final rule (89 FR 98116 and 98117), we established a Complex Organization Adjustment beginning in the CY 2025 performance period/2027 MIPS payment year to account for the organizational complexities faced by Virtual Groups and APM Entities, including Shared Savings Program ACOs, when reporting eCQMs. A Virtual Group and an APM Entity will receive one measure achievement point for each submitted eCQM that meets the case minimum requirement at Sec. 414.1380(b)(1)(iii) and the data completeness requirement at Sec. 414.1340. Each reported eCQM may not score more than 10 measure achievement points and the total achievement points (numerator) may not exceed the total available measure achievement points (denominator) for the quality performance category. The Complex Organization Adjustment for a Virtual Group or APM Entity may not exceed 10 percent of the total available measure achievement points in the quality performance category. The adjustment will be added for each eCQM submitted at the individual measure level. Since Shared Savings Program ACOs are APM Entities, this policy is applicable to Shared Savings Program ACOs reporting the APP Plus quality measure set beginning in performance year 2025.

eCQM/MIPS CQM Reporting Incentive: We originally adopted an incentive for ACOs to begin transitioning to eCQM/MIPS CQM reporting (herein referred to as the “eCQM/MIPS CQM reporting incentive”) in the CY 2022 PFS final rule (86 FR 65261 and 65262). In the CY 2023 PFS final rule, we extended the eCQMs/MIPS CQM reporting incentive through performance year 2024 to align with the timeline for sunsetting of the CMS Web Interface reporting option and to allow ACOs an additional year to gauge their performance on the eCQMs/MIPS CQMs before full reporting of the measures are required beginning in performance year 2025 (87 FR 69836 through 69838). We further extended the eCQM/MIPS CQM reporting incentive in the CY 2025 PFS final rule (89 FR 98124) to continue to support ACOs in the transition to eCQMs for digital quality measurement reporting. Meeting the criteria for the eCQM/MIPS CQM incentive allows an ACO to meet the quality performance standard and be eligible to receive maximum shared savings and avoid maximum shared losses (if applicable).

As we stated in the CY 2026 PFS proposed rule (90 FR 32676 and 32677), the extension of the eCQM/MIPS CQM reporting incentive ensures continued support for ACOs as they gain experience reporting all payer/ all patient measures. Specifically, for performance year 2025 and subsequent performance years for ACOs reporting eCQMs, and performance years 2025 and 2026 for ACOs reporting MIPS CQMs, an ACO will meet the quality performance standard used to determine eligibility for maximum shared savings

and to avoid maximum shared losses, if applicable:

If the ACO reports all of the eCQMs/MIPS CQMs in the APP Plus quality measure set applicable for a performance year, meeting the MIPS data completeness requirement for all eCQMs/MIPS CQMs;

Achieves a quality performance score equivalent to or higher than the 10th percentile of the performance benchmark on at least one of the outcome measures in the APP Plus quality measure set; and

Achieves a quality performance score equivalent to or higher than the 40th percentile of the performance benchmark on at least one of the remaining measures in the APP Plus quality measure set (89 FR 98122 through 98124).

We stated in the CY 2025 PFS final rule (89 FR 98123) that we believe the increased number of quality measures that will be phased into the APP Plus quality measure set over time will afford ACOs expanded opportunities to satisfy the eCQM/MIPS CQM reporting incentive criteria. For instance, the number of eCQMs/MIPS CQMs in the APP Plus quality measure set will increase from four in performance year 2025 to five in performance year 2026. Once MIPS CQMs are removed from the APP Plus quality measure set in performance year 2027, the number of eCQMs in the APP Plus quality measure set will increase from 5 to 6 in performance year 2027. With the finalized removal of Quality ID: 487 Screening for Social Drivers of Health from the APP Plus quality measure set as described in section III.F.6.d. of this final rule, once all of the eCQMs are incorporated into the APP Plus quality measure set, there would be seven eCQMs. Out of these seven eCQMs, two of them (Quality ID: 001 Diabetes: Glycemic Status Assessment Greater Than 9% and Quality ID: 236 Controlling High Blood Pressure) are outcome measures and focus on the management of chronic conditions. There are also three eCQMs (Quality ID: 112 Breast Cancer Screening, Quality ID: 113 Colorectal Cancer Screening, and Quality ID: 493 Adult Immunization Status) that focus on wellness and prevention. (2) Removing the Health Equity Adjustment Applied to an ACO's Quality Score

In the CY 2026 PFS proposed rule (90 FR 32677 through 32679), we stated that after further consideration and experience implementing the eCQM/MIPS reporting incentive and the Complex Organization Adjustment, in conjunction with the previous policies we have finalized with respect to the health equity adjustment, we have concluded that the eCQM/MIPS CQM reporting incentive and the Complex Organization Adjustment provide duplicative incentives to the health equity adjustment for ACOs to meet the quality performance standard under the Shared Savings Program.

As described in the CY 2026 PFS proposed rule (90 FR 32676), an ACO that is eligible for the health equity adjustment may receive up to a maximum of 10 additional points that are added to its MIPS quality performance category score, the sum of which then becomes the ACO's health equity adjusted quality performance score (87 FR 69831). The application of the health equity adjustment to an ACO's MIPS quality performance category score allows the ACO to achieve a higher quality score that would be used to determine whether the ACO meets the quality performance standard. For performance year 2024 and subsequent performance years, if the ACO's health equity adjusted quality performance score is equivalent to or higher than the 40th percentile across all MIPS quality performance category scores, excluding entities/providers eligible for facility-based scoring, then the ACO is determined to have met the quality performance standard under the Shared Savings Program and is eligible to receive maximum shared savings and avoid maximum shared losses (if applicable), at which point additional ACO quality performance points provide no further benefit.

Another pathway for an ACO to meet the quality performance standard is to meet the criteria for the eCQM/MIPS CQM reporting incentive as described in the CY 2026 PFS proposed rule (90 FR 32676 and 32677). ACOs that meet the criteria for the eCQM/MIPS CQM reporting incentive would meet the quality performance standard regardless of their MIPS quality performance category score and be eligible to receive maximum shared savings and avoid maximum shared losses, if applicable.

In the CY 2026 PFS proposed rule (90 FR 32677), we stated that, based on performance year 2023 ACO quality results, among 71 ACOs that qualified for the health equity adjustment in performance year 2023, 13 ACOs earned health equity adjustment bonus points with an average of 3.54 bonus points (out of 10) awarded. Since all 13 of the ACOs that received health equity adjustment bonus points also met the criteria for the eCQM/MIPS CQM reporting incentive, these ACOs would have met the quality performance standard to be eligible to receive maximum shared savings and avoid maximum shared losses (if applicable), even if the health equity adjustment bonus points were not applied. This demonstrates the duplicative nature of the health equity adjustment and the eCQM/MIPS CQM reporting incentive. We stated that, although limited data was currently available, we expected that this trend will continue and that ACOs that would have received health equity adjustment bonus points are likely to also meet the criteria for the eCQM/MIPS CQM reporting incentive and meet the quality performance standard in future performance years. The Complex Organization Adjustment upwardly adjusts an ACO's MIPS quality performance category score when the ACO reports eCQMs. As described in the CY 2026 PFS proposed rule (90 FR 32676), an ACO will receive one measure achievement point for each submitted eCQM that meets the case minimum requirement at Sec. 414.1380(b)(1)(iii) and the data completeness requirement at Sec. 414.1340, and the Complex Organization Adjustment may be up to 10 percent of the total available measure achievement points in the quality performance category. Based on the quality measures finalized for the APP Plus quality measure set for the Shared Savings Program (89 FR 98128 through 98130), ACOs that report eCQMs will receive the Complex Organization Adjustment to their MIPS quality performance category score on up to four measures (that is, four points) in performance year 2025, 5 measures (that is, five points) in performance year 2026, and 6 measures (that is, six points) in performance year 2027, if each eCQM meets the case minimum requirement at Sec. 414.1380(b)(1)(iii) and the data completeness requirement at Sec. 414.1340. In the CY 2026 PFS proposed rule (90 FR 32680), we stated that should we finalize our proposal to remove Quality ID: 487 Screening for Social Drivers of Health from the APP Plus quality measure set for performance year 2028 or the performance year that is one year after the eCQM specification becomes available for Quality ID: 493 Adult Immunization Status, whichever is later, ACOs that report eCQMs would receive the Complex Organization Adjustment on up to seven measures (that is, seven points) if each eCQM meets the case minimum requirement at Sec. 414.1380(b)(1)(iii) and the data completeness requirement at Sec. 414.1340.\414\ As the number of eCQMs

that ACOs are required to report in the APP Plus quality set grows, the relative value of the Complex Organization Adjustment will increase. Both the health equity adjustment and the Complex Organization Adjustment serve to upwardly adjust an ACO's quality score to increase the ACO's ability to meet the quality performance standard by achieving a quality score that is equivalent to or higher than the 40th percentile across all MIPS quality performance category scores, excluding entities/providers eligible for facility-based scoring. The health equity adjustment and Complex Organization Adjustment are duplicative because they serve a similar function. The Complex Organization Adjustment is accounted for in the calculation of the ACO's MIPS quality performance category score; whereas, the health equity adjustment bonus points are added to the ACO's MIPS quality performance category score. Both ultimately increase an ACO's MIPS quality performance category score and, therefore, improve the ACO's ability to meet the quality performance standard.

\414\ As discussed in section III.F.6.d. of this final rule, we are finalizing the proposal to remove Quality ID: 487 Screening for Social Drivers of Health from the APP Plus quality measure set.

As discussed in the CY 2023 PFS final rule, we finalized the health equity adjustment to support ACOs that report all payer/all patient eCQMs/MIPS CQMs, perform high on quality, and serve a high proportion of underserved beneficiaries (87 FR 69838). We further stated that, because every year a greater proportion of ACOs are making the switch to eCQMs, instituting a health equity adjustment for those ACOs making the switch to eCQMs would allow us to study the impacts and make refinements during subsequent rulemaking (87 FR 69839). Moreover, in the CY 2023 PFS final rule, we expressed our concern that ACOs that serve a large portion of beneficiaries dually eligible for Medicare and Medicaid and the Medicare Part D LIS may receive lower quality scores during the switch to eCQMs without an adjustment and, in turn, be incentivized to avoid these populations, delay switching to eCQMs for as long as possible, or even cease participation in the Shared Savings Program altogether (87 FR 69839).

As we stated in the CY 2026 PFS proposed rule (90 FR 32678), we believe that the eCQM/MIPS CQM reporting incentive and the Complex Organization Adjustment sufficiently support ACOs to address the unique challenges they face when reporting all payer/all patient measures and sufficiently support ACOs that serve large proportions of beneficiaries dually eligible for Medicare and Medicaid and the Medicare Part D LIS. Both the eCQM/MIPS reporting incentive and the Complex Organization Adjustment have broader applicability than the health equity adjustment. The eCQM/MIPS CQM reporting incentive is available to all ACOs that report eCQMs/MIPS CQMs and meet the criteria for the reporting incentive; whereas the Complex Organization Adjustment is available to all ACOs that report eCQMs and meet the case minimum requirement at Sec. 414.1380(b)(1)(iii) and the data completeness requirement at Sec. 414.1340 for each eCQM. Due to the criteria that need to be met for an ACO to be eligible to receive the health equity adjustment, it only applies to a select group of ACOs that serve large proportions of beneficiaries dually eligible for Medicare and Medicaid and the Medicare Part D LIS. Furthermore, unlike the eCQM/MIPS CQM reporting incentive, the health equity adjustment does not guarantee that ACOs will meet the quality performance standard.

We further stated that we believe the application of the Complex Organization Adjustment and the extension of the eCQM/MIPS CQM reporting incentive, as finalized in prior rules, have made it unnecessary to continue the application of the health equity adjustment to an ACO's quality score. The Complex Organization Adjustment and the extension of the eCQM/MIPS CQM reporting incentive underscore our commitment to all payer/all patient quality measure reporting and are more broadly applicable than the health equity adjustment. Therefore, we proposed to remove the health equity adjustment applied to an ACO's quality score beginning in performance year 2025. In alignment with the Administration's priority to streamline regulations,\415\ our proposal to remove the health equity adjustment applied to an ACO's quality score beginning in performance year 2025 would de-duplicate scoring factors and simplify our quality scoring methodology, without reducing the support available under our policies for ACOs to meet the quality performance standard and be eligible to receive maximum shared savings and avoid maximum shared losses (if applicable).

\415\ Refer to Executive Order 14192 “Unleashing Prosperity Through Deregulation” https://www.federalregister.gov/documents/2025/02/06/2025-02345/unleashing-prosperity-through-deregulation.

Additionally, in the CY 2024 PFS final rule, we finalized that ACOs that report Medicare CQMs would be eligible to have the health equity adjustment added to their quality performance category score when calculating shared savings payments (88 FR 79110). In the CY 2025 PFS final rule, we finalized that beginning in the CY 2025 performance period/2027 MIPS payment year, measures of the Medicare CQM collection type would be scored using flat benchmarks for the measure's first two performance periods in MIPS (89 FR 98120 and 98121). In performance year 2025, all four Medicare CQMs that are in the APP Plus quality measure will be scored using a flat benchmark. In the CY 2026 PFS proposed rule (90 FR 32678), we stated that we believe that the use of flat benchmarks in a measure's first two performance periods in MIPS may allow ACOs with high scores to earn maximum or near maximum measure achievement points while allowing room for quality improvement and rewarding that improvement in subsequent years. Use of flat benchmarks in a measure's first two performance periods in MIPS also helps to ensure that ACOs with high quality performance on a measure are not penalized as low performers (89 FR 98105). There are scoring scenarios in which ACOs would earn higher measure achievement points under flat benchmarks than they would earn under performance period benchmarks, most notable being scenarios in which ACOs have a tight distribution of performance rates on a measure (89 FR 98119). We stated that we anticipate that flat benchmarks would provide benefits that are duplicative of the health equity adjustment for ACOs reporting Medicare CQMs for performance year 2025, where performance year 2025 is the measure's first or second performance period in MIPS using the Medicare CQM collection type.

In the CY 2026 PFS proposed rule (90 FR 32678 and 32679), we stated that section 1871(e)(1)(A)(ii) of the Act prohibits the Secretary from retroactively applying a substantive change in Medicare regulations unless, as applicable here, the Secretary determines that failure to apply the change retroactively would be contrary to the public interest. We stated that we believed it would be contrary to the public interest to apply the proposed removal of the health equity adjustment applied to an ACO's quality score prospectively only. As such, we proposed to apply the removal retroactively, beginning in performance year 2025. Performance year 2025 will be the first performance year when the Complex Organization Adjustment will apply to ACOs for reporting eCQMs. In

performance year 2025, the eCQM/MIPS CQM reporting incentive will continue to be applicable to ACOs, and all Medicare CQMs in the APP Plus quality measure set will be scored using flat benchmarks.

As we discussed earlier in this section, the eCQM/MIPS CQM reporting incentive and the Complex Organization Adjustment provide duplicative incentives alongside the incentive provided by the health equity adjustment for ACOs to meet the quality performance standard under the Shared Savings Program. Performance year 2023 ACO quality results demonstrate the duplicative nature of the health equity adjustment and the eCQM/MIPS CQM reporting incentive, where the ACOs that earned health equity adjustment bonus points also met the criteria for the eCQM/MIPS CQM reporting incentive. The health equity adjustment is added to an ACO's MIPS quality performance category score. ACOs that achieve the quality performance standard by meeting the eCQM/MIPS CQM reporting incentive are evaluated on their performance on measure-level quality performance scores, not the ACO's MIPS quality performance category score. As such, health equity adjustment bonus points are not used in the determination of the quality performance standard for ACOs that achieve the quality performance standard by meeting the eCQM/MIPS CQM reporting incentive. This dynamic further adds to the confusion and operational complexity of having multiple duplicative incentives for ACOs to meet the quality performance standard under the Shared Savings Program. Both the health equity adjustment and the Complex Organization Adjustment serve to upwardly adjust an ACO's quality score in order increase the ACO's ability to meet the quality performance standard. Furthermore, we noted earlier in this section that we anticipate that flat benchmarks would provide benefits that are duplicative of the health equity adjustment for ACOs reporting Medicare CQMs for performance year 2025, where performance year 2025 is the measure's first or second performance period in MIPS using the Medicare CQM collection type.

We also discussed that we believe that the eCQM/MIPS CQM reporting incentive and the Complex Organization Adjustment sufficiently support ACOs to address the unique challenges they face when reporting all payer/all patient measures and sufficiently support ACOs that serve large proportions of beneficiaries dually eligible for Medicare and Medicaid and the Medicare Part D LIS (these are the goals of the health equity adjustment) due to the broader applicability of both the eCQM/ MIPS reporting incentive and the Complex Organization Adjustment than the health equity adjustment.

We stated that we believe that it is in the public interest to remove the health equity adjustment applied to an ACO's quality score beginning in performance year 2025 to simplify our quality scoring methodology for ACOs, while maintaining sufficient support for ACOs to meet the quality performance standard through the application of the eCQM/MIPS CQM reporting incentive, the Complex Organization Adjustment, and use of flat benchmarks for Medicare CQMs. We noted that our proposal would allow ACOs to focus on a simpler scoring methodology that includes more widely applicable incentives, determine how to improve the quality of care furnished to their beneficiaries, and operate with greater focus to improve care coordination activities, thus resulting in the improvement of their performance on quality measures and ability to serve their beneficiaries. We further stated that making this change retroactively would provide greater clarity for ACOs by establishing continuity in resource language between performance year 2025 and subsequent performance years, allowing ACOs to plan ahead and have additional time to update internal operations and more easily prepare for consistent quality performance standards.

Specifically, we proposed to revise and republish Sec. 425.512(b), to include the following proposed amendments:

At Sec. 425.512 removing paragraph (b)(3).

At Sec. 425.512 redesignating paragraphs (b)(4) and (b)(5) as paragraphs (b)(3) and (b)(4), respectively.

Revising references to paragraphs (b)(4) and (b)(5) (which we proposed to redesignate as paragraphs (b)(3) and (b)(4)), as follows:

++ At Sec. 425.512 in paragraphs (b)(1) and (b)(2), removing the reference “paragraph (b)(4)” and adding in its place the reference “paragraph (b)(3)”.

++ At Sec. 425.512 in paragraph (b)(4)(iii) (which we proposed to redesignate as paragraph (b)(3)(iii)), removing the reference “paragraph (b)(4)(ii)” and adding in its place the reference “paragraph (b)(3)(ii)”.

++ At Sec. 425.512 in paragraph (b)(4)(iv)(A)(2) (which we proposed to redesignate as paragraph (b)(3)(iv)(A)(2)) introductory text, removing the reference “paragraph (b)(4)(iv)(A)(1)(ii)” and adding in its place the reference “paragraph (b)(3)(iv)(A)(1)(ii)”.

++ At Sec. 425.512 in paragraph (b)(4)(iv)(B) (which we proposed to redesignate as paragraph (b)(3)(iv)(B)), removing the reference “paragraph (b)(4)(iv)(A)” and adding in its place the reference “paragraph (b)(3)(iv)(A)”.

++ At Sec. 425.512 in paragraph (b)(4)(v) (which we proposed to redesignate as paragraph (b)(3)(v)), removing the references to “paragraph (b)(4)(iv)(B)”, “paragraph (b)(4)(iii)”, and “paragraph (b)(4)(iv)” and adding in their place the references to “paragraph (b)(3)(iv)(B)”, “paragraph (b)(3)(iii)”, and “paragraph (b)(3)(iv)”, respectively.

At Sec. 425.512 in paragraph (b)(4)(iv)(A)(2)(ii) (which we proposed to redesignate as paragraph (b)(3)(iv)(A)(2)(ii)), removing the phrase “For performance year 2024 and subsequent performance years” and adding in its place the phrase “For performance year 2024”.

At Sec. 425.512 in paragraph (b)(5) (which we proposed to redesignate as paragraph (b)(4)), revising the introductory text and paragraph references to read as follows: “Use of ACO's quality score. The ACO's quality score, determined in accordance with paragraphs (b)(1) through (3) of this section, is used as follows:”.

Since the publication of the CY 2026 PFS proposed rule, the performance year 2024 ACO quality results have become available. We used this data to conduct simulations on how the proposed removal of the health equity adjustment and the application of the eCQM/MIPS CQM reporting incentive, Complex Organization Adjustment, and flat benchmarking policies for Medicare CQMs would impact ACOs' quality scores. Based on this analysis described in further detail below, we continue to believe that the health equity adjustment would be duplicative with other adjustments in the quality scoring methodology and its proposed removal would not reduce the support available under our policies for ACOs to meet the quality performance standard and be eligible to receive maximum shared savings and avoid maximum shared losses (if applicable).

To inform the results of these simulations, we note that there are three pathways through which an ACO can meet the Shared Savings Program quality performance standard in performance year 2024. Meeting any one of these three pathways allows ACOs to be eligible to receive maximum shared savings and avoid maximum shared losses (if applicable). These pathways are: (1) achieving a quality performance score that is equivalent to or higher than the 40th percentile across all MIPS quality performance category scores,

excluding entities/providers eligible for facility-based scoring as described at Sec. 425.512(a)(5)(i)(A)(1); (2) meeting the criteria for the eCQM/MIPS CQM reporting incentive as described at Sec. 425.512(a)(5)(i)(A)(2); or (3) meeting the criteria for ACOs in the first performance year of their first agreement period as described at Sec. 425.512(a)(2)(ii). ACOs can also meet the quality performance standard if they qualify for the Shared Savings Program's quality extreme and uncontrollable circumstances (EUC) policy described at Sec. 425.512(c). We further clarify that, unlike receiving the eCQM/ MIPS CQM reporting incentive, receiving the health equity adjustment does not equate to meeting the Shared Saving Program's quality performance standard; instead, it provides bonus points to eligible ACOs that are added to their quality score. The sum of these bonus points and the ACO's MIPS quality performance category score is then used to determine whether the ACO achieved a quality performance score that is equivalent to or higher than the 40th percentile across all MIPS quality performance category scores, excluding entities/providers eligible for facility-based scoring and thus whether or not the ACO met the quality performance standard under the first pathway described above.

Overview of performance year 2024 quality results and simulations: Based on performance year 2024 ACO quality results, 39 ACOs earned health equity adjustment bonus points with an average of 4 bonus points (out of 10) awarded. Out of 39 ACOs that earned health equity adjustment bonus points for performance year 2024:

In total, 26 out of 39 ACOs that earned health equity adjustment bonus points were eligible for the eCQM/MIPS CQM reporting incentive because they reported either eCQMs or MIPS CQMs and met the criteria for the eCQM/MIPS reporting incentive.

++ Additionally, 8 ACOs among the 26 ACOs that received the eCQM/ MIPS CQM reporting incentive and met the quality performance standard as a result reported MIPS CQMs. We note that because these 8 ACOs did not report eCQMs, they would not have been eligible to receive the Complex Organization Adjustment if it was applicable in performance year 2024.

++ 18 ACOs among the 26 ACOs that received the eCQM/MIPS CQM reporting incentive reported eCQMs and would have been awarded additional measure achievement points added to their MIPS quality performance category score under the Complex Organization Adjustment if it was applicable in performance year 2024; these ACOs also met the criteria for the eCQM/MIPS CQM reporting incentive and the quality performance standard as a result.

13 ACOs reported only Medicare CQMs, and as a result, they would not have been eligible for the eCQM/MIPS CQM reporting incentive or Complex Organization Adjustment. Starting in performance year 2025, Medicare CQMs will be scored using flat benchmarks for their first two performance periods in MIPS as described at Sec. 414.1380(b)(1)(ii)(F). These 13 ACOs would have been eligible to have the three Medicare CQMs they reported scored using flat benchmarks if the flat benchmarks for Medicare CQMs policy were applicable in performance year 2024.

eCQM/MIPS CQM Reporting Incentive: Out of these 39 ACOs, 26 ACOs reported eCQMs/MIPS CQMs and met the quality performance standard by meeting the criteria for the eCQM/MIPS CQM reporting incentive, through which they were eligible to receive maximum shared savings and avoid maximum shared losses (if applicable) regardless of their quality score. These 26 ACOs did not receive any further benefit from earning health equity adjustment bonus points, thus demonstrating the duplicative nature of the health equity adjustment and the eCQM/MIPS CQM reporting incentive to achieve the quality performance standard based on both performance year 2023 (as described in the CY 2026 PFS proposed rule (90 FR 32677)) and 2024 ACO quality results.

Use of flat benchmarks to score Medicare CQMs: In performance year 2024, there were 13 ACOs that earned health equity adjustment bonus points and reported only Medicare CQMs; therefore, these ACOs were not eligible for the eCQM/MIPS CQM reporting incentive. Even though these ACOs earned health equity adjustment bonus points, the bonus points were insufficient in helping the ACOs meet one pathway to the quality performance standard, which is based on achieving a quality score that is equivalent to or higher than the 40th percentile across all MIPS quality performance category scores, excluding entities/providers eligible for facility-based scoring; however, these 13 ACOs were able to meet the quality performance standard after the application of the policy for ACOs in the first performance year of their first agreement period as described at Sec. 425.512(a)(2) or the quality EUC policy as described at Sec. 425.512(c).

We conducted an internal analysis of the performance year 2024 ACO quality results to better understand the potential impact of the proposed removal of the health equity adjustment on these ACOs. Specifically, we simulated the application of flat benchmarks for Medicare CQMs (as described at Sec. 414.1380(b)(1)(ii)(F)), which will be in effect starting in performance year 2025. Had flat benchmarks been applied to the three Medicare CQMs in the APP quality measure set in performance year 2024, the average MIPS quality performance category score earned by these 13 ACOs would have been on average 14 percentage points higher compared to an average increase of 4 percentage points that these ACOs earned from the health equity adjustment in performance year 2024, a difference of 10 percentage points. This would thus increase the likelihood that these ACOs would meet the quality performance standard by achieving a quality score that is equivalent to or higher than the 40th percentile across all MIPS quality performance category scores, excluding entities/providers eligible for facility- based scoring or the alternative quality performance standard. Additionally, when we reviewed the number of percentage points each of the 13 ACOs would have received under flat benchmarks as compared to the number of percentage points received through the health equity adjustment, we found that all 13 of these ACOs would have received a greater percentage point increase from flat benchmarks for Medicare CQMs than what they had received under the health equity adjustment. As such, we anticipate that, while ACOs that choose to report Medicare CQMs would not be eligible for the eCQM/MIPS reporting incentive or the Complex Organization Adjustment, these ACOs would likely sufficiently benefit from our policy to score Medicare CQMs using flat benchmarks as described at Sec. 414.1380(b)(1)(ii)(F). Specifically, we anticipate that these ACOs would receive a positive scoring impact under flat benchmarks for Medicare CQMs, that would be greater than the current positive scoring impact these ACOs received under the health equity adjustment.

Complex Organization Adjustment: We simulated the impact that the Complex Organization Adjustment, which is effective beginning in the CY 2025 performance period/2027 MIPS payment year as described at Sec. 414.1380(b)(1)(vii)(C), would have had on the 39 ACOs that earned health equity adjustment bonus points if it had been applied in performance year 2024. We found that out of the 26 ACOs that earned health equity adjustment bonus

points in performance year 2024 and reported eCQMs/MIPS CQMs, 18 ACOs would have been eligible to receive the Complex Organization Adjustment because these ACOs submitted at least one eCQM. Had the Complex Organization Adjustment been applied in performance year 2024, the average MIPS quality performance category score for these 18 ACOs would have been 6 percentage points on average as compared to an average increase of 3 percentage points that these ACOs earned through the application of the health equity adjustment bonus points, thus increasing the likelihood that these ACOs would meet the quality performance standard by achieving a quality score that is equivalent to or higher than the 40th percentile across all MIPS quality performance category scores, excluding entities/providers eligible for facility- based scoring. The other eight ACOs reported MIPS CQMs and not eCQMs and thus would not have been eligible to receive the Complex Organization Adjustment. We also note that all 26 ACOs that reported eCQMs/MIPS CQMs (that is, the 18 the ACOs that would have been eligible for the Complex Organization Adjustment had it been applicable for performance year 2024 and the eight ACOs that did not submit at least one eCQM and would not have been eligible for the Complex Organization Adjustment had it been applicable for performance year 2024) were eligible for the eCQM/MIPS CQM reporting incentive, which allowed these ACOs to meet the quality performance standard and be eligible to receive maximum shared savings and avoid maximum shared losses (if applicable) regardless of their quality score.

We received public comments on the proposals related to removing the health equity adjustment applied to an ACO's quality score beginning in performance year 2025. The following is a summary of the comments we received and our responses.

Comment: A few commenters supported our proposal to remove the health equity adjustment applied to an ACO's quality score. These commenters supported the goal of simplifying the scoring methodology and providing incentives like the Complex Organization Adjustment and believed a clear and streamlined approach to quality scoring allows ACOs to focus more on care improvement activities over complex reporting mechanics.

Response: We thank commenters for their support of our proposal.

Comment: Many commenters disagreed that the eCQM/MIPS CQM reporting incentive and the Complex Organization Adjustment are duplicative of the health equity adjustment and stated that they serve different purposes. The commenters noted that these adjustments are not uniformly applied across ACOs and vary based on reporting pathways. A commenter stated that these incentives, while valuable for encouraging certain types of data reporting, do not provide a sufficiently broad or comprehensive support mechanism for essential hospitals to thrive in a value-based care environment. Another commenter questioned why the health equity adjustment was added to begin with if it was duplicative with other adjustments. Many commenters recommended that we retain the health equity adjustment applied to an ACO's quality score.

Response: In response to comments stating that the eCQM/MIPS CQM reporting incentive and the Complex Organization Adjustment are not uniformly applied across ACOs and vary based on reporting pathways, we note that the eCQM/MIPS CQM reporting incentive and the Complex Organization Adjustment are available to all ACOs based on the reporting option ACOs choose. In contrast, the health equity adjustment eligibility criteria limit the adjustment's applicability to a select group of ACOs based on the proportion of assigned beneficiaries who are dually eligible for Medicare and Medicaid and the Medicare Part D LIS. Furthermore, unlike the eCQM/MIPS CQM reporting incentive, the health equity adjustment does not guarantee that ACOs will meet the quality performance standard.

We believe that the eCQM/MIPS CQM reporting incentive and the Complex Organization Adjustment sufficiently support ACOs to address the unique challenges they face when reporting all payer/all patient measures and sufficiently support ACOs that serve large proportions of beneficiaries dually eligible for Medicare and Medicaid and the Medicare Part D LIS, including essential hospitals. Based on our analysis of performance year 2024 ACO quality results as described above and as discussed in our responses below, we continue to believe that the health equity adjustment is duplicative of the eCQM/MIPS CQM reporting incentive and Complex Organization Adjustment.

In response to the comment that questioned why the health equity adjustment was added to begin with if it was duplicative of other adjustments, we note that, as discussed in the CY 2023 PFS final rule, our aim in finalizing the health equity adjustment was to encourage high ACO quality performance, reinforce ACOs' transition to reporting all payer/all patient eCQMs/MIPS CQMs, and provide an incentive for ACOs to provide high quality care to all of the populations they serve (87 FR 69839). We also stated that, because every year a greater proportion of ACOs are making the switch to eCQMs, instituting a health equity adjustment for those ACOs making the switch to eCQMs will allow us to study the impacts and make refinements during subsequent rulemaking (87 FR 69839). Since we adopted the health equity adjustment, we also note that we have added or extended other incentives to reinforce ACOs' transition to reporting eCQMs/MIPS CQMs, including making the Complex Organization Adjustment available to ACOs that report eCQMs, extending the eCQM/MIPS CQM reporting incentive, and applying flat benchmarks to Medicare CQMs in their first two performance periods in MIPS.

Comment: We received several comments addressing whether the eCQM/ MIPS CQM reporting incentive was duplicative of the health equity adjustment. A commenter suggested CMS acquire additional data to determine if the eCQM/MIPS CQM reporting incentive and the health equity adjustment are duplicative. A commenter stated that, even though CMS referenced that all 13 of the ACOs that received the health equity adjustment bonus points in performance year 2023 also met the criteria for the eCQM/MIPS CQM reporting incentive, performing well in underserved areas does not necessarily mean that an ACO will meet the standard for the eCQM/MIPS CQM reporting incentive. The commenter noted that maintaining the health equity adjustment alongside the eCQM/MIPS CQM reporting incentive would continue to appropriately reward providers who consider all aspects of a patient's health. A commenter stated that the eCQM/MIPS CQM reporting incentive is not duplicative of the health equity adjustment because the former rewards ACOs for their reporting method while the latter rewards ACOs due to population-based challenges.

Response: As described in the CY 2026 PFS proposed rule (90 FR 32676), an ACO that is eligible for the health equity adjustment may receive up to a maximum of 10 additional points that are added to its MIPS quality performance category score, the sum of which then becomes the ACO's health equity adjusted quality performance score. The application of the health equity adjustment to an ACO's MIPS quality performance category score allows the ACO to achieve a higher

quality score that would be used to determine whether the ACO meets the quality performance standard. We finalized in the CY 2023 PFS final rule (87 FR 69842) and the CY 2024 final rule (88 FR 79109 and 79110) that, for performance year 2024 and subsequent performance years, if the ACO's health equity adjusted quality performance score was equivalent to or higher than the 40th percentile across all MIPS quality performance category scores, excluding entities/providers eligible for facility-based scoring, then the ACO was determined to have met the quality performance standard under the Shared Savings Program and was eligible to receive maximum shared savings and avoid maximum shared losses (if applicable).

Another pathway for an ACO to meet the quality performance standard is to meet the criteria for the eCQM/MIPS CQM reporting incentive as described in the CY 2026 PFS proposed rule (90 FR 32676 and 32677). ACOs that meet the criteria for the eCQM/MIPS CQM reporting incentive would meet the quality performance standard regardless of what their MIPS quality performance category score is and be eligible to receive maximum shared savings and avoid maximum shared losses, if applicable. ACOs that achieve the quality performance standard by meeting the eCQM/ MIPS CQM reporting incentive are evaluated on their performance on measure-level quality performance scores, not the ACO's MIPS quality performance category score. As such, health equity adjustment bonus points are not used in the determination of the quality performance standard for ACOs that achieve the quality performance standard by meeting the eCQM/MIPS CQM reporting incentive.

In response to comments that suggested CMS acquire more data before determining whether the eCQM/MIPS CQM reporting incentive is duplicative with the health equity adjustment, we discussed earlier in this section of the final rule that performance year 2024 ACO quality results have become available since the publication of the CY 2026 PFS proposed rule. We found that all 26 ACOs that earned health equity adjustment bonus points and reported eCQMs/MIPS CQMs also met the criteria for the eCQM/MIPS CQM reporting incentive and thus meeting the quality performance standard and demonstrating the duplicative nature of the health equity adjustment and the eCQM/MIPS CQM reporting incentive.

Based on our experience with the program and our knowledge of the ACOs that participate in it, we expect that this trend will continue and that ACOs that would have received health equity adjustment bonus points will continue to benefit from the eCQM/MIPS CQM reporting incentive.

Comment: We received comments specifically addressing whether the Complex Organization Adjustment was duplicative of the health equity adjustment. A commenter stated that the health equity adjustment complements rather than duplicates the Complex Organization Adjustment. Another commenter stated that the Complex Organization Adjustment is tied to eCQM reporting but fails to capture the full spectrum of challenges that essential hospitals encounter. A commenter stated that the Complex Organization Adjustment and the health equity adjustment are not duplicative because the former addresses workflow burden and the latter accounts for unique circumstances faced by ACOs that serve a high proportion of beneficiaries who are from underserved neighborhoods, eligible for the Medicare Part D LIS, or dual eligibles. The commenter stated that many of these ACOs do not have the capability to report eCQMs in the near term and thus cannot qualify for the Complex Organization Adjustment. Another commenter stated that the health equity adjustment and the Complex Organization Adjustment capture two different areas of work and incorrectly noted that less than one-fifth (13/71) of ACOs who received the health equity adjustment also received the Complex Organization Adjustment. The commenter stated that the Complex Organization Adjustment accounts for organizational complexities encountered with APMs, while the health equity adjustment is intended to account for low-income beneficiaries who may have poorer health outcomes and higher resource needs. A commenter urged CMS to retain the Complex Organization Adjustment and the health equity adjustment on a permanent basis because the Complex Organization Adjustment was intended to provide incentives for the financial and technological difficulties ACOs face as they transition to all payer/all patient reporting via eCQMs and achieve data completeness thresholds. Some commenters proposed an alternative to removing the health equity adjustment where an ACO can choose either the Complex Organization Adjustment or the health equity adjustment. A commenter stated that CMS should increase the Complex Organization Adjustment maximum to 10 points if the health equity adjustment is removed.

Response: In response to the comment that stated that the Complex Organization Adjustment does not capture the full spectrum of challenges encountered by essential hospitals, we note that both the health equity adjustment and the Complex Organization Adjustment upwardly adjust an ACO's MIPS quality performance category score to increase the ACO's ability to meet the quality performance standard, but do not guarantee that the ACO will meet the quality performance standard. Specifically, the Complex Organization Adjustment upwardly adjusts an ACO's MIPS quality performance category score by adding points to specific measures where the ACO reported via the eCQM collection type and met the case minimum and data completeness requirements; whereas, the health equity adjustment bonus points are added to the ACO's overall MIPS quality performance category score, which is used to determine the ACO's quality score for the Shared Savings Program. As described in the CY 2026 PFS proposed rule (90 FR 32676), an ACO will receive one measure achievement point for each submitted eCQM that meets the case minimum requirement at Sec. 414.1380(b)(1)(iii) and the data completeness requirement at Sec. 414.1340, and the Complex Organization Adjustment may be up to 10 percent of the total available measure achievement points in the quality performance category. Based on the quality measures finalized for the APP Plus quality measure set that Shared Savings Program ACOs are required to report beginning in performance year 2025 (89 FR 98128 through 98130), ACOs that report eCQMs will receive the Complex Organization Adjustment to their MIPS quality performance category score on up to four measures (that is, four points) in performance year 2025, 5 measures (that is, 5 points) in performance year 2026, and 6 measures (that is, 6 points) in performance year 2027, if each eCQM meets the case minimum requirement at Sec. 414.1380(b)(1)(iii) and the data completeness requirement at Sec. 414.1340. We are finalizing our proposal to remove Quality ID: 487 Screening for Social Drivers of Health from the APP Plus quality measure set as described in section III.F.6.d. of this final rule; therefore, for performance year 2028 or the performance year that is one year after the eCQM specification becomes available for Quality ID: 493 Adult Immunization Status, whichever is later, ACOs that report eCQMs would receive the Complex Organization Adjustment on up to seven measures (that is, seven

points) if each eCQM meets the case minimum requirement at Sec. 414.1380(b)(1)(iii) and the data completeness requirement at Sec. 414.1340.

We disagree with the commenter's suggestion that CMS increase the Complex Organization Adjustment's maximum value to 10 points. As we stated in the CY 2025 PFS final rule, in limiting the application to virtual groups and APM Entities and capping the adjustment to 10 percent of the total achievable points in the quality performance category, the Complex Organization Adjustment will serve to help these participants overcome barriers to eCQM reporting while reducing scoring inflation (89 FR 98438).

As discussed earlier in this section of the final rule, we conducted an internal analysis of performance year 2024 ACO quality results where we simulated the impact of the Complex Organization Adjustment if it had been applied in performance year 2024. We found that for the 18 ACOs that would have been eligible to receive the Complex Organization Adjustment, the average MIPS quality performance category score would have been 6 percentage points higher on average as compared to an average increase of 3 percentage points that these ACOs earned through the application of the health equity adjustment bonus points, thus increasing the likelihood for these ACOs to meet the quality performance standard by achieving a quality score that is equivalent to or higher than the 40th percentile across all MIPS quality performance category scores, excluding entities/providers eligible for facility-based scoring. Based on our experience with the program and knowledge of the ACOs that participate in it, we expect that estimated impacts will continue and that ACOs reporting eCQMs that would have received health equity adjustment bonus points are poised to have net benefits from the Complex Organization Adjustment.

In response to the comment that stated that the Complex Organization Adjustment does not account for unique circumstances faced by ACOs that serve a high proportion of beneficiaries, we note that, while the methodology for the health equity adjustment and the Complex Organization Adjustment differ, both adjustments aim to upwardly adjust an ACO's quality score for purposes of determining whether an ACO met quality performance standard. The Complex Organization Adjustment was finalized to support full and equitable participation in all payer/all patient collection types, especially among large groups such as Shared Savings Program ACOs (89 FR 98102). The overlap in fundamental goals between the Complex Organization Adjustment and health equity adjustment demonstrates how the former will provide continued support for ACOs.

In response to the comment that many ACOs do not have the capability to report eCQMs in the near term and thus cannot qualify for the Complex Organization Adjustment, we note that these ACOs have the option to report Medicare CQMs, and as such, would benefit from the flat benchmark for Medicare CQM policy described at Sec. 414.1380(b)(1)(ii)(F). As discussed earlier in this section of the final rule, based on an internal simulation of performance year 2024 ACO quality results, the 13 ACOs that earned health equity adjustment bonus points in performance year 2024 and reported Medicare CQMs would have benefited from the flat benchmarks for Medicare CQMs to a greater degree than the health equity adjustment, had that policy been applicable in performance 2024.

We disagree with the suggestion for ACOs to choose to have the health equity adjustment or Complex Organization Adjustment applied to the ACOs' MIPS quality performance category score. As discussed in this section of the final rule, our simulated analysis suggests that ACOs are expected to have a greater increase in their MIPS quality performance category scores due to the Complex Organization Adjustment as compared to the health equity adjustment.

Comment: A commenter stated that retaining the health equity adjustment is ideal as other incentives begin to be phased out as eCQMs become the standard. A commenter stated that the end of the eCQM/MIPS CQM reporting incentive after performance year 2026 makes it a temporary replacement for the health equity adjustment.

Response: We disagree with the commenter. We clarify that, as stated in the CY 2026 PFS proposed rule (90 FR 32676), we further extended the eCQM/MIPS CQM reporting incentive in the CY 2025 PFS final rule (89 FR 98124) to continue to support ACOs in the transition to eCQMs for digital quality measurement reporting.

Specifically, for performance year 2025 and subsequent performance years for ACOs reporting eCQMs, and performance years 2025 and 2026 for ACOs reporting MIPS CQMs, an ACO will meet the quality performance standard used to determine eligibility for maximum shared savings and to avoid maximum shared losses, if applicable:

If the ACO reports all of the eCQMs/MIPS CQMs in the APP Plus quality measure set applicable for a performance year, meeting the MIPS data completeness requirement for all eCQMs/MIPS CQMs;

Achieves a quality performance score equivalent to or higher than the 10th percentile of the performance benchmark on at least one of the outcome measures in the APP Plus quality measure set; and

Achieves a quality performance score equivalent to or higher than the 40th percentile of the performance benchmark on at least one of the remaining measures in the APP Plus quality measure set (89 FR 98122 through 98124).

Comment: Several commenters stated that reporting eCQMs is not feasible despite the incentives, due to technology constraints and vendors' abilities to accurately aggregate and deduplicate data across numerous disparate EHRs and other data sources. The commenters further noted that this transition can be particularly challenging for smaller, less well-resourced organizations. The commenters further noted that removal of the health equity adjustment may result in these organizations losing out on earned shared savings, thus being left with fewer resources to fund the reporting transition.

Response: Regarding concern over vendors' abilities to accurately aggregate and deduplicate data across numerous disparate EHRs and other data sources, we note that in the CY 2025 PFS final rule, we directed readers to guidance on reporting eCQMs/MIPS CQMs that recognized these challenges (89 FR 98108). Specifically, for concerns related to de- duplication, we encouraged ACOs and their vendors to consider using our DedupliFHIR open-source data deduplication and record matching tool. The tool includes a backend library and a front-end desktop application that can be downloaded from the DedupliFHIR GitHub repository at https://github.com/DSACMS/dedupliFHIR. We continue to encourage ACOs and their vendors to participate in our regular QCDR and Qualified Registry support calls and to submit questions to the Quality Payment Program help desk, as needed. Additionally, for ACOs with significant EHR vendor concerns, when issues of potential noncompliance with certification requirements are unresolvable, we note that the Assistant Secretary for Technology Policy/Office of the National Coordinator for Health Information Technology (ASTP/ONC) has provided a complaint process for

certified products available to the public at https://www.healthit.gov/topic/certified-health-it-complaint-process.

In our responses above, we describe why we continue to believe that the eCQM/MIPS CQM reporting incentive and the Complex Organization Adjustment provide duplicative incentives to the incentive provided by the health equity adjustment, for ACOs to meet the quality performance standard under the Shared Savings Program and be eligible to receive maximum shared savings and avoid maximum shared losses, if applicable. Thus, we disagree with commenters that the removal of the health equity adjustment will result in these organizations losing out on shared savings. As discussed earlier in this section of the final rule, there were 13 ACOs that earned health equity adjustment bonus points in performance year 2024 and reported Medicare CQMs. When we simulated the application of flat benchmarks for Medicare CQMs on the performance year 2024 ACO quality results for these 13 ACOs, we found that they scored higher on average when scored with flat benchmarks compared to when their scores were adjusted by the health equity adjustment. The average MIPS quality performance category score earned by these 13 ACOs would have been 14 percentage points higher compared to an average increase of 4 percentage points that these ACOs earned from the health equity adjustment in performance year 2024, a difference of 10 percentage points; therefore, increasing the likelihood for these ACOs to meet the quality performance standard by achieving a quality score that is equivalent to or higher than the 40th percentile across all MIPS quality performance category scores, excluding entities/providers eligible for facility-based scoring.

Comment: Many commenters stated that the removal of the health equity adjustment would disproportionately harm ACOs serving beneficiaries who are dually eligible for Medicare and Medicaid and other complex populations. The commenters noted that the adjustment provides a critical guardrail for organizations with complex beneficiary populations, including high proportions of dual eligible populations. A commenter further noted that despite providing high quality care, due to high exclusion rates and other measure-related challenges, ACOs serving these populations often have lower quality scores and that this change jeopardizes the shared savings of organizations serving some of the most high-cost and vulnerable Medicare beneficiaries. A commenter stated, as an example, that FQHCs' beneficiaries are predominantly dual eligible or Medicare Part D LIS eligible, and the health equity adjustment recognizes the additional effort required to improve outcomes for these populations.

Response: We acknowledge commenters' concerns. In the CY 2026 PFS proposed rule (90 FR 32678), we stated that we believe that the eCQM/ MIPS CQM reporting incentive and the Complex Organization Adjustment sufficiently support ACOs to address the unique challenges they face when reporting all payer/all patient measures and support ACOs that serve large proportions of beneficiaries dually eligible for Medicare and Medicaid and the Medicare Part D LIS. Both the eCQM/MIPS reporting incentive and the Complex Organization Adjustment have broader applicability than the health equity adjustment. The eCQM/MIPS CQM reporting incentive is available to all ACOs that report eCQMs/MIPS CQMs and meet the criteria for the reporting incentive; whereas, the Complex Organization Adjustment is available to all ACOs that report eCQMs and meet the case minimum requirement at Sec. 414.1380(b)(1)(iii) and the data completeness requirement at Sec. 414.1340 for each eCQM. The criteria to receive the health equity adjustment is limited to ACOs with a certain proportion of assigned beneficiaries who are dually eligible for Medicare and Medicaid or receive Medicare Part D LIS. Furthermore, unlike the eCQM/MIPS CQM reporting incentive, the health equity adjustment does not guarantee that ACOs will meet the quality performance standard and be eligible to receive maximum shared savings and avoid maximum shared losses (if applicable). Our analyses detailed above illustrate the support that could be provided by other incentives and demonstrate that the health equity adjustment is otherwise duplicative of these other incentives. The 13 ACOs that received the health equity adjustment that reported Medicare CQMs were not eligible for the eCQM/MIPS CQM reporting incentive, and none of those 13 ACOS would have met the quality performance standard with the health equity adjustment. As noted above, flat benchmarks would have provided a greater benefit and increased the chance for these ACOs that reported Medicare CQMs to meet the quality performance standard.

Comment: A commenter stated that removal of the health equity adjustment would have detrimental effects on patients' health and therefore lead to higher costs. Additionally, several commenters noted that ACOs tend to contribute some of the highest savings to the Medicare Trust Funds on a per-beneficiary basis. These commenters noted that eliminating the health equity adjustment will drive out organizations CMS seeks to retain.

Response: We disagree with commenters that the removal of the health equity adjustment will lead to higher costs. Our analyses show that there are other adjustments that support ACOs in quality reporting. We believe specifically the eCQM/MIPS CQM reporting incentive and Complex Organization Adjustment, as well as flat benchmarks under Medicare CQM reporting are sufficient incentives to retain participation of ACOs so they can continue to coordinate care and achieve savings to Medicare.

Comment: A few commenters stated that, absent the adjustment, ACOs with higher amounts of Medicaid patients will likely perform worse on all-payer measures, which effectively turns quality measurement into a measure of an ACO's population mix rather than quality performance.

Response: As discussed in section III.F.8.(2) of this final rule, the health equity benchmark adjustment (HEBA) that we are finalizing to rename the “population adjustment” modifies an ACO's historical benchmark according to the proportion of its assigned beneficiaries who are dually eligible for Medicare and Medicaid or receive the Medicare Part D LIS. We note that the population adjustment that went into effect starting in performance year 2025 will continue to provide ACOs with additional financial resources to serve dual eligible beneficiaries and beneficiaries who receive the Medicare Part D LIS since it is intended to encourage ACOs to attract and retain medically complex beneficiaries. We further believe that the population adjustment will continue to offer a targeted mechanism to support ACO participants such as hospitals and FQHCs that care for a high proportion of dual eligible or Medicare Part D LIS eligible beneficiaries.

Comment: The commenters noted that the ACO's ability to change its participation list might mean that it drops practitioners that are less “efficient” compared to their region or are serving an increasing number of Medicaid patients.

Response: Regarding commenters' concerns related to ACOs modifying their participant list to exclude “efficient” practitioners, we do not believe that the removal of the health equity adjustment will prompt the removal of practitioners from ACO

participant lists because we believe the population adjustment to the historical benchmark provides adequate incentive for ACOs not to engage in this behavior.

Comment: A commenter stated that the health equity adjustment ensures that the Medicare payment methodology accounts for the complexity of higher-risk populations. Another commenter stated that removing the adjustment would eliminate a crucial mechanism designed to reward and incentivize clinicians who provide care to underserved and at-risk populations. The commenter believed that the health equity adjustment is essential to ensure that ACOs treating marginalized communities are supported and can help bolster ACOs' ability to earn shared savings.

A commenter stated that removing the health equity adjustment will likely disincentivize ACOs from forming in areas with greater proportions of populations with unmet social and economic need and incentivize ACOs to exclude providers who primarily serve these populations. Another commenter stated that removal of the health equity adjustment should be reconsidered because it aligns with the goal of providing specific populations with more coordinated and cost-effective care.

Response: We disagree with the comments that the proposed removal of the health equity adjustment would disincentivize ACOs from participating and serving higher-risk populations. As we described in the CY 2026 PFS proposed rule (90 FR 32677 through 32679), we continue to believe the health equity adjustment is duplicative with other adjustments in the quality scoring methodology. Removing the health equity adjustment is balanced with the availability of other adjustments to support ACOs, including the eCQM/MIPS CQM reporting incentive, Complex Organization Adjustment and flat benchmarks for Medicare CQMs. Additionally, the removal of the health equity adjustment will help to simplify the quality scoring methodology.

Comment: A commenter stated that maintaining this adjustment could help CMS retain data on providers and populations with risk factors impacting delivery of care, which could inform future decision making.

Response: Removal of the health equity adjustment does not mean that we would lose the data on provider and ACO assigned beneficiary characteristics used to calculate and implement the health equity adjustment. We would continue to have access to information such as ACO assigned beneficiaries that are dually eligible for Medicare and Medicaid or receive the Medicare Part D LIS since we maintain this data for other policies and programs. This data could be used to inform future analyses if needed.

Comment: A commenter stated that the removal of the health equity adjustment would lower the final MIPS scores of ACO providers in MIPS APM tracks of the Shared Savings Program, and therefore, lower their MIPS payment adjustment and financially harm providers.

Response: We believe that the commenter misunderstood how the health equity adjustment is applied under the Shared Savings Program. The health equity adjustment bonus points are added to the ACO's MIPS quality performance category score for purposes of calculating the ACO's quality score under the Shared Savings Program only. The health equity adjustment is not applied to an ACO's MIPS quality performance category score for purposes of calculating the ACO's MIPS final scores or MIPS payment adjustment. As such, removal of the health equity adjustment would not impact an ACO's performance under MIPS.

Comment: A commenter stated that the health equity adjustment should be retained because it is available to ACOs that report Medicare CQMs, unlike the eCQM/MIPS CQM reporting incentive and Complex Organization Adjustment. Another commenter proposed an alternative for CMS to update the health equity adjustment to only apply to ACOs that report via Medicare CQMs to eliminate the overlap between these adjustments. Another commenter stated that removing financial resources to Medicare CQM reporters potentially decreases participation in the program, contrary to CMS' goal of having all patients in an accountable care relationship by 2030. Another commenter stated that flat benchmarks for Medicare CQM and the health equity adjustment are not duplicative because the former is uniformly applied and does not account for the worse health outcomes consistently observed in underserved populations. The commenter further stated that flat benchmarks are temporary and are not a lasting offset to the unique challenges faced by ACOs that serve high ADI, Medicare Part D LIS, and dual eligible populations.

Response: The option to report using the eCQM/MIPS CQM/Medicare CQM collection types in performance year 2026 and the eCQM/Medicare CQM in performance year 2027 and subsequent years, will allow ACOs to select the submission method that is most appropriate and advantageous for their situation and technological capabilities. We note that the eCQM/ MIPS CQM reporting incentive and the Complex Organization Adjustment are available to ACOs that choose to report via the eCQM or MIPS CQM collection type, or the eCQM collection type, respectively. ACOs that choose to report the Medicare CQM collection type will benefit from the flat benchmark for Medicare CQMs policy described at Sec. 414.1380(b)(1)(ii)(F).

In response to the comment that stated that flat benchmarks for Medicare CQMs and the health equity adjustment are not duplicative because the former is uniformly applied and does not account for the worse health outcomes consistently observed in underserved populations, we note that while the methodology for the application of the health equity adjustment and flat benchmarks for Medicare CQMs differ, as discussed in the CY 2026 PFS proposed rule (90 FR 32678), the use of flat benchmarks in a Medicare CQM measure's first two performance periods in MIPS may allow ACOs with high scores to earn maximum or near maximum measure achievement points while allowing for room for quality improvement and rewarding that improvement in subsequent years and to help ensure that ACOs with high quality performance on a measure are not penalized as low performers. Similar to the health equity adjustment, flat benchmarks for Medicare CQMs are applicable to the Medicare CQMs included in the APP Plus quality measure set. Specifically, as discussed in the CY 2025 PFS final rule, Medicare CQM measures are eligible for flat benchmarks from performance year 2025 to performance year 2028 (89 FR 98121). The following measures are included:

Medicare CQM version of Quality ID: 112 Breast Cancer Screening will be scored using a flat benchmark in performance years 2025 and 2026.

Medicare CQM version of Quality ID: 113: Colorectal Cancer Screening and Quality will be scored using flat benchmarks in performance years 2026 and 2027.

Medicare CQM version of Quality ID: 305 Initiation and Engagement of Substance Use Disorder Treatment will be scored using a flat benchmark in performance year 2027 and 2028.

Medicare CQM version of Quality ID: 493 Adult Immunization Status will be eligible for flat benchmarks for two years beginning with performance year 2028 or the performance year that is one year after the eCQM specifications

become available for these measures, whichever is later.

We also note that, while our policy for flat benchmarks for Medicare CQMs described at Sec. 414.1380(b)(1)(ii)(F) is only applicable to measures during their first two performance periods in MIPS, as discussed in the CY 2025 PFS final rule, the use of historical benchmarks, when data are available after the first two performance periods in MIPS, will allow ACOs to know the benchmarks prior to the start of the performance year and create opportunities for improvement (89 FR 98120). We further note that we will monitor ACOs' uptake of eCQMs and Medicare CQMs and should we consider extending flat benchmarks for Medicare CQMs, we would do so through notice and comment rulemaking.

In response to the comment that stated that removing financial resources to Medicare CQM reporters potentially decreases participation in the program, we refer interested parties to the discussion of an internal simulation of performance year 2024 ACO quality results found earlier in this section of the final rule. Specifically, we simulated the application of flat benchmarks for Medicare CQMs for the 13 ACOs that earned health equity bonus points and reported Medicare CQMs in performance year 2024. Had flat benchmarks been applied to the three Medicare CQMs in the APP quality measure set in performance year 2024, the average MIPS quality performance category score earned by these 13 ACOs would have received an average increase of 14 percentage points higher compared to an average increase of 4 percentage points that these ACOs earned from the health equity adjustment in performance year 2024, a difference of 10 percentage points. Additionally, we note that all 13 of these ACOs would have received a greater percentage point increase from flat benchmarks for Medicare CQMs than what they had received under the health equity adjustment. Based on these results, we believe that flat benchmarks for Medicare CQMs will support ACOs in meeting the quality performance standard and alternative quality performance standard in a manner that is equal to or greater than the benefit ACOs received from the health equity adjustment. Moreover, the collective benefit of flat benchmarks for Medicare CQMs, in conjunction with the eCQM/MIPS CQM reporting incentive and the Complex Organization Adjustment, would provide sufficient support to ACOs to substantiate the sunsetting of the health equity adjustment.

For the reasons described in this section of the final rule and the results noted previously, we also disagree with the comment that proposed an alternative for CMS to update the health equity adjustment to only apply to ACOs that report via Medicare CQMs to eliminate the overlap between these adjustments.

Comment: A commenter noted that the expansion of the APP Plus quality measure set is not duplicative of the health equity adjustment because these measures are domains where dual eligible and rural populations historically perform worse due to systemic barriers and noted that adding more of these measures will increase disparities and heighten the need for the health equity adjustment.

Response: We did not state in the CY 2026 PFS proposed rule that the APP Plus quality measure set is duplicative of the health equity adjustment. However, in response to the comment that adding more measures will increase disparities and heighten the need for the health equity adjustment, as described at Sec. 425.512(b)(4)(v), we clarify that the health equity adjustment is capped at 10 points. This cap was established when the health equity adjustment was finalized in performance year 2023 and was not designed to increase (or decrease) as the quality measure set expands (or contracts). As the number of measures in the APP Plus quality measure set increases, the health equity adjustment cap would become increasingly restrictive in its benefit. In contrast, the benefits of the eCQM/MIPS CQM reporting incentive and flat benchmarks for Medicare CQMs policy are not limited by an increase in the APP Plus quality measure set. While the Complex Organization Adjustment does have a cap as described at Sec. 414.1380(b)(1)(vii)(C), the cap is relative to the total available measure achievement points, and by design, would increase or decrease based on the number of measures being scored. For these reasons, we believe that the eCQM/MIPS CQM reporting incentive, Complex Organization Adjustment, and flat benchmarks for Medicare CQMs are more appropriate policies for supporting ACOs as the APP Plus quality measure set expands.

As stated in an earlier response, as the number of eCQMs that ACOs are required to report in the APP Plus quality set grows, the value of the Complex Organization Adjustment will increase such that ACOs will have the opportunity to earn more measure achievement points. We also noted that we are finalizing our proposal to remove Quality ID: 487 Screening for Social Drivers of Health from the APP Plus quality measure set, as described in section III.F.6.d. of this final rule. Therefore, for performance year 2028 or the performance year that is one year after the eCQM specification becomes available for Quality ID: 493 Adult Immunization Status, whichever is later, ACOs that report eCQMs would receive the Complex Organization Adjustment on up to seven measures (that is, seven points) if each eCQM meets the case minimum requirement at Sec. 414.1380(b)(1)(iii) and the data completeness requirement at Sec. 414.1340. Additionally, we stated in the CY 2025 PFS final rule (89 FR 98123) that we believe the increased number of quality measures that will be phased into the APP Plus quality measure set over time will afford ACOs expanded opportunities to satisfy the eCQM/MIPS CQM reporting incentive criteria.

Comment: A commenter stated that the removal of the health equity adjustment would overburden physicians.

Response: While the commenter did not explain why they believe that the removal of the health equity adjustment would overburden physicians, we disagree that it would do so. As we stated in the CY 2026 PFS proposed rule (90 FR 32679), we believe that removing the health equity adjustment applied to an ACO's quality score would simplify our quality scoring methodology for ACOs, while maintaining sufficient support for ACOs to meet the quality performance standard through the application of the eCQM/MIPS CQM reporting incentive, the Complex Organization Adjustment, and use of flat benchmarks for Medicare CQMs. Our proposal would allow ACOs and their participating providers to focus on a simpler scoring methodology that includes more widely applicable incentives, determine how to improve the quality of care furnished to their beneficiaries, and operate with greater focus to improve care coordination activities, thus resulting in the improvement of their performance on quality measures and ability to serve their beneficiaries.

Comment: Several commenters stated that the health equity adjustment aligns with CMS' goals to encourage accountable care providers to take on downside risk for vulnerable beneficiary populations.

Response: We note that there are existing Shared Savings Program policies that encourage ACOs to take on downside risks. Specifically, we direct commenters to the option to receive advanced investment payment as described at Sec. 425.630. We note that, as

stated in section III.F.2.(2) of this final rule, advance investment payments are designed to provide upfront funding to assist new, low- revenue ACOs inexperienced with performance-based risk Medicare ACO initiatives. We believe this type of upfront funding can aid eligible ACOs in their development such that they could be able to take on downside risk a little more quickly.

We also direct readers to eligible ACOs' option to receive prepaid shared savings as described at Sec. 425.640. We also note that, as stated in the CY 2025 PFS final rule (89 FR 98132), we believe that the option to receive prepaid shared savings will reduce barriers to participation in the Shared Savings Program for eligible ACOs by supporting investments in increased staffing, healthcare infrastructure, and the provision of accountable care for beneficiaries. While there are limitations on the use of prepaid shared savings, the option to receive prepaid shared savings is available to eligible ACOs participating in Levels C-E of the BASIC track or the ENHANCED track during the agreement period in which they would receive prepaid shared savings, provided they meet other applicable requirements. Additionally, we direct commenters to section III.F.8. of this final rule for a discussion on our policies related to the population adjustment to the historical benchmark. We believe that these policies sufficiently support ACOs in the assumption of risk, and the efficacy of these policies would not be impeded by our proposal to remove the health equity adjustment as discussed in detail in our aforementioned analyses, which indicated that historically, the removal of the health equity adjustment would not have prevented any ACOs that benefitted from the health equity adjustment to meet the quality performance standard.

Comment: Some commenters stated that removing the health equity adjustment signals to providers that equity is no longer a top priority in the Medicare program. A commenter urged CMS to find a better way to address health disparities. Some commenters believed the health equity adjustment aligns with the Administration's goals to improve health and prevent chronic illnesses as it can encourage new ACOs and support existing ACOs that serve beneficiaries at higher risk for developing chronic conditions.

Response: In the CY 2026 PFS proposed rule (90 FR 32678), we stated that we believe that the application of the Complex Organization Adjustment and the extension of the eCQM/MIPS CQM reporting incentive, as finalized in prior rules, have made it unnecessary to continue the policy of applying the health equity adjustment to an ACO's quality score. The Complex Organization Adjustment and the extension of the eCQM/MIPS CQM reporting incentive underscore our commitment to all payer/all patient quality measure reporting and are more broadly applicable than the health equity adjustment. As discussed later in this section, we are finalizing our proposal with modification to remove the health equity adjustment applied to an ACO's quality score beginning in performance year 2026. In alignment with the Administration's priority to streamline regulations, our policy to remove the health equity adjustment would de-duplicate scoring factors and simplify our quality scoring methodology, without reducing the support available under our policies for ACOs to meet the quality performance standard and be eligible to receive maximum shared savings and avoid maximum shared losses (if applicable).

Comment: A commenter stated that it is inconsistent to remove the health equity adjustment while retaining the HEBA when, in the commenter's belief, they share the goal of supporting ACOs that serve vulnerable populations and incentivizing their long-term participation. Another commenter stated that retaining the HEBA but eliminating the health equity adjustment undermines CMS' stated policy goal of supporting ACOs that serve vulnerable population and incentivizing long-term participation of these ACOs.

Response: Our proposal to remove the health equity adjustment applied to an ACO's quality score is based on our conclusion that the eCQM/MIPS CQM reporting incentive and the Complex Organization Adjustment provide duplicative incentives to the incentives provided by the health equity adjustment. In contrast, there are no Shared Savings Program financial benchmark adjustments that serve a similar function to the HEBA. We refer readers to section III.F.8. of this final rule for a discussion on our policies related to the population adjustment.

Comment: Several commenters opposed our proposal to remove the health equity adjustment applied to an ACO's quality score beginning in performance year 2025. Several commenters encouraged CMS to retain the population and income adjustment bonus points for performance year 2025 and subsequent performance years, with other commenters urging CMS to expand the adjustment to all collection types. Several commenters stated that removing the adjustment, particularly retroactively 9 months into the reporting period, would create harm by making it more difficult for ACOs serving high proportions of dual eligible and Medicare Part D LIS beneficiaries to remain in the Shared Savings Program. A commenter noted that retroactively eliminating the adjustment adds uncertainty and financial risk, while another commenter had concerns about the retroactive change and noted that ACOs have already made strategic and financial decisions in anticipation of the health equity adjustment being available and that retroactive removal would create confusion and disrupt ongoing investments.

A commenter disagreed that the retroactive removal of the adjustment was in the public interest and noted that there is no evidence of “double payment” or additional cost to the Medicare Trust Fund, as CMS stated the health equity adjustment was not applied in cases where the eCQM/MIPS CQM reporting incentive was met. The commenter noted that CMS must demonstrate that no harm exists to justify retroactive elimination of the health equity adjustment and noted that CMS has not provided evidence that the health equity adjustment increases costs or undermines program integrity.

Response: In the CY 2026 PFS proposed rule (90 FR 32678), we stated that we believe it would be contrary to the public interest to apply the proposed removal of the health equity adjustment applied to an ACO's quality score prospectively only. As such, we proposed to apply the removal retroactively, beginning in performance year 2025. Additionally, we stated that we believe that it is in the public interest to remove the health equity adjustment applied to an ACO's quality score beginning in performance year 2025 to simplify our quality scoring methodology for ACOs, while maintaining sufficient support for ACOs to meet the quality performance standard through the application of the eCQM/MIPS CQM reporting incentive, the Complex Organization Adjustment, and use of flat benchmarks for Medicare CQMs. We stated that making this change retroactively would provide greater clarity for ACOs by establishing continuity in resource language between performance year 2025 and subsequent performance years, allowing ACOs to plan ahead and have additional time to update internal operations and more easily prepare for consistent quality performance standards.

We acknowledge the commenters' concerns related to the retroactive effective date for removing the health

equity adjustment applied to an ACO's quality score beginning in performance year 2025. Therefore, we are finalizing our proposal with modification to remove the health equity adjustment applied to an ACO's quality score beginning in performance year 2026, instead of performance year 2025 as we proposed. We believe that revising the removal of the health equity adjustment to begin in performance year 2026 would address the commenters' concerns about the retroactive effective date interfering with the existing ACOs' operations, causing uncertainty for participants, and lacking clear benefit for all ACOs.

Section 1871(e)(1)(A)(ii) of the Act prohibits the Secretary from retroactively applying a substantive change in Medicare regulations unless failure to do so would be contrary to the public interest. While we recognized in the CY 2026 PFS proposed rule that removing the health equity adjustment applied to an ACO's quality score beginning in performance year 2025 could promote consistency and simplification in scoring methodology, upon further consideration, we conclude that these benefits are outweighed by the risks of altering incentives when the performance year is already underway. ACOs have already made decisions based on the availability of the health equity adjustment for performance year 2025, and retroactive removal could create unnecessary disruption.

We discussed earlier in this section of the final rule that, since the publication of the CY 2026 PFS proposed rule, the performance year 2024 ACO quality results have become available. We used this data to conduct simulations on how the removal of the health equity adjustment and the application of the eCQM/MIPS CQM reporting incentive, Complex Organization Adjustment, and flat benchmarking policies for Medicare CQMs would impact ACOs' quality scores. Based on our findings, we believe that the collective benefit of flat benchmarks for Medicare CQMs, in conjunction with the eCQM/MIPS CQM reporting incentive and the Complex Organization Adjustment, would provide sufficient support to ACOs in performance year 2025 and subsequent performance years to substantiate the removal of the health equity adjustment. We acknowledge that ACOs will want to understand the specific impact of our new policies--notably, the extension of the eCQM/MIPS CQM reporting incentive, the Complex Organization Adjustment, and flat benchmarks for Medicare CQMs--on their ACO before the removal of the health equity adjustment. For this reason, and the reasons described in this section of this final rule, we are finalizing the removal of the health equity adjustment prospectively for performance year 2026, instead of retroactively for performance year 2025 as had been proposed.

We received a few comments on the health equity adjustment that we consider to be out of scope and will not be addressing these comments in this final rule.

After consideration of public comments, we are finalizing with modification our proposal to remove the health equity adjustment applied to an ACO's quality score beginning in performance year 2026. In alignment with this final policy, we are also finalizing with modification our proposed revisions to the terminology in the Shared Savings Program used to describe the health equity adjustment and other related terms for performance years 2023 through 2025, as discussed in section III.F.6.c.(3) of this final rule.

Specifically, we are finalizing with modification our proposal to revise and republish paragraph (b) of Sec. 425.512, as follows:

Commensurate with our modification to remove the health equity adjustment in performance year 2026 and not in performance year 2025 as had been proposed, we are not finalizing our proposal to remove Sec. 425.512(b)(3). Instead, we are finalizing at Sec. 425.512(b)(3) introductory text to remove the phrase “and subsequent performance years”.

We are not finalizing our proposal at Sec. 425.512 to redesignate paragraph (b)(4) as paragraph (b)(3) and paragraph (b)(5) as paragraph (b)(4), respectively.

We are not finalizing our proposal to revise references to Sec. 425.512(b)(4) and (b)(5) (which we proposed to redesignate as paragraphs (b)(3) and (b)(4)).

We are not finalizing our proposal at Sec. 425.512(b)(4)(iv)(A)(2)(ii), and instead are finalizing to remove the phrase “For performance year 2024 and subsequent performance years” and add in its place the phrase “For performance years 2024 and 2025”.

We are making a change that was omitted from the CY 2026 PFS proposed rule to ensure consistency with existing regulation text in Sec. 425.512(b)(4)(iv)(A)(1)(ii) and (b)(4)(iv)(A)(2)(i) by finalizing the addition of clarifying text at Sec. 425.512(b)(4)(iv)(A)(2)(ii) to align language within these paragraphs, namely to consolidate the terms “LIS” and “Medicare Part D LIS”, which are synonyms in this context. Specifically, we are removing the phrase “LIS or dually eligible” and adding in its place the phrase “the Medicare Part D LIS or are dually eligible”.

We are not finalizing our proposed revisions to Sec. 425.512(b)(5) introductory text and paragraph references.

(3) Revising the Terminology in the Shared Savings Program Regulations Used to Describe the Health Equity Adjustment and Other Related Terms

We stated in the CY 2026 PFS proposed rule (90 FR 32679 and 32680) that to accurately reflect the data used to calculate the health equity adjustment in performance years 2023 and 2024, we proposed to revise the terminology used to describe this adjustment and other related terms in the Shared Savings Program regulations. Previously, the term health equity was used in a broad way that could lead to confusion regarding whether or not impermissible features, such as race and ethnicity, were included in Shared Savings Program policies (which they are not). We did not propose changes in the methodology currently used to calculate the health equity adjustment bonus points or the health equity adjusted quality performance score for performance years 2023 and 2024.

In revising the terminology used to describe the health equity adjustment, we found that our use of the terms “quality score” and “quality performance score” could lead to confusion. As such, we also proposed to revise the terms “quality score” and “quality performance score” at Sec. 425.512. We proposed to apply the term “quality score” consistently throughout Sec. 425.512 to mean an ACO- level quality score and also apply the term “quality performance score” to consistently mean a measure-level score.

Additionally, we proposed to update the cross-references in Sec. Sec. 425.605 and 425.610 to reference the entirety of Sec. 425.512. With respect to Sec. 425.512(b), we note that the amendments are specified in revised and republished paragraph (b). Specifically, we proposed the following conforming revisions to terminology used in the Shared Savings Program at Sec. Sec. 425.512, 425.605, and 425.610:

At Sec. 425.512 in paragraphs (a)(3)(i), (b)(5)(iv) (which, as discussed later in this section, we proposed to redesignate as paragraph (b)(4)(iv)), (c)(2)(i), (c)(2)(ii), and (c)(3)(i) remove the phrase “quality performance score” and add in its place the phrase “quality score”.

At Sec. 425.512 in paragraphs (a)(4)(i)(A), (a)(5)(i)(A)(1), (a)(5)(i)(B)(1), (a)(5)(i)(C)(1), (a)(7), (b)(1), (b)(2), (c)(3)(ii), (c)(3)(iii), and (c)(3)(iv) remove

the phrase “health equity adjusted quality performance score” and add in its place the phrase “quality score”.

At Sec. 425.512 in paragraph (b) subject heading revised to read as follows: “Calculation of an adjustment to an ACO's quality score for performance years 2023 and 2024”.

At Sec. 425.512 in paragraphs (b)(1) and (b)(2), remove the phrase “health equity adjustment bonus points” and add in its place the phrase “population and income adjustment bonus points”.

At Sec. 425.512 in paragraph (b)(4) (which we proposed to redesignate as paragraph (b)(3)), revise the introductory text to read as follows: “Calculation of ACO's population and income adjustment bonus points. CMS calculates the ACO's bonus points as follows:”.

At Sec. 425.512 in paragraph (b)(4)(iv) (which we proposed to redesignate as paragraph (b)(3)(iv)), remove the phrase “an underserved multiplier” and add in its place the phrase “a multiplier”.

At Sec. 425.512 in paragraph (b)(4)(iv)(A)(1) (which we proposed to redesignate as paragraph (b)(3)(iv)(A)(1)), remove the phrase “that is considered underserved”.

At Sec. 425.512 in paragraph (b)(4)(iv)(B) (which we proposed to redesignate as paragraph (b)(3)(iv)(B)), remove the phrase “health equity adjustment bonus points” and add in its place the phrase “bonus points”.

At Sec. 425.512 in paragraph (b)(4)(v) (which we proposed to redesignate as paragraph (b)(3)(v)): remove the phrase “underserved multiplier” and add in its place the phrase “multiplier”; and remove the phrase “health equity adjustment bonus points” and add in its place the phrase “bonus points”.

At Sec. 425.605 in paragraphs (d)(1)(i)(A)(3)(ii), (d)(1)(i)(A)(4)(ii), (d)(1)(ii)(A)(3)(ii), (d)(1)(ii)(A)(4)(ii), (d)(1)(iii)(A)(3)(ii), (d)(1)(iii)(A)(4)(ii), (d)(1)(iv)(A)(3)(ii), (d)(1)(iv)(A)(4)(ii), (d)(1)(v)(A)(3)(ii), and (d)(1)(v)(A)(4)(ii) remove the phrase “health equity adjusted quality performance score calculated according to Sec. 425.512(b)” and add in its place the phrase “quality score calculated according to Sec. 425.512”.

At Sec. 425.610 in paragraphs (d)(3)(ii), (d)(4)(ii), (f)(3)(i)(A) and (f)(4)(i)(A) remove the phrase “health equity adjusted quality performance score calculated according to Sec. 425.512(b)” and add in its place the phrase “quality score calculated according to Sec. 425.512”.

We sought public comments on these proposed changes. These proposed terminology changes are reflected in the summaries of the quality reporting requirements and quality performance standards that we included in Tables 52 and 53 of the CY 2026 PFS proposed rule (90 FR 32683 through 32685).

We received public comments on these proposals. The following is a summary of the comments we received and our responses.

Comment: Several commenters supported our proposal to rename the “health equity adjustment bonus points” to the “population and income adjustment bonus points.” Several commenters stated that the name change would enhance clarity and more accurately represent the policy of providing the opportunity to upwardly adjust the quality score for ACOs with complex beneficiary populations to reflect the additional challenges of serving these populations without sacrificing policy goals.

Response: We thank commenters for their support.

Comment: A commenter recommended that CMS rename the adjustment to a “population adjustment to quality”, since the term “health equity” may cause the public to inappropriately assume that the adjustment is based on race or ethnicity, when in fact the adjustment is not.

Response: We thank the commenter for the recommendation, but we believe that the proposed change in terminology from “health equity adjustment” to “population and income adjustment” will accurately reflect the data used to calculate the adjustment.

Comment: A commenter stated that replacing the health equity adjustment with a “population adjustment” does not offer the same level of focus or transparency on fairness in care delivery and that the new language risks weakening CMS' longstanding commitment to addressing inequities.

Response: We note that the proposed change in terminology from “health equity adjustment” to “population and income adjustment” will not change how the adjustment is calculated and will more accurately reflect the data used to calculate the adjustment.

As discussed in section III.F.6.c (2) of this final rule, we are finalizing with modification our proposal to remove the health equity adjustment applied to an ACO's quality score beginning in performance year 2026 (instead of performance year 2025 as proposed). In alignment with this finalized policy, we are finalizing with modification our proposed revisions to the terminology in the Shared Savings Program used to describe the health equity adjustment and other related terms for performance years 2023 through 2025 (instead of performance years 2023 and 2024 as proposed). There will be no changes in the methodology currently used to calculate the health equity adjustment bonus points or the health equity adjusted quality performance score for performance years 2023 through 2025.

We are finalizing as proposed to our proposed revisions of the terms “quality score” and “quality performance score” at Sec. 425.512 to apply the term “quality score” consistently throughout Sec. 425.512 to mean an ACO-level quality score and apply the term “quality performance score” to mean a measure-level score. Additionally, we are finalizing our proposal to update the cross- references in Sec. Sec. 425.605 and 425.610 to reference the entirety of Sec. 425.512. With respect to Sec. 425.512(b), we note that the amendments are specified in revised and republished paragraph (b). These finalized changes are reflected in Tables X2 and X3 of this final rule.

Specifically, we are finalizing with modification the proposed revisions to terminology used in the Shared Savings Program at Sec. Sec. 425.512, 425.605, and 425.610 to reflect that the health equity adjustment will be removed beginning in performance year 2026:

As described in section III.F.6.c.(2) of this final rule, we are not finalizing our proposal at Sec. 425.512(b)(3) to remove paragraph (b)(3) and are not finalizing our proposal at paragraphs (b)(4) and (b)(5) to redesignate paragraph (b)(4) as paragraph (b)(3) and paragraph (b)(5) as paragraph (b)(4), respectively.

At Sec. 425.512(a)(3)(i), (b)(5)(iv), (c)(2)(i), (c)(2)(ii), and (c)(3)(i) removing the phrase “quality performance score” and adding in its place the phrase “quality score”.

At Sec. 425.512(a)(4)(i)(A), (a)(5)(i)(A)(1), (a)(5)(i)(B)(1), (a)(5)(i)(C)(1), (a)(7), (b)(1), (b)(2), (b)(3), (c)(3)(ii), (c)(3)(iii), and (c)(3)(iv) removing the phrase “health equity adjusted quality performance score” and adding in its place the phrase “quality score”.

At Sec. 425.512(b) modifying the subject heading to read as follows: “Calculation of an adjustment to an ACO's quality score for performance years 2023 through 2025”.

At Sec. 425.512(b)(3), removing the phrase “health equity adjusted quality performance score” and adding in its place the phrase “quality score”.

At Sec. 425.512(b)(3), removing the phrase “health equity adjustment bonus points” and adding in its place the phrase “population and income adjustment bonus points”.

As described in section III.F.6.c.(2) of this final rule, at Sec. 425.512(b)(3),

removing from the introductory text the phrase “and subsequent performance years”.

At Sec. 425.512(b)(1), (b)(2), and (b)(3) removing the phrase “health equity adjustment bonus points” and adding in its place the phrase “population and income adjustment bonus points”.

At Sec. 425.512(b)(4), revising the introductory text to read as follows: “Calculation of ACO's population and income adjustment bonus points. CMS calculates the ACO's bonus points as follows:”.

At Sec. 425.512(b)(4)(iv), removing the phrase “an underserved multiplier” and adding in its place the phrase “a multiplier”.

At Sec. 425.512(b)(4)(iv)(A)(1), removing the phrase “that is considered underserved”.

At Sec. 425.512(b)(4)(iv)(B), removing the phrase “health equity adjustment bonus points” and adding in its place the phrase “bonus points”.

At Sec. 425.512(b)(4)(v): removing the phrase “underserved multiplier” and adding in its place the phrase “multiplier”; and removing the phrase “health equity adjustment bonus points” and adding in its place the phrase “bonus points”.

At Sec. 425.605(d)(1)(i)(A)(3)(ii), (d)(1)(i)(A)(4)(ii), (d)(1)(ii)(A)(3)(ii), (d)(1)(ii)(A)(4)(ii), (d)(1)(iii)(A)(3)(ii), (d)(1)(iii)(A)(4)(ii), (d)(1)(iv)(A)(3)(ii), (d)(1)(iv)(A)(4)(ii), (d)(1)(v)(A)(3)(ii), and (d)(1)(v)(A)(4)(ii) removing the phrase “health equity adjusted quality performance score calculated according to Sec. 425.512(b)” and adding in its place the phrase “quality score calculated according to Sec. 425.512”.

At Sec. 425.610(d)(3)(ii), (d)(4)(ii), (f)(3)(i)(A) and (f)(4)(i)(A) removing the phrase “health equity adjusted quality performance score calculated according to Sec. 425.512(b)” and adding in its place the phrase “quality score calculated according to Sec. 425.512”. d. Updating the APP Plus Quality Measure Set (1) Background

In the CY 2026 PFS proposed rule (90 FR 32680), we stated that in the CY 2025 PFS final rule, we created the APP Plus quality measure set to align with the Adult Universal Foundation measures (89 FR 98356) and finalized a phase-in schedule for incorporating measures into the APP Plus quality measure set.

We finalized in the CY 2025 PFS final rule (89 FR 98105) that, for performance year 2025 and subsequent performance years, Shared Savings Program ACOs will be required to report the APP Plus quality measure set. We also finalized that Shared Savings Program ACOs will be required to report on and will be scored on all applicable quality measures in the APP Plus quality measure set according to the phase-in schedule for incorporating measures into the APP Plus quality measure set. We also stated in the CY 2025 PFS final rule (89 FR 98116 and 98117) that the APP Plus quality measure set for Shared Savings Program ACOs will include 11 measures (eight eCQMs/Medicare CQMs, two administrative claims-based measures, and the CAHPS for MIPS Survey measure) beginning with performance year 2028 or the performance year that is one year after the eCQM specifications become available for Quality ID: 487 Screening for the Social Drivers of Health and Quality ID: 493 Adult Immunization Status, whichever is later, and ACOs will be scored on the required 11 measures.

The final APP Plus quality measure set for Shared Savings Program ACOs, for performance year 2025 and subsequent performance years, was specified in Tables 39 through 42 of the CY 2025 PFS final rule (89 FR 98128 through 98132). (2) Revisions

Proposed changes to the following measures that are included in the APP Plus quality measure set were discussed in the CY 2026 PFS proposed rule (90 FR 32705 and 32706):

Breast Cancer Screening (Quality ID: 112)

Colorectal Cancer Screening (Quality ID: 113)

Preventive Care and Screening: Screening for Depression and Follow-up Plan (Quality ID: 134) (eCQM collection type only)

Clinician and Clinician Group Risk-Standardized Hospital Admission Rates for Patients with Multiple Chronic Conditions (Quality ID: 484)

Screening for Social Drivers of Health (Quality ID: 487)

Further discussion and our rationale for the proposed modification or removal of these measures was provided in Table Groups D and DD, and C, respectively, in Appendix 1 of the CY 2026 PFS proposed rule.

We stated in the CY 2026 PFS proposed rule (90 FR 32680) that with the proposed removal of Quality ID: 487 Screening for Social Drivers of Health from the APP Plus quality measure set as described in the CY 2026 PFS proposed rule (90 FR 32705 and 32706) and Table Group C in Appendix 1), we proposed that the APP Plus quality measure set for Shared Savings Program ACOs would include ten measures (seven eCQMs/ Medicare CQMs, two administrative claims-based measures, and the CAHPS for MIPS Survey measure) beginning with performance year 2028 or the performance year that is 1 year after the eCQM specification becomes available for Quality ID: 493 Adult Immunization Status, whichever is later. ACOs would be scored on the required ten measures. The proposed APP Plus quality measure set for Shared Savings Program ACOs, for performance year 2028 or the performance year that is 1 year after the eCQM specification becomes available for Quality ID: 493, whichever is later, is specified in Table 51 of the CY 2026 PFS proposed rule (90 FR 32681).

As discussed in section XXX of this final rule, we are finalizing with modification the proposed changes to the following measures that are included in the APP Plus quality measure set:

Breast Cancer Screening (Quality ID: 112)

Colorectal Cancer Screening (Quality ID: 113)

We refer readers to section XXX of this final rule for a discussion of how we are finalizing as proposed the changes to the following measures that are included in the APP Plus quality measure set:

Preventive Care and Screening: Screening for Depression and Follow-up Plan (Quality ID: 134) (eCQM collection type only)

Clinician and Clinician Group Risk-Standardized Hospital Admission Rates for Patients with Multiple Chronic Conditions (Quality ID: 484)

Screening for Social Drivers of Health (Quality ID: 487)

Further discussion and our rationale for the modification or removal of these measures is provided in Table Groups D and DD, and C, respectively, in Appendix 1 of this final rule.

With the removal of Quality ID: 487 Screening for Social Drivers of Health from the APP Plus quality measure set as described in section XXX and Table Group C in Appendix 1 of this final rule, the APP Plus quality measure set for Shared Savings Program ACOs will include ten measures (seven eCQMs/Medicare CQMs, two administrative claims-based measures, and the CAHPS for MIPS Survey measure) beginning with performance year 2028 or the performance year that is 1 year after the eCQM specification becomes available for Quality ID: 493 Adult Immunization Status, whichever is later. ACOs will be scored on the required ten measures. The final APP Plus quality measure set for Shared Savings Program ACOs, for

performance year 2028 or the performance year that is 1 year after the eCQM specification becomes available for Quality ID: 493, whichever is later, is specified in Table B-G5 of this final rule. [GRAPHIC] [TIFF OMITTED] TR05NO25.124