Title 42

SECTION 425.204

425.204 Content of the application.

§ 425.204 Content of the application.

(a) Accountability for beneficiaries. As part of its application and participation agreement, the ACO must certify that the ACO, its ACO participants, and its ACO providers/suppliers have agreed to become accountable for the quality, cost, and overall care of the Medicare fee-for-service beneficiaries assigned to the ACO.

(b) Disclosure of prior participation. (1) The ACO must disclose to CMS whether the ACO, its ACO participants, or its ACO providers/suppliers have participated in the Medicare Shared Savings Program under the same or a different name, or is related to or has an affiliation with another Shared Savings Program ACO.

(2) The ACO must specify whether the related participation agreement is currently active or has been terminated. If it has been terminated, the ACO must specify whether the termination was voluntary or involuntary.

(3) If the ACO, ACO participant, or ACO provider/supplier was previously terminated from the Shared Savings Program, the ACO must identify the cause of termination and what safeguards are now in place to enable the ACO, ACO participant, or ACO provider/supplier to participate in the program for the full term of the participation agreement.

(c) Eligibility. (1) As part of its application, an ACO must certify that the ACO satisfies the requirements set forth in this part. Upon request, the ACO must submit the following supporting materials to demonstrate that it satisfies the requirements set forth in this part:

(i) Documents (for example, ACO participant agreements, agreements with ACO providers/suppliers, employment contracts, and operating policies) sufficient to describe the ACO participants' and ACO providers'/suppliers' rights and obligations in and representation by the ACO, and how the opportunity to receive shared savings or other financial arrangements will encourage ACO participants and ACO providers/suppliers to adhere to the quality assurance and improvement program and evidence-based clinical guidelines.

(ii) A description, or documents sufficient to describe, how the ACO will implement the required processes and patient-centeredness criteria under § 425.112, including descriptions of the remedial processes and penalties (including the potential for expulsion) that will apply if an ACO participant or an ACO provider/supplier fails to comply with and implement these processes.

(iii) Materials documenting the ACO's organization and management structure, including an organizational chart, a list of committees (including names of committee members) and their structures, and job descriptions for senior administrative and clinical leaders specifically noted in § 425.108 and § 425.112(a)(2).

(iv) Evidence that the governing body -

(A) Is an identifiable body;

(B) Represents a mechanism for shared governance for ACO participants;

(D) Is at least 75 percent controlled by its ACO participants.

(v) Evidence that the governing body includes a Medicare beneficiary representative(s) served by the ACO who does not have a conflict of interest with the ACO, and who has no immediate family member with conflict of interest with the ACO.

(vi) A copy of the ACO's compliance plan or documentation describing the plan that will be put in place at the time the participation agreement with CMS becomes effective.

(2) Upon request, the ACO must provide copies of all documents effectuating the ACO's formation and operation, including, without limitation the following:

(i) Charters.

(ii) By-laws.

(iii) Articles of incorporation.

(iv) Partnership agreement.

(v) Joint venture agreement.

(vi) Management or asset purchase agreements.

(vii) Financial statements and records.

(viii) Resumes and other documentation required for leaders of the ACO.

(3) If an ACO requests an exception to the governing body requirement in § 425.106(c)(2) or (c)(3), the ACO must describe -

(i) Why it seeks to differ from the requirement; and

(ii) If seeking an exception to (c)(2), how the ACO will provide meaningful representation in ACO governance by Medicare beneficiaries.

(iii) If seeking an exception to the requirement at (c)(3), why the ACO is unable to meet the requirement and how it will involve ACO participants in innovative ways in ACO governance.

(4)(i) An ACO must certify that it is recognized as a legal entity in the State, Federal or Tribal area in which it was established and that it is authorized to conduct business in each State or Tribal area in which it operates.

(ii) An ACO formed among two or more ACO participants must provide evidence in its application that it is a legal entity separate from any of the ACO participants.

(5) The ACO must provide CMS with such information regarding its ACO participants and its ACO providers/suppliers participating in the program as is necessary to implement the program.

(i) The ACO must submit a list of all ACO participants and ACO providers/suppliers in accordance with § 425.118.

(ii) ACOs must also submit any other specific identifying information as required by CMS in the application process.

(iii) The ACO must certify the accuracy of this information.

(6) As part of the application process and upon request by CMS, the ACO must submit documents demonstrating that its ACO participants, ACO providers/suppliers, and other individuals or entities performing functions or services related to ACO activities are required to comply with the requirements of the Shared Savings Program. The evidence to be submitted must include, without limitation, sample or form agreements and, in the case of ACO participant agreements, the first and signature page(s) of each executed ACO participant agreement. CMS may request all pages of an executed ACO participant agreement to confirm that it conforms to the sample form agreement submitted by the ACO. The ACO must certify that all of its ACO participant agreements comply with the requirements of this part.

(d) Distribution of savings. As part of its application to participate in the Shared Savings Program, an ACO must certify it has a mechanism and plan to receive and use payments for shared savings, including criteria for distributing shared savings among its ACO participants and ACO providers/suppliers.

(e) Selection of track and option for interim payment calculation. (1) As part of its application, an ACO must specify the Track for which it is applying (as described in § 425.600).

(2)(i) An ACO applying to participate in the program with a start date of April 1, 2012 or July 1, 2012, has the option of requesting an interim payment calculation based on the financial performance for its first 12 months of program participation and quality performance for CY 2012.

(ii) An ACO must request interim payment calculation as part of its application to participate in the Shared Savings Program.

(f) Assurance of ability to repay. (1) An ACO must have the ability to repay all shared losses for which it may be liable under a two-sided model.

(2) An ACO that will participate in a two-sided model must establish one or more of the following repayment mechanisms in an amount and by a deadline specified by CMS in accordance with this section:

(i) An escrow account with an insured institution.

(ii) A surety bond from a company included on the U.S. Department of Treasury's List of Certified Companies.

(iii) A line of credit at an insured institution (as evidenced by a letter of credit that the Medicare program can draw upon).

(3) An ACO that will participate under a two-sided model of the Shared Savings Program must submit for CMS approval documentation that it is capable of repaying shared losses that it may incur during its agreement period, including details supporting the adequacy of the repayment mechanism.

(i) An ACO participating in Track 2 must demonstrate the adequacy of its repayment mechanism prior to any change in the terms and type of the repayment mechanism, and at such other times as requested by CMS.

(ii) An ACO entering an agreement period in Levels C, D, or E of the BASIC track or the ENHANCED track must demonstrate the adequacy of its repayment mechanism prior to the start of its agreement period, prior to any change in the terms and type of the repayment mechanism, and at such other times as requested by CMS.

(iii) An ACO entering an agreement period in Level A or Level B of the BASIC track must demonstrate the adequacy of its repayment mechanism prior to the start of any performance year in which it either elects to participate in, or is automatically transitioned to, a two-sided model, Level C, Level D, or Level E of the BASIC track, prior to any change in the terms and type of the repayment mechanism, and at such other times as requested by CMS.

(iv) An ACO that has submitted a request to renew its participation agreement must submit as part of the renewal request documentation demonstrating the adequacy of the repayment mechanism that could be used to repay any shared losses incurred for performance years in the next agreement period. The repayment mechanism applicable to the new agreement period may be the same repayment mechanism currently used by the ACO, provided that the ACO submits documentation establishing that the duration of the existing repayment mechanism has been revised to comply with paragraph (f)(6)(ii) of this section, and the amount of the repayment mechanism complies with paragraph (f)(4) of this section.

(v) As part of its application, a re-entering ACO must submit documentation demonstrating the adequacy of the repayment mechanism that could be used to repay any shared losses incurred for performance years in the next agreement period. The repayment mechanism applicable to the new agreement period may be the same repayment mechanism currently used by the re-entering ACO, provided that the ACO is the same legal entity as an ACO that previously participated in the program, and the ACO submits documentation establishing that the duration of the existing repayment mechanism has been revised to comply with paragraph (f)(6)(ii) of this section and the amount of the repayment mechanism complies with paragraph (f)(4) of this section.

(4) CMS calculates the amount of the repayment mechanism as follows:

(i) For a Track 2 ACO, the repayment mechanism amount must be equal to at least 1 percent of the total per capita Medicare Parts A and B fee-for-service expenditures for the ACO's assigned beneficiaries, based on expenditures used to calculate the benchmark for the applicable agreement period, as estimated by CMS at the time of application.

(ii) For a BASIC track or ENHANCED track ACO, the repayment mechanism amount must be equal to the lesser of the following:

(A) One percent of the total per capita Medicare Parts A and B fee-for-service expenditures for the ACO's assigned beneficiaries, based on expenditures for the most recent calendar year for which 12 months of data are available.

(B) Two percent of the total Medicare Parts A and B fee-for-service revenue of its ACO participants, based on revenue for the most recent calendar year for which 12 months of data are available.

(iii) For agreement periods beginning on or after July 1, 2019, CMS recalculates the ACO's repayment mechanism amount before the second and each subsequent performance year in the agreement period in accordance with this section based on the certified ACO participant list for the relevant performance year.

(A) If the recalculated repayment mechanism amount exceeds the existing repayment mechanism amount by at least 50 percent or $1,000,000, whichever is the lesser value, CMS notifies the ACO in writing that the amount of its repayment mechanism must be increased to the recalculated repayment mechanism amount.

(B) Within 90 days after receipt of such written notice from CMS, the ACO must submit for CMS approval documentation that the amount of its repayment mechanism has been increased to the amount specified by CMS.

(iv)(A) In the case of an ACO that has submitted a request to enter a new participation agreement for an agreement period starting on or after January 1, 2022 and is a renewing ACO or a re-entering ACO that is the same legal entity as an ACO that previously participated in the program: If the ACO wishes to use its existing repayment mechanism to establish its ability to repay any shared losses incurred for performance years in the new agreement period, the amount of the repayment mechanism must be equal to at least the amount calculated by CMS in accordance with paragraph (f)(4)(ii) of this section.

(B) Under the following circumstances, an ACO that renewed its participation agreement for an agreement period beginning on July 1, 2019, or January 1, 2020, may elect to decrease the amount of its repayment mechanism.

(1) The ACO elected to continue to use its existing repayment mechanism for the agreement period beginning on July 1, 2019, or January 1, 2020, and the amount of that repayment mechanism was greater than the repayment mechanism amount estimated at the time of renewal application according to paragraph (f)(4)(ii) of this section.

(2) The repayment mechanism amount for performance year 2021, as recalculated pursuant to paragraph (f)(4)(iii) of this section, is less than the existing repayment mechanism amount.

(3) CMS will notify the ACO in writing if the ACO may elect to decrease the amount of its repayment mechanism pursuant to this paragraph (f)(4)(iv)(B). The ACO must submit such election, together with revised repayment mechanism documentation, in a form and manner and by a deadline specified by CMS. CMS will review the revised repayment mechanism documentation and may reject the election if the repayment mechanism documentation does not comply with the requirements of this paragraph (f).

(5) After the repayment mechanism has been used to repay any portion of shared losses owed to CMS, the ACO must replenish the amount of funds available through the repayment mechanism within 90 days. The resulting amount available through the repayment mechanism must be at least the amount specified by CMS in accordance with paragraph (f)(4) of this section.

(6) The repayment mechanism must be in effect for the duration of the ACO's participation under a two-sided model plus 12 months following the conclusion of the agreement period, except as otherwise specified in this section.

(i) For an ACO that is establishing a new repayment mechanism to meet this requirement, the repayment mechanism must satisfy one of the following criteria:

(A) The repayment mechanism covers the entire duration of the ACO's participation under a two-sided risk model plus 12 months following the conclusion of the agreement period.

(B) The repayment mechanism covers a term of at least the first two performance years in which the ACO is participating under a two-sided model and provides for automatic, annual 12-month extensions of the repayment mechanism such that the repayment mechanism will eventually remain in effect for the duration of the agreement period plus 12 months following the conclusion of the agreement period.

(ii) For a renewing ACO, or a re-entering ACO that is the same legal entity as an ACO that previously participated in the program, that wishes to use its existing repayment mechanism to establish its ability to repay any shared losses incurred for performance years in the new agreement period, the existing repayment mechanism must be amended to meet one of the following criteria.

(A) The duration of the existing repayment mechanism is extended by an amount of time that covers the duration of the new agreement period plus 12 months following the conclusion of the new agreement period.

(B) The duration of the existing repayment mechanism is extended, if necessary, to cover a term of at least the first two performance years of the new agreement period and provides for automatic, annual 12-month extensions of the repayment mechanism such that the repayment mechanism will eventually remain in effect for the duration of the new agreement period plus 12 months following the conclusion of the new agreement period.

(iii) CMS may require the ACO to extend the duration of the repayment mechanism if necessary to ensure that the ACO fully repays CMS any shared losses for each of the performance years of the agreement period.

(iv) The repayment mechanism may be terminated at the earliest of the following conditions:

(A) The ACO has fully repaid CMS any shared losses owed for each of the performance years of the agreement period under a two-sided model.

(B) CMS has exhausted the amount reserved by the ACO's repayment mechanism and the arrangement does not need to be maintained to support the ACO's participation under the Shared Savings Program.

(C) CMS determines that the ACO does not owe any shared losses under the Shared Savings Program for any of the performance years of the agreement period.

(g) Consideration of claims billed under merged and acquired entities' TINs. An ACO may request that CMS consider, for purposes of beneficiary assignment and establishing the ACO's benchmark under § 425.601, § 425.602, or § 425.603, claims billed under the TINs of entities that have been acquired through sale or merger by an ACO participant.

(1) The ACO may include an acquired entity's TIN on its ACO participant list under the following circumstances:

(i) The ACO participant has subsumed the acquired entity's TIN in its entirety, including all of the providers and suppliers that reassigned their right to receive Medicare payment to the acquired entity's TIN.

(ii) Each provider or supplier that previously reassigned his or her right to receive Medicare payment to the acquired entity's TIN has reassigned his or her right to receive Medicare payment to the TIN of the acquiring ACO participant and has been added to the ACO provider/supplier list under paragraph (c)(5) of the section.

(iii) The acquired entity's TIN is no longer used to bill Medicare.

(2) The ACO must submit the following supporting documentation in the form and manner specified by CMS.

(i) An attestation that -

(A) Identifies by TIN both the acquired entity and the ACO participant that acquired it;

(B) Specifies that all the providers and suppliers that previously reassigned their right to receive Medicare payment to the acquired entity's TIN have reassigned such right to the TIN of the identified ACO participant and have been added to the ACO provider/supplier list under paragraph (c)(5) of this section; and

(ii) Documentation sufficient to demonstrate that the acquired entity's TIN was merged with or purchased by the ACO participant.

[76 FR 67973, Nov. 2, 2011, as amended at 80 FR 32837, June 9, 2015; 81 FR 80559, Nov. 15, 2016; 82 FR 53369, Nov. 15, 2017; 83 FR 68063, Dec. 31, 2018; 85 FR 85038, Dec. 28, 2020]