42 C.F.R. §§ 425.654–425.662

§425.654. Calculating county expenditures and regional expenditures.

42 C.F.R. § 425.654

(a)

Calculating county expenditures. For agreement periods beginning on January 1, 2024, and in subsequent years, CMS does all of the following to determine risk adjusted county fee-for-service expenditures for use in calculating the ACO's regional fee-for-service expenditures:

(1)

(i)

Determines average county fee-for-service expenditures based on expenditures for the assignable population of beneficiaries in each county in the ACO's regional service area. The assignable population of beneficiaries is identified for the relevant benchmark or performance year using the assignment window or expanded window for assignment that is consistent with the beneficiary assignment methodology selected by the ACO for the performance year according to § 425.400(a)(4)(ii).

(ii)

Makes separate expenditure calculations for each of the following populations of beneficiaries—

(A)

ESRD.

(B)

Disabled.

(C)

Aged/dual eligible Medicare and Medicaid beneficiaries.

(D)

Aged/non-dual eligible Medicare and Medicaid beneficiaries.

(2)

Calculates assignable beneficiary expenditures using the payment amounts included in Parts A and B fee-for-service claims with dates of service in the 12-month calendar year for the relevant benchmark or performance year, using a 3-month claims run out with a completion factor. The calculation—

(i)

Excludes IME and DSH payments, and the supplemental payment for IHS/Tribal hospitals and Puerto Rico hospitals; and

(ii)

Considers individually beneficiary identifiable final payments made under a demonstration, pilot or time limited program.

(3)

Truncates a beneficiary's total annual Parts A and B fee-for-service per capita expenditures at the 99th percentile of national Medicare fee-for-service expenditures for assignable beneficiaries identified for the 12-month calendar year that corresponds to the relevant benchmark or performance year, in order to minimize variation from catastrophically large claims.

(4)

Adjusts fee-for-service expenditures for severity and case mix of assignable beneficiaries in the county using prospective HCC risk scores. The calculation is made according to the following populations of beneficiaries:

(i)

ESRD.

(ii)

Disabled.

(iii)

Aged/dual eligible Medicare and Medicaid beneficiaries.

(iv)

Aged/non-dual eligible Medicare and Medicaid beneficiaries.

(b)

Calculating regional expenditures. For all agreement periods beginning on January 1, 2024, and in subsequent years, CMS calculates an ACO's risk adjusted regional expenditures by:

(1)

Weighting the risk adjusted county-level fee-for-service expenditures determined under paragraph (a) of this section according to the ACO's proportion of assigned beneficiaries in the county, determined by the number of the ACO's assigned beneficiaries in the applicable population (according to Medicare enrollment type) residing in the county in relation to the ACO's total number of assigned beneficiaries in the applicable population (according to Medicare enrollment type) for the relevant benchmark or performance year for each of the following populations of beneficiaries:

(i)

ESRD.

(ii)

Disabled.

(iii)

Aged/dual eligible Medicare and Medicaid beneficiaries.

(iv)

Aged/non-dual eligible Medicare and Medicaid beneficiaries.

(2)

Aggregating the values determined under paragraph (b)(1) of this section for each population of beneficiaries (according to Medicare enrollment type) across all counties within the ACO's regional service area.

Notes, amendments, and revision history

Amendments

[87 FR 70246, Nov. 18, 2022, as amended at 88 FR 79549, Nov. 16, 2023]

Authority

Authority: 42 U.S.C. 1302, 1306, 1395hh, and 1395jjj.

Source

Source: 76 FR 67973, Nov. 2, 2011, unless otherwise noted.

Amendments

[87 FR 70246, Nov. 18, 2022, as amended at 88 FR 79549, Nov. 16, 2023]

§425.655. Calculating the regional risk score growth cap adjustment factor.

42 C.F.R. § 425.655

(a)

General. This section describes the methodology for calculating the regional risk score growth cap adjustment factor that will be applied to the regional growth rate component of the three-way blend used to update the historical benchmark as described in § 425.652(b) for agreement periods beginning on January 1, 2024, and in subsequent years.

(b)

Calculating county risk scores. CMS does all of the following to determine county prospective HCC and demographic risk scores for use in calculating the ACO's regional risk scores:

(1)

Determines average county prospective HCC and demographic risk scores for the assignable population of beneficiaries in each county in the ACO's regional service area. The assignable population of beneficiaries is identified for the relevant benchmark or performance year using the assignment window or expanded window for assignment that is consistent with the beneficiary assignment methodology selected by the ACO for the performance year according to § 425.400(a)(4)(ii).

(2)

Makes separate risk score calculations for each of the following populations of beneficiaries—

(i)

ESRD.

(ii)

Disabled.

(iii)

Aged/dual eligible Medicare and Medicaid beneficiaries.

(iv)

Aged/non-dual eligible Medicare and Medicaid beneficiaries.

(c)

Calculating regional risk scores. CMS calculates an ACO's regional prospective HCC and demographic risk scores by:

(1)

Weighting the county-level risk scores determined under paragraph (b) of this section according to the ACO's proportion of assigned beneficiaries in the county, determined by the number of the ACO's assigned beneficiaries in the applicable population (according to Medicare enrollment type) residing in the county in relation to the ACO's total number of assigned beneficiaries in the applicable population (according to Medicare enrollment type) for the relevant benchmark or performance year for each of the following populations of beneficiaries:

(i)

ESRD.

(ii)

Disabled.

(iii)

Aged/dual eligible Medicare and Medicaid beneficiaries.

(iv)

Aged/non-dual eligible Medicare and Medicaid beneficiaries.

(2)

Aggregating the values determined under paragraph (c)(1) of this section for each population of beneficiaries (according to Medicare enrollment type) across all counties within the ACO's regional service area.

(d)

Determining aggregate growth in regional risk scores. CMS determines aggregate growth in regional prospective HCC and demographic risk scores by:

(1)

Determining growth in regional prospective HCC and demographic risk scores determined in paragraph (c) of this section (expressed as a ratio of the performance year regional risk score to the BY3 regional risk score) for each of the following populations of beneficiaries:

(i)

ESRD.

(ii)

Disabled.

(iii)

Aged/dual eligible Medicare and Medicaid beneficiaries.

(iv)

Aged/non-dual eligible Medicare and Medicaid beneficiaries.

(2)

Determines the aggregate growth in regional risk scores by calculating a weighted average of the growth in regional prospective HCC risk scores or demographic risk scores, as applicable, across the populations described in paragraph (d)(1) of this section. When calculating the weighted average growth in prospective HCC risk scores or demographic risk scores, as applicable, the weight applied to the growth in risk scores for each Medicare enrollment type is equal to the product of the ACO's historical benchmark expenditures, adjusted in accordance with § 425.652(a)(8), for that enrollment type and the ACO's performance year assigned beneficiary person years for that enrollment type.

(e)

Determining the cap on regional risk score growth. CMS determines the cap on regional prospective HCC risk score growth by:

(1)

Computing the sum of the aggregate growth in regional demographic risk scores as determined in paragraph (d)(2) of this section and 3 percentage points.

(2)

Calculating the ACO's aggregate market share by calculating the weighted average of the share of assignable beneficiaries in the ACO's regional service area that are assigned to the ACO for the performance year as determined in § 425.652(b)(2)(iv) across the populations described in § 425.652(b)(1). In calculating this weighted average, the weight applied to the share for each Medicare enrollment type is equal to the ACO's performance year assigned beneficiary person years for that enrollment type.

(3)

Adding to the sum computed in paragraph (e)(1) of this section an amount equal to the product of—

(i)

The ACO's aggregate market share as determined in paragraph (e)(2) of this section.

(ii)

The difference between the aggregate growth in regional prospective HCC risk scores as determined in paragraph (d)(2) of this section and the sum determined in paragraph (e)(1) of this section. This difference is subject to a floor of zero.

(f)

Determining the regional risk score growth cap adjustment factor. CMS determines the regional risk score growth cap adjustment factor for each Medicare enrollment type to be applied in calculating the regional growth rate described in § 425.652(b) by comparing the aggregate growth in regional prospective HCC risk scores determined in paragraph (d)(2) of this section and, if applicable, the growth in regional prospective HCC risk scores for individual Medicare enrollment types as determined in paragraph (d)(1) of this section with the cap determined in paragraph (e) of this section.

(1)

If the aggregate growth in regional prospective HCC risk scores determined in paragraph (d)(2) of this section does not exceed the cap on regional risk score growth determined in paragraph (e) of this section, CMS will set the regional risk score growth cap adjustment factor equal to 1 for each of the following populations of beneficiaries:

(i)

ESRD.

(ii)

Disabled.

(iii)

Aged/dual eligible Medicare and Medicaid beneficiaries.

(iv)

Aged/non-dual eligible Medicare and Medicaid beneficiaries.

(2)

If the aggregate growth in regional prospective HCC risk scores determined in paragraph (d)(2) of this section exceeds the cap determined in paragraph (e) of this section, CMS will compare the growth in regional prospective HCC risk scores for each Medicare enrollment type as determined in paragraph (d)(1) of this section with the cap on regional risk score growth determined in paragraph (e) of this section.

(i)

If the growth in regional prospective HCC risk scores for the enrollment type determined in paragraph (d)(1) of this section does not exceed the cap on regional risk score growth determined in paragraph (e) of this section, CMS will set the regional risk score growth cap adjustment factor for that enrollment type equal to 1.

(ii)

If the growth in regional prospective HCC risk scores determined in paragraph (d)(1) for the enrollment type exceeds the cap on regional risk score growth determined in paragraph (e) of this section, CMS will set the regional risk score growth cap adjustment factor for that enrollment type equal to the growth in regional prospective HCC risk scores for the enrollment type determined in paragraph (d)(1) of this section divided by the cap on regional risk score growth determined in paragraph (e) of this section.

Notes, amendments, and revision history

Amendments

[88 FR 79549, Nov. 16, 2023, as amended at 89 FR 98576, Dec. 9, 2024]

Authority

Authority: 42 U.S.C. 1302, 1306, 1395hh, and 1395jjj.

Source

Source: 76 FR 67973, Nov. 2, 2011, unless otherwise noted.

Amendments

[88 FR 79549, Nov. 16, 2023, as amended at 89 FR 98576, Dec. 9, 2024]

§425.656. Calculating the regional adjustment to the historical benchmark.

42 C.F.R. § 425.656

(a)

General. This section describes the methodology for calculating the regional adjustment to the historical benchmark based on the ACO's regional service area expenditures, making separate calculations for the following populations of beneficiaries: ESRD, disabled, aged/dual eligible Medicare and Medicaid beneficiaries, and aged/non-dual eligible Medicare and Medicaid beneficiaries. This section applies to regional adjustment calculations for agreement periods beginning on January 1, 2024, and in subsequent years.

(b)

Calculation of an average per capita expenditure amount for the ACO's regional service area. To compute an average per capita expenditure amount for the ACO's regional service area, CMS does all of the following:

(1)

Determines the counties included in the ACO's regional service area based on the ACO's BY3 assigned beneficiary population.

(2)

Determines the ACO's regional expenditures as specified under § 425.654 for BY3.

(3)

Adjusts for differences in severity and case mix between the ACO's assigned beneficiary population for BY3 and the assignable population of beneficiaries for the ACO's regional service area for BY3. The assignable population of beneficiaries is identified for BY3 using the assignment window or expanded window for assignment that is consistent with the beneficiary assignment methodology selected by the ACO for the performance year according to § 425.400(a)(4)(ii).

(c)

Calculation of the adjustment. To calculate the adjustment, CMS does all of the following:

(1)

Determines the difference between the average per capita amount of expenditures for the ACO's regional service area as specified under paragraph (b)(1) of this section and the average per capita amount of the ACO's historical benchmark determined under § 425.652(a)(1) through (7) and (c)(2), for each of the following populations of beneficiaries:

(i)

ESRD.

(ii)

Disabled.

(iii)

Aged/dual eligible Medicare and Medicaid beneficiaries.

(iv)

Aged/non-dual eligible Medicare and Medicaid beneficiaries.

(2)

Applies a percentage, as determined in paragraph (e) of this section.

(3)

Caps the per capita dollar amount for each Medicare enrollment type (ESRD, disabled, aged/dual eligible Medicare and Medicaid beneficiaries, aged/non-dual eligible Medicare and Medicaid beneficiaries) calculated under paragraph (c)(2) of this section at a dollar amount equal to a percentage of national per capita expenditures for Parts A and B services under the original Medicare fee-for-service program in BY3 for assignable beneficiaries in that enrollment type identified for the 12-month calendar year corresponding to BY3 using data from the CMS Office of the Actuary. The cap is applied as follows:

(i)

For positive adjustments, the per capita dollar amount for a Medicare enrollment type is capped at 5 percent of the national per capita expenditure amount for the enrollment type for BY3.

(ii)

For negative adjustments, the per capita dollar amount for a Medicare enrollment type is capped at negative 1.5 percent of the national per capita expenditure amount for the enrollment type for BY3.

(4)

For negative adjustments, CMS will multiply the regional adjustments calculated in paragraphs (c)(2) or (3) of this section by 1 minus an offset factor equal to the sum of the following—

(i)

Proportion of the ACO's BY3 assigned beneficiaries that are dually eligible for Medicare and Medicaid; and

(ii)

The difference between the ACO's weighted average prospective HCC risk score for BY3 taken across the four Medicare enrollment types and 1. When calculating the weighted average prospective HCC risk score, the weight applied to the prospective HCC risk score for BY3 for each Medicare enrollment type is equal to the product of the BY3 per capita expenditures for that enrollment type and the BY3 person years for that enrollment type.

(5)

The offset factor described in paragraph (c)(4) of this section is subject to a minimum value of zero (representing no offset to the negative regional adjustment) and a maximum value of 1 (representing a full offset to the negative regional adjustment).

(d)

Expression of the regional adjustment as a single value.

(1)

CMS expresses the regional adjustment as a single value by taking a person-year weighted average of the Medicare enrollment type-specific regional adjustment values determined in paragraph (c) of this section.

(2)

CMS uses the regional adjustment expressed as a single value for purposes of determining the adjustment, if any, that will be applied to the benchmark in accordance with § 425.652(a)(8).

(e)

Phase-in of weights used in regional adjustment calculation.

(1)

The first time that an ACO's benchmark is adjusted based on the ACO's regional service area expenditures, CMS calculates the regional adjustment as follows:

(i)

Using 35 percent of the difference between the average per capita amount of expenditures for the ACO's regional service area and the average per capita amount of the ACO's initial or rebased historical benchmark, if the ACO is determined to have lower spending than the ACO's regional service area.

(ii)

Using 15 percent of the difference between the average per capita amount of expenditures for the ACO's regional service area and the average per capita amount of the ACO's initial or rebased historical benchmark, if the ACO is determined to have higher spending than the ACO's regional service area.

(2)

The second time that an ACO's benchmark is adjusted based on the ACO's regional service area expenditures, CMS calculates the regional adjustment as follows:

(i)

Using 50 percent of the difference between the average per capita amount of expenditures for the ACO's regional service area and the average per capita amount of the ACO's rebased historical benchmark if the ACO is determined to have lower spending than the ACO's regional service area.

(ii)

Using 25 percent of the difference between the average per capita amount of expenditures for the ACO's regional service area and the average per capita amount of the ACO's rebased historical benchmark if the ACO is determined to have higher spending than the ACO's regional service area.

(3)

The third time that an ACO's benchmark is adjusted based on the ACO's regional service area expenditures, CMS calculates the regional adjustment as follows:

(i)

Using 50 percent of the difference between the average per capita amount of expenditures for the ACO's regional service area and the average per capita amount of the ACO's rebased historical benchmark if the ACO is determined to have lower spending than the ACO's regional service area.

(ii)

Using 35 percent of the difference between the average per capita amount of expenditures for the ACO's regional service area and the average per capita amount of the ACO's rebased historical benchmark if the ACO is determined to have higher spending than the ACO's regional service area.

(4)

The fourth or subsequent time that an ACO's benchmark is adjusted based on the ACO's regional service area expenditures, CMS calculates the regional adjustment to the historical benchmark using 50 percent of the difference between the average per capita amount of expenditures for the ACO's regional service area and the average per capita amount of the ACO's rebased historical benchmark.

(5)

To determine if an ACO has lower or higher spending compared to the ACO's regional service area, CMS does the following:

(i)

Multiplies the difference between the average per capita amount of expenditures for the ACO's regional service area and the average per capita amount of the ACO's historical benchmark for each population of beneficiaries (ESRD, disabled, aged/dual eligible Medicare and Medicaid beneficiaries, aged/non-dual eligible Medicare and Medicaid beneficiaries) as calculated under paragraph (c)(1) of this section by the applicable proportion of the ACO's assigned beneficiary population (ESRD, disabled, aged/dual eligible Medicare and Medicaid beneficiaries, aged/non-dual eligible Medicare and Medicaid beneficiaries) for BY3 of the historical benchmark.

(ii)

Sums the amounts determined in paragraph (e)(5)(i) of this section across the populations of beneficiaries (ESRD, disabled, aged/dual eligible Medicare and Medicaid beneficiaries, aged/non-dual eligible Medicare and Medicaid beneficiaries).

(iii)

If the resulting sum is a net positive value, the ACO is considered to have lower spending compared to the ACO's regional service area. If the resulting sum is a net negative value, the ACO is considered to have higher spending compared to the ACO's regional service area.

(iv)

If during the term of the agreement period CMS adjusts the ACO's benchmark, as specified in § 425.652(a)(9), CMS redetermines whether the ACO is considered to have lower spending or higher spending compared to the ACO's regional service area for purposes of determining the percentage in paragraphs (e)(1) through (3) of this section used in calculating the regional adjustment.

(f)

Special rules for determining the weights used in the regional adjustment calculation for a re-entering ACO. For a re-entering ACO whose prior agreement period benchmark was calculated according to § 425.603(c), CMS determines the weight used in the regional adjustment calculation described in paragraphs (b) through (e) of this section by considering the agreement period the ACO is entering into according to § 425.600(f) in combination with either of the following—

(1)

The weight previously applied to calculate the regional adjustment to the ACO's benchmark under § 425.603(c)(9) in its most recent prior agreement period; or

(2)

For a new ACO identified as a re-entering ACO, CMS considers the weight previously applied to calculate the regional adjustment to the benchmark under § 425.603(c)(9) in its most recent prior agreement period of the ACO in which the majority of the new ACO's participants were participating previously.

Notes, amendments, and revision history

Amendments

[87 FR 70246, Nov. 18, 2022, as amended at 88 FR 79550, Nov. 16, 2023]

Authority

Authority: 42 U.S.C. 1302, 1306, 1395hh, and 1395jjj.

Source

Source: 76 FR 67973, Nov. 2, 2011, unless otherwise noted.

Amendments

[87 FR 70246, Nov. 18, 2022, as amended at 88 FR 79550, Nov. 16, 2023]

§425.658. Calculating the prior savings adjustment to the historical benchmark.

42 C.F.R. § 425.658

(a)

General. For agreement periods beginning on January 1, 2024, and in subsequent years, CMS calculates an adjustment to the historical benchmark to account for savings generated in the 3 years prior to the start of the ACO's current agreement period for renewing or re-entering ACOs that were reconciled for one or more performance years in the Shared Savings Program during this period.

(b)

Calculate average per capita savings amount.

(1)

Calculate total per capita savings or losses for each performance year during the 3 years prior to the start of the ACO's current agreement period. CMS applies the following requirements in determining the amount of per capita savings or losses for each performance year:

(i)

Per capita savings or losses will be set to zero for a performance year if the ACO was not reconciled for the performance year.

(ii)

If an ACO generated savings for a performance year but was not eligible to receive a shared savings payment for that year due to noncompliance with the requirements of this part, per capita savings for that year will be set to zero.

(iii)

For a new ACO identified as re-entering ACO, per capita savings or losses will be determined based on the per capita savings or losses of the ACO in which the majority of the ACO's ACO participants were participating.

(2)

Take the simple average of the per capita savings or losses calculated in paragraph (b)(1) of this section, including values of zero, if applicable.

(3)

Determine the ACO's eligibility for the prior savings adjustment as follows—

(i)

If the average per capita amount computed in paragraph (b)(2) of this section is less than or equal to zero, the ACO is not eligible to receive an adjustment for prior savings.

(ii)

If the average per capita amount computed in paragraph (b)(2) of this section is positive, apply a proration factor to account for any upward growth in the ACO's assigned population in the benchmark years of the ACO's current agreement period as compared to the size of the assigned population when the ACO was reconciled for the corresponding performance years in its prior agreement period.

(c)

Calculate the per capita prior savings adjustment.

(1)

If an ACO is eligible for the prior savings adjustment as determined in paragraph (b)(3) of this section, the prior savings adjustment will equal the lesser of the following:

(i)

50 percent of the pro-rated average per capita amount computed in paragraph (b)(3)(ii) of this section.

(ii)

5 percent of national per capita expenditures for Parts A and B services under the original Medicare fee-for-service program in BY3 for assignable beneficiaries identified for the 12-month calendar year corresponding to BY3 using data from the CMS Office of the Actuary and expressed as a single value by taking a person-year weighted average of the Medicare enrollment type-specific values.

(2)

[Reserved]

(d)

Applicability of the prior savings adjustment. CMS compares the per capita prior savings adjustment determined in paragraph (c)(1) of this section with the regional adjustment, expressed as a single value as described in § 425.656(d), and the population adjustment as determined in § 425.662(b), if any, to determine the adjustment, if any, that will be applied to the ACO's benchmark in accordance with § 425.652(a)(8).

(e)

Recalculation of the prior savings adjustment during an agreement period.

(1)

The ACO's prior savings adjustment is recalculated for changes to the ACO's savings or losses for a performance year used in the prior savings adjustment calculation in accordance with § 425.316(b)(2)(ii)(B) or (C) due to compliance action to address avoidance of at-risk beneficiaries or as a result of issuance of a revised initial determination under § 425.315.

(2)

For a new ACO identified as a re-entering ACO, the prior savings adjustment is recalculated for changes to savings or losses for a performance year used in the prior savings adjustment calculation, if the savings or losses of the ACO in which the majority of the new ACO's participants were participating change in accordance with § 425.316(b)(2)(ii)(B) or (C) due to compliance action to address avoidance of at-risk beneficiaries or as a result of issuance of a revised initial determination under § 425.315.

Notes, amendments, and revision history

Amendments

[87 FR 70248, Nov. 18, 2022, as amended at 88 FR 79551, Nov. 16, 2023; 89 FR 98576, Dec. 9, 2024; 90 FR 50020, Nov. 5, 2025]

Authority

Authority: 42 U.S.C. 1302, 1306, 1395hh, and 1395jjj.

Source

Source: 76 FR 67973, Nov. 2, 2011, unless otherwise noted.

Amendments

[87 FR 70248, Nov. 18, 2022, as amended at 88 FR 79551, Nov. 16, 2023; 89 FR 98576, Dec. 9, 2024; 90 FR 50020, Nov. 5, 2025]

§425.659. Calculating risk scores used in Shared Savings Program benchmark calculations.

42 C.F.R. § 425.659

(a)

General. CMS accounts for differences in severity and case mix of the ACO's assigned beneficiaries and assignable beneficiaries (as defined under § 425.20) in calculations used in establishing, adjusting, and updating the ACO's historical benchmark.

(b)

Prospective Hierarchical Condition Category (HCC) risk score calculation. In determining Medicare FFS beneficiary prospective HCC risk scores for a performance year and each benchmark year of the ACO's agreement period, CMS does the following:

(1)

CMS specifies the CMS-HCC risk adjustment methodology used to calculate prospective HCC risk scores for Medicare FFS beneficiaries (as defined under § 425.20) for use in Shared Savings Program calculations as follows:

(i)

In calculating risk scores for Medicare FFS beneficiaries for a performance year, CMS applies the CMS-HCC risk adjustment methodology applicable for the corresponding calendar year.

(ii)

For agreement periods beginning before January 1, 2024, CMS applies the CMS-HCC risk adjustment methodology for the calendar year corresponding to the benchmark year in calculating risk scores for Medicare FFS beneficiaries for each benchmark year of the agreement period.

(iii)

For agreement periods beginning on January 1, 2024, and in subsequent years, CMS applies the CMS-HCC risk adjustment methodology for the calendar year corresponding to the performance year, as specified under paragraph (b)(1)(i) of this section, in calculating risk scores for Medicare FFS beneficiaries for each benchmark year of the agreement period.

(2)

CMS does the following to calculate the prospective HCC risk scores identified in paragraph (b)(1) of this section for a benchmark or performance year:

(i)

Removes the Medicare Advantage coding intensity adjustment, if applicable.

(ii)

Renormalizes prospective HCC risk scores by Medicare enrollment type (ESRD, disabled, aged/dual eligible Medicare and Medicaid beneficiaries, and aged/non-dual eligible Medicare and Medicaid beneficiaries) based on the national assignable FFS population for the relevant benchmark or performance year.

(iii)

Calculates the average prospective HCC risk score by Medicare enrollment type (ESRD, disabled, aged/dual eligible Medicare and Medicaid beneficiaries, and aged/non-dual eligible Medicare and Medicaid beneficiaries).

Notes, amendments, and revision history

Amendments

[88 FR 79551, Nov. 16, 2023]

Authority

Authority: 42 U.S.C. 1302, 1306, 1395hh, and 1395jjj.

Source

Source: 76 FR 67973, Nov. 2, 2011, unless otherwise noted.

Amendments

[88 FR 79551, Nov. 16, 2023]

§425.660. Accountable Care Prospective Trend (ACPT).

42 C.F.R. § 425.660

(a)

General. For agreement periods beginning on January 1, 2024, and in subsequent years, CMS incorporates a fixed projected growth rate determined at the beginning of the ACO's agreement period called the Accountable Care Prospective Trend (ACPT) into the blended update factor described in § 425.652(b) when updating an ACO's benchmark for each performance year of the agreement period.

(b)

Determination of ACPT. An ACPT is a flat dollar amount calculated using one or more annualized growth rates based on national fee-for-service Medicare expenditures projected by the CMS Office of the Actuary. In determining the ACPT for an enrollment type for each performance year, CMS does all of the following:

(1)

Projects per capita growth in Parts A and B fee-for-service expenditures for benchmark year 3 (BY3) and each performance year of the ACO's agreement period. The calculation—

(i)

Excludes IME and DSH payments, and the supplemental payment for IHS/Tribal hospitals and Puerto Rico hospitals; and

(ii)

Makes separate expenditure calculations for each of the following populations of beneficiaries—

(A)

ESRD.

(B)

Aged/Disabled.

(2)

Calculates one or more annualized growth rates for the population of beneficiaries described in paragraph (b)(1)(ii)(A) of this section (the ESRD ACPT) and one or more annualized growth rates for the population of beneficiaries described in paragraph (b)(1)(ii)(B) of this section (the Aged/Disabled ACPT). These annualized growth rates will remain fixed over the ACO's agreement period. The annualized growth rate is an annual rate of growth in projected expenditures during the ACO's 5-year agreement period relative to BY3, calculated as follows—

(i)

Using a uniform annualized projected rate of growth over each of the 5 performance years of the 5-year agreement period; or

(ii)

If annualization as specified in paragraph (b)(2)(i) of this section is determined not to reasonably fit the anticipated growth curve, CMS will apply an alternative annualization technique using two or more annualized growth rates reflecting the projected rates of growth during the 5 performance years comprising the 5-year agreement period.

(3)

For each performance year, multiplies the applicable annualized growth rate described in paragraph (b)(2) of this section by BY3 truncated national per capita fee-for-service Medicare expenditures for assignable beneficiaries for each Medicare enrollment type (ESRD, disabled, aged/dual eligible Medicare and Medicaid beneficiaries, and aged/non-dual eligible Medicare and Medicaid beneficiaries) identified for the 12-month calendar year corresponding to BY3 to express the annualized growth rate as a flat dollar amount as follows:

(i)

The ESRD ACPT is used for the ESRD population.

(ii)

The Aged/Disabled ACPT is used for the following populations— disabled, aged/dual eligible Medicare and Medicaid beneficiaries, and aged/non-dual eligible Medicare and Medicaid beneficiaries.

(4)

Adjusts the flat dollar amounts described in paragraph (b)(3) of this section for each performance year for differences in severity and case mix between the ACO's BY3 assigned beneficiary population and the national assignable FFS population for each Medicare enrollment type identified for the 12-month calendar year corresponding to BY3.

(5)

Divides the risk adjusted flat dollar amounts described in paragraph (b)(4) of this section by the ACO's historical benchmark expenditures described in § 425.652(a) for each Medicare enrollment type to calculate the percent increase to be included in the blended update factor described in § 425.652(b)(4).

Notes, amendments, and revision history

Amendments

[87 FR 70248, Nov. 18, 2022]

Authority

Authority: 42 U.S.C. 1302, 1306, 1395hh, and 1395jjj.

Source

Source: 76 FR 67973, Nov. 2, 2011, unless otherwise noted.

Amendments

[87 FR 70248, Nov. 18, 2022]

§425.661. Reserved

42 C.F.R. § 425.661

Notes, amendments, and revision history

Authority

Authority: 42 U.S.C. 1302, 1306, 1395hh, and 1395jjj.

Source

Source: 76 FR 67973, Nov. 2, 2011, unless otherwise noted.

§425.662. Calculating the population adjustment to the historical benchmark.

42 C.F.R. § 425.662

(a)

General. For agreement periods beginning on January 1, 2025, and in subsequent years, CMS calculates the population adjustment to the historical benchmark.

(b)

Calculation of the population adjustment. To calculate the adjustment described in paragraph (a) of this section, CMS does all of the following:

(1)

Calculates the weighted average of the ACO's third benchmark year (BY3) national per capita expenditure amounts across the following populations of beneficiaries, where the weights are the ACO's BY3 proportion of assigned beneficiaries for that enrollment type:

(i)

ESRD.

(ii)

Disabled.

(iii)

Aged/dual eligible Medicare and Medicaid beneficiaries.

(iv)

Aged/non-dual eligible Medicare and Medicaid beneficiaries.

(2)

Calculates a scaler as the difference between 5 percent of the national per capita expenditure amount, expressed as single value as calculated in paragraph (b)(1) of this section, and the higher of: the regional adjustment, expressed as a single value as described in § 425.656(d); the per capita prior savings adjustment determined in § 425.658(c); or no adjustment, in the case where the regional adjustment is negative and the ACO is not eligible for the prior savings adjustment under § 425.658(b)(3)(i).

(3)

Determines the ACO's eligibility for the population adjustment based on the proportion of the ACO's assigned beneficiaries for the performance year who are enrolled in the Medicare Part D low-income subsidy (LIS) or dually eligible for Medicare and Medicaid. An ACO is only eligible for the population adjustment if this proportion is greater than or equal to 15 percent. An ACO with a proportion less than 15 percent is ineligible to receive the population adjustment.

(4)

Calculates the population adjustment. If the ACO is eligible for the population adjustment as determined in paragraph (b)(3) of this section, the adjustment is equal to the product of the scaler calculated in paragraph (b)(2) of this section and the proportion of the ACO's assigned beneficiaries for the performance year who are enrolled in the Medicare Part D LIS or dually eligible for Medicare and Medicaid.

(c)

Applicability of the population adjustment. CMS compares the population adjustment determined in paragraph (b)(4) of this section with the regional adjustment, expressed as a single value as described in § 425.656(d), and the per capita prior savings adjustment determined in § 425.658(c), if any, to determine the adjustment, if any, that will be applied to the ACO's benchmark in accordance with § 425.652(a)(8)(ii).

Notes, amendments, and revision history

Amendments

[89 FR 98576, Dec. 9, 2024, as amended at 90 FR 50020, Nov. 5, 2025]

Authority

Authority: 42 U.S.C. 1302, 1306, 1395hh, and 1395jjj.

Source

Source: 76 FR 67973, Nov. 2, 2011, unless otherwise noted.

Amendments

[89 FR 98576, Dec. 9, 2024, as amended at 90 FR 50020, Nov. 5, 2025]