CMS Releases Physician Fee Schedule Proposed Rule, Continuing Emphasis on Equity and Value-Based Care

July 12, 2022

The Centers for Medicare & Medicaid Services on July 7 released its proposed rule for the Medicare physician fee schedule for Calendar Year 2023. Among other updates, the proposed rule contains significant programmatic changes to the Medicare Shared Savings Program.

Specifically, the changes are aimed at expanding value-based care, ensuring equitable healthcare access for rural and other underserved populations, supporting less experienced accountable care organizations (ACOs), and encouraging long-term participation of current ACOs, including by:

  • Providing advance shared savings payments to new ACOs focused on rural and other underserved populations;
  • Allowing new ACOs to participate in an upside-only risk sharing model for a longer time period in order to better develop care processes before taking on downside risk; and
  • Updating the Medicare Shared Savings Program’s (MSSP’s) performance benchmarking methodology.


Several of the Centers for Medicare & Medicaid Services’ (CMS’s) proposed MSSP reforms stem from provider feedback that ACOs serving rural and other underserved populations require both significant upfront capital investment and additional ramp-up time to succeed in risk-based accountable care models. Building on this feedback, CMS has proposed new methods to foster ACO development to better serve rural and other underserved populations.

Advance Shared Savings Payments

Building on lessons learned from the Center for Medicare & Medicaid Innovation (CMMI) ACO Investment Model, CMS proposes providing advance shared savings payments to new ACOs (i.e., not renewing or reentering ACOs) serving rural and other underserved populations. Such advance investment is intended for new ACOs that will provide accountable care to historically underserved beneficiaries to improve provider infrastructure, increase staffing, and address beneficiaries’ social and other health needs.

As proposed, eligible ACOs would receive a one-time fixed payment of $250,000 and quarterly payments for the first two years of their five-year agreement period. Quarterly payments would be determined using a 100-point scoring methodology, which would pay greater amounts to ACOs serving high numbers of dual eligible beneficiaries or those living in areas of high deprivation (as measured by the area deprivation index (ADI)), with the goal that such increased funding would be used to address the beneficiaries’ social and other health needs.

CMS would recoup the advance shared savings payments when the ACO begins to achieve shared savings on its own. If an ACO ultimately does not achieve shared savings, CMS would not recoup any funds, unless the ACO terminates its MSSP participation during the agreement period. CMS expects that such advance shared savings payments would provide an opportunity for providers in rural and other underserved areas to form ACOs, develop necessary program infrastructure, and promote health equity by addressing beneficiary needs holistically. CMS proposes that the initial ACO application cycle for advance shared savings payments will take place in Calendar Year (CY) 2023, targeting a January 1, 2024 start date.

Ramp Up to Full-Risk

CMS also proposes allowing less experienced ACOs additional time and greater flexibility in transitioning from taking on only upside performance-based risk to full risk. As proposed, beginning on January 1, 2024, new ACOs could elect to participate in a one-sided shared savings model under a five-year agreement. Certain eligible ACOs would also be able to continue with the upside-only model for an additional two years—providing less experienced ACOs up to seven years in a one-sided risk model before transitioning to a two-sided risk model. Beginning in CY 2023, CMS also proposes allowing existing Level A and B ACO participants the option to continue in the one-sided model for the remainder of their current participation agreement. The agency believes that providing newer ACOs with additional ramp-up time to design their care processes will remove a perceived barrier to participation and, ultimately, make ACOs more successful under full risk-based arrangements.

In the same vein, CMS proposes modifying its eligibility criteria to qualify for shared savings, which would allow lower revenue ACOs to achieve shared savings without meeting the minimum savings rate requirement. Eligible ACOs that meet the required quality performance standard for receiving shared savings would receive half of the maximum sharing rate for their participation level (e.g., 20% instead of 40% under Levels A and B). Further, eligible ACOs that do not meet the general shared savings quality performance standard but do meet a proposed alternative quality performance standard would be eligible for shared savings based on a sliding-scale approach. Such sliding scale would favor higher payments to ACOs that would benefit the most from shared savings—particularly, undercapitalized ACOs serving rural and other underserved populations.

Introducing MIPS Quality Performance Category Score

To further advance its health equity aims, CMS also proposes incorporating a health equity adjustment to each ACO’s Merit-Based Incentive Payment System quality performance category score, which will incentivize the provision of high-quality care for rural and underserved populations by enhancing scoring for such ACOs through this health equity adjustment. As proposed, such adjustment could only increase ACO performance and not decrease scores.


While the foregoing proposals largely aim to promote the MSSP’s growth and support new ACO participants, CMS also proposes various changes to encourage continuing participation by current ACOs. First, the agency proposes revamping MSSP’s performance benchmarking methodology, including updates that would, among other things, reduce the effects of both an ACO’s own historical performance and ACO market penetration on regional expenditures in the relevant market in setting benchmarks. CMS would change its methodology for updating the historical benchmark to include a prospective external factor, offering a counterbalance against an ACO’s own performance and ACO market penetration. Specifically, CMS would incorporate a projected administrative growth factor into a three-way blend with national and regional growth rates in order to annually reassess an ACO’s historical benchmark—partially insulating the annual update from savings resulting from the ACO’s own actions and the impact of ACO market penetration. CMS also proposes adding a prior savings adjustment for historical benchmarks of renewing and reentering ACOs. CMS’s proposed changes to the MSSP benchmarking methodology would apply to periods beginning on January 1, 2024.

The agency has also proposed several updates aimed at easing ACOs’ administrative burdens. CMS proposes doing away with its requirement that ACOs must submit marketing materials to the agency for review prior to use. In response to participant feedback that current annual notice requirements for beneficiaries have caused unanticipated burden and confusion, CMS is also proposing modifying such requirements so that ACOs must provide beneficiary notice on the benefits of value-based care prior to or at the first primary care service visit once per agreement period, along with a follow-up beneficiary communication within 180 days of such notice, beginning in 2023. The agency also proposes eliminating its requirement that ACOs applying for the SNF 3-Day Rule Waiver provide narratives describing the ACO’s communication plan, care management plan, and beneficiary evaluation and admission plan.

The Biden-Harris administration’s emphasis on supporting rural health and bridging the health equity gap is clearly present in this rulemaking and continues the emblematic goal of the administration while advancing the proposition of value-based care.

The CY 2023 physician fee schedule proposed rule is encouraging for prospective MSSP ACO participants, particularly those that seek to serve rural and other underserved populations and could benefit from upfront capital and additional time to develop their care infrastructure before taking on downside risk. The proposed rule also reflects CMS’s ongoing responsiveness to stakeholders, taking feedback from current ACO participants and crafting policy revisions to address that feedback. CMS encourages current ACOs and other providers and suppliers to submit comments on its proposed rule. The 60-day public comment period ends on September 6, 2022.


If you have any questions or would like more information on the issues discussed in this LawFlash, or if you are interested in submitting a comment to the proposed rule or are considering establishment of an ACO, please contact any of the following Morgan Lewis lawyers:

Felicia Alexander

Albert Shay
Jacob Harper