Physician Fee Schedule final rule brings key changes for ACOs

Major changes to the Medicare Shared Savings Program

Aligning with HHS' commitment to promoting better chronic disease management and prevention, the 2026 Medicare Physician Fee Schedule final rule introduced major changes to the Shared Savings Program.

First, CMS is reducing the maximum time an accountable care organization, or ACO, can participate in the one-sided financial risk model of the Shared Savings Program's BASIC track from seven performance years to five performance years during the ACO's first agreement period in the BASIC track's glide path.

This change applies to agreement periods beginning on or after Jan. 1, 2027, and is designed to encourage organizations to take on two-sided risk arrangements more quickly, CMS stated.

Next, CMS said in the rule that it is increasing flexibility with the minimum number of assigned Medicare fee-for-service beneficiaries required for participation, so ACOs will only need to meet a 5,000-assigned beneficiary threshold by the third benchmark year.

The agency will permit ACOs to fall below the threshold in previous benchmark years, although ACOs that do so must either enter the BASIC track if they have entered a new agreement period or face limits on shared savings and losses if they miss the threshold at any time during the agreement period.

ACOs that fall below the threshold during any benchmark year will also be excluded from using policies that provide certain low-revenue ACOs in the BASIC track with increased opportunities to share in savings, CMS added.

Other changes finalized in the 2026 Medicare Physician Fee Schedule final rule include:

• Expanding quality and finance extreme and uncontrollable circumstances policies to ACO affected by cyberattacks, such as ransomware.
• Requiring ACOs to report changes to their ACO participant list during the performance year, such as when an ACO participant experiences a change in ownership.
• Requiring ACOs to report changes during the performance year to their skilled nursing facility affiliate list, including when a facility changes ownership.
• Revising the definition of primary care services used for beneficiary assignment.
• Renaming the "health equity benchmark adjustment" to the "population adjustment."

Changes to Medicare quality reporting

There are several changes to quality reporting in the Shared Savings Program and other physician quality reporting programs, including the Merit-Based Incentive Payment System (MIPS), coming next year.

In the Shared Savings Program, the most significant modification to quality reporting is the elimination of the health equity scoring factor, effective in performance year 2026 (versus the proposed 2025 performance year). CMS said the health equity adjustment, specifically, has led to duplicate scoring factors and a more complex quality scoring methodology.

Instead, CMS will continue to apply the complex organization adjustment and extend the electronic clinical quality measure (eCQM) reporting incentive. Flat benchmarks for Medicare CQMs' first two performance periods in MIPS have also made it unnecessary to apply the health equity scoring factor, CMS added.

Starting on Jan. 1, 2026, CMS will also implement a dual standard monitoring system in which it will track whether ACOs meet both the primary quality performance standards and an alternative quality performance standard. Failure to meet both standards could result in program termination.

Additionally, CMS finalized changes in the 2026 Medicare Physician Fee Schedule to align Medicare quality reporting programs. As part of the alignment effort, CMS will update the quality measure set for the "alternative payment model performance pathway plus" for Shared Savings Program ACOs.

The updates include the elimination of Quality ID: 487 Screening for Social Drivers of Health and the expansion of survey modes for the Consumer Assessment of Healthcare Providers and Systems for MIPS. The latter change will include a mail-phone administration protocol to a web-mail-phone administration protocol starting with the 2027 performance year.

The National Association of ACOs (NAACOS) said in a statement that it appreciates the finalized policies "that will improve the Medicare Shared Savings Program." The group has previously criticized program methodologies, specifically around burdensome quality reporting requirements and historical benchmarking setbacks.

"We look forward to working with CMS to strengthen the program by addressing issues that threaten the long-term sustainability of accountable care and driving innovation in the model," stated Emily Brower, president and CEO of NAACOS.

Jacqueline LaPointe is a graduate of Brandeis University and King's College London. She has been writing about healthcare finance and revenue cycle management since 2016.