Medicare ACO Track 1 Presenting Opportunities for Rural Healthcare

A pathway to sustainability for rural healthcare could be the new Accountable Care Organization (ACO) model called the Medicare ACO Track 1+.

Announced by the Center for Medicare and Medicaid Innovation with the Centers for Medicare & Medicaid Services (CMS), the ACO Track 1+ model will test a payment design that provides a more limited downside risk than what currently exists in Tracks 2 or 3 of the Medicare Shared Savings Program (SSP). This new model is designed to encourage more small practices and small rural hospitals to advance into performance-based risk.

To be fair, this has been in the making for some time; many from across the healthcare and medical leadership spectrum, especially in physician groups, have requested this type of ACO model with a plethora of options to be added. As a result of listening and feedback, CMS designed this model as part of a balanced approach to care coordination and attaining population health.   

As a result, beginning in 2018, CMS will allow providers to be a part of an Advanced Alternative Payment Model (APM) focusing on:

  1. Improving care; and
  2. An opportunity to earn an incentive payment under the Quality Payment Program (QPP), which implements the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA).

ACO Focus

Those ACOs that sign up will be able to join the Track 1+ model as part of the 2018, 2019, and 2020 SSP application cycles, which will align with Program Tracks 1, 2, and 3.

Unique Characteristics

Based on SSP Track 1, this new model also includes elements of Track 3, including:

  1. The prospective beneficiary assignment to allow each ACO to know in advance the patient population it will manage;
  2. Downside risk (although at a level lower than that of Track 3);
  3. The option to request a Skilled Nursing Facility (SNF) three-day rule waiver to provide greater flexibility to Track 1+ ACOs.
  4. A maximum shared savings rate of 50 percent, based on quality performance. This is the same rate as Track 1, but lower than those of Tracks 2 and 3, which have maximum shared savings rates of 60 and 75 percent, respectively.
  5. A loss sharing rate of 30 percent. Track 1 ACOs are in upside-only contracts. In the Track 2 ACO model, the rates are 40 and 75 percent, respectively. CMS has also noted that it plans to incorporate lower risk levels for certain ACOs, including organizations with physicians only or ACOs with rural hospital members.
  6. An arrangement that will be “benchmark-based,” including:
    1. ACOs that have rural hospitals with more than 100 beds (model also includes cancer centers) and participate inpatient prospective payments.
    2. ACOs that are participating with rural hospitals with 200 or fewer beds and are owned and operated by a health system.

    3. ACOs with participants owned or operated by a rural hospital with 100 or fewer beds that is not in a part of the ACO.
      Using the aforementioned three examples, the loss sharing limit is 4 percent of the ACO’s updated historical benchmark, which is significantly lower than both Track 2 (which phases up to 10 percent) and Track 3 (starts at 15 percent). 

  7. A second type of risk arrangement that is “revenue-based.” This means that if the ACO in the Track 1+ model does not fall into one of the aforementioned categories, then its loss sharing limit in 2018 would be 8 percent of the Medicare fee for service revenue. It should be noted that this is subject to change in the following years based on MACRA advanced APM requirements and changes. 
  8. A provision that if the nominal risk requirement revenue standard for APM increases, then Track 1+ ACOs must also increase their respective loss sharing limits to continue in the advanced APM program. The revenue will be based on a loss limit that is capped at 4 percent of the updated historical benchmark, regardless of the advanced APM mandated requirements.

Digging Deeper with Benchmark Determinations

Under this model the loss sharing limit would be determined by CMS near the start of the ACO’s agreement period, which would be based on the ACO’s initial application to the model or application for Model renewal and then additionally re-determined based on an annual certification process.

According to CMS, changes to the loss sharing limit (the revenue- or benchmark-based methodology) would be made by CMS based on the annual certification process that occurs prior to the start of a performance year. As previously noted, the Track 1+ ACO’s loss sharing limit could be adjusted up or down on this basis.

As it relates to SSP ACOs that have renewed their respective participation agreements, the benchmark that would apply under the model would also then incorporate a regional benchmark adjustment, as specified in the June 2016 SSP final rule (81 FR 37950).

Did you Apply?

The Track 1+ 2018 application cycle aligning with the annual application cycle for the SSP is in circulation, and the required notice of intent to apply (NOIA) was issued in late May 2017. Speculation is that this will be a large enrollment class.

More Insight

Please note that an ACO must concurrently participate in Track 1 of the SSP in order to be eligible to participate in the new model. The Track 1+ model was open to SSP Track 1 ACOs that are within their current agreement period, new applicants, and Track 1 ACOs that are renewing their participation agreement and meet the eligibility criteria of the Track 1+ model.

Disclaimer: Track 2 and 3 ACOs are not eligible for the Track 1+model.

Deeper Pockets Payment Process

New program participants and ACOs seeking renewal of their SSP participation agreement would have needed to complete the SSP application process. All ACOs interested in participating in the model would have needed to complete an additional application process for Track 1+.

Of course, just in case things don’t go as planned, CMS mandates in requirements that the ACOs have an established repayment mechanism to assure CMS of its ability to repay shared losses. This means that to ensure that the model remains a solid pathway for ACOs to participate in a two-sided risk framework and to transition to higher risk (as is found in Track 2 or 3), CMS will limit an ACO’s participation in the model to one full three-year agreement period.

Additionally, all new participants and renewing ACOs could enter one three-year agreement period within the model structure, and any ACOs that transition to the model during their existing Track 1 agreement period would then have the opportunity to renew for another three-year agreement under the model.


With the “doc fix” sustainable growth rate (SGR) formula gone and the new era of realigning physician payments under Medicare from volume to value, there is already news that CMS has given a pass on MACRA requirements, and as a result, providers will not have to comply with the Merit-Based Incentive Payment System (MIPS). It has been noted that this will save millions in costs necessary to participate for technology, compliance, recording, and implementation of activities.

CMS sent letters to nearly 807,000 providers stating that they wouldn’t be evaluated in MIPS for 2017. Last October, this number was around 780,000, and then 642,000 were slated to participate, and now it looks like a figure closer to 420,000. This is either because providers didn’t meet the qualifications of $30,000 in Medicare PFS Part B spending or providing care to 100 Medicare patients (for providers at a critical access hospital, the portion of charges paid under the Medicare physician fee schedule counts toward the $30,000 threshold, not the facility payment to the CAH). There are also other reasons.  No matter; MACRA compliance, by CMS’s own numbers, will cost the healthcare industry around $1.3 billion to implement. 

MACRA Spectrum 

For providers, the clock is already ticking, and any Medicare reimbursement for providers in 2019 will be based on how well they perform on the aforementioned metrics this year. Under the MIPS program, providers can earn a bonus or penalty of 4 percent of their reimbursement in 2019.

As a reminder with the MIPS program, provider pay is based on success in four performance categories: quality, resource use, clinical practice improvement, and advancing care information through use of health technology. The advancing care criteria is based on the government’s Meaningful Use program, which is used as a mechanism to see if providers should be rewarded for using electronic health records (EHRs).

Providers are still uncertain and have been in stop/start or neutral mode waiting to see if CMS will change any additional requirements. Those who never received a notice from CMS about participation should go to the CMS website ( and enter their respective TIN number to see if they qualify. Some have been waiting on the sidelines, while others implemented necessary EHR and compliance upgrades only to be told they wouldn’t need to participate.

Hope for the Future

According to many researchers, the CMS MSSP program has failed and needs to be revamped under the lens of value-based care. These researchers note that CMS has lost massive amounts of money on the program for three consecutive years, from 2013-2015, with annual losses tripling from 2013 to 2015 (totaling $26 million in 2015).

Rural healthcare desperately needs to be included in innovation models, especially since value-based payments have arrived. Hopefully this new model sees a strong number of rural participants as they ease more comfortably into managing risk, developing even better patient-centered care and outcomes, and achieving population health.

Rural healthcare is used to risk – it’s the reward that’s desperately needed.


Janelle Ali-Dinar, PhD

Janelle Ali-Dinar, PhD is a rural healthcare expert and advocate with more than 15 years of healthcare executive experience in many key areas addressing critical access hospitals (CAHs), rural health clinics (RHCs), physicians, and patients. Dr. Ali-Dinar is a sought-after speaker on Capitol Hill. A former hospital CEO and regional rural strategy executive, Janelle is also a past National Rural Health Association rural fellow, Rural Congress member, and Nebraska Rural Health Association president. She is currently the Nebraska DHHS chair of The Office of Minority Health Statewide Council, addressing needs of rural, public, minority, tribal, and refugee health, and she serves on the Regional Health Equity Region VII council as co-chair of Rural Health and Partnerships. Janelle holds a master’s degree and doctorate in communications and is a recent graduate in public health leadership. Janelle is currently the vice president of rural health for MyGenetx and is a member of the RACmonitor editorial board.

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