CMS Announces Major Reforms to Medicare ACOs and Physician Payment Structures

The Centers for Medicare & Medicaid Services (CMS) has proposed significant reforms to Medicare’s physician payment and value-based care programs aimed at expanding accountable care and modernizing payment structures, with a focus on preventive care.

The Centers for Medicare & Medicaid Services (CMS) announced on [insert date] a series of proposed reforms intended to overhaul the Medicare program, particularly concerning physician payment and value-based care. These proposals are poised to enhance the accessibility of accountable care organizations (ACOs), modernize payment systems for physicians, and foster a shift from traditional reactive healthcare to a more preventive approach.

According to CMS Administrator Dr. Mehmet Oz, these reforms represent some of the most significant changes to Medicare in recent years. He emphasized that the proposed changes aim to facilitate a greater focus on preventive care and improve overall patient outcomes. “These changes would make it easier for clinicians to focus on prevention, improve coordination for patients, and ensure Medicare rewards better outcomes rather than more services,” Dr. Oz stated.

Enhancements to Medicare ACOs

One of the focal points of the proposed reforms is the expansion of the Medicare Shared Savings Program (Shared Savings Program), which is the largest value-based payment initiative in the United States. The proposed enhancements are designed to strengthen participation in ACOs and bolster incentives for delivering high-quality, coordinated care.

ACOs, which consist of groups of healthcare providers collaborating to deliver coordinated care to Medicare beneficiaries, have shown measurable improvements in patient health outcomes. Data from the Shared Savings Program indicates that patients under ACO care are more likely to receive preventive screenings and experience better management of chronic conditions. In performance year 2024, 75% of the 476 participating ACOs earned shared savings payments totaling approximately $4.1 billion, contributing to net savings of about $2.5 billion for the Medicare Trust Funds.

The CMS’s proposed rule seeks to enhance the Shared Savings Program by implementing several key changes, including:

• Increasing opportunities for certain ACOs to share savings.
• Introducing financial incentives for first-time participants in the program.
• Establishing more predictable spending targets.
• Simplifying technology requirements to reduce administrative burdens.
• Allowing selected ACOs to decrease or eliminate out-of-pocket costs for beneficiaries starting April 1, 2027.

Modernizing Physician Payment

In addition to ACO reforms, CMS is proposing updates to the Physician Fee Schedule (PFS) to better reflect contemporary medical practices. Over the years, the PFS has become encumbered with outdated payment policies that do not accurately represent the complexities of modern healthcare delivery.

The proposed updates aim to recalibrate payment rates to improve transparency, accuracy, and consistency in how care is compensated. Key elements of this proposal include:

• Aligning payments more closely with the time, resources, and complexity of care delivery.
• Taking into account efficiencies gained when multiple services are rendered during a single patient visit.
• Enhancing oversight of billing practices to ensure accurate claims submission.
• Increasing clarity regarding the calculation of physician payment rates.

These revisions are seen as crucial steps toward supporting better patient outcomes by incentivizing appropriate care at the right time, while also ensuring the effective use of Medicare resources.

Transitioning to Value-Based Care

Another significant change proposed by CMS is the planned phase-out of the traditional Merit-based Incentive Payment System (MIPS) by 2029. Instead, the agency aims to introduce MIPS Value Pathways (MVPs) that focus on clinically meaningful measures tailored to various specialties.

MIPS, initially launched in 2017, was intended to shift Medicare away from a fragmented fee-for-service model toward one that emphasizes quality and value. The proposed transition to MVPs represents a culmination of efforts to refine the reporting process while alleviating the burden on clinicians. Starting in 2029, traditional MIPS will be retired, allowing for a streamlined approach to quality reporting.

To facilitate this transition, CMS has proposed three new MVPs centered on diabetes, hypertension, and hospital-based care, which are expected to broaden participation and promote preventive measures in healthcare. Additionally, new core measures for MIPS will be introduced in 2027, requiring clinicians to report at least one measure relevant to their specialty and patient demographics.

Public Engagement and Next Steps

The proposed reforms mark a significant step in the evolution of Medicare, aiming to enhance accountable care, modernize physician payment systems, reduce administrative burdens, and improve patient outcomes while maintaining the program’s long-term sustainability. CMS has opened a public comment period to gather feedback from stakeholders across the healthcare landscape.

For additional information regarding the proposed rule, interested parties can access it via the Federal Register. Detailed fact sheets related to the Quality Payment Program and the Physician Fee Schedule are also available through CMS’s website.