Pioneer A Cos

DRAFT/CONFIDENTIAL
PIONEERACCOUNTABLECAREORGANIZATION
BENEFICIARYALIGNMENTANDFINANCIALRECONCILIATION
SPECIFICATIONS
(Version5.3)
July14,2011
Preparedfor:
HoangmaiPham
CentersforMedicare&MedicaidServices
InnovationCenter
Preparedby:
HenryBachofer
GregoryPope
JohnKautter
CordonNewhart
RTIInternational
PioneerACOBeneficiaryAlignmentandFinancialReconciliationSpecifications 2
July14,2011 DRAFT/CONFIDENTIAL Ver.5.3
Contents
1.0 Specificationsummary......................................................................................................................3
2.0 ACOalignment..................................................................................................................................4
2.1 ProspectiveACOalignmenteligiblepopulation...........................................................................4
2.2 ACOalignedpopulation................................................................................................................5
2.2.1 InitialAlignment....................................................................................................................6
2.2.2 RealignmentandAttestation................................................................................................8
2.3 Nationalreferencepopulation......................................................................................................9
2.4 Baselinedecedentpopulation....................................................................................................10
3.0 Savingscalculation..........................................................................................................................11
3.1 Minimumsavings/lossthreshold................................................................................................12
3.2 Maximumsavings/loss................................................................................................................12
4.0 Performanceperiodexpenditure...................................................................................................13
4.1 Averageexpenditureperbeneficiary(unweighted,uncapped,unannualized).........................13
4.2 Annualizedexpenditures............................................................................................................14
4.3 Capped,annualizedexpenditures...............................................................................................15
4.4 Weighted,capped,annualizedexpenditures.............................................................................16
5.0 Baselineexpenditure......................................................................................................................18
5.1 Baseyearexpenditure................................................................................................................19
5.1.1 Annualizedbaseyearexpenditure.....................................................................................19
5.1.2 Capped,annualizedbaseyearexpenditure........................................................................20
5.2 Trendingofbaseyearexpenditurestocommonbaseyear(BY3)..............................................21
5.3 3yearweightedaveragetrended,capped,annualizedexpenditureforabeneficiary.............22
5.4 Newlyeligibleandotheralignedbeneficiarieswithout12eligiblebaseperiodmonths...........23
5.5 Baselineexpendituresfordecedents.........................................................................................28
5.6 3yearbaselineexpenditure.......................................................................................................28
6.0 Benchmarkcalculation....................................................................................................................30
6.1 Nationalreferencepopulationcohort........................................................................................30
6.2 Referencepopulationexpenditure.............................................................................................31
6.3 Adjustmentforbeneficiaryentitlementcategory,age,andsex................................................32
6.3.1 Performanceperiodagesexadjustedreferenceexpenditure..........................................33
6.3.2 Baselineagesexadjustedreferenceexpenditure.............................................................33
7.0 Populationbasedpayments...........................................................................................................35
8.0 Tables..............................................................................................................................................36
Table81Evaluationandmanagementservicecodesincludedinbeneficiaryalignmentcriteria.......36
Table82Specialtycodesforprimarycarephysicians...........................................................................38
Table83Specialtycodesforspecialistphysicians.................................................................................39
Table84.Variablesusedintotalbeneficiaryexpenditurecalculations...............................................40
Table85.ScheduleforPioneerACObeneficiaryalignmentandbaselineexpenses(performance
years1through3)...................................................................................................................................41
Table8.6AgeandSexCategoriesbyEntitlementCategory...................................................................43
1.0 Specificationsummary
Thisspecificationprovidesadetailedspecificationofthemethodsthatwillbeusedtoidentifyor
calculate:
TheACOalignedpopulation;
Thereferencepopulation;
Baselineexpenditures;
Theexpenditurebenchmark;and,
Performanceperiodexpenditures.
Thisspecificationdoesnotaddressthedevelopmentofthequalityperformancescoreoritsuseinthe
calculationofsharedsavings(orloss)amounts.
ThesespecificationsarebasedontheRequestforApplicationsthatwaspublishedMay17,2011.They
mayberevisedsubsequenttothepublicationofthefinalrulesfortheMedicareSharedSavingsProgram
orinresponsetocommentsandfurtheranalysisconductedduringthereviewofapplicationsand
negotiationofagreementswithsuccessfulapplicants.Theyareintendedtoprovideamoredetailedand
specificstatementofthemethodsthatareexpectedtobeincludedinthoseagreementstoaid
applicantsintheirevaluationofthePioneermodel.
2.0 ACOalignment
TheACOalignedpopulationandthenationalreferencepopulationonwhichthetrendfactorsusedto
developthebenchmarkwillbebasedwillbothbedrawnfromtheACOalignmenteligiblepopulation.
TheACOalignedpopulationwillincludethoseACOalignmenteligiblebeneficiarieswhomeetthe
requirementsforalignmentwithanACO.
BoththeACOalignedandnationalreferencepopulationswillbeidentifiedonaprospectivebasisprior
tothestartofaperformanceperiod.Finalfinancialsettlementforaperformanceyearwillbebasedon
theclaimsexperienceofthoseprospectivelyalignedbeneficiariesthatcontinuedtomeettheACO
alignmentrequirementsduringtheperformanceperiod.
2.1 ProspectiveACOalignmenteligiblepopulation
Theprospectivealignmenteligiblepopulationwillbeidentifiedusingeligibilityandclaimsdatafora36
monthalignmentperiodthatwillbespecifictoeachperformanceyearasshowninTable21.Table21
alsoshowsthebaselineperiodsthatwillbeusedduringthefirstthreePioneerperformanceyears.
1
The
alignmentperiodisupdatedforeachnewperformanceyear,butthebaselineperiodremainsthesame
untilthePioneerACOis"rebased"after3performanceyears(notshowninTable21).
Table21.AlignmentandbaselineperiodsforPioneerACOsfor2012through2014performanceyears
Period
PerformanceYears
CY2012 CY2013 CY2014
Alignment 7/1/20086/30/2009
7/1/20096/30/2010
7/1/20106/30/2011
7/1/20096/30/2010
7/1/20106/30/2011
7/1/20116/30/2012
7/1/20106/30/2011
7/1/20116/30/2012
7/1/20126/30/2013
Baseline CY2009
CY2010
CY2011
CY2009
CY2010
CY2011
CY2009
CY2010
CY2011
Theclaimsexperienceforthespecifiedperiodwillbetrendedforwardtothirdbaseyear,e.g.,claimsincurredduringcalendar
year2009willbetrendedforwardtobecomparabletoclaimsincurredduringcalendaryear2011byapplyingthegrowthin
expendituresforthereferencepopulation.
Source:CMSPioneerACORFA.
Tobeeligibleforprospectivealignment,abeneficiarymustbeeligibleforalignmentinthethird(latest)
alignmentyear.Thatis,abeneficiarymusthave12monthsoffeeforservice(FFS)coverageunder
MedicarePartAandMedicarePartBandmeettheotherrequirementsforalignmenteligibilityinthe
thirdalignmentyear.
1
Thetermperformanceyeargenerallyreferstoacalendaryear.ThePioneerACORequestforApplications
indicatedthatthefirstperformanceyearcouldbelongerthan12months.However,thisspecificationassumes
thatthefirstperformanceyearforPioneerACOswillbeginJanuary1,2012,andwillbeacalendaryear.
Abeneficiarysclaimsexperienceforanalignmentyearwillbeusedinprospectivealignment
calculationsandincludedintheprospectivebaselineexpenditureestimateifthebeneficiary:
has12monthsofcoverageunderbothMedicarePartAandPartBduringthealignmentyear;
hasnomonthsofcoverageinwhichMedicarewasthesecondarypayerduringthealignmentyear;
hasnomonthsofcoverageunderaMedicaremanagedcareplanduringthealignmentyear;
wasaU.S.residentduringthealignmentyear;and,
receivedatleastoneoftheE&MserviceslistedinTable81duringthealignmentyear.
Theserequirementsmeanthatabeneficiarywhodiesduringanalignmentyearisnoteligiblefor
prospectivealignmentwithanACO.Theidentificationofbaselinedecedentsisdiscussedinsections2.4,
andtheinclusionofdecedentexpendituresinthebaselineisdiscussedinsection5.5.
Thealignmenteligibilityrequirementsalsomeanthatabeneficiarywillnotbeeligibleforprospective
alignmentifthebeneficiaryfirstbecomescoveredbyMedicareinthethirdalignmentyearorifthe
beneficiarywascoveredbyaMedicaremanagedcareplaninthethirdalignmentyear.Abeneficiarywill
becomeeligibleforprospectivealignmentintheyearaftersheorhehasaccumulatedatleast12
monthsofFFSexperience.Thisrequirementmeans,further,thatexpendituresbyabeneficiaryduring
theirfirstmonthsofMedicarecoveragewillnotbeincludedinbaselineexpenditures.Again,thisis
appropriateasexpendituresduringaperformanceyearwillnotincludeexpendituresduringthefirst
monthsofMedicarecoverage.
ThefinalACOalignedandreferencepopulationsforaperformanceperiodthatwillbeincludedin
financialreconciliationwillbedetermined3monthsaftertheendofeachperformanceperiod.A
beneficiarythatisincludedintheprospectivealignmentatthestartoftheperformanceperiodmayfail
tomeetrequirementsforalignmentduringtheperformanceperiod.(Forexample,abeneficiarymay
joinaMedicareAdvantageplan.)Prospectivealignmentwillidentifyallbeneficiariesthatmaybe
alignedwiththeACOduringtheperformanceperiod.Finalalignmentwillsimplyremoveany
prospectivelyalignedbeneficiarywhodoesnotmeetthealignmenteligibilityrequirementsduringthe
performanceyear.
2.2 ACOalignedpopulation
PioneerACOswillbeaccountableforthecostandqualityoutcomesoftheiralignedbeneficiariesateach
endofperiodreconciliation.ThePioneerACOpaymentmodelmayincludeeitherprospectiveor
retrospectivealignment.TheACOalignedpopulationdescribedinthisspecificationsreportisconsistent
withprospectivealignment.APioneerACOmayinsteadchooseretrospectivealignment.The
retrospectivealignmentprocessesoftheMedicareSharedSavingsProgram(MSSP)willbeused,with
changesasnecessarytoreflectdifferencesinrelateddesigncriteriabetweenthePioneerandMSSP
paymentmodels.
Foragivenperformanceperiod,thepopulationofMedicarebeneficiariesforwhomaPioneerACOis
accountablewillbeidentifiedasthosebeneficiariesthattheACOhasprovidedapluralityofeligible
evaluationandmanagement(E&M)servicesinthepriorthreeyears(alignmentperiod),withthemore
recentyearsweightedmoreheavily(60%,30%,10%).Thatis,theallowedchargesforE&Mservices
incurredinalignmentyear3willbeweightedbyafactorof0.6,thosefromalignmentyear2by0.3,and
thosefromalignmentyear1by0.1.ThebeneficiarywillbealignedwiththeACOifitprovidedthe
pluralityofE&Mservicestothebeneficiaryduringthethreealignmentyears.
Atalltimes,Medicarebeneficiarieswillremainfreetoselecttheprovidersandservicesoftheirchoice.
ThePioneerACOpaymentmodeldoesnotincludeanyrestrictionsonorchangestoMedicarefeefor
servicebenefits,nordoesitincludeprovisionsforbeneficiariestooptoutofalignmentwithanACOfor
purposesofexpenditurecalculationsandqualityperformancemeasurement.Anyfuturepossible
provisionsforbeneficiariestooptoutofexpenditurecalculationsandqualitymeasurementwillmirror
thoseinthefinalregulationsfortheMSSP.
2.2.1 InitialAlignment
Foreachperformanceyear,thefollowingstepswilldeterminethePioneerACOprospectivealignment
usinginformationfromthe3yearalignmentperiod(the3alignmentyearsimmediatelypriortothe
performanceperiod).Attheendoftheperformanceyear,prospectivelyalignedbeneficiarieswhodid
notmeetthecriteriaforalignmentduringtheperformanceyearwillbeidentifiedandeliminatedfrom
financialreconciliationcalculations.Becauseoftheseadditional,latersteps,somebeneficiarieswhoare
initiallyalignedwillnotbeincludedinfinancialreconciliationfortheperformanceperiod.
TobeprospectivelyalignedtoanACO,abeneficiarymustmeeteachofthefollowinggeneralcriteria:
1) Musthave12months
2
ofMedicarePartAandBenrollmentinthelastyearofthealignment
period.
2) MustnothaveanymonthsofMedicareAdvantage(MA)enrollmentorMedicareSecondary
Payer(MSP)statusinthelastyearofthealignmentperiod.
3) MustbeaUSresidentinthelastyearofthealignmentperiod.
4) Mustbealiveonthelastdayofthealignmentperiod.
5) Musthaveapluralityofeligibleevaluationandmanagement(E&M)servicesattheACOduring
thealignmentperiod(seedetailsbelow).
Criteria14guaranteethatthereiscompleteandrecentdatatodeterminewhethertheACOhas
historicallyprovidedthepluralityofE&Mservicestothebeneficiary.Thesecriteriaprospectively
identifythebeneficiarieswhowillbeincludedinthereferencepopulation.Criterion5identifiesthe
cohortofbeneficiariesthattheACOisaccountablefor.Criterion5identifiesthosemembersofthe
prospectivelyidentifiedreferencepopulationthatarealignedwiththeACO.TheACOhassomecontrol
overthehealthcareofbeneficiariesthatitprovidesthepluralityofE&Mservicesto,andthushassome
abilitytocoordinatetheircare.
Thedetailedstepsforinitialalignmentareasfollows:
Step1)IdentifyallbillingTaxIdentificationNumbers(TINs)usedbyprovidersaffiliatedwitheachACO.
3
2
Asusedinthisdocumentmonthandmonthofeligibilitymeansanycalendarmonthinwhichabeneficiary
mettheeligibilityrequirementsforACOalignmentonatleastoneday.
3
TheACOmaybeitsownlegalentityandhaveitsownTIN,butinthecaseofanACOthatisnotitselfaMedicare
provider,theACOTINwouldnotappearontheclaim.
Step2)IdentifybillingTINsfromStep1inwhichtheACOonlyreportsasubsetoftheirproviders.For
thesebillingTINs,identifytheappropriateNationalProviderIdentifiers(NPIs).
4
Step3)IdentifyallPartBcarrier(physician/supplier)claimslineitemsforqualifyingE&Mservicesthat
wereprovidedduringthethreeyearalignmentperiod(atanyprovider,notjustACOaffiliated
providers).ThequalifyingE&MservicesrefertotheE&Mservicecodes(seeTable81insection8)of
primarycareandselectspecialistphysiciansfromTables82and83insection8.Allowedchargeswill
beusedasameasureofservicesprovided.
Step4)IdentifyallMedicarebeneficiaryHealthInsuranceClaimNumbers(HICNs)
5
ofbeneficiarieswith
aqualifyingE&MservicefromStep3.
Step5)Usingallowedcharges,determinethepercentageofqualifyingE&Mservicesthatare
providedbyprimarycarephysicians(seeTable82forlistofspecialtycodes).Forbeneficiarieswhere
thispercentageislessthan10%,skipStep6andalignusingStep7.
Step6)Aligneachbeneficiarytoaprovider(ACOornonACOTIN)basedonthepluralityofprimarycare
servicesandothercriteria.
DetailsonStep6Identifytheprovider(ACOornonACOTIN)thatprovidesthepluralityofthe
beneficiarysprimarycarequalifiedE&Mservices,
6
asmeasuredbyallowedcharges,andflagthe
beneficiaryasbeingalignedtothisprovider.Todothis,calculateaprimarycareservicesalignment
ratioforeachprovider.Thealignmentratioforprimarycareservicesisdefinedtobetheproportionof
totalqualifyingE&Mservicesbilledbyaproviders(ACOornonACOTIN)primarycarephysicians(see
Table2forlistofspecialtycodes).Foreachprovider,sumthebeneficiariesallowedchargesoverthe3
yearalignmentperiod,usingweightsof60%/30%/10%,withtheearliestyearweightedleast.Toobtain
theprimarycareservicesalignmentratio,dividetheweightedsumofallowedchargesforagiven
providerbythetotalweightedsumofallowedchargesatallproviders.Alignthebeneficiarytothe
providerwhohasthehighestprimarycareservicesalignmentratio.Inthecaseofatiealignthe
beneficiarytotheproviderwhoperformedthemostrecentprimarycareE&Mservice.Intheeventofa
furthertie,proceedtoStep8.
Step7)Forbeneficiarieswhoreceivelessthan10%oftheirqualifyingE&Mservicesfromprimarycare
physicians(seeStep5),alignthebeneficiaryusingservicesprovidedbyspecialistphysicians.
DetailsonStep7Identifytheprovider(ACOornonACOTIN)thatprovidesthepluralityofthe
beneficiarysspecialist(seeTable83insection8)E&Mservices,asmeasuredbyallowedcharges,and
flagthebeneficiaryasbeingalignedtothisprovider.Todothis,calculateaspecialtycareservices
alignmentratioforeachprovider.Thealignmentratioforspecialtycareservicesisdefinedtobethe
proportionoftotalqualifyingE&Mservicesbilledbyaproviders(ACOornonACOTIN)specialist
physicians(selectspecialtiesfromTable83).Foreachprovider,sumthebeneficiariesallowedcharges
overthe3yearalignmentperiod,usingweightsof60%/30%/10%,withthemostdistantyearweighted
4
MultipleNPIsmaybillthrougheachTIN.E&MserviceswiththeACOspecifiedTIN/NPIcombinationswillbe
identifiedandusedforalignment.
5
AnalternativeMedicarebeneficiaryidentifier,theBeneficiaryLinkKey,mightbeusedinplaceoftheHICN.
6
TotalqualifyingE&MservicesreferstoqualifyingE&MservicesprovidedbyALLproviders(TINs).ForStep6,
consideronlyE&Mservices(lineitems)withprimarycarespecialtycodes.
least.Toobtainthespecialtycareservicesalignmentratio,dividetheweightedsumofallowedcharges
foragivenproviderbythetotalweightedsumofallowedchargesatallproviders.Alignthebeneficiary
totheproviderwhohasthehighestspecialtycareservicesalignmentratio.Intheeventofatie,align
thebeneficiarytotheproviderwhoperformedthemostrecentspecialtycareE&Mservice.Intheevent
ofafurthertie,proceedtoStep8.
Step8)Tiebreakrule:ForbeneficiariesnotalignedinSteps6or7duetoties,performbeneficiary
alignmentusingALLPartBcarrier(physician/supplier)claimsforqualifyingE&Mvisits.
DetailsonStep8Usingallowedcharges,alignthebeneficiarytotheprovider(ACOornonACOTIN)
whoprovidesthepluralityofabeneficiary'sPartBcarrier(physician/supplier)services,usingaPartB
servicesalignmentratioand60%/30%/10%weightinginasimilarfashiontotheprevioustwosteps.In
theeventofatie,alignthebeneficiarytotheproviderwhoperformedthemostrecentPartBservice.
Step9)Dropbeneficiariesfrominitialalignmentiftheydidnotmeetoneormoreofthefollowinginthe
lastyearofthealignmentperiod:a)12monthsofMedicarePartAandBenrollment;b)nomonthsof
MAenrollmentorMSPstatus,c)USresident.
Step10)Dropbeneficiariesfrominitialalignmentiftheywerenotaliveonthefirstdayofthe
performanceyear.
NotesonStep10DateofdeathcanberecordedintheMedicareenrollmentfilemonthsaftera
beneficiaryhasdied.ThemostrecentMedicareenrollmentfilewillbeusedtoidentifydeathsthathave
beenrecordedbythetimeinitialalignmentisconducted.MorerecentMedicareenrollmentfileswillbe
availableforperformanceperiodrealignmentandadditionalbeneficiarieswhodiedduringthe
alignmentperiodmaybedroppedfromfinancialreconciliation.
2.2.2 RealignmentandAttestation
ACOsthatselectprospectivealignmentwillbeaccountableforthecostandqualityoutcomesofalltheir
prospectivelyalignedbeneficiariesateachendofperiodreconciliation,withcertainexceptions.
BeneficiariesinitiallyalignedtoanACOwillbeconsiderednolongerbeingintheACOsdesignated
patientpopulationforpurposesofperformancemeasurementandexpenditurecalculationsifthey
satisfyoneormoreofthefollowingconditionsintheperformanceyear:
1) HaszeromonthsofPartAandBenrollment.
2) HasatleastonemonthofPartAonlyenrollmentorPartBonlyenrollmentorMAenrollmentor
MSPstatus.
3) IsanonUSresident.
4) TransfersMedicareaddresstoaCoreBasedStatisticalArea(CBSA)orruralcountythatdoesnot
overlapwithorisnotadjacenttotheACOslocation(wherethemajorityofitscliniciansare
located).
5) Receivesmorethan50%oftheirE&Mallowedchargesinnonoverlapping,nonadjacentCBSAs
orruralcountiesduringtheperformanceperiod.
Inaddition,asnotedpreviously,ifmorerecentMedicareenrollmentfiles,thanwereavailableduring
theinitialalignmentprocess,showsthatthebeneficiarydiedduringthealignmentperiod,theywillno
longerbealignedtotheACO.
Finally,beneficiarieswhonewlyenrollinMedicareorwhodisenrollfromanMAplanmayalsobe
alignedwithACOsthroughanaffirmativeattestationonbehalfofthebeneficiarythataspecificACOis
hisorherprimaryprovider.ThesebeneficiarieswillbeincludedinthefinancialcalculationsfortheACO
inthefirstperformanceyearaftertheyhaveaccrued12monthsoffeeforserviceexperience.
Beneficiarieswhoalreadyhave12ormoremonthsoffeeforserviceexperiencemayattestatanytime,
butwillnotbeincludedintheACOsexpenditurecalculationsuntilthesubsequentperformanceperiod.
Forexample,a65yearoldwhoenrollsinMedicarebeforeJuly1ofthefirstperformanceperiodwillbe
eligibleforalignmentandexpenditurecalculationsatthebeginningofthethirdperformanceperiod.
Theintentofproceduresforbeneficiaryattestationistoallowpatientsandproviderstoalignbasedon
mutuallyacknowledgedcarerelationshipsratherthanclaimsbasedalgorithms.However,attestationis
notintendedtoresultinACOsselectingsometypesofbeneficiariesmorethanothersforinclusionin
theirexpenditurebaselineandbenchmark,andthisprovisionmayberevisedifprogrammonitoring
revealsdifferencesbetweenattestingpatientsandthosepatientstreatedbytheACOwhodonotattest.
2.3 Nationalreferencepopulation
ThefactorsthatwillbeusedtocalculatetheACOspecificexpenditurebenchmarkasdiscussedin
section6willbecalculatedfromtheexpendituresofthenationalreferencepopulationofallACO
alignmenteligiblebeneficiaries.JustastheACOalignedpopulationisspecifictoaperformanceyear,
thereferencepopulationwillberedefinedforeachnewperformanceyear.
Theprospectivelyidentifiedalignmenteligiblepopulationwillbeusedtocalculatethepreliminary
baselineexpenditureforthereferencepopulation.
Thefinalreferencepopulationthatisusedinfinancialreconciliationwillconsistofallprospectively
identifiedalignmenteligiblebeneficiariesthatalsomeettherequirementsforalignmenteligibilityinthe
performanceperiod.Specifically,thefinalreferencepopulationwillconsistofanyprospectively
identifiedalignmenteligiblebeneficiarywho:
(a) WascoveredunderMedicarepartsAandpartBinthefirstmonthoftheperformanceyear;
(b) HadnomonthsofPartAonlyorPartBonlycoverageduringtheperformanceyear;
(c) HadnomonthsofenrollmentinaMedicareprivatehealthplanduringtheperformanceyear;
(d) HadnomonthscoverageduringtheperformanceyearduringwhichMedicarewasthe
secondarypayer;and,
(e) WasnotaU.S.residentduringtheperformanceyear.
Thenationalreferencepopulationwillalsoinclude,forpurposesofdevelopingbaselinereference
expenditures,baselinedecedentsasdefinedinsection2.4.
2.4 Baselinedecedentpopulation
Asnotedinsection2.1,theprospectivealignmenteligiblepopulationdoesnotincludedecedents.To
makesurethatbaselineexpendituresforthereferencepopulationaswellastheACOaligned
populationreflectsexpendituresincurredbydecedents,baselinedecedentswillbeidentifiedforeach
performanceyear.
DecedentbeneficiarieswillbeeligibleforalignmentwithanACOduringaperformanceyearifthe
beneficiary:
wascoveredunderbothMedicarePartAandPartBduringthefirstmonthofan3
rd
alignmentyear;
had12monthsofMedicarePartAonlyorPartBonlycoverageduringthe2
nd
alignmentyears;
hadnomonthsofcoverageinwhichMedicarewasthesecondarypayerduringthe2
nd
or3
rd
alignmentyears;
hadnomonthsofcoverageunderaMedicaremanagedcareplanduringthe2
nd
or3
rd
alignment
years;
wasaU.S.residentduringthe2
nd
and3
rd
alignmentyears;and,
receivedatleastoneoftheE&MserviceslistedinTable81duringthe2
nd
alignmentyear.
DecedentbeneficiarieswillbealignedwithanACOusingthesamemethodsdescribedinsection2.2but
usingdataforonlythe1
st
and2
nd
alignmentyears.
Thedecedentpopulationwillbeidentifiedusingdataforthe36monthperiodfromJuly1,2008through
June30,2010.Thealignmentofbeneficiarieswhodiedduringthatperiodwillbebasedonthe
providersaffiliatedwiththeACOforeachperformanceyear.
3.0 Savingscalculation
ThegrosssavingsachievedbyanACOinaperformanceyearisthedifferencebetweentheobserved
expendituresincurredbythebeneficiariesalignedwiththeACOintheperformanceyearandthe
expenditurebenchmarkfortheACOspopulation.
S
p
= (B
py
-
) -(E
p
) (Formula3.1)
where
S
p
=savings(peralignedbeneficiary)fortheperformanceyear
B
p
-
=benchmarkfortheperformanceyear
E
p
=expenditureofalignedpopulationintheperformanceyear
TheamountofthegrosssavingsthatisavailabletotheACO(beforeapplicationofqualityincentive
adjustments)isgivenby:
A
p
= (S
py
)(P
p
)(
p
) (Formula3.2)
where
A
p
=amountofsavings(loss)paidto(recoveredfrom)theACOintheperformanceyear
S
p
=grosssavings(loss)bornebyACOintheperformanceyear
P
p
=percentageofgrosssavings(loss)bornebyACOintheperformanceyear
p
=adjustmentforqualityperformancescoreintheperformanceyear
ThePioneerRFAspecifiesarangeforthefractionofgrosssavings(loss)tobebornebytheACO.The
rangeisdeterminedbytheperformanceyear:
InPY1,between50%and70%ofsavings(loss)isbornebytheACO
Thefractionofgrosssavings(loss)bornebytheACOwillbeadjustedbytheACOsqualityperformance
score.Thespecificmethodsusedtoadjustthegrosssavingsfractionforqualityperformancewillbe
definedfollowingpublicationofthefinalrulefortheMedicareSharedSavingsProgram,asnotedinthe
PioneerRFA.
3.1 Minimumsavings/lossthreshold
Iftheamountofgrosssavings(loss)islessthan1%ofthebenchmark,nosavings(loss)willbepaidto
(recoveredfrom)theACO.
3.2 Maximumsavings/loss
ThePioneerRFAspecifiesarangeforthemaximumsavings(loss)thatwillbepaidto(recoveredfrom)
theACO.Themaximumsavings(loss)isspecifiedasapercentageofthebenchmarkanddeterminedby
theperformanceyear:
InPY1,themaximumsavings(loss)paidtoorrecoveredfromtheACOis5%to15%
InPY2,themaximumsavings(loss)paidtoorrecoveredfromtheACOis10%to15%
InPY3,themaximumsavings(loss)paidtoorrecoveredfromtheACOis15%
Thedevelopmentoftheexpenditureinaperformanceperiodisdescribedinsection4,thebenchmark
fortheperformanceperiodinsection5,andthebaselineexpenditurefortheperformanceperiodin
section6.
4.0 Performanceperiodexpenditure
Theexpenditure(peralignedbeneficiary)inaperformanceperiodisthesumofallMedicarepayments
onclaims:
(a) forservicescoveredbyPartAorPartBofMedicare;
(b) thatareincurred(i.e.,withadateofservice)duringtheperformanceperiod;and,
(c) thatarepaid(andconsideredtobethefinalaction)notmorethan3monthsafterthelastday
oftheperformanceperiod.
exceptthat:
(d) Medicareinpatientpassthroughpaymentamounts(estimates)oninpatientclaimswillbe
excludedfromexpenditures.
7
Thedateofserviceforeachtypeofcoveredserviceisasfollows:
Inpatienthospitalclaim:thedischargedateorlastdayofcoverageforaninpatienthospitalstay;
SNFclaim:thelastdayofaSNFstaythatiscoveredbyMedicarePartA;
HHAclaim:thethroughdateofaclaimforHHAservices;
Outpatienthospitalclaim:thedateofservicefortheclaimlineitem;
Physicianorotherproviderclaim:the"throughdate"fortheclaimlineitem(HCPCSprocedure);
DMEorothersupplierclaim:thedateofservicefortheclaimlineitem(HCPCSitem/service);
Hospiceclaim:theclaimthroughdate.
ThespecificrequirementsfortheinclusionofclaimsaregiveninTable84insection8.
4.1 Averageexpenditureperbeneficiary(unweighted,uncapped,unannualized)
Thebasicstatementoftheaverageexpenditureperbeneficiaryinaperformanceperiodisgivenby:
E
p
=
(C
pj,i
)
N
pj
i=0
N
pj
(Formula4.1)
where
E
p
istheaverageexpenditureperbeneficiaryinthePY

N
pj
=0
denotesthesumoverallbeneficiaries(i)intheACOalignedpopulationinthePY
C
p,
=totalincurredclaimsofalignedbeneficiaryiinthePY
7
Thepassthroughamountssuchasdirectmedicaleducationandbaddebtareultimatelyreconciledandpaid
basedonhospitals'MedicareCostReports.TheamountsonclaimsareestimatesbyMedicareclaimsprocessing
contractorsandcanbeunreliable.
N
p
=numberofbeneficiariesalignedwiththeACOinthePY
Notallbeneficiariesinaperformanceperiodwillhave12monthsofexposure(i.e.,coverageunder
MedicarePartsAandB).Themostimportantgroupofbeneficiarieswithfewerthan12monthsof
experiencewillbedecedents.
Asaresult,formula4.1mustbemodifiedforuseincalculatingperformanceperiodexpendituresand
savings.Thesemodificationsinvolvethreesteps:
Annualizationtocorrectforabeneficiarywithfewerthan12monthsofexposure;
Applicationofthecaponannual(orannualized)expenditures;and,
Reweightingtocalculatetheaverageannualizedexpenditureperbeneficiarylifeyear(orperson
year).
Thesethreestepsarediscussedinsections4.2through4.4.Comparableadjustmentsmustalsobemade
tothebaselineexpendituresoftheACOalignedbeneficiariesandtoboththebaselineandperformance
periodexpendituresofthereferencepopulation.
4.2 Annualizedexpenditures
Toadjustfortheeffectofhavingfewerthan12monthsexperience,theexpendituresincurredduring
theperformanceperiodwillbeannualized.Theannualizedexpendituresincurredbyabeneficiary
duringperformanceyear1isgivenby:
C
p,
i
=
C
pj,i
pj,i
(Formula4.2)
p,
=
M
pj,i
12
(Formula4.2a)
where
C
p,
i
=annualizedexpenditureofalignedbeneficiaryiinPY
C
p,
=totalincurredclaimsofalignedbeneficiaryiinPY
p,
=numberofalignmenteligiblelifeyearsofexperienceofbeneficiaryiinPY
H
p,
=numberofalignmenteligiblemonthsofexperienceofbeneficiaryiinPY
Note,further,thattheannualizedexpenditureofbeneficiaryiisequaltotheaveragemonthly
expenditureofthebeneficiarymultipliedby12.
4.3 Capped,annualizedexpenditures
ACOsmayelecttocaptheexpendituresincurredbyanindividualbeneficiarytoreducetheimpactof
beneficiarieswhoincurextraordinaryclaimsontheaverageperformanceyearexpenditureoftheACO
alignedpopulation.
8
Differentreferencepopulationtrendfactorswillbecalculatedandusedforthose
ACOsthatelecttocapandforthosethatelectnottocapannualizedexpenditures.ForACOsthatelect
tocapannualizedexpenditures,theannualizedcappedexpenditureisgivenby:
C
p,
ii
= _
C
p,
i
i C
p,
i
K
p,

K
p,
i C
p,
i
> K
p,
(Formula4.3)
where
C
p,
ii
=isthecapped,annualizedexpenditureofbeneficiaryiinPY
C
p,
i
=istheannualizedexpenditureofbeneficiaryiinPY(fromformula4.2)
K
p,
=thecaponannualexpendituresapplicabletobeneficiaryiinPY
Foralignedbeneficiariesentitledbyageordisability,thecapK
p,
willbetheunweighted99th
percentileoftheannualizedexpendituredistributionintheageddisablednationalreferencepopulation
foreachperformanceyear.
ForalignedESRDbeneficiariesthecapK
p,
developedfromthenationalreferencepopulationforeach
performanceyearwillbe:
1) theweightedmean,annualizeduncappedexpendituresofESRDbeneficiaries;plus
2) thedifferenceof(a)theageddisabledcapand(b)theweightedmean,annualized,expendituresof
ageddisabledbeneficiaries.
ThecapforbeneficiariesclassifiedashavingESRDinsomebutnotallmonthsduringtheperformance
yearwillbeaweightedaverageoftheESRDandageddisabledcapsaccordingtotheproportionofthe
eligiblemonthsineachstatus.Theweightedaveragecapforsuchabeneficiaryisgivenby:
K
p,
=
|(K
cd,pj
)(M
cd,pj,i
)+(K
csrd,pj
)(M
csrd,pj,i
)]
|(M
cd,pj,i
)+(M
csrd,pj,i
)]
(Formula4.4)
where
K
p,
=thecaponannualexpendituresapplicabletobeneficiaryiinPY
8
Theelectiontocap,ornottocap,annualizedexpenditureswillapplytobothbaselineandperformanceyear
expenditures.Thatis,ifanACOelectsnottocapannualizedexpendituresboththeaveragebaselineand
performanceyearexpenditureswillbecalculatedonanuncappedbasis.IfanACOelectstocapannualized
expendituresboththeaveragebaselineandperformanceyearexpenditureswillbecalculatedonacappedbasis.
K
ud,p
=thecaponannualexpendituresforagedanddisabledbeneficiariesinPY
K
csd,p
=thecaponannualexpendituresforESRDbeneficiariesinPY
H
ud,p,
=numberofalignmenteligiblemonthsofESRDfreeexperienceofbeneficiaryiinPY
H
csd,p,
=numberofalignmenteligiblemonthsofexperiencewithESRDofbeneficiaryiinPY
4.4 Weighted,capped,annualizedexpenditures
Abeneficiarywithfewerthan12monthsexposureintheperformanceyearshouldnotbecounted
equallywithbeneficiarieswithafull12monthsofexposurebecausethebeneficiarydoesnotincur
claimsineverymonthoftheperformanceyear.Theannualized,cappedexpenditurewillbeweighted
basedonthenumberofexposuremonthsofthebeneficiaryintheperformanceperiod.Theweighted,
capped,annualizedexpenditureisgivenby:
E
p
ii
=meanofcapped,annualizedexpendituresweightedbylifeyears
E
p
ii
=
j[C
pj,i
||
(
pj,i
)[
N
pj
i=0
(
pj,i
)
N
pj
i=0
(Formula4.5)
where
E
p
ii
istheaverageweighted,capped,annualizedexpenditureperbeneficiaryinPY1
C
p,
ii
=cappedannualizedexpendituresofbeneficiaryiinPY1
p,
=numberoflifeyearsofexperienceincurredbyalignedbeneficiaryiinPY

N
pj
=0
meanssumoverallbeneficiaries(i)intheACOalignedpopulationinPY.
Ignoringtheeffectofcapping,theaverageweightedannualizedexpenditure(E
p
ii
)equalstheaverage
expenditureperalignmenteligiblemonthmultipliedby12.ThiscanbeseenbyreplacingC
p,
ii
with
C
p,
i
inFormula4.5(becauseweareignoringtheeffectofcapping)andsubstitutingthedefinitionof
C
p,
i
fromFormula4.2:
E
p
ii
=
_
[C
pj,i
[Y
pj,i
(
pj,i
)_
N
pj
i=0
(
pj,i
)
N
pj
i=0
(Formula4.5a)
Simplifying,formula4.5acanberewrittenassimplytheaverageexpenditureofACOaligned
beneficiariesperlifeyear:
E
p
ii
=
(C
pj,i
)
N
pj
i=0
(
pj,i
)
N
pj
i=0
(Formula4.5b)
Substitutingthedefinitionof
p,
fromFormula4.2a:
E
p
ii
=
(C
pj,i
)
N
pj
i=0
_
M
pj,i
12
]
N
pj
i=0
(Formula4.5c)
E
p
ii
= 12_
(C
pj,i
)
N
pj
i=0
(M
pj,i
)
N
pj
i=0
_ (Formula4.5d)
where
E
p
ii
istheaverageweighted,capped,annualizedexpenditureperbeneficiaryinPY1
C
p,
ii
=cappedannualizedexpendituresofbeneficiaryiinPY1
C
p1,
=totalincurredclaimsofalignedbeneficiaryiinPY
p,
=numberoflifeyearsofexperienceincurredbyalignedbeneficiaryiinPY
H
p,
=numberofalignmenteligiblemonthsofexperienceofbeneficiaryiinPY

N
pj
=0
meanssumoverallbeneficiaries(i)intheACOalignedpopulationinPY.
Inotherwords,settingasidetheeffectofcapping,theaverageweightedannualizedexpenditureper
beneficiaryisequaltotheaveragemonthlyexpenditureofACOalignedbeneficiariesmultipliedby12.
5.0 Baselineexpenditure
BecausetheACOalignedpopulationchangesfromoneperformanceyeartothenext,baseline
expendituresarespecifictoaperformanceyear,andwillberecalculatedforeachperformanceyear.A
preliminarybaselineexpenditurewillbecalculatednearthebeginningoftheACO's3yearagreement
period,usingtheprospectivelyalignedPY1population.Thefinalbaselineexpenditurewillnotbe
calculateduntiltheACO'sfinallyalignedpopulationforaperformanceyearisavailable,whichwillbe
aftertheconclusionoftheperformanceyear.SeeTable85forasummaryofthesequencingof
alignment,baseline,andperformanceyearcalculationsduringperformanceyears1through3.
ThebaselineexpenditureforanACOisbasedontheexpendituresincurredbytheACOaligned
populationovera3yearbaselineperiod.Inthissection,wedenotethe3yearsofthebaselineperiod
byBY1(calendaryear2009),BY2(calendaryear2010),andBY3(calendaryear2011),whereBY3isthe
mostrecent(latest)baselineyear.
TwodifferenttypesofACOalignedbeneficiariescontributetothebaselineexpenditure:(1)established
beneficiarieswhohadatleastafullyearoffeeforservicecoverageunderPartsAandBofMedicare
duringthebaselineperiod;and(2)newlyeligiblebeneficiarieswhohadlessthanafullyearoffeefor
servicecoverageunderPartsAandBduringthebaselineperiod.Thissecondtypeofbeneficiary
includesnewMedicareprogramenrollees,andbeneficiariesdisenrollingfromaprivateMedicarehealth
plan.
Thesameproceduresapplytothecalculationofbaselineexpendituresforthepopulationalignedwith
anACOandforthereferencepopulationofallalignmenteligiblebeneficiaries.
Thedevelopmentofthebaselineexpenditureinvolves9steps.Thefirstsixofthesestepsinvolvethe
calculationofthebaselineforbeneficiarieswhowereeligibleforestablishedbeneficiaries.
1. CalculatethetotalMedicarePartAandPartBclaimsincurredbytheACOaligned(oralignment
eligible)beneficiaryineachofthethreebaseyearsincludedinthebaselineperiod.
2. CalculatethetotalmonthsineachofthethreebaseyearsduringwhichtheACOaligned(or
alignmenteligible)beneficiarywaseligibleforalignment.
3. CalculatetheannualizedexpenditureforeachACOaligned(oralignmenteligible)beneficiary
foreachofthethreebaseyearsincludedinthealignmentperiod
4. Calculatethecapped,annualizedexpenditureforeachACOalignedbeneficiary(oralignment
eligible)foreachofthethreeyearsincludedinthebaselineperiod.
9
5. Trendthecapped,annualizedexpenditureforeachACOaligned(oralignmenteligible)
beneficiaryforeachbaseyeartoacommonbaseyear,specificallytobaseyear3.
6. Calculatethe3yearweightedaverageofthetrended,capped,annualizedbaselineexpenditure
foreachACOaligned(oralignmenteligible)beneficiary.Thisisthe3yearweightedaverage
expenditurebaselinefortheACOaligned(oralignmenteligible)beneficiary.
Thelasttwostepsinvolvethecalculationofthebaselinefornewlyeligiblebeneficiaries.
9
ThisstepappliesonlyiftheACOelectstousecappedexpendituresinthesavingscalculations.
7. Calculatethe3yeartrended,capped,annualizedbaselineexpenditureforeachnewlyeligible
ACOalignedbeneficiary.
8. Calculatethe3yeartrended,capped,annualizedbaselineexpenditureforACOaligned
decedentsasdefinedinsection2.4.
9. Calculatetheweightedaverageofthe3yearweightedaverageexpenditurebaselineforall
ACOalignedbeneficiaries,includingbothallprospectivelyelignedbeneficiaries(fromstep6),
newlyeligiblebeneficiaries(fromstep7),anddecedents(fromstep8).Thisisthebaselinethat
willbeusedinthecalculationofthebenchmarkforaperformanceyear.
InSection5.1wedescribethedevelopmentofabeneficiarysbaselineexpenditureforeachofthethree
baselineyears.
InSection5.2wedescribethetrendingofexpenditurefromBY1andBY2toBY3.
Insection5.3wedescribethecalculationofthe3yearbaselineexpenditureforeachACOaligned
beneficiaryasaweightedaverageofthebeneficiariescapped,annualizedexpendituresineachofthe3
baselineyears.
InSection5.4,wedescribethecalculationofthe3yearbaselineexpenditureforthe"newlyeligible"
beneficiarieswhodonothave12eligiblemonthsinBY3.
InSection5.5,wedescribethecalculationofthe3yearbaselineexpenditurefor"decedents".
InSection5.6,wedescribethecalculationofthe3yearweightedaverageexpenditurebaselineforall
ACOalignmenteligiblebeneficiaries.
5.1 Baseyearexpenditure
Thebaselineexpenditureforabeneficiaryisdevelopedfromtheexpenditureincurredbyabeneficiary
ineachofthethreeyearsthatcomprisethebaselineperiod(2009through2011).Themethodsusedto
calculatethebeneficiarysexpenditureforeachofthesethreeyearsarethesameasthoseusedto
developtheperformanceperiodexpenditurethataredescribedinsection4,withoneexception.The
beneficiarysexpenditureforeachbaseyearisnotweightedbythebeneficiarysmonthsofalignment
eligibilityuntilthethreeyearsarecombinedintoasinglebaselineexpenditureamount.
5.1.1 Annualizedbaseyearexpenditure
Theannualizedexpenditureincurredbyabeneficiaryineachofthethreebaseyearsadjuststheamount
oftheclaimsincurredduringeachyearforthemonthsofACOalignmenteligibilityduringthatyear.The
annualizedbaseyearexpenditureforbaseyear1isgivenby:
C
b1,
i
=
C
bj1,i
bj1,i
(Formula5.1)
b1,
=
M
bj1,i
12
(Formula5.1a)
C
b1,
i
= _
C
bj1,i
M
bj1,i
] 12 (Formula5.1b)
where
C
b1,
i
=annualizedexpenditureofalignedbeneficiaryiinBY1
C
b1,
=totalincurredclaimsofalignedbeneficiaryiinBY1
b1,
=numberofalignmenteligiblelifeyearsofexperienceofbeneficiaryiinBY1
H
b1,
=numberofalignmenteligiblemonthsofexperienceofbeneficiaryiinBY1
TheformulasforBY2andBY3arethesameasformulas6.1through6.1bexceptthatby2andby3are
substituted,respectively,forby1.
Asdiscussedabove,theannualizedexpenditureisanestimateoftheclaimsthatwouldhavebeen
incurredbythebeneficiarywithfewerthan12monthsofeligibilityifthebeneficiaryhadincurredclaims
for12monthsatthesamerateasinmonthsofeligibility.Thatis,abeneficiarywhoincurredclaimsata
rateof$6,000duringeachofhersixmonthsofeligibilitywould,ifthatrateofspendinghadcontinued
for12months,haveincurredclaimsof$72,000duringthecalendaryear.
5.1.2 Capped,annualizedbaseyearexpenditure
Thedevelopmentofthecappedannualizedexpenditureforabeneficiaryineachbaseyearusesthe
samemethodsandformulasdiscussedinsection4inconnectionwithperformanceperiodexpenditures.
Thebasicformulaforthecapped,annualizedexpenditureisgivenbyformula4.3.
Thecapped,annualizedexpenditureofabeneficiaryisthelesseroftwoamounts:(a)theannualized
expendituresincurredbythebeneficiaryduringmonthsofACOalignmenteligibilityineachbaseyear;
and(b)themaximumannualizedexpenditureineachofthebaseyears:
C
b1,
ii
= _
C
b1,
i
i C
b1,
i
K
b1,

K
b1,
i C
b1,
i
> K
b1,
(Formula5.2a)
C
b2,
ii
= _
C
b2,
i
i C
b2,
i
K
b2,

K
b2,
i C
b2,
i
> K
b2,
(Formula5.2b)
C
b3,
ii
= _
C
b3,
i
i C
b3,
i
K
b3,

K
b3,
i C
b3,
i
> K
b3,
(Formula5.2c)
where
C
b1,
ii
=capped,annualizedexpenditureofbeneficiaryiinBY1
C
b1,
i
=annualizedexpenditureofbeneficiaryiinBY1(fromformula4.1)
K
b1,
=caponannualexpendituresapplicabletobeneficiaryiinBY1
ThedefinitionofthetermsforBY2andBY3arethesameexceptthatby2andby3aresubstituted,
respectively,forby1.
Asdiscussedinsection4.3,thecap(K
b1,
,K
b2,
,orK
b3,
)thatwillbeappliedtoannualexpenditures
willdependonwhetherthebeneficiaryhasESRD.Thecapthatisappliedtoagedanddisabled
beneficiarieswithoutESRDwillbeequaltotheunweighted99thpercentileoftheannualized
expendituredistributionfortheageddisablednationalreferencepopulationforthespecifiedbaseyear.
ForalignedESRDbeneficiariesthecapdevelopedfromthenationalreferencepopulationforthe
specifiedbaseyearwillbethemean,annualizeduncappedexpendituresofESRDbeneficiariesplusthe
differencebetweentheageddisabledcapandtheunweightedmean,annualized,expendituresofaged
disabledbeneficiaries.
ThecapforbeneficiariesclassifiedashavingESRDinsomebutnotallmonthsduringtheperformance
yearwillbeaweightedaverageofthecapsforESRDandageddisabledbeneficiarieswheretheweight
appliedistheproportionoftheeligiblemonthsineachstatus.Seesection4.3foradetailed
specification.
5.2 Trendingofbaseyearexpenditurestocommonbaseyear(BY3)
Thecapped,annualizedexpenditureforeachofthefirstandsecondyearsofthebaselineperiodwillbe
trendedforwardtothethird(last)yearofthebaselineperiodbyapplyingtrendfactorsderivedfromthe
nationalreferencepopulation.
Toderivethesetrendfactors,thenationalreferencepopulationwillbedefinedtoincludebeneficiaries
aliveattheendofBY3with12eligiblemonthsinBY3.
Thetrendfactorthatisappliedtothebeneficiaries'capped,annualizedexpenditurewillbespecificto
theentitlement/age/sexcategorytowhichthebeneficiarybelongs.Eachalignedandreference
beneficiarywillbeassignedtoherorhisentitlement/age/sexcellbasedonBY3(2011)entitlement
status,ageandsex.
B
b1,
= (C
b1,
ii
) _
R
bj3,c
i
||
R
bj1,c
i
||
_ (Formula5.3a)
B
b2,
= (C
b2,
ii
) _
R
bj3,c
i
||
R
bj2,c
i
||
_ (Formula5.3b)
B
b3,
= (C
b3,
ii
) (Formula5.3c)
where
B
b1,
=capped,annualizedexpenditureofbeneficiaryiinBY1(2009)trendedtoBY3(2011)
B
b2,
B
b3,
=capped,annualizedexpenditureofbeneficiaryiinBY3(2011)
R
b1,u
i
ii
=averagecapped,annualizedexpenditureofreferencepopulationinthe
entitlement/age/sexcategorytowhichbeneficiaryibelongs(o
)inBY1(2009)
R
b2,u
i
ii
)inBY2(2010)
R
b3,u
i
ii
)inBY3(2011)
C
b1,
ii
C
b2,
ii
C
b3,
ii
5.3 3yearweightedaveragetrended,capped,annualizedexpenditureforabeneficiary
Thetrended,capped,annualizedexpendituresforeachofthethreebaseyearswillbecombinedtogive
thebaselineexpenditureforeachACOalignedbeneficiary.Thebeneficiarysexpenditureforeachbase
yearwillbeweightedbythenumberofmonthsofACOeligibilityinthatyearandtheweightassignedto
thatyearbytheACObaselinepolicy(i.e.,60%oftheeligibilitymonthsinthe3
rd
baselineyear,30%of
theeligibilitymonthsinthe2
nd
baselineyear,and10%oftheeligibilitymonthsinthe3
rd
baselineyear.
b3,
= (B
b1,
)(w
b1,
) +(B
b2,
)(w
b2,
) +(B
b3,
)(w
b3,
) (Formula5.4)
w
b1,
=
(M
bj1,i
)(0.1)
|(M
bj1,i
)(0.1)+(M
bj2,i
)(0.3)+(M
bj3,i
)(0.6)]
(Formula5.4a)
w
b2,
=
(M
bj2,i
)(0.3)
|(M
bj1,i
)(0.1)+(M
bj2,i
)(0.3)+(M
bj3,i
)(0.6)]
(Formula5.4b)
w
b3,
=
(M
bj3,i
)(0.6)
|(M
bj1,i
)(0.1)+(M
bj2,i
)(0.3)+(M
bj3,i
)(0.6)]
(Formula5.4c)
where
B
b3,
=3yearaveragebaselineofbeneficiaryiexpenditurestrendedtoBY3(2011)
B
b1,
B
b2,
B
b3,
w
b1,
=weightedcontributionofBY1(2009)expenditureofbeneficiaryitothe3yearbaseline
ofbeneficiaryi
w
b2,
ofbeneficiaryi
w
b3,
ofbeneficiaryi
H
b1,
=alignmenteligiblemonthsofbeneficiaryiinBY1(2009)
H
b2,
H
b3,
5.4 Newlyeligibleandotheralignedbeneficiarieswithout12eligiblebaseperiodmonths
Inthefirstperformanceperiodallbeneficiarieswillhave12monthsofexperienceinthe3
rd
baseline
year(i.e.,2010)becausethisisarequirementforalignment.Therewill,therefore,benoneedforspecial
provisionstocalculateandincludeintheACObaselineanamountthatrepresentstheexperienceof
newlyeligiblebeneficiaries.Howeverinthesecondandthirdperformanceyears,specialprovisionwill
bemadetoincludeabaselineexpenditureamountfornewlyeligiblebeneficiaries.Thissectionfocuses
oncalculatingbaselineexpendituresfor"newlyeligiblebeneficiaries",bywhichwemeannewMedicare
programenrolleeswhoenrollinMedicareafterthefirstmonthofthe3rdbaselineyear.Similarissues
arisefordisenrolleesfromMedicareprivatehealthplansorotherbeneficiarieswhomaybeeligiblefor
ACOalignmentinperformanceyears2and3,butwhodonothave12eligiblemonthsofexpenditure
datainthe3baselineyears.Themethodsdescribedinthissectionwillbeusedtocalculatebaseline
expendituresforallalignedbeneficiarieswithout12monthsofeligibleexperienceinthe3baseperiod
years.
10
Inperformanceyear1(2012),thealignmentperiodisthesubstantiallythesameasthebaselineperiod.
Asaresult,beneficiarieswith12monthsofexperienceinthe3
rd
yearofthealignmentperiod(ending
June2011),whichisarequirementforalignment,willalsohave6monthsofexperienceinthe3
rd
year
ofthebaselineperiod.Manyofthesebeneficiarieswillalsohaveeligibleexperienceinthe1stand2
nd
yearsofthebaselineperiod(endingin2009and2010,respectively).Claimsincurredduring2009
through2011willbeusedtodevelopthebaselineexpenditureforthesebeneficiariesusingthemethod
specifiedintheprevioussection.
Inperformanceyear2(2013),thealignmentperioddiffersfromthebaselineperiod.Thealignment
periodcoversthethree12monthperiodsendinginJune2010,2011,and2012.Abeneficiarywith12
monthsexperienceinthethirdalignmentyear(ending2012),willnotnecessarilyhave12months(or
anymonths)ofeligibleexperienceinthe3yearbaselineperiod20092011.Similarlyinperformance
year3(2014),alignmenteligiblebeneficiarieswillnotnecessarilyhave12,orany,eligiblemonthsof
experienceinthebaselineperiod.BeneficiarieswhowereinenrolledinaMedicareprivatehealthcare
planduringsomeorallofthebaselineperiodmaybeeligibleforalignmentinperformanceyears2and
3,yetalsomaynothave12eligiblemonthsinthebaselineperiod.Baselineexpendituresforthese
typesofbeneficiarieswillbecalculatedusingthemethodsdescribedinthissection.
Inthecaseofthesenewlyeligibleorotherbeneficiarieswithout12eligiblemonthsintheoriginal3year
baselineperiod(CY2009throughCY2011),their3yearbaselineperiodwillbedefinedasthe3year
alignmentperiodfortheperformanceyear.Further,the3baseyearswillbeweightedasfollows:
The3
rd
yearofthealignmentperiodwillbetreatedasifitwerethe1
st
yearofthebaseline
period,andwillbeweighted10%.
The2
nd
nd
yearofthebaseline
The1
st
rd
yearofthebaseline
Forperformanceyear2,thebaselineyearswillbe:
Baseyear1(2012),whichwillbeweighted10%.
Forperformanceyear3,thebaselineyearswillbe:
10
Baselineexpendituresforallbeneficiarieswithatleast12eligiblemonthsinthe3yearbaselineperiod2008
2010willbecalculatedfrombaselineperiodexpenditures,accordingtothemethodsdescribedearlierinSection5.
Fornewlyeligiblebeneficiarieswithoutexperienceinthebaselineperiod,theolderbaselineyearswill
morecloselyrepresentspatternsofutilizationandexpenditureintheoriginal3rdbaseperiodyear
2011,whichisthefundamentalbaseyearusedinthePioneerACObenchmarkcalculation.
Consequently,itisappropriatetogivegreaterweighttotheyearsthatareclosertotheoriginalbaseline
period.Allalignedbeneficiarieswithout12eligiblemonthsintheoriginalbaselineperiod20092011
areguaranteedtohaveatleast12eligiblemonthsintheredefinedbaselineperiodbecauseallaligned
beneficiariesmusthave12eligiblemonthsinthe3rdyearofthealignmentperiod.
Afurtherstipulationisthatthebaselineperiodforabeneficiarywillbedeterminedbytheyearinwhich
thebeneficiaryfirstbecomeseligibleforACOalignment.Thismeansthatthebaselineexpenditurefora
beneficiary,oncecalculated,willnotbechanged(recalculated).Ifabeneficiaryqualifiesforalignment
inPY1andherorhisbaselineexpendituresarecalculated,thosesamebaselineexpenditureswillbe
usedforPY2andPY3.Similarly,baselineexpenditurescalculatedfornewlyalignedbeneficiariesinPY2
willbeusedforPY3.InPY3,baselineexpenditureswillonlybecalculatedforbeneficiariesnewlyaligned
inPY3,whosebaselineexpenditureswerenotcalculatedforPY1orPY2.
Becausetheclaimsexperienceofnewlyeligiblebeneficiariesmaybefromayearthatislaterthanthe
3
rd
baselineperiodyear(2010),theseexpendituresmustberolledbacktothe3
rd
baselineyearby
applyingtrendfactorsderivedfromthenationalreferencepopulation.Forperformanceyear2:
B
u3,
= (C
u3,
ii
) _
R
bj3,c
i
||
0
cj3,c
i
||
] (Formula5.6a)
B
u2,
= (C
u2,
ii
) _
R
bj3,c
i
||
0
cj2,c
i
||
] (Formula5.6b)
B
u1,
= (C
u1,
ii
) (Formula5.6c)
where
B
u3,
=capped,annualizedexpenditureofnewlyeligiblebeneficiaryiinalignmentyear3
(2012)
11
trendedtoBY3(2011)
B
u2,
(2011)trendedtoBY3(2011)
B
u1,
=capped,annualizedexpenditureofnewlyalignedbeneficiaryiinalignmentyear1
(2010)
u
u3,u
i
ii
=averagecapped,annualizedexpenditureofnewlyeligiblereferencepopulationinthe
age/sexcategorytowhichnewlyeligiblebeneficiaryibelongs(o
)inalignmentyear3
(2012)
11
ForbeneficiarieswhofirstbecomeenrolledinMedicareafter2010,theeligibilitymonthsandexpenditure
duringBY3will,ofcourse,bezero.
u
u2,u
i
ii
=averagecapped,annualizedexpenditureofnewlyeligiblereferencepopulationinthe
age/sexcategorytowhichnewlyeligiblebeneficiaryibelongs(o
)inalignmentyear2
(2011)
R
b3,u
i
ii
=averagecapped,annualizedexpenditureofreferencepopulationintheage/sex
categorytowhichbeneficiaryibelongs(o
)inBY3(2011)
C
u3,
ii
(2012)
C
u2,
ii
(2011)
C
u1,
ii
(2010)
Theavailableyearsofexperiencewouldbecombinedusingthesamemethodofweightingthe
individualbaseyearexpenditures:
b3,
= (B
u3,
)(w
u3,
) +(B
u2,
)(w
u2,
) +(B
u1,
)(w
u1,
) (Formula5.7)
w
u3,
=
(M
cj3,i
)(0.1)
|(M
cj3,i
)(0.1)+(M
bj2,i
)(0.1)+(M
cj1,i
)(0.6)]
(Formula5.7a)
w
u2,
=
(M
cj2,i
)(0.3)
|(M
cj3,i
)(0.1)+(M
cj2,i
)(0.3)+(M
cj1,i
)(0.6)]
(Formula5.7b)
w
u1,
=
(M
cj1,i
)(0.6)
|(M
cj3,i
)(0.1)+(M
cj2,i
)(0.3)+(M
cj1,i
)(0.6)]
(Formula5.7c)
where
B
b3,
=3yearaveragebaselineofnewlyeligiblebeneficiaryiexpenditurestrendedtoBY3
(2010)
B
u3,
B
b2,
B
u1,
(2010)
w
b3,
=weightedcontributionofalignmentyear3(2012)expenditureofnewlyeligible
beneficiaryitothe3yearbaselineofbeneficiaryi
w
b2,
w
u1,
H
u3,
=alignmenteligiblemonthsofnewlyeligiblebeneficiaryiinalignmentyear3(2012)
H
u2,
H
u1,
Usingthesemethods,abaselineexpenditureisobtainedforeveryalignedbeneficiarywithlessthan12
eligiblemonthsintheoriginalbaselineperiod(20092011).Thesebaselineexpendituresareincludedin
theunweightedaveragebaselineexpendituresacrossallalignedbeneficiaries,toobtainoverallACO
baselineexpenditures,asgivenbyFormula6.5.
Anexamplemaymakethisclearer.AssumeabeneficiarybecameeligibleforMedicareinOctober2011
andwascontinuouslyACOeligiblethroughDecember2012.Thebeneficiarythereforehas:
12monthsofACOalignmenteligibilityin2012
3monthsofACOalignmenteligibilityin2011
0monthsofACOalignmenteligibilityin2010andearlier
Thebeneficiaryhas,intotal15monthsofACOalignmenteligibility.Onaweightedeligibilitybasis,the
annualweightsforeachyearare:
10%ofthe12monthsofexperiencein2012,normalizedbythetotal2.1weightedeligible
months,whichequalsa2012weightof1.2/2.1=57%.
30%ofthe3monthsofexperiencein2011,normalizedbythetotal2.1weightedeligible
months,whichequalsa2011weightof0.9/2.1=43%
60%ofthe0monthsofexperiencein2010,whichequalsa2010weightof0.
Ifthebeneficiaryscapped,annualizedexpenditure(aftertrendingtothe3
rd
baselineyear(2010))are
$2,400in2011and$3,100in2012.ThebeneficiaryincurrednoMedicareexpendituresin2010.The
weighted3yearaveragebaselineexpenditureforthebeneficiarywouldbe:
For2012(treatedasthe1
st
yearofthebaseline):$3,100x(1.2/2.1)=$1,771.43
nd
yearofthebaseline):$2,400x(0.9/2.1)=$1,028.57
rd
yearofthebaseline):$0x0.0weightedmonths=$0
Summingtheseamountsgivesabaselineexpenditureof$2,800forthisbeneficiary.
5.5 Baselineexpendituresfordecedents
Thebaselineexpenditureofdecedentswillbecalculatedusingthemethodsdescribedinsections5.1,
5.2and5.3.Thebaselinedecedentexpenditurewillbecalculatedonceforthebeneficiariesidentifiedin
section2.4,i.e.,beneficiarieswhodiedduringthe36monthalignmentperiodforperformanceperiod1.
Thebaselineexpenditureforeachofthesebeneficiarieswillbeincludedinthecalculationofbaseline
expendituresforeachperformanceyear.
5.6 3yearbaselineexpenditure
ThebaselineexpenditureforanACO'sperformanceyearistheweightedaverageofthebaseline
expendituresofthebeneficiariesalignedtotheACOintheperformanceyearwherethebeneficiary
levelexpendituresareweightedbytheweightedlifeyear.TheACO'sbaselineexpenditurecanbe
written:
b3
=
|(B
b3,i
)(
b3,i
)]
N
i=1
(
b3,i
)
N
i=1
(Formula5.8)
where
B
b3
=theACO's3yearbaselineexpenditureforaperformanceyear

N
=1
denotesthesumoverallbeneficiaries(i)intheACOalignedpopulationforthe
performanceyear
B
b3,
=3yearbaselineexpenditureofbeneficiaryiexpressedinannualized,BY3dollars
b3,
=3yearweightedaveragelifeyearsofbeneficiaryi
N =numberofbeneficiariesalignedwiththeACOintheperformanceyear.
The3yearweightedaveragelifeyears
b3,
usedinFormula6.8isgivenby:
b3,
=
|(M
bj1,i
)(0.1)+(M
bj2,i
)(0.3)+(M
bj3,i
)(0.6)]
12
(Formula5.9)
where
b3,
=3yearweightedaveragelifeyearsofbeneficiaryi
H
b1,
=alignmenteligiblemonthsofbeneficiaryiinBY1
H
b2,
H
b3,
The3yearbaselinerepresentsthetotalexpenditurethatwasincurredbyallalignedbeneficiariesover
the3baselineyears.However,eachbaselineyeardoesnotcontributeequallytoanaligned
beneficiary'sbaselineexpendituresfortworeasons:
The60%/30%/10%baselineyearsweightinggiveslessweighttoabaseyearthatismoredistant(in
time)fromtheperformanceyear.Thisweighting,ineffect,assumesthatthemoretimethathas
elapsedsinceabaseyearandtheperformanceyearthelesspredictiveexpendituresinthatbase
yearwillbeofperformanceyearexpenditure.
Somebeneficiarieswillhavelessexperiencetocontributetothetotalexpenditureofthealigned
populationoverthethreebaseyears.Somebeneficiarieswillhavebeenalignmenteligibleforonly
oneortwoyears,whileotherbeneficiaries(specificallydecedents)willhavefewerthan12months
ofexperienceinabaselineyear.Becausetheperformanceyearexpenditure(calculatedas
describedinsection4)representsanexpenditureperpersonyear,andbecauseanaligned
beneficiarywithfewerthan12monthsofexperienceintheperformanceyearcontributeslessto
theaverageexpenditureperpersonyearintheperformanceyearthanabeneficiarywith12months
ofexperience,itisappropriatetoweightbaselineexpendituresfortheamountofexperience
contributedbyeachbeneficiary.
6.0 Benchmarkcalculation
ThePioneerACORFAspecifiesthattheexpenditurebenchmarkwillbeequaltotheACOsbaselineper
capitaexpenditureincreasedbyanamountequalto50%ofthenationalpercapitapercentagegrowth
rateappliedtotheACOs3yearbaselineexpenditureplus50%ofthedollarchangeinthenationalper
capitaexpenditure.
Thisformulaforcalculatingthebenchmarkcanbewritten:
B
p
-
= B
b3
+u.SjB
b3
[
R
pj
R
b3
[ +u.S(R
p
) (Formula6.1)
R
p
= R
p
-R
b3
(Formula6.1a)
where
B
p
-
=percapitabenchmarkforPY
B
b3
=3yearbaselinepercapitaexpenditureofalignedpopulationexpressedinBY3dollars
R
p
=percapitaexpenditureofreferencepopulationinPY
R
b3
=percapitaexpenditureofreferencepopulationfor3yearbaseperiod
R
p
=dollarchangeinpercapitaexpenditureofreferencepopulationfromtoPY.
Thisbasicformulacanberestatedas:
B
p
-
= B
b3
+[
R
pj
R
b3
[
|B
b3
+R
b3
]
2
(Formula6.1b)
StatedinEnglish:thebenchmarkisthebaselineplusthereferencepopulationgrowthratemultipliedby
thesimpleaverageofthebaselineACOexpenditureandthebaselinereferencepopulationexpenditure.
Thisrestatementshowsthat,effectively,thePioneerbenchmarkisadjustingtheACOspecificbaseline
expendituresupwardsordownwardshalfwaytowardthenationalaveragebaseline,andthenapplying
thenationalpercentagegrowthrate.
6.1 Nationalreferencepopulationcohort
ThebasiceligibilityrequirementsforthenationalreferencepopulationarediscussedinSection2.3.The
nationalreferencepopulationincludesallalignmenteligiblebeneficiaries,whetherornottheyare
actuallyalignedtoanyspecificACO.Thenationalreferencepopulationincludesbothbeneficiaries
alignedtoACOsandbeneficiariesnotalignedtoanyACO.Thenationalreferencepopulationexcludes
beneficiariesnotresidingintheUnitedStates.
Thedollarandpercentagechangeinnationalreferencepopulationexpenditureswillbecalculatedfor
theprospectivelyidentifiedcohortofbeneficiarieswhoareACOalignmenteligibleforeach
performanceyear.Moreexplicitly:
ThereferencecohortforPY1willconsistofbeneficiarieswhowerealignmenteligibleinalignment
year1forPY1(July2008throughJune2011).
Aprospectivelydefinedreferencepopulationcohortwillbedefinedforeachperformanceyear,justas
anACO'salignedpopulationwillberedefinedforeachperformanceyear.
Analignmenteligiblebeneficiarywouldcontributetotheexpenditurebaselineofthereference
populationandtothebaselineofanACOwithwhichsheorheisalignedonlyinthosebaseyearsin
whichsheorhewasalignmenteligible.
6.2 Referencepopulationexpenditure
Theexpenditure(perACOeligiblebeneficiary)inaperformanceperiodisthesumofallMedicare
paymentsonclaimsassociatedwithanACOalignmenteligiblebeneficary:
(a) forservicescoveredbyPartAorPartBofMedicare;
(b) thatareincurred(i.e.,withadateofservice)duringtheperformanceperiod;and,
(c) thatarepaid(andconsideredtobethefinalaction)notmorethan3monthsafterthelastday
oftheperformanceperiod,
exceptthat:
(d) Medicareinpatientpassthroughpaymentamounts(estimates)oninpatientclaimswillbe
excludedfromexpenditures.
12
AlignmentwithanACOisnotarequirementforthereferencepopulation.Thatis,thereference
expenditurewillbebasedonallclaimsincurredbyanyACOalignmenteligiblebeneficiarywhetheror
notthebeneficiaryisalignedwithanACO.
ThedatesofserviceforeachtypeofcoveredservicearethesameasfortheACOalignedpopulation:
Inpatienthospitalclaim:thedischargedateorlastdayofcoverageforaninpatienthospitalstay;
SNFclaim:thelastdayofaSNFstaythatiscoveredbyMedicarePartA;
12
Thepassthroughamountssuchasdirectmedicaleducationandbaddebtareultimatelyreconciledandpaid
basedonhospitals'MedicareCostReports.TheamountsonclaimsareestimatesbyMedicareclaimsprocessing
contractorsandcanbeunreliable.
HHAclaim:thethroughdateofaclaimforHHAservices;
Outpatienthospitalclaim:thedateofservicefortheclaimlineitem;
Physicianorotherproviderclaim:thedateofservicefortheclaimlineitem(HCPCSprocedure);
DMEorothersupplierclaim:thedateofservicefortheclaimlineitem(HCPCSitem/service);
Hospiceclaim:claimthroughdate.
Referencepopulationexpenditureswillbecalculatedusingthesamemethodsthatareusedtocalculate
ACOalignedbeneficiaryexpenditures.AsdescribedinSection4,expenditureswillbeannualizedand
capped,andmeanexpenditureswillbeweightedbybeneficiaries'eligibilityfraction.Expendituresfor
thereferencepopulationcohortwillbecalculatedinthebaselineyear(2011)andintheperformance
year.
Thebaselineexpenditureforthereferencepopulationwillalsoincludetheexpendituresforthebaseline
decedentpopulation(seesection2.4)inthesamewaythatthebaselineexpenditureoftheACOaligned
populationwillincludeexpendituresofalignedbaselinedecedents(seesection5.5).
6.3 Adjustmentforbeneficiaryentitlementcategory,age,andsex
Thereferencepopulation'sexpendituresforthebaselineandperformanceperiodwillbeadjustedto
reflectthecompositionoftheACOsalignedpopulation.Forpurposesofthisadjustment,beneficiaries
willbegroupedintoage/sexcategorieswithinthreeentitlementcategories:
(1) BeneficiariesoriginallyentitledtoMedicarecoverageonthebasisofagewhodonothave
ESRDwillbegroupedintonotmorethan16age/sexcategories;
(2) BeneficiariesoriginallyentitledtoMedicarecoverageonthebasisofdisabilitywhodonot
haveESRDwillbegroupedintonotmorethan20age/sexcategories;
(3) BeneficiarieshavingESRD,regardlessoftheoriginalbasisofentitlement,willbegrouped
intonotmorethan14age/sexcategories.
Theanticipatedage/sexcategoriesforeachoftheseeligibilitycategoriesaregiveninTable8.6.The
specificcategoriesmayberedefinedbasedonfurtheranalysis.
Asdescribedinthissection,adjustmentforthecompositionoftheACOsalignedpopulationwillbe
accomplishedbymultiplyingthereferencepopulationmeanexpenditureineachentitlement/age/sex
cellbytheACO'sproportionofalignedbeneficiarypersonyearsineachentitlement/age/sexcell.For
thebenchmarkcalculation,thereferencepopulation'sabsoluteandpercentageexpenditurechanges
fromthebaselinetotheperformanceperiodwillbebasedontheentitlement/age/sexadjusted
referencepopulationexpenditures.
13
13
TakinganaverageoftheabsoluteexpenditurechangesinthenationalreferencecohortweightedbytheACO's
alignedbeneficiaryagesexproportionsgivesthesameresultasthemethoddescribedinthissection.However,
takingaweightedaverageofnationalpercentagechangesgivesadifferent,incorrectanswer.Thisisbecausethe
overallpercentagechangeisaffectedbythebaselineexpenditurelevelsoftheagesexcells,notjusttheir
percentagechanges.Themethoddescribedinthissectiongivesthecorrectresultforbothabsoluteand
percentageagesexadjustedchanges.
Foraperformanceyear,boththeACOalignedpopulationandthenationalreferencepopulationare
cohortsthatconsistofthesameindividualsinthebaselineperiodandintheperformanceyear.Thus,
theACOagesexproportionsdonotvarybybaselineorperformanceperiod.Forconvenience,we
definetheageandsexofmembersoftheACOalignedandreferencepopulationsasbaselinevalues(in
thelastyearofthebaselineperiod).
6.3.1 Performanceperiodagesexadjustedreferenceexpenditure
Theagesexadjustedreferenceexpenditureforaperformanceperiodisgivenby:
R
p
iii
=
|(N
bj,c
)(R
pj,c
|||
)]
c
(N
bj,c
)
c
(Formula6.2)
where
R
p
iii
=ACOadjustedweighted,capped,annualizedreferenceexpenditureinthePY

u
meanssumoverallentitlement/age/sexcategoriesa
N
b,u
=NumberofACOalignedbeneficiarypersonyearsinentitlement/age/sexcategory(a)
forthebaselineperiod
R
p,u
iii
=theaverageweighted,capped,annualizedexpenditureofthereferencepopulationin
entitlement/age/sexcategory(a)forthePY
6.3.2 Baselineagesexadjustedreferenceexpenditure
TheaverageACOadjustedreferenceexpenditureinthebaselineperiodisgivenby:
R
b3
iii
=
j(N
bj,c
)[R
bj3,c
|||
[
c
(N
bj,c
)
c
(Formula6.3)
where
R
b3
iii
=age/sexadjustedweighted,capped,annualizedreferenceexpenditureinPY

u
meanssumoverallage/sexcategoriesa
N
b,u
=NumberofACOalignedbeneficiarypersonyearsinage/sexcategory(a)forthe
baselineperiod
R
b3,u
iii
=theaverageweighted,capped,annualizedexpenditureofthereferencepopulationin
age/sexcategory(a)forperformanceperiod1
7.0 Populationbasedpayments
IfanACOgeneratesaminimumaverageannualsavings(definedbelow)overperiods1and2,theACOs
paymentwilltransitiontopopulationbasedpaymentinperiod3.Populationbasedpaymentisaper
beneficiarypermonthpaymentamountintendedtoreplaceasignificantportionoftheACOsFFS
paymentwithaprospectivepayment.IftheACOdoesnotgeneratetheminimumaverageamountof
savingsoverperiods1and2,theACOwillnottransitiontopopulationbasedpaymentinperiod3.
Instead,theperiod3arrangementwillreverttotheperiod1arrangementandtheACOsAgreementwill
concludeattheendofthreeyears.
Theminimumaverageannualsavingsamountwillbenogreaterthan5%(forACOsinstateswiththe
lowesthistoricalMedicareexpenditurelevels)andnolessthan1%(forACOsinstateswiththehighest
historicalMedicareexpenditurelevels),andwillvaryinverselywiththerelativeMedicareexpenditure
levelinthestatewheretheACOislocated.ForACOslocatedinmorethanonestate,CMSwillsetthe
minimumaverageannualsavingsamountbasedonthestatewherethepluralityoftheACOsaligned
beneficiariesreside.
CMSwillmakeaprovisionaldeterminationofwhetheranACOqualifiesforpopulationbasedpayment
attheendofthesecondperformanceperiod.Paymentforthethirdperformanceperiodwillbegin
basedonthisprovisionalassessment,andwillthenbeadjusted,ifnecessary,basedonCMSfinal
assessmentafterthreemonthsofclaimsrunout.
TheACOsprovidersandsupplierswillreceivefeeforservicepaymentsat50%offeeforservice
paymentratesonsubmittedclaimsforservicesdeliveredtoalignedbeneficiaries.CMSwillprovidea
monthlypopulationbasedpaymentthatwillequaltheremainderoftheACOsprojectedFFSrevenue
foritsalignedMedicarepatientsasaperbeneficiarypermonthpayment(PBPM)."ProjectedFFS
revenue"isdefinedastheACO'sbenchmarkexpendituresfortheperformanceyear,thecalculationof
whichisdescribedinSection5.Uponendofperiodreconciliation,theACOwillstillreceiveupto70%
sharedsavingsandlosses,subjecttoqualityperformanceadjustments.Endofperiodreconciliationis
describedinSection3.
TheACOwillhavetheoptionforperiod4ofthesamepaymentarrangementsasPeriod3,exceptthat
theACOsexpenditurebaselinewillberesettoreflectaverageMedicarespendingforitsaligned
beneficiariesinyears2011,2012,and2013.ForPeriod5,theACOwillhavetheoptionofcontinuingthe
Period4paymentarrangements,withoutadditionalresettingoftheexpenditurebaseline.Finally,ifthe
ACOchooses"OptionB"asdefinedintheCMSPioneerACORFA,theACOwillreceivepopulationbased
paymentsinperiod3(and,optionally,inperiods4and5)andendofperiodreconciliationwitha75%
sharingrateforsharedsavingsandsharedlosses,withamaximumsavings/lossof15%ofthe
benchmark.
8.0 Tables
Table81
Evaluationandmanagementservicecodesincludedinbeneficiaryalignmentcriteria
OfficeorOtherOutpatientServices
99201NewPatient,brief
99202NewPatient,limited
99203NewPatient,moderate
99204NewPatient,comprehensive
99205NewPatient,extensive
99211EstablishedPatient,brief
99212EstablishedPatient,limited
99213EstablishedPatient,moderate
99214EstablishedPatient,comprehensive
99215EstablishedPatient,extensive
InitialNursingFacilityCare
99304NeworEstablishedPatient,brief
99305NeworEstablishedPatient,moderate
99306NeworEstablishedPatient,comprehensive
SubsequentNursingFacilityCare
99308NeworEstablishedPatient,limited
99310NeworEstablishedPatient,extensive
NursingFacilityDischargeServices
OtherNursingFacilityServices
99318NeworEstablishedPatient
Domiciliary,RestHome,orCustodialCareServices
Domiciliary,RestHome,orHomeCarePlanOversightServices
99339,brief
99340,comprehensive
HomeServices
WellnessVisits
G0402WelcometoMedicarevisit
G0438Annualwellnessvisit
G0439Annualwellnessvisit
SOURCE:ListofE&MCodesfromtheMedicareSharedSavingsProgram[MSSP].ThePioneerRFAstates
thatforeligibilityrequirements,theintentistohavethePioneerModelbeconsistentwiththeproposed
regulationsoftheMSSP.
Table82
Specialtycodesforprimarycarephysicians
Code Specialty
1 generalpractice
8 familypractice
11 internalmedicine
38 geriatricmedicine
50 nursepractitioner
97 physicianassistant
SOURCE:MSSPproposedregulations.ThePioneerRFAstatesthattheprimarycareproviderswill
consistoftheprimarycareprovidersusedintheMSSPprogram,aswellastheadditionofnurse
practitionersandphysicianassistants.
Table83
Specialtycodesforspecialistphysicians
39(nephrology)
Oncology:
83(hematology/oncology)
90(medicaloncology)
91(surgicaloncology)
92(radiationoncology)
98(gynecological/oncology)
66(rheumatology)
46(endocrinology)
29(pulmonology)
13(neurology)
86(neuropsychiatry)
6(cardiology)
SOURCE:PioneerRFAlistofeligiblespecialtiespluspersonalcommunicationfromHoangmaiPhamof
CMS.
Table84.
Variablesusedintotalbeneficiaryexpenditurecalculations
PaymentisEqual
to ClaimDeniedif
LineItem
Deniedif
Through
Date
SNF ClaimPayment
Amount
Anyvaluefor'ClaimMedicareNon
Paymentreasoncode'
Noexclusion Claim
Through
Date
Inpatient
1
ClaimPayment
Amount
Paymentreasoncode'
Noexclusion Claim
Through
Date
Outpatient ClaimPayment
Amount
Paymentreasoncode'
Noexclusion Claim
Through
Date
Home
Health
ClaimPayment
Amount
Paymentreasoncode'
Noexclusion Claim
Through
Date
Physician/
Supplier
PartB
LineNCHPayment
Amount
'CarrierClaimPaymentDenial
Code'=0orDthroughY
LineProcessing
IndicatorCode
A,R,orS
LineThrough
Date
DME LineNCHPayment
Amount
'CarrierClaimPaymentDenial
Code'=0orDthroughY
LineProcessing
IndicatorCode
A,R,orS
Line
Through
Date
Hospice ClaimPayment
Amount
AnyvalueforClaimMedicareNon
Paymentreasoncode
Noexclusion Claim
Through
Date
1
Inpatientexpenditureswillnotincludepassthroughamounts.
Table85.
ScheduleforPioneerACObeneficiaryalignmentandbaselineexpenses
(performanceyears1through3)
Date
Applies
toPY Event
September30,2011 PY1 PreliminaryidentificationofalignedpopulationforPY1forpurposesof
(a)determiningeligibilityofACOtoparticipateinthePioneerprogram
and(b)generatingadeidentifieddatasetforusebyACOinplanning
forPY1.Thispreliminaryidentificationwouldbebasedondatafor
claimsthatwere(a)incurredduringthe3yearalignmentperiod
endingtheJune30,2011,and(b)paidthroughJune30,2011(i.e.,no
runoutofclaimsexperience).
December1,2011 PY1 IdentificationofprospectivelyalignedpopulationforPY1basedon
dataforclaimsthatwere(a)incurredduringthe3yearalignment
periodendingtheJune30,2011,and(b)paidthroughSeptember30,
2011(i.e.,witha3monthrunoutofclaimsexperience).Thisisthe
officiallistofprospectivelyalignedbeneficiariesforPY1.Itwilldiffer
fromthepreliminarylist(providedonlyforPY1)asaresultofthe
claimsrunout.
May1,2012 PY1 CalculationofprospectivePY1baselinesfortheACOsprospectively
alignedPY1populationandforthePY1referencepopulationbasedon
dataforclaimsthatwere(a)incurredduringthe3yearbaselineperiod
endingDecember31,2011,and(b)paidthroughMarch31,2012.
2012.
May1,2013 PY2 CalculationofPY2prospectivebaselinesfortheACOsprospectively
May1,2013 PY1 IdentificationoffinalPY1alignedpopulation(i.e.,identificationofPY1
prospectivelyalignedbeneficiarieswhowerenotalignmenteligible
duringPY1).IdentificationoffinalPY1referencepopulation(i.e.,
identificationofPY1prospectivelyidentifiedalignmenteligible
beneficiarieswhowerenotalignmenteligibleduringPY1).
June1,2013 PY1 CalculationofPY1finalbaselinesfortheACOsfinalalignedPY1
populationandforthePY1referencepopulationbasedondatafor
claimsthatwere(a)incurredduringthe3yearbaselineperiodending
December31,2011,and(b)paidthroughMarch31,2012.
CalculationofPY1performanceyearexpendituresfortheACOsfinal
Date
Applies
toPY Event
2013.
Table8.6
AgeandSexCategoriesbyEntitlementCategory
OriginallyAgedbeneficiarieswithoutcurrentESRD
Age65to69
Age65to69
Age70to74
Age75to79
Age80to84
Age85to89
Age90to94
Age95andolder
OriginallyDisabledbeneficiarieswithoutcurrentESRD
Age0to34
Age35to44
Age45to54
Age55to59
Age60to64
Age65to69
Age70to74
Age75to79
Age80to84
Age85andolder
CurrentESRD
Age0to34
Age35to44
Age45to54
Age55to59
Age60to64
Age65to69
Age70andolder

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