CMS Finalizes the Categories of ACOs Eligible to Obtain Reimbursement for VTCertain Telemedicine Services

On June 4, 2015, the Centers for Medicare & Medicaid Services (“CMS”) issued a final rule1 revising the Medicare Shared Savings Program (“MSSP”) for Accountable Care Organizations (“ACOs”) that establishes the categories of ACOs that may bill Medicare for certain telemedicine services (the “Final Rule”).

Historically, Medicare has imposed strict criteria for payment for telemedicine services,2 whether provided to patients within or outside of an ACO.3 Under Section 1834(m) of the Social Security Act and its implementing regulations, Medicare only pays for telemedicine services furnished to a patient located in one of eight locations if other conditions are also met: (i) the services qualify as Medicare telehealth services eligible for reimbursement; (ii) the services are furnished via an interactive telecommunications system; and (iii) the services are furnished by an eligible telehealth individual.4 If a telemedicine encounter meets all of these criteria, Medicare pays a facility fee to the originating site (patient location) and a separate fee-for-service payment to the healthcare provider, based on prevailing Medicare rates.5

Providers and policy advocates alike have greatly criticized the telehealth payment criteria outlined above as deterring ACOs and other providers from expanding their utilization of telemedicine services.6 Under established regulations, Medicare will not reimburse a provider for telemedicine services if they are provided to patients located in urban areas or in their residences when treated.

HLTHeadline_6.9.15In response to such complaints, in March of 2015 the Obama Administration introduced a new ACO model, called the Next Generation ACO, and categorically granted such ACOs a waiver from the telemedicine payment criteria outlined above (commonly referred to as the “telehealth waiver”).7 That is, Next Generation ACOs, unlike other ACOs, were authorized to obtain reimbursement for any telemedicine services provided to patients—regardless of the patient’s location when treated or compliance with the other telehealth payment criteria.8 Consequently, Next Generation ACO participants could obtain Medicare reimbursement for treating patients located in urban areas or residences. The Obama Administration announced the new model as part of its drive to expand telemedicine utilization generally.9 In its December 2014 Proposed Rule10 modifying the Medicare Shared Savings Program, CMS hinted that it would also issue a waiver to the telehealth program requirements for all Medicare Shared Savings Program ACO Models11—enabling them to use and bill for all telemedicine services provided.

However, in the Final Rule issued on June 4, CMS reversed course. The Final Rule limits the telehealth waiver to a newly created class of ACOs under the Medicare Shared Savings Program, called Track 3 ACOs. Track 3 ACOs (like Track 2 ACOs) are a two-sided risk model in which participants share in both the savings and losses generated from treating ACO patients. However, Track 3 ACOs have some distinctions: (i) ACO participants treat a prospectively defined patient population; (ii) participants receive a higher percentage of any shared savings accrued under the program; and (iii) providers are waived from certain Medicare requirements (e.g., the telehealth payment requirements and the SNF 3-day rule in which participants must have a 3-day inpatient hospital stay before admission to a skilled nursing facility is reimbursable).12

In the Final Rule, CMS also announced that it will no longer extend the telehealth waiver to Track 1 ACOs (ACOs that share in any savings accrued from program operations but not the losses).13  Consequently, Track 1 ACOs are still unable to obtain reimbursement for telemedicine services provided to patients in urban areas or homes.

Finally, CMS delayed any decision on extending the telehealth waiver to Track 2 ACOs (ACOs in which participants agree to share losses accruing from program operations in exchange for a greater share in any savings accrued from program operations). Rather, CMS announced its intention to “take a phased approach to the introduction of additional waivers with testing by the CMS Innovation Center prior to any decision” to extend waivers to other ACOModels.14 CMS, however, stated it intends to introduce a telehealth waiver for Track 2 ACOs starting in 2017, with details structured from the experience in implementing the telehealth waiver for the Next Generation ACOs.15

CMS’ decision to limit the telehealth waiver’s applicability to Track 2 and 3 ACOs is one of many policy initiatives introduced in the Final Rule to urge providers to migrate from one-sided ACO Models (e.g., Track 1 ACOs) to greater risk-bearing ACO structures (e.g., two-sided ACO Models such as the Track 2 and Track 3 ACO Models).16 The Final Rule characterizes the Telehealth Waiver as a carrot, or financial incentive, to encourage development of Track 3 ACOs and Next Generation ACOs. It also recognizes that relaxing the strict criteria for telemedicine reimbursement may be necessary to enable ACOs to effectively service their beneficiary populations in a timely manner.17

In describing the rationale for restricting telemedicine reimbursement to two-sided ACOs, CMS cited efficiency concerns, stating, “We believe that ACOs that bear financial risk would have a heightened incentive to restrain wasteful spending by their ACO participants and ACO providers/suppliers . . . in turn, reducing the likelihood of over-utilization.”18 CMS also noted, “We continue to have concerns that immediately adopting untested or unproven waivers with which we have little experience on a national scale could lead to unintended consequences for the [fee-for-services] beneficiaries we serve or for the health care system more broadly.”19

Language in the Final Rule suggests that CMS is likely to extend some form of a telehealth waiver to Track 2 ACOs, and possibly other ACOs structured as two-sided risk models, by 2017.20 CMS’ experience with implementing the telehealth waiver for the Track 3 and Next Generation ACOs will dictate the details of any future telehealth waivers offered and should be monitored.

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  1. Final Rule, Medicare Program; Medicare Shared Savings Program: Accountable Care Organizations (Jun. 4, 2015), available at
  2. The terms “telemedicine services” and “telehealth services” are commonly used interchangeably, with the term “telehealth services” used in the Social Security Act § 1834(m) and its implementing regulations.
  3. See Social Security Act § 1834(m). Id.; 42 C.F.R. § 410.78(b).
  4. Id.; 42 C.F.R. § 410.78(b).
  5. Social Security Act §§ 1834(m)(2)(B) & (m)(3); 42 C.F.R. § 410.78(b); 78 Fed. Reg. 72780 (Dec. 8, 2014).
  6. Lowes, Robert, Telemedicine Payment to Expand Under New Breed of ACO, Mediscape Medical News (Mar. 11, 2015) available at
  7. SeeConway, Patrick. M.D., Building on the Success of the ACO Model, The CMS Blog (Mar. 10, 2015) available at; see also Maheu, Marlene, Ph.D., Medicare Telehealth Reimbursement for Home-Based Care? The Next Generation ACO Has Arrived. (Mar. 22, 2015), available at
  8. Id.
  9. Supranote 9; see also HHS Press Release, Affordable Care Act initiative builds on success of ACOs (Mar. 10, 2015), available at
  10. 79 Fed. Reg. 72781 (Dec. 8, 2014).
  11. See 79 Fed. Reg. 72821 (Dec. 8, 2014) (noting that imposing a telehealth waiver promotes the MSSP Program goals to improve care for beneficiaries in ACOs and it may conclude that a wavier of certain telehealth requirements under Section 1899(f) of the Social Security Act are necessary to carry out the MSSP without distinguishing between types of ACOs); see also Final Rule at 266 (“In the December 2014 proposed rule, we reiterated our intent to continue to encourage ACOs’ forward movement up the ramp from one-sided model to performance-based risk.”).
  12. CMS Finalizes MSSP Rule, Seeks to Make Participation More Attractive to ACOs(Jun. 5, 2015), available at,-Seeks-to-Make-Participation-More-Attractive-to-ACOs.aspx; see also Final Rule at 438 (“All ACOs electing to participate in Track 3 will be offered the opportunity to apply for the waiver of the SNF 3-day rule for their prospectively assigned beneficiaries at the time of their initial application to the program.”)
  13. Final Rule at 444.
  14. Final Rule at 446.
  15. Final Rule at 446.
  16. SeeFinal Rule at 435-36.
  17. Final Rule at 444-45 (“We believe that a waiver of certain telehealth-related rules under Part 425 for ACOs participating under a two-sided risk model may be necessary in order to give participants and ACO providers/suppliers more flexibility under FFS Medicare to provide appropriate and timely care for assigned beneficiaries.”).
  18. Final Rule at 436.
  19. Id.
  20. Final Rule at 444-45 (“We intend to offer such a waiver starting as early as in 2017, with specific requirements to be determined based on CMS’ experience implementing such a waiver in the Next Generation ACO Model.”).

Kilpatrick Townsend LLP

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