CMS Proposes Significant Overhaul of the Medicare Shared Savings Program in the CY 2027 Physician Fee Schedule

APMConnect
2 days ago
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Published on APM Connect | August 2026

The CY 2027 Medicare Physician Fee Schedule Proposed Rule, released July 16, 2026, includes some of the most consequential proposed modifications to the Medicare Shared Savings Program (MSSP) in recent years.

While some changes take effect as early as January 2027, others (particularly the benchmark recalibration) will reshape the financial landscape for ACOs into the next decade.

Taken together, the proposals reflect CMS's intent to simultaneously expand the reach of the program, tighten benchmark methodology to reduce arbitrage, and offer new tools for beneficiary engagement.

Here is what ACOs need to understand about each major proposal.

Benchmark Recalibration: Targeting "VBC Arbitrage"

Perhaps the most financially significant proposal for Enhanced Track ACOs is a recalibration of the existing benchmark adjustment weights. CMS is proposing to reduce the maximum weight applied to the regional adjustment while modifying the Prior Savings Adjustment scaling factor and implementing guardrails on upward benchmark adjustments — including risk adjustment of the 5% cap on positive regional, prior savings, and population adjustments.

The explicit motivation is to reduce what can be described as "benchmark arbitrage": a dynamic in which ACOs generate shared savings not because they have genuinely improved care or reduced unnecessary utilization, but because their benchmarks were set advantageously relative to regional spending. CMS has been telegraphing this concern for several rule cycles, and this proposal represents a direct response.

For ACOs that have heavily relied on favorable benchmark positioning because of lower historical spend relative to their region, this change will meaningfully reduce their shared savings opportunity. For those whose regional adjustment has been larger than their prior savings adjustment, the rule estimates impacts in the range of -$100 per member per year in benchmark reduction. This change would take effect for agreement periods starting in 2027. You can bet that MSSP ACOs who were up for a 5-year renewal in 2027 did not factor this into their renewal calculations.

Attribution Methodology Updates

CMS has stated a goal of having 100% of Traditional Medicare fee-for-service beneficiaries in an accountable care relationship by 2030. The CY 2027 proposed rule advances that ambition through updates to the MSSP attribution methodology, with an effective date of January 2028.

The most notable component is a change that would allow patients who switch from Medicare Advantage back to traditional fee-for-service Medicare to be assigned to an ACO earlier in that transition. Currently, there is a lag before such beneficiaries become attributable; the proposal would tighten that window. CMS's own simulations project a net increase in attributed lives under this change but with an important composition effect: the newly attributed population disproportionately includes higher-acuity, higher-cost beneficiaries and individuals with end-stage renal disease (ESRD), a population that tends to switch back to FFS Medicare when their care needs intensify.

For ACOs, this means expanded attributed populations that may not look like the populations they have historically managed under the program. ACOs should model the potential cost profile of their newly attributed members under this scenario and assess whether their care management infrastructure — particularly for high-risk and ESRD patients — is adequately resourced to absorb this shift. ACOs with robust chronic kidney disease and ESRD care pathways may find this change less disruptive than those without.

CMS’s simulation showed less than 1% growth in assigned beneficiaries under this proposed change, but an average decrease of 3.92% in gross savings. In a preemptive response to some ACOs unhappy about this change, CMS stated, “we believe the considerations outweigh the concern about the potential for attrition from the Shared Savings Program by ACOs unwilling to be held accountable for the quality and cost of care of this population of Medicare beneficiaries.”

Quality Measure Removals: A More Stable Measure Set

On the quality side, CMS is proposing to remove two measures from the MSSP quality reporting set that were previously slated for addition in 2027: Adult Immunization Status and Initiation and Engagement of Substance Use Disorder (SUD) Treatment.

The rationale offered by CMS is operational. The agency cites the need to maintain a stable measure set and to avoid measures with ongoing reporting challenges. Removing measures that would have created new data infrastructure and workflow demands for ACOs is a meaningful, if modest, relief.

For ACOs already benchmarked against the existing MSSP quality measure set — which includes measures on diabetes control, depression screening, hypertension management, cancer screenings, readmissions, and CAHPS — this change is effectively neutral. The current measure set remains intact, and the removal of the two additions simplifies the quality reporting picture.

Quality Reporting: MIPS CQMs and New Medicare CQMs

In an effort to support ACOs in the transition to FHIR-based digital quality measures (dQMs) that will be required in 2030, CMS is extending the MIPS CQM reporting option through 2029 and creating a new Medicare eCQM collection type that only requires reporting on the ACO’s assigned beneficiaries instead of the all payer population.

ACOs will still need to report all payer/all patient eCQMs or MIPS CQMs to be eligible for the reporting incentive and complex organization adjustment.

Part B Cost Sharing Waiver: A New Beneficiary Engagement Tool

One of the more novel proposals in the rule is the introduction of a voluntary Part B Cost Sharing Waiver mechanism, through which ACOs could elect to reduce or waive Medicare Part B cost sharing for certain beneficiaries and services. The proposal would take effect as early as April 2027.

Under the proposal, ACOs would have discretion to define the categories of beneficiaries and services for which cost sharing would be reduced, with certain exclusions (durable medical equipment and Part B drugs are specifically carved out). The waiver would be structured with eligibility criteria, application requirements, record retention obligations, and OIG safe harbor provisions to ensure compliance with federal law.

CMS frames this as a tool to remove financial barriers to care — specifically, to allow ACOs to support beneficiaries who might otherwise delay or forgo high-value services due to out-of-pocket costs. For ACOs operating in lower-income service areas, or those with care gap closure programs focused on preventive or chronic care services, the waiver could serve as a meaningful lever for beneficiary engagement and utilization management.

The strategic and operational questions are significant, however. ACOs considering this option will need to assess which services and populations would benefit most from a waiver, what the net financial effect would be on total expenditures (and therefore on shared savings calculations), and how to administer the waiver in a compliant and consistent way. CMS has confirmed that Part B cost sharing waived under this mechanism will be included in total MSSP expenditures, meaning the waiver is not a free good; it affects the cost baseline against which shared savings are measured.

ACO E/M Modifier to Replace G2211: Rewarding Longitudinal Care

The proposed rule also addresses the existing G2211 complexity add-on code, which was designed to recognize the additional resources required for longitudinal, comprehensive primary care relationships. CMS proposes to replace G2211 with a new ACO-specific evaluation and management modifier — one that would pay at twice the rate of the equivalent modifier for non-ACO providers.

Under the proposal, ACO participants would receive a modifier payment equivalent to approximately 32% of the total RVUs for the applicable E/M service, compared to 16% for providers not participating in an ACO. The modifier is voluntary, but those who bill it should be aware that claims billed under the modifier will be included in total MSSP expenditures, affecting the cost baseline against which performance is measured.

CMS wants to make ACO participation more financially attractive for primary care physicians and to signal that longitudinal patient relationships — the foundation of value-based care — carry additional resource requirements worthy of differential payment. For ACOs with large primary care networks, the modifier represents a direct revenue opportunity and a utilization factor to model carefully before widespread adoption.

The effective date for this change is January 2027.

The Bigger Picture

Read together, these proposals reflect CMS pursuing three goals simultaneously: tightening the financial rewards for benchmark-advantaged ACOs, expanding the reach of the program by pulling more FFS beneficiaries into accountable care relationships, and creating new payment and engagement tools to make ACO participation more attractive for providers and more valuable for patients.

For ACOs, the critical near-term actions are to model the benchmark recalibration impact against current and projected performance, assess the composition effects of the attribution expansion, evaluate the Part B cost sharing waiver as a potential strategy, and prepare for the G2211 modifier transition in January 2027.

The comment deadline is September 14, 2026. ACOs are encouraged to engage directly with CMS on the benchmark methodology changes and the attribution expansion. Both proposals carry significant financial implications that warrant careful scrutiny and, where appropriate, formal comment.

For the full proposed rule, see: Medicare and Medicaid Programs; CY 2027 Payment Policies Under the Physician Fee Schedule

This post is intended for informational purposes. Readers should consult the full proposed rule text and legal counsel before making compliance or operational decisions based on proposed — not yet finalized — provisions.