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CMS Announces First Groups to Join “Next Generation” ACOs

Increased risk will bring greater rewards––theoretically

The Centers for Medicare and Medicaid Services (CMS) has announced 121 new participants in Medicare Accountable Care Organization (ACO) initiatives designed to improve the care patients receive in the health care system and to lower costs. Of these organizations, 21 will be the first to join Medicare’s new ACO model, the Next Generation.

The new model builds on experience from the Pioneer ACO Model and the Shared Savings Program, according to the CMS. Unlike other ACO models, the Next Generation model includes a prospectively (rather than retrospectively) set benchmark, allows beneficiaries to choose to be aligned to the ACO, and tests beneficiary incentives for seeking care at Next Generation providers, including increased availability of telehealth and care-coordination services.

Participants in the Next Generation model will be exposed to higher levels of financial risk –– up to 100% risk –– than ACOs in current initiatives. However, while they are at greater financial risk, they also have a greater opportunity to share in more of the model’s savings through better care coordination and care management, according to the CMS. In addition, the ACOs will receive their budgets prospectively, in advance of the performance year, to plan and manage care around these financial targets from the outset. The ACOs will also be able to select from flexible payment options, such as infrastructure payments that support ACO investments in care.

The CMS also announced that the Medicare Shared Savings Program welcomed 100 new ACOs and nearly 150 renewing ACOs on January 1, 2016. Since the start of the ACO program in early 2012, thousands of health care providers have signed on to participate. In 2016, approximately 15,000 more physicians will be participating in ACOs under the program. With the new group of ACOs, CMS will have 434 ACOs participating in the Shared Savings program next year, serving more than 7.7 million beneficiaries. ACOs have demonstrated increased interest in performance-based risk arrangements, with 22 ACOs now opting for either track 2 or track 3 participation, the CMS said. 

Thirty-nine Shared Savings program ACOs will also participate in the ACO Investment Model (AIM). This model, which has a total of 41 participants, will provide prepaid shared savings to encourage new ACOs to form in rural and underserved areas, and to encourage current Shared Savings program ACOs to transition to a performance-based risk arrangement.

When the Next Generation model was announced early last year, observers questioned whether hospitals and physicians would have enough control over patients’ utilization patterns and tendencies to roam outside the ACO network, undermining quality and cost-control efforts. At least one health system that had been a Medicare ACO leader said it might bypass the new ACO initiative in favor of pursuing pure capitated payment.

The CMS announced at that time that Next Generation ACOs would be able to offer financial incentives to keep patients in the provider network. If beneficiaries committed to seek care through their ACO, the ACO could pay them $50 every year, fully funded by the CMS. The government said this would provide a long-term incentive for beneficiaries to get their care in the ACO network.

“I don't know how much $50 is really going to encourage people to go one way or another,” said Matt Fisher, a health care attorney. “In this day and age, $50 doesn’t even cover a phone bill.”

Sources: Department of Health and Human Services; July 11, 2016; and Modern Healthcare; March 14, 2015.

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