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Next Generation ACO risk model generates savings, CMS says

Agency evaluation of Next Gen sets stage for ACOs to qualify as Advanced APMs under MACRA and get incentive payments.

Susan Morse, Managing Editor

The Next Generation Accountable Care Organization model generated Medicare savings of about $62 million in the 2016 performance year, a figure CMS is touting for ACOs to make the leap to greater risk.

CMS Administrator Seema Verma is making it clear to hospitals and physician practices in ACOs that the Next Gen model is the one to emulate, now that the agency is taking away the upside-only risk model of the Medicare Shared Savings Program.

"These results provide further evidence that ACOs succeed under two-sided risk," Verma said by statement. "ACOs in the Next Generation Model are being held accountable with strong financial incentives and are provided with substantial flexibility and regulatory relief. They are delivering value and providing quality care to patients and taxpayers even in their first performance year, and we believe that these results are achievable for other ACOs under similar incentives."

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ACOs receive a portion of the savings they achieve. ACOs in Next Generation assume the highest level of downside risk, at 80-100 percent two-sided risk.

In an evaluation report for the 2016 first performance year of Next Gen released last week, CMS said the model shows promising early results in both cost and quality.

Next Gen models are associated with a 1.7 percent reduction, or about $100 million, in Medicare spending. This includes a 1.3 percent drop in inpatient stays, a 1.5 percent decline in nonhospital evaluation and management visits per month and an increase of 11.9 percent in annual wellness visits per year, CMS said.

The bottom line is a net spending reduction of 1.1 percent, or $62 million.

While applauding the evaluation of the Next Gen model, the National Association of Accountable Care Organizations is encouraging CMS to also do an independent evaluation of the ACO Medicare Shared Savings Program, saying one has never been done.

"The Medicare ACO program, including the Next Generation model and the Medicare Shared Savings Program, is the largest value-based payment model in the country and an essential tool in moving the health system toward better value," said Clif Gaus, president and CEO of NAACOS.

ACOs in the Medicare Shared Savings Program assume the lowest level of risk, or no risk. Most have remained there. Of the 649 total Medicare ACOs, 561 are in MSSP and do not take on risk for increases in costs.

In an overhaul of the ACO MSSP program called "Pathways to Success," CMS said this was about to change. ACOs will be required to take on more risk and CMS is limiting MSSP participation from six, to two years.

Pathways to Success takes many of the principles from the Next Generation ACO model and adopts them for MSSP.

The overhaul is expected to save Medicare $2.2 billion over ten years, while an estimated 107 ACOs are projected to drop out.

But in exchange for the risk of losing money, participants will have broader flexibility to innovate, including around provisions of telehealth, regulatory waivers and the ability to offer wellness incentives to beneficiaries.

Pathways to Success expands the length of ACO participation from three years to five years. The current model is scheduled to run for five years, ending Dec. 31, 2020.

In a Health Affairs blog on the ACO MSSP overhaul, Verma outlined two tracks for ACOs to take, basic and enhanced.

The basic track would begin with up to two years of upside-only risk and then gradually transition in years three, four, and five to increasing levels of performance risk, concluding in year five at a level of risk that meets the standard to qualify as an Advanced Alternative Payment Model under MACRA to receive the incentive payments.

Given their program experience, current upside-only ACOs would be limited to only one year without risk. 

The enhanced track would allow providers to take on risk and qualify as an Advanced APM immediately. This track would offer the same amount of risk for each of the five years, at a level of risk sharing higher than the maximum amount reached in the basic  track.  

ACOs inexperienced with two-sided risk would be able to enter at any level of risk in the basic track or go straight to the enhanced track.

Low revenue ACOs, which are typically composed of physician practices, have generally shown greater savings than high revenue ACOs, which often include hospitals, CMS said.  

Therefore, under Pathways to Success, after completing a five-year agreement under the basic track, low revenue ACOs would be able to renew for a second agreement period at the highest level of risk in that track, while high revenue ACOs would be required to move to the enhanced track and take on additional risk.

The comment period on the ACO MSSP overhaul closes October 16.

Twitter: @SusanJMorse
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