CMS Launches Next Generation ACO

March 25, 2015 | By

The Centers for Medicare and Medicaid Services (“CMS”) has released information about a new accountable care organization (“ACO”) model, called the Next Generation ACO. According to CMS, “the Next Generation ACO Model offers a new opportunity in accountable care – one that sets more predictable financial targets, enables providers and beneficiaries greater opportunities to coordinate care, and aims to attract the highest quality of care.”

The ACO model has been developed as a result of the Patient Protection and Affordable Care Act. The main objective of an ACO model is to effectively coordinate high-quality care between providers and suppliers at lower costs to Medicare beneficiaries. If the ACO provides high-quality care and lowers the cost of care, it will be able to receive a share of those savings.

The Next Generation ACO is designed for providers who have had success with the current Medicare Shared Savings Program or the Pioneer Model, but desire greater opportunity for financial growth. The Next Generation ACO is distinctly different from previous ACO models:

  • Next Generation ACOs will not rely on rolling benchmarks, but instead be based on fixed benchmarks, which will account for prior achievements including attainment and improvement of efficiency.
  • Next Generation ACOs will feature new payment structures that allow for advanced infrastructure investment options and, perhaps more importantly, capitation as a payment mechanism in addition to the normal fee-for-service methods.
  • Next Generation ACOs will be required to have at least 10,000 Medicare beneficiaries. The only exception to this is an ACO that has “its primary service areas located in a rural county” where the requirement is reduced to 7,500 beneficiaries. The model will be aligned in a way similar to the Pioneer Model wherein the claims-based alignment processes will continue, and in addition, beneficiaries will be able to voluntary align themselves with an ACO. Patient protections will continue to be emphasized by allowing beneficiaries to have greater access to the services and providers they seek.
  • Next Generation ACOs “will have a number of tools available to enhance the management of care for their beneficiaries. These include additional coverage of telehealth and post-discharge home services and coverage of skilled nursing care without prior hospitalization.”
  • In order to reward beneficiary engagement, CMS proposes direct payments to beneficiaries. In a departure from the current ACO models, “patients will be able to voluntarily enroll in accountable care, and in exchange, have their co-pays reduced or eliminated” for services like primary care visits.
  • Next Generation ACOs can choose between two risk arrangements. One arrangement provides for an 80% sharing rate in performance years 1 through 3 and an 85% sharing rate in performance years 4 and 5. The other provides for 100% risk for Part A and Part B expenditures per year. Both arrangements provide for a 15% savings/losses cap.

CMS expects 15-20 ACOs to participate in the Next Generation ACO model. With this model, CMS addresses the rather salient criticism that few ACOs actually realized shared savings. The Next Generation ACO model attempts to address concerns of shifting benchmarks and limited risk potential for successful ACOs. The model will create identifiable goals and a clear timeline toward improving outcomes based on quality not quantity while increasing both risk and reward for successful ACOs. While staying true to the importance of improving access, cost, and quality simultaneously, the Next Generation ACO model continues the march away from fee-for-service payment methods to capitation.

Applications are due June 1, 2015, and performance begins January 1, 2016.


To read the CMS blog about the Next Generation ACO, click here.

To read the CMS fact sheet, click here.

To read the CMS FAQs, click here.

For more information about applying, visit the CMS website.

Anthony Knapp is a guest contributor to Health Law Gurus™. He received his J.D. from Widener University School of Law, where he was editor of the Health Law Colloquium. He previously clerked in the Philadelphia Court of Common Pleas and worked as a Navigator to facilitate consumer access to health insurance in Delaware.