CMS pushes the envelope with Next Generation ACO model

“Space, the final frontier. These are the voyages of the starship Enterprise. Its five-year mission: to explore strange new worlds, to seek out new life and new civilizations, to boldly go where no man has gone before.”
   - Captain James T. Kirk

Like the famous introduction to Star Trek, etched into the memories of those of us who grew up in the late-1960s, on March 10 the U.S. Department of Health and Human Services (HHS) announced the launch of a similar exploratory venture, the Next Generation ACO Model.

Coming just six weeks after HHS’ announcement of its intention to push a significantly larger share of Medicare payments through alternative payment models such as ACOs, the Next Generation ACO Model will test whether strong financial incentives, coupled with tools to help facilitate better patient engagement and care management, can improve health outcomes and reduce expenditures for Medicare fee-for-service beneficiaries.

In December 2013, the Center for Medicare and Medicaid Innovation issued a request for information that solicited input on the Pioneer ACO Model and ideas for structuring new ACO models. Judging from the considerable length of the Next Generation ACO Model’s request for applications (55 pages) and the program’s formidable complexity, the new Model seems like a superset of ideas submitted to the Innovation Center.

The new Model offers financial arrangements with greater levels of risk and reward than the Medicare Shared Savings Program (MSSP) or the Pioneer ACO Model. For example, under Arrangement A of the new Model, the ACO is entitled to 80 percent of the shared savings during the first three performance years and 85 percent during the last two performance years. In addition, the savings/losses cap is 15 percent.

In contrast with the MSSP and Pioneer approaches, under the Next Generation financial model, the Centers for Medicare and Medicaid Services (CMS) will establish the ACO’s expenditure benchmark prior to the start of each performance year, factoring in expenditure, quality, and risk score data, as well as regional and national efficiency adjustments.

In addition to normal fee-for-service (FFS) payments, the Next Generation Model will test whether alternative payment mechanisms enable investments in infrastructure and care coordination. In 2016, Next Generation ACOs will have the additional payment mechanism options of: 1) normal FFS plus a monthly infrastructure payment; and 2) population-based payments. Then in 2017, capitation—in which the ACO receives from CMS a per-beneficiary-per-month payment and CMS bills the ACO for claims that it receives for the ACO’s beneficiary population—will be an option.

CMS requires each Next Generation ACO to have at least 10,000 beneficiaries, interestingly with 7,500 from rural areas, where the other ACO programs have not been as successful. As CMS expects only 15 to 20 ACOs to participate in the Model—most likely including some of the more proficient Pioneer and MSSP ACOs—the new Model should be viewed as a limited test bed for evaluating and refining innovations for possible rollout to the broader ACO community.

Echoing Captain Kirk, here’s what one could say about this latest ACO program from CMS: “ACOs, the final frontier. These are the voyages of the Next Generation ACO Model. Its five-year mission: to allow for greater care coordination and engagement between providers and beneficiaries, to explore and test new risk tracks and payment models, to boldly go where no ACO has gone before.”

Ken Perez is vice president of healthcare policy at Omnicell, Inc.