On March 10, 2015, CMS announced a new accountable care organization (ACO) model designed to increase both risk-sharing by participating providers and potential shared savings.  Parties interested in participating in this “Next Generation ACO Model” have until May 1, 2015 to submit a letter of intent to CMS.

CMS states that the Next Generation ACO Model will place a greater emphasis on population health management by transitioning such ACOs toward a capitated payment model and away from fee-for-service reimbursement.  CMS will evaluate a Next Generation ACO’s performance based on established financial benchmarks and not solely on the ACO’s past financial performance, which CMS believes is an appropriate metric for ACOs that are experienced in care coordination.  While CMS will include participating providers’ historic financial expenditures as part of the benchmark calculation, the agency will also make adjustments to the benchmark to reflect the ACO’s financial efficiency relative to other providers in its region.  CMS says that under this approach “ACOs achieve savings through year-to-year improvements over historic expenditures (improvement), but the magnitude by which they must improve will vary based on relative efficiency (attainment).”  CMS also will incorporate performance on certain quality metrics into the payment calculation.  Although this structure places greater risk on providers, CMS will exclude some high-cost outlier patient encounters from the performance evaluations and will increase the potential shared savings amount to 15 percent of the ACO’s benchmark.

CMS acknowledges that this Model resembles how Medicare Advantage plans are paid, but emphasizes that unlike Medicare Advantage plans, Next Generation ACOs are subject to all rules and regulations applicable to original Medicare.  For example, beneficiaries retain the ability to seek care from any provider regardless of whether that provider participates in the Next Generation ACO. 

Parties may apply to begin participating as a Next Generation ACO beginning in either 2016 or 2017.  Next Generation ACOs agree to participate in the program for three one-year initial performance periods, with an option for two additional one-year extensions. 

More details on the new Model, including the Request for Applications and Letter of Intent, are available here.