On March 10, 2015, the Centers for Medicare & Medicaid Services (“CMS”) announced a new Next Generation ACO Model for Medicare accountable care organizations or “ACOs.” This proposal further expands the shared risk models already established under the Medicare Shared Savings Program (“MSSP”) and Pioneer ACO Model (“Pioneer”), and is strongly indicative of the administration’s views on the future of Medicare.

The Next Generation ACO Model is intended for organizations that have experience in coordinating care for large populations of patients, and like MSSP and Pioneer, will be for only Medicare fee-for-service beneficiaries. The minimum number of aligned beneficiaries will be 10,000 (7,500 for rural ACOs). Organizations that apply in the first cycle will enter into a three-year agreement with CMS (three 12-month performance years), with the potential for two 12-month extensions.

ACOs that participate in the Next Generation model will be allowed to assume higher levels of financial risk and reward than MSSP and Pioneer ACOs. Specifically, CMS will offer two risk sharing arrangements: “Increased Shared Risk” and “Full Performance Risk.” Under the “Increased Shared Risk” arrangement, Next Generation ACOs will share 80% of the risk for Medicare Parts A and B for PY1-3 (2016-2018) and 85% in PY4-5 (2019-2020), with a 15% cap on savings/losses. Under the “Full Performance Risk” arrangement, Next Generation ACOs will share 100% of the risk for Medicare Parts A and B, with a 15% cap on savings/losses. Both arrangements will include a discount based on quality and efficiency adjustments.

Despite CMS’ willingness to allow Next Generation ACOs to accept greater downside financial risk, the Next Generation ACOs still will be required to comply with all applicable state laws and regulations regarding provider based risk-bearing entities.

The Next Generation ACO Model also differs from MSSP and Pioneer in that it provides:

  • A greater selection of payment mechanisms, including capitation (starting in 2017);
  • Refined benchmarking methods that reward attainment and improvement in cost containment and that ultimately transition away from comparisons to an ACO’s historical expenditures; and
  • So-called “benefit enhancement tools” to help ACOs improve beneficiary engagement (e.g., access to telehealth services; reward payments to beneficiaries for receiving care from the ACO; and a process that will allow beneficiaries to confirm their care relationship with ACO providers).

CMS will hold two rounds of applications in 2015 and 2016 and anticipates accepting 15 to 20 Next Generation ACOs. Applicants will be evaluated on (1) organizational structure; (2) leadership and management; (3) financial plan and experience with risk sharing; (4) patient centeredness; and (5) clinical care model. For round one consideration, interested organizations must submit an electronic Letter of Intent by May 1, 2015. The deadline for the complete application is June 1, 2015. Letters of Intent and applications for round two will be made available in March 2016.

CMS will host its second open door forum regarding the initiative on March 24, 2015. Additional details are available on the Innovation Center’s Next Generation ACO Model webpage.