On March 10, the U.S. Department of Health and Human Services announced, on behalf of the Centers for Medicare and Medicaid Services’ (CMS) Innovation Center, the "Next Generation Accountable Care Organization (ACO) Model" of payment and care delivery. The new model updates and expands the possible payment models for ACOs in the Medicare Shared Savings Program (MSSP). The Next Generation ACO Model, an initiative for ACOs that are experienced in coordinating care for patient populations, allows such ACOs to assume a higher level of financial risk and reward than is currently available in current Medicare ACO initiatives.

According to CMS, the goal of the Next Generation ACO Model is to test whether strong financial incentives for ACOs, coupled with tools to support better patient engagement and care management, can improve health outcomes and lower costs as compared to Medicare fee-for-service beneficiaries. Specifically, the new model is meant to address some of the problems experienced by prior ACOs that discontinued their participation when they failed to achieve the required performance targets and/or financial savings. Any organization that meets the applicant eligibility requirements, including existing MSSP ACOs or Pioneer ACOs, may apply.

Some of the key features of the Next Generation ACO Model are:

  • Beneficiaries aligned with the ACO maintain their original Medicare benefits, consistent with existing ACO models, including open access 
  • The benchmark will be set prior to the start of a performance year, rather than CMS establishing a final updated benchmark at the end of each performance year as is the case with prior ACO models 
  • Four payment mechanisms are available: 
    • Normal fee-for-service 
    • Normal fee-for-service plus monthly infrastructure payment 
    • Population-based payments 
    • Capitation (beginning in 2017) 
  • Two risk-sharing arrangement options: 
    •  Increased Parts A and B shared risk of 80% in years 1-2 and 85% in years 4-5, with 15% savings/loss cap 
    •  Full performance risk with 15% savings/loss cap 
  • Consistent calculation of all ACO benchmarks, regardless of the payment mechanism and risk arrangement chosen by the ACO 
  • CMS has the ability to adjust the experience trend in response to price changes that have a substantial impact on ACO expenditures to prevent ACOs from being unfairly penalized or rewarded for major payment changes beyond their control 
  • Incorporates relative efficiency into the discount, as well as the ability to develop a long-term benchmarking methodology for the ACO’s performance in years 4 and 5 to address concerns about the increasing difficulty of achieving savings every year 
  • Allows voluntary alignment of beneficiaries in addition to alignment based on historic claim data

The Next Generation ACO Model includes specific benefit enhancement tools to improve the beneficiary’s engagement with the ACO, including:

  • Greater access to home care visits, teleheath services, and skilled nursing facilities 
  • Opportunities for beneficiaries to receive reward payments for receiving care from the ACO, although each beneficiary maintains his or her freedom of choice in regard to providers 
  • A process for beneficiaries to confirm their care relationships with ACO providers 
  • Greater collaboration between CMS and ACOs to improve communication with beneficiaries about the nature of ACOs and the potential benefit to their care 

Potential 2015 applicants must submit a Letter of Intent by May 1, 2015, and an application by June 1, 2015. Detailed information and an application can be found on the Innovation Center’s website. Another round of applications is anticipated in 2016.