On March 10, 2015, the CMS Innovation Center (CMMI) announceda new model, the Next Generation ACO Model. This newest model builds on experience from the CMMI Pioneer ACO Model and the Medicare Shared Savings Program (MSSP). Its goal is to test whether strong financial incentives for Accountable Care Organizations (ACOs), combined with increased flexibility, can improve health outcomes and lower expenditures for Medicare fee-for-service (FFS) beneficiaries.

The Affordable Care Act (ACA) created CMMI to test innovative payment and service delivery models for reducing expenditures while preserving or enhancing quality of care for patients. Like the recently announced Oncology Care Model, the Next Generation ACO model will be consistent with HHS Secretary Burwell’s “Better, Smarter, Healthier” approach to improving U.S. healthcare, by transitioning Medicare toward paying providers based on the quality, rather than quantity, of care.

Model Design
Beginning in January 2016, the Next Generation ACO Model will offer financial arrangements with higher levels of risk and reward than current Medicare ACO initiatives.  This new model will use improved benchmarking methods that reward both attaining and improving cost containment and that eventually transition away from comparisons to the ACO’s historical expenditures. Unlike past ACO models, the goal of the Next Generation ACO model is to smooth ACO cash flow and improve investment capabilities through alternative payment mechanisms.

In this new model, CMMI will also engage Medicare beneficiaries in their care by improving the patient experience and rewarding beneficiaries for seeking care from an ACO. The Model will allow beneficiaries to seek the services and providers of their choice, but will mitigate fluctuations in beneficiary populations to maintain long-term sustainability.

Next Generation ACOs may be formed by Medicare-enrolled providers and/or suppliers structured as: physicians or other practitioners in group practice arrangements; networks of individual practices of physicians or other practitioners; hospitals employing physicians or other practitioners; partnerships or joint venture arrangements between hospitals and physicians or other practitioners; Federally Qualified Health Centers; Rural Health Clinics; or Critical Access Hospitals.

CMMI will accept ACOs into the Next Generation ACO Model through two rounds of applications, each consisting of three initial performance years and two optional one-year extensions. Participants in the MSSP and the Pioneer ACO Model may apply, as may all other organizations that meet applicant eligibility requirements. CMS expects approximately 15 to 20 ACOs to participate in the Model with representation from a variety of provider organization types and geographic regions.

A core feature of the Next Generation ACO Model is the prospectively-set benchmark. Unlike other CMMI ACO models, in which the final benchmark is determined at the end of each year, CMS will establish the Next Generation Model benchmark prior to the start of each performance year. The benchmark will be set using the most accurate expenditure, quality, and risk score data available at the time. 

The Model also will test the effectiveness of alternative risk arrangements and payment mechanisms in facilitating investments in infrastructure and care coordination to improve health outcomes. The Next Generation Model will offer a choice of two risk arrangements, and participants will be able to choose from four payment mechanisms: (1) Normal FFS Payment; (2) Normal FFS Payment + Monthly Infrastructure Payment; (3) Population-Based Payments (PBP); or (4) Capitation. The same methodology will be used to set the benchmark for all Next Generation ACOs regardless of the chosen payment mechanism or risk arrangement.

Application Process
CMS will accept ACOs into the Next Generation ACO Model through two rounds of applications in 2015 and 2016. For round one consideration, interested organizations must submit a Letter of Intent (LOI) by May 1, 2015. A round one application must be submitted electronically by June 1, 2015. Round two LOIs and applications will be made available in March 2016.

For more information on this model, visit the Next Generation ACO Model website. If you have any questions or would like our assistance when considering whether to apply to participate in the Next Generation ACO Model or analyzing how the Model would affect your practice or business, please contact one of the Hogan Lovells lawyers listed in the “Contacts” section.