On March 10, the Centers for Medicare & Medicaid Services (CMS) announced a new Accountable Care Organization (ACO) model. An initiative of the Center for Medicare and Medicaid Innovation (CMMI), the “Next-Generation ACO Model” offers provider groups experienced in coordinating care the opportunity to assume higher levels of financial risk and reward than are available under the current Pioneer Model and Medicare Shared Savings Program (MSSP).

The objective 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, will lead to improved health outcomes and lower costs for Original Medicare fee-for-service beneficiaries. The model will be evaluated based on how well it delivers better care for individual patients, better population health and slower spending growth.

What’s Important to Know About the New Model?

The new model is a further refinement of the Medicare ACO program. It responds to concerns that ACOs and other stakeholders have raised about the current models.

CMS expects about 15-20 ACOs with at least 10,000 participants (7,500 in rural areas) to participate in the “Next-Generation Model,” representing a variety of provider organization types and geographic regions. (Click here for specific eligibility criteria.) It’s important for those considering the new model to understand that:

  • The ACOs coming into the new model cannot simultaneously be participating in another Medicare ACO model or program, but prior participation in Pioneer or MSSP may be helpful.
  • The model requires ACOs to take on much more risk than other models. Among the options is full risk capitation.
  • ACO payments will be based on prospective benchmarks rather than the current retrospective benchmarks. At the start of each year, the ACO will know what its spending targets are.
  • At this time, only Parts A and B utilization are included in the model, not Part D.
  • Covered benefits for Parts A and B are “as is,” without the limitations found in Medicare Advantage health plan arrangements, such as restrictions on out-of-network usage or requirements for primary care physician gatekeepers.
  • ACOs will need to confirm that their level of assumed financial risk does not conflict with state laws or regulations on provider risk. This can be a gray area where careful presentations may affect regulatory conclusions.

What’s Included in the New Model?

The new model indicates that CMS is listening. It incorporates many changes based on the feedback that CMS received during the Pioneer ACO and MSSP process. Among the new features it includes are:

  • The option for full risk capitation (not shared savings) to the ACO.
  • The option for CMS to process claims from providers and then pass them to the ACO for payment, so that ACOs can negotiate discounts or alternative amounts.
  • Minor incentives for patients for their formal cooperation with the ACO. (The cash incentives may raise some controversies around the model.)
  • A higher risk to the ACO than to CMS, compared with most former models.
  • An improved patient alignment process for determining the Medicare patients for whom the ACO should be responsible.

The new model includes refined benchmarking methods that reward quality performance, reward attainment and improvement in cost containment, and transition away from references to the ACO’s historical expenditures. In addition, the model provides a selection of alternative payment mechanisms to support moving from fee-for-service reimbursements to capitation. It also includes several tools to help ACOs improve their engagement with beneficiaries, including:

  • Waivers of current Medicare coverage restrictions, so that ACO patients have enhanced access to home visits, telehealth services and skilled nursing facilities.
  • A reward payment to beneficiaries for receiving care from the ACO.
  • A process letting beneficiaries confirm their alignment with a particular ACO, even if the alignment process might not align that patient with that ACO.
  • A collaboration between CMS and ACOs to support clearly communicating to beneficiaries the characteristics and potential benefits of the ACO in relation to their care.

The new model will consist of three initial performance years and two optional one-year extensions. CMS will publicly report the performance of Next-Generation ACOs on quality metrics, including patient experience ratings, on its website.

Responses to the Request for Applications are due on June 1, 2015. For more information on Next-Generation ACOs, click here.