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Next Generation ACO Model Saved Medicare $62M in 2016

The Next Generation ACO Model helped Medicare save $62M in 2016 and provided encouraging evidence that downside risk ACOs can be effective for containing costs.

Source: Thinkstock

By Thomas Beaton

- Next Generation Accountable Care Organizations (ACO) saved the Medicare program $62 million during their first year of operation in 2016, encouraging CMS to expand downside risk models across Medicare.

Next Generation ACOs accept the highest risk of any current CMS accountable care programs, which emphasizes the achievement of reducing costs while maintaining high quality of care, said CMS Administrator Seema Verma.

“These results provide further evidence that ACOs succeed under two-sided risk,” Verma said.  

“ACOs in the Next Generation Model are being held accountable with strong financial incentives and are provided with substantial flexibility and regulatory relief. They are delivering value and providing quality care to patients and taxpayers even in their first performance year, and we believe that these results are achievable for other ACOs under similar incentives.”

In 2016, the program launched with 16 participating ACOs and has since added two new members. The Next Generation ACO program is slated to run until the end of 2020.

According to CMS, the average size of a Next Generation ACO is 26,511 beneficiaries. Participants in the program provide care to just over 477,000 Medicare members.  More than 31,000 individual providers and 755 care facilities are involved in the initiative.

In the first performance year, Next Generation ACOs reduced per member per month (PMPM) costs by $18.20, the report says. On the high end of the scale, one ACO slashed costs by $79.40 per member per month.

Only four Next Generation ACOs experienced increased care costs during the program’s first year.

In addition to reducing spending, beneficiaries receiving care within Next Generation ACOs saw improved quality and fewer hospitalizations.

Per 1000 beneficiaries, Next Generation ACOs saw 1.7-day fewer hospital stays per month, 15.6 fewer non-hospital evaluation and management visits per month, and 20.2 percent more annual wellness visits per year.

“Consistent with prior ACO work, this savings appeared to be largely associated with reductions in hospital and SNF associated costs. Impacts on cost, utilization and quality varied between individual ACOs,” CMS said.

“These early results are promising. We look forward to observing results in the second performance year to observe whether this trend continues for these ACOs and is replicated in subsequent Next Generation ACO program cohorts.”

At the start of 2016, 7 out of 18 Next Generation ACOs selected a 100 percent full-risk option. However, the seven ACOs later opted to participate in an opportunity to reduce shared financial risk down to 80 percent. Fifteen total ACOs enrolled in the 80 percent risk option and three ACOS stayed enrolled in the 100 percent option by the end of 2016.

Next Generation ACOs can choose one of three payment mechanisms that include a fee-for-service (FSS) payment design, a hybrid FSS plus monthly infrastructure payment design, or a population-based payment system.

The hybrid FFS design reimburses providers for care costs and new health IT investments, while the population-based payment system reimburses providers based on health outcomes for a set of beneficiaries.

Nine Next Generation ACOs chose the FFS payment system, seven ACOs chose the hybrid FFS system, and two chose the population-based payment system.

Downside risk Next Generation ACOs are more likely to treat a greater proportion of high-risk beneficiaries than other Medicare organizations, CMS found.

In 2016, ten of the eighteen Next Generation ACOs had higher-than-average concentrations of beneficiaries with chronic diseases and greater healthcare utilization. In addition, between 27 to 34 percent of Medicare beneficiaries served by Next Generation ACOs are high-risk and dual eligible for Medicaid.

The results of the Next Generation ACO program led CMS to propose the Pathways to Success program that aims to reform  the Medicare Shared Savings Program (MSSP).

Pathways to Success aims to create more Medicare ACOs that assume even greater downside risk. CMS is optimistic that the promising results from the Next Generation program will also be reflected in future endeavors.

“After six years of experience, the time has come to put real ‘accountability’ in Accountable Care Organizations. Medicare cannot afford to support programs with weak incentives that do not deliver value,” Verma said.

“ACOs can be an important component of a system that increases the quality of care while decreasing costs; however, most Medicare ACOs do not currently face any financial consequences when costs go up, and this has to change.”

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