United States: Obama Administration Announces "Next Generation ACOs"

Last Updated: March 13 2015
Article by Andrew J. Shin

In a highly anticipated announcement on Tuesday, March 10, the Centers for Medicare and Medicaid Services (CMS) released details for a new Accountable Care Organization (ACO) program called the Next Generation ACO (NGACO).  The newest model comes amidst intense discussion from health policy experts and industry leaders on the future of the ACO program at CMS and expected changes to the Medicare Shared Savings Program (MSSP).

The NGACO model differs from the existing portfolio of ACOs in several important ways.  For one, the NGACO offers financial arrangements with higher levels of risk and reward.  In year 2, NGACOs would be able to select a full capitation payment mechanism that would prospectively pay for each attributed beneficiary on a monthly basis.  This is a significant development for some integrated health care systems that have largely stood on the sidelines of the CMS ACO programs due to the lack of incentives and ability to manage from a set amount of funding.

Other distinctions include refined benchmarking methods that ultimately transition away from comparisons to an ACO's historical expenditures.  By making this change, high performing health systems will have a greater incentive to join/continue in the ACO program and avoid being penalized for past quality and cost containment successes.

Finally, what may be the most interesting additions to the ACO arsenal of tools, are several "benefit enhancements" that will give ACOs the ability to circumvent a series of Medicare rules that go beyond benefits that Medicare Advantage (MA) plans are able to offer.  For example, flexibility around Medicare telehealth rules would allow ACOs to utilize the technology regardless of a patient's geographic location.  This would allow patients who are homebound or who require care from remote locations (outside of a physician's office) to be able to receive care using a low-cost and efficient mechanism.

The new benefits include:

  1. Greater access to home visits, telehealth services, and skilled nursing facilities;
  2. Opportunities to receive a reward payment for receiving care from the ACO;
  3. A process that allows beneficiaries to confirm their care relationship with ACO providers; and,
  4. Greater collaboration between CMS and ACOs to improve communication with beneficiaries about the characteristics and potential benefits of ACOs in relation to their care.

One important difference to note between MA plans and the NGACOs is that beneficiaries in the NGACO retain their choice of providers, as opposed to being confined within a network.  Additionally, beneficiaries are not required to pay any additional out of pocket costs to NGACOs, as they do for premium payments in MA.

An area of major contention within the health policy community that the NGACOs attempt to take on is the concern over high turnover within a specific ACO's attributed population.  Initial data from both the Pioneer and MSSP ACO programs have shown that beneficiary turnover was significant and many industry experts have cited this as a major factor in deciding whether to form/continue in the ACO program(s).

The NGACO supplements the existing claims-based alignment methodology with a voluntary alignment program.  Under this new tool, ACOs may offer beneficiaries the option to confirm or deny their care relationships with specific NGACO providers/suppliers, superseding the claims-based attribution method.  Additionally, beneficiaries could even be eligible for payment rewards up to $50 per year for choosing to receive their care from a NGACO.

The NGACO program represents the Obama Administration's boldest move yet towards population-based payment.  However, with only 15-20 ACOs expected to be awarded over the first two rounds, the NGACO program does not likely represent a panacea approach for less experienced health systems and those facing unique circumstances such as those in highly underserved communities.

Further, other models that are forthcoming, such as specialty-focused bundled payments and other multi-payer payment models, will be interesting to watch as CMS considers other areas to focus on for cost-containment and how that weighs into providers' assessments to pursue ACOs as their chosen path.  Ultimately, the success of the ACO program may not be measured in how many ACOs there are, but by the evidence generated to support the fact that they can work to delivery high(er) quality care, while maintaining or reducing health care costs.  If that is the case, then the NGACO model seems to be a very significant step in making that a reality.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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