United States: Medicare ACO v. 3.0—More Risk, More Money?

The Centers for Medicare and Medicaid (CMS) announced on March 10, 2015 that it is adding a new Accountable Care Organization (ACO) model to its cadre of innovative models.1 Titled the "Next Generation ACO Model," CMS' new ACO model allows provider groups to assume higher levels of financial risk and reward than currently available under its Pioneer Model and Shared Savings Program model. CMS noted that the goal of the Next Generation ACO Model (Next Generation) is to "test whether strong financial incentives for ACOs can improve health outcomes and lower expenditures for Original Medicare fee-for-service (FFS) beneficiaries."2

The latest in CMS' innovation models, Next Generation will join five other existing ACO models:

  • Medicare Shared Savings Program (MSSP);
  • Pioneer ACO Model (Pioneer);
  • Advance Payment ACO Model
  • ACO Investment Model; and
  • Comprehensive End Stage Renal Disease (ESRD) Care Initiative.3

Unlike the MSSP and Pioneer models, Next Generation allows ACOs to take on near-complete financial risk. Organizations will have a choice between two risk arrangements that determine the portion of the savings or losses that accrue to the Next Generation ACO.4 As illustrated in the following table, under Arrangement A ("Increased Shared Risk"), the Next Generation ACO would share up to 80-85 percent of Medicare Parts A and B expenditures for aligned beneficiaries. Under Arrangement B ("Full Performance Risk"), the Next Generation ACO would be responsible for 100 percent of Part A and B expenditures for aligned beneficiaries. Both arrangements provide for a maximum sharing/loss rate higher than those in the MSSP (up to 60 percent) or Pioneer models (up to 75 percent).5

Risk Arrangements in the Next Generation Model

Source: CMS Next Generation ACO Model Request for Applications, page 13 (2015).

The risk taken by Next Generation ACOs is short of complete risk since they are not accountable for expenditures beyond the 99th percentile, and aggregate savings or losses will be capped at 15 percent of the benchmark.

CMS developed the Next Generation ACO Model specifically for ACOs that are experienced in coordinating care for populations of patients.6 Aside from the higher levels of risk and reward, organizations interested in the Next Generation model may wonder how the new model differs from the Pioneer ACO Model and MSSP.  Two additional key differences are:

  • Next Generation offers a selection of payment mechanisms to enable a graduation from FFS reimbursements to capitation; and
  • The new model adds several "benefit enhancement" tools to help ACOs improve beneficiary engagement—greater access to home visits, telehealth services, and skilled nursing facilities; opportunities to receive a reward payment for receiving care from the ACO; a process that allows beneficiaries to confirm their care relationship with ACO providers; and greater collaboration between CMS and ACOs to improve communication with beneficiaries about characteristics and potential benefits of ACOs in relation to their care.

Current MSSP or Pioneer ACOs are eligible to apply for the Next Generation model, in addition to other organizations that meet applicant eligibility requirements. Applicants with prior participation in a CMS program or demonstration will be asked in their Next Generation ACO Model application to show good performance in the previous model. All applicants will be evaluated based on five key criteria: 1) organizational structure; 2) leadership and management; 3) financial plan and experience with risk sharing; 4) patient centeredness; and 5) clinical care model.7 Of note, ACOs may not simultaneously participate in the Next Generation ACO Model and MSSP or Pioneer.

Organizations interested in applying to participate in the Next Generation ACO Model can choose between two different rounds of consideration. For consideration for the January 1, 2016 start date, organizations must submit a Letter of Intent (LOI) by May 1, 2015. Only those organizations that submit an LOI will be able to complete round one applications due June 1, 2015. Information about the 2017 start date and round two consideration dates will be released in spring of 2016. LOIs and online applications can be filed through the Next Generation ACO Model website.8


1 The March 10, 2015 CMS press release can be found here. Note: Medicare ACOs are comprised of groups of doctors, hospitals, and other health care providers and suppliers who voluntarily coordinate care they provide to their "Original Medicare" patients. By coordinating care, ACOs seek to eliminate fragmented or disconnected care that can result from lost or unavailable medical records between providers, duplicated medical procedures and tests, difficulty scheduling medical appointments or general lack of communication between providers for a particular patient. ACO providers and suppliers may receive a shared savings payment from CMS if the ACO meets certain quality performance standards and has generated shareable savings under the performance-based payment methodology of the applicable model.

2 See March 10, 2015 CMS press release.

3 Additional information on the various CMS ACO models can be found here.

4 The risk arrangement applies to the difference between actual expenditures and the discounted benchmark. The benchmark is a surrogate measure of what the Medicare FFS Parts A and B expenditures would otherwise have been in the absence of the ACO. ACO performance is compared to the benchmark to determine shared savings/losses. For more details on the calculation of the benchmark, see the Request for Applications here .

5 For more information on the calculation of shared savings/losses see here; Actual maximum sharing/loss rates vary with the participation year for the particular ACO model.

6 See March 10, 2015 CMS press release.

7 For more details on the criteria and application process, see Appendix F of the Request for Applications here .

8 Visit http://innovation.cms.gov/initiatives/Next-Generation-ACO-Model/

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
31 Jan 2019, Other, Los Angeles, United States

Invites you to join us for a private cooking class hosted by Parties that Cook!

31 Jan 2019, Conference, Los Angeles, United States

The Southern California Association of Corporate Counsel's In-House Counsel Conference

6 Feb 2019, Other, Los Angeles, United States

Please join Sheppard Mullin for cocktails & hors d'oeuvres during The Wind Power Finance & Investment Summit 2019

Similar Articles
Relevancy Powered by MondaqAI
McDermott Will & Emery
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
McDermott Will & Emery
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions