United States: HHS Announces Next Generation ACO Model Of Payment And Care Delivery

Last Updated: April 8 2015
Article by James R. Dutro, Thomas E Dutton, David W. Grauer, Gerald M. Griffith, Lisa G. Han, Todd P. Kelly, John M. Kirsner and David T. Morris
Most Read Contributor in United States, September 2019

On March 10, 2015, the U.S. Department of Health and Human Services ("HHS") announced the Next Generation Accountable Care Organization Model ("Next Gen ACO Model"), a new initiative sponsored by the Centers for Medicare & Medicaid Services' ("CMS") Innovation Center. Scheduled to begin in January 2016, the five-year program is designed for organizations that demonstrate significant experience in coordinating care for patient populations. Although there is no limit on the number of organizations that may participate in the Next Gen ACO Model, CMS is anticipating that only 15–20 will be selected for participation.

As described in more detail in the related Commentary, the Next Gen ACO Model is distinguished from its predecessors by the following:

Focus on Medicare Providers/Suppliers. The Next Gen ACO model departs from the MSSP's focus on the Medicare-enrolled TIN and instead looks to individual Medicare providers or suppliers (identified by a National Provider Identification ("NPI") or CMS Certification Number ("CCN")) as the building blocks of a Next Gen ACO. As a consequence, the Next Gen ACO Model affords participants significant flexibility to select specific providers who are best able to contribute to the Next Gen ACO's success.

Choice of Two-Sided Risk Arrangements. The Next Gen ACO Model requires participants to assume downside financial risk. Those that do are provided opportunities for greater reward than is currently available under either the MSSP or the Pioneer ACO Model. Under the Next Gen ACO Model, participating ACOs may choose one of two upside/downside risk arrangements: increased shared risk (80–85 percent of Medicare Parts A and B expenditures) and full performance risk (100 percent of Medicare Parts A and B expenditures).

Prospective Benchmarking. A prospectively set benchmark, against which a Next Gen ACO's Medicare Parts A and B expenditures will be measured to determine shared savings or losses, is a core component of the Next Gen ACO Model. Under the methodology used to determine the benchmark, the magnitude by which a Next Gen ACO must improve in order to achieve savings will vary based on the Next Gen ACO's efficiency relative to other organizations.

Provider Choice of Payment Mechanisms. The Next Gen ACO Model is designed to offer Next Gen ACOs the opportunity for stable and predictable cash flow while testing the effectiveness of alternative payment mechanisms in facilitating investments in infrastructure and care coordination. Next Gen ACOs may choose from a menu of payment mechanisms, including: (i) normal fee-for-service; (ii) normal fee-for-service plus monthly infrastructure payments; (iii) "population-based payments" (a combination of discounted fee-for-service and monthly lump-sum payments); and (iv) full capitation (available starting in 2017).

Beneficiary Engagement. The Next Gen ACO Model includes a number of features that are intended to encourage care coordination and closer care relationships between a Next Gen ACO and Medicare beneficiaries. Next Gen ACOs may take advantage of certain Medicare payment rule waivers that will allow them to offer beneficiaries expanded telemedicine services, enhanced access to post-discharge home health visits, and/or skilled nursing facility services without the prerequisite three-day inpatient stay. In addition, CMS will allow beneficiaries to voluntarily choose to be "aligned" with a specific Next Gen ACO and will offer cash rewards to beneficiaries who seek care through their aligned Next Gen ACO.

Preferred Providers and Affiliates. The Next Gen ACO Model affords Next Gen ACOs opportunities to collaborate with health care providers who are not "full" participants in the Next Gen ACO but who nonetheless may contribute to the goals of a Next Gen ACO by serving as a provider of the enhanced benefits described above or by agreeing to participate in the Next Gen ACO's capitation arrangement with CMS.

Availability of Waivers and Other Regulatory Guidance. At present, the Final Interim ACO Waivers Rule and the antitrust and tax-exempt regulatory guidance specific to the MSSP are not applicable to the Next Gen ACO Model. Pending the availability of any waivers and regulatory guidance, Next Gen ACOs must separately analyze all of the applicable fraud and abuse, antitrust, and tax-exempt regulatory issues and plan for provider engagement in a higher risk environment, with no guarantee of higher levels of waiver protection.

There are two application cycles in consecutive years for the Next Gen ACO Model, with each application cycle having its own letter of intent and application submission processes. For consideration in the first cycle (which will have an initial agreement term that consists of three 12-month performance periods with the potential of two additional 12-month extensions), interested organizations must submit a nonbinding letter of intent to CMS no later than May 1, 2015 and an application no later than June 1, 2015.

For a more detailed discussion of the Next Gen ACO Model, please read our related Commentary

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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