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'Next Gen' ACO Designed to Boost Savings, Care Quality

Tony Hagen @oncobiz
Published: Wednesday, Mar 11, 2015

Patrick Conway

Patrick Conway

The Centers for Medicare & Medicaid Services (CMS) has announced the launch of a “Next Generation Accountable Care Organization (ACO) Model,” designed to increase savings on healthcare spending while improving medical care. But, the initiative will also place a higher level of financial risk squarely on providers.

Several CMS-sanctioned ACO models already exist, but “the ACOs in the Next Generation ACO Model will take on greater performance risk than ACOs in current models, while also potentially sharing in a greater portion of savings. To support increased risk sharing, ACOs will have a stable, predictable benchmark and flexible payment options that support ACO investments in care improvement infrastructure that provides high quality care to patients,” CMS said in a statement.

CMS officials defined the new ACO model as a test of whether stronger financial incentives and better tools for patient engagement and care management can improve health outcomes and lower expenditures for Medicare fee-for-service (FFS) beneficiaries.

Among the changes:

  • Rewards for patients for receiving care from participating ACO physicians and other professionals.
  • Coverage of skilled nursing care without prior hospitalization.
  • Expanded coverage of telehealth and post-discharge home services to support coordinated care at home.
  • Efforts to stabilize beneficiary populations through claims participation.
  • Smoother cash flow for ACOs via alternative payment mechanisms.
“The ACO model responds to stakeholder requests for the next stage of the ACO model that enables greater engagement of beneficiaries, a more predictable, prospective financial model, and the flexibility to utilize additional tools to coordinate care for beneficiaries,” Patrick Conway, deputy administrator for Innovation and Quality and chief medical officer for CMS, said in a statement.

Officials said that the newer model is designed to move a higher number of Medicare beneficiaries into models that pay providers based on quality of care rather than volume of services received.

The program builds on several preexisting CMS ACO types, including the Pioneer ACO Model and the Medicare Shared Services Program.

According to the American Hospital Association, there were 400 US-based ACOs with government contracts as of May 2014. Another 210 had commercial contracts and, overall, 21 million patients were covered. The CMS programs are intended to provide for better quality information on patients to aid in healthcare decisions and also greater partnership in healthcare decisions between patients and their providers. The Next Generation ACO Model is for existing ACOs willing to assume higher levels of financial risk and reward than are available under the Pioneer and Shared Savings models, CMS said.

In a report produced for CMS on the results of the Pioneer ACO, L&M Policy Research concluded that the 32 participating ACOs did achieve first-year savings of approximately $20 per beneficiary per month between 2011 and 2012, resulting in an overall $146.9 million savings to the Medicare program.

However, the report stated that 23 of the 32 participating ACOs did not show significant changes in total Medicare spending compared to their FFS counterparts.

CMS said an estimated 15 to 20 ACOs are expected to participate in the Next Generation program, which will initiate application rounds this year and in 2016.

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