Next Generation ACO Model Has Saved Medicare $667M, So Far

October 21, 2021 - The Next Generation Accountable Care Organization (ACO) Model has saved Medicare millions of dollars over the past four performance years. But with one more year to go due to the COVID-19 pandemic, the Model is actually operating at a loss.

Next Generation ACOs have saved Medicare nearly $667 million thanks to reductions in Parts A and B spending since 2016, according to an independent evaluation of the model commissioned by CMS. Risk-based ACOs in the program were able to decrease gross spending by 1.2 percent across four performance years, with the largest reductions taking place with skilled nursing facility and post-acute care.

Notably, in the fourth performance year (2019), Next Generation ACOs reduced acute care spending—the largest category of Medicare spending. This was the first year ACOs in the Model were able to impact acute care spending.

However, after accounting for $909 million in shared savings and other payouts to the risk-based ACOs, the Next Generation ACO Model was associated with $243 million in net losses. The losses equate to a net increase in Medicare spending of 0.4 percent over the four performance years, the evaluation stated.

Overall, researchers said the spending reductions were “modest” and a “mismatch between CMS financial benchmarking and NGACO [Next Generation ACO] experience with spending impacts” may explain the results.

“CMS calculates financial performance relative to national benchmarks, while our model evaluation compared NGACO performance on spending and utilization measures relative to a matched comparison group,” they explained in the report.

The method for determining ACO savings has been hotly debated. Industry stakeholders have also criticized how the CMS Innovation Center has previously evaluated the Model, comparing savings from care to care delivered to beneficiaries outside of the Next Generation ACO. This includes beneficiaries who may have been cared for by providers in the Medicare Shared Savings Program or other alternative payment and care delivery models.

Without net savings to Medicare though, the Next Generation ACO Model is on the chopping block despite calls from industry groups for an extension. CMS told participants in May that it would terminate the Model after this performance year since it has increased net Medicare spending.

The National Association of ACOs (NAACOS) said the most recent results are part of a “flawed comparison” that “undervalues the success of the Next Gen model.”

In contrast to the report, NAACOS president and CEO Clif Gaus, ScD, said the results were “impressive” and “are the latest illustration of the success of Medicare ACOs, benefiting patients, providers and taxpayers alike.”

“Recent ACO results coupled with an enhanced commitment to accountable care from the Biden administration represent a notable paradigm shift toward achieving healthcare transformation,” Gaus said publicly following the report’s release.

NAACOS and others are using the results to encourage CMS to create an option for the risk-based ACOs once the Next Generation ACO Model expires at the end of the year.

“As the Next Generation ACO Model concludes this year, Premier strongly urges CMS to incorporate the innovations tested in this model into the Medicare Shared Savings Program and other Innovation Center models,” the healthcare improvement company said in a statement. “This includes the ability for ACOs to take on full risk, pay participant participants capitated payment, provide more care in the home and alter beneficiary cost sharing.”

NAACOS advised CMS to create a new track in the Medicare Shared Savings Program for Next Generation ACOs, much like the Track 1+.

The CMS Innovation Center announced a strategy refresh earlier this week. The Center did not say whether it would provide a new pathway for Next Generation ACOs.