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Next Generation ACOs Save Medicare $62M, Maintain Care Quality

Next Generation ACOs generated net savings to Medicare because the program allows the organizations to take on high levels of two-sided financial risk, CMS stated.

Next Generation ACO model and accountable care organizations (ACOs)

Source: Xtelligent Media

By Jacqueline LaPointe

- Accountable care organizations (ACOs) in the Next Generation ACO program produced nearly $62 million in net savings to Medicare while maintaining care quality in 2016, CMS recently reported in the newly released evaluation of the program’s first performance year.

Overall, ACOs in the program’s first performance year reduced spending by approximately $100 million, or a 1.7 percent decline, before shared savings and losses payments. The savings primarily stemmed from reductions in hospital and skilled nursing facility use.

At the same time, the ACOs slightly improved care quality and healthcare utilization, CMS found. The federal agency reported the following per 1,000 beneficiaries aligned to a Next Generation ACO provider:

  • 1.7 fewer acute care hospital days per month, or a 1.3 percent decline
  • 15.6 fewer non-hospital evaluation and management visits per month, or a 1.5 percent reduction
  • 20.4 more annual wellness visits per visit, or a 11.9 percent boost

CMS attributed the Next Generation ACO program’s early success to the level of financial risk organizations assumed. The model requires ACOs to take on between 80 to 100 percent two-sided financial risk, the highest levels offered by any Medicare ACO program.

“These results provide further evidence that ACOs succeed under two-sided risk,” stated CMS Administrator Seema Verma. “ACOs in the Next Generation Model are being held accountable with strong financial incentives and are provided with substantial flexibility and regulatory relief. They are delivering value and providing quality care to patients and taxpayers even in their first performance year, and we believe that these results are achievable for other ACOs under similar incentives.”

The early results of the Next Generation ACO program “reinforce CMS’ commitment to the principles outlined in the Pathways to Success proposed changes for the Medicare Shared Savings Program,” the federal agency added.

Under the proposed Pathways to Success initiative, CMS plans to move more Medicare ACOs to two-sided financial risk. The proposed initiative would overhaul the Medicare Shared Savings Program (MSSP) by requiring participating ACOs to take on two-sided financial within two years, rather than six years.

“After six years of experience, the time has come to put real ‘accountability’ in Accountable Care Organizations. Medicare cannot afford to support programs with weak incentives that do not deliver value,” Verma said when announcing the proposed Pathways to success initiative.

“ACOs can be an important component of a system that increases the quality of care while decreasing costs; however, most Medicare ACOs do not currently face any financial consequences when costs go up, and this has to change,” she continued.

CMS intends for the financial risk requirements in the Pathways to Success initiative to help the MSSP generate net savings while maintaining or improving care quality. The MSSP has shown increases in net spending for both Medicare and taxpayers, CMS reported.

Participating ACOs in one-sided financial risk tracks are partly to blame, the federal agency added. About 82 percent of all the ACOs in the MSSP are not taking on financial risk for increases in spending. And MSSP performance data shows one-sided risk ACOs increase Medicare spending in aggregate.

Requiring organizations to take on financial risk sooner should help the program save Medicare $2.2 million over the next ten years, CMS projected.

The results from the Next Generation ACO program’s first performance year suggest that ACOs can save and improve care quality when they are held accountable for the care they deliver, CMS explained. Similar incentives and financial risk requirements in future Medicare ACO programs will be key to lowering healthcare costs and advancing care quality, the federal agency indicated.


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