Next Generation ACOs Saved Medicare Over $184M in 2018

January 13, 2020 - Next Generation accountable care organizations (ACOs) reduced spending by about 1.11 percent in 2018, returning more than $184 million to the Medicare Trust Funds, according to new program results from CMS.

The results published in a new Health Affairs blog post authored by CMS Administrator Seema Verma noted that those figures accounted for the savings generated by the discount applied to the performance year benchmark and shared savings payments made to the risk heavy ACOs. Medicare will pay the organizations about $285 million as shared savings and recoup nearly $64 million in shared losses.

However, savings from the 50 Next Generation ACOs may not be as high as the actuarial analysis shows, Administrator Verma pointed out.

Alongside program results, CMS also published the second evaluation report for the Next Generation ACO model, which assessed the program’s first two performance years – 2016 and 2017. The report prepared by NORC at the University of Chicago found that the program, which allows ACOs to take on 80 or 100 percent financial risk, actually increased spending in some performance years.

Specifically, the report showed that the Next Generation ACO model did not result in a statistically significant difference in spending over the first two performance years, with participating ACOs actually having a statistically significant increase in spending of $115.6 million in 2017.

Savings for the second performance year – of lack thereof – differed substantially from the figures CMS reported earlier. In December 2018, the federal agency touted that the Next Generation ACO model returned over $164 million to the Medicare Trust Fund in 2017 according to an actuarial analysis.

The difference stems from the structure of the analyses, Administrator Verma explained in the new blog post. Specifically, the evaluation report “uses different methods than the actuarial results to retrospectively compare the cost of care for beneficiaries served by Next Generation ACOs to a comparison group not exposed to the intervention,” she wrote.

These differences are key to truly evaluate the effectiveness of an alternative payment model, added Administrator Verma who also stated that looking at net spending when assessing the performance of a model is needed.

Net spending measures how much spending changed after factoring in shared savings payouts to model participants, she elaborated. Without looking at shared savings payouts, the program “would appear to have decreased spending across performance years one and two; the net values provide the full story,” she wrote.

“By comparing these two numbers, we assess the effectiveness of the model and the savings realized,” she continued.

Additionally, Administrator Verma highlighted the need to have “strong and targeted incentives for lower spending” in alternative payment model demonstrations, like the Next Generation ACO model.

“Savings tend to increase as health care providers take on more risk, but even high levels of risk do not guarantee that a model will result in overall savings,” she wrote. “We also need to ensure that our benchmarks are set accurately for comparison purposes so that they reward true changes and are not instead rewarding patterns of care existing in certain geographic areas, changes in coding that lead to an appearance of increased risk in a population, or changes in how care is provided that were already happening absent the model.”

The Next Generation ACO model is slated to end at the end of this year. But industry groups are calling on CMS to make the ACO program permanent, especially in light of new program results.

“The Next Gen program has been very successful, focusing on the CMS Innovation Center’s goals of lowering spending and improving quality,” Clif Gaus, ScD, president and CEO of the National Association of Accountable Care Organizations (NAACOS) stated in a press release. “CMS should recognize the contributions of these ACOs and this program and continue it as an alternative payment model for years to come.”

On its website, Premier stated that the Next Generation ACO model “provides the programmatic flexibility and payment evolution needed to break away from the fragmented fee-for-service system and permits the implementation of alternatives that reward quality, safety, coordination and efficiency by progressive industry leaders.”

The healthcare improvement company which interacts with Next Generation ACO through its Population Health Management Collaborative continues to urge CMS to make the program permanent, but voluntary to “support the efforts of industry leading health systems, and work with providers to achieve continued success in these innovative models.”