'Next Generation' ACOs: How they differ from Pioneer, MSSP models

The Centers for Medicare & Medicaid Services' newest accountable care organization model aims to address problems experienced by the Pioneer ACOs that caused many to drop out when they failed to achieve the performance benchmarks and financial savings.

[Related coverage: CMS announces 'Next Generation' accountable care organization model]

"Pioneer was designed so that one could exit but no one [new] could enter and that creates the problem [of] attrition over time," Patrick Conway, M.D., chief medical officer and deputy administrator for innovation and quality at CMS, told reporters on Tuesday.

The new model, dubbed the "Next Generation ACO," will allow participants to take on more financial risk with more predictable financial targets and the potential to obtain a greater reward.

CMS says the next generation offers financial arrangements with higher levels of risk and reward than either the Pioneer or Medicare Shared Savings Program because it uses refined benchmarking methods that reward attainment and improvement in cost containment, and that it "ultimately transitions away from comparisons to an ACO's historical expenditures." The new model also offers more payment mechanisms to transition away from fee-for-service reimbursements to capitation.

The model will help "move the Medicare program--and the healthcare system at large--toward paying providers based on quality, rather than quantity, of care," CMS wrote in its frequently asked questions document.

In addition, the model includes several "benefit enhancement tools" to help ACOs improve patient engagement, including greater access to home visits, telehealth services and skilled nursing facilities. CMS also said it allows for greater collaboration between the agency and ACOs to improve communications with patients about the characteristics and potential benefits of ACOs in relation to their care.

College of Healthcare Information Management Executives President and CEO Russell Branzell, in an interview with FierceHealthIT, calls the model the next logical step in the payment and patient management system that IT should be ready to support.

"Talking to hospital CEOs and CIOs, this is something that's been on their radar for a while," Branzell says. "Generally, everyone knew this was coming. Hopefully someday we'll get to a wellness model, but this is that next step out of fee-for-service to some level of risk capitation."

As to concerns expressed by existing ACOs that it becomes more difficult to earn savings every year, CMS says the new model addresses the problem by incorporating relative efficiency into the discount and through the development of a long-term benchmarking methodology for performance years four and five.

Like current ACO models, the next generation ACOs will use historical expenditures to develop their baselines and benchmarks for the first three years. The baseline is risk-adjusted and trended before CMS applies the discount, which incorporates regional and national efficiency.

"Under this approach, ACOs achieve savings through year-to-year improvement over historic expenditures [improvement], but the magnitude by which they must improve will vary based on relative efficiency [attainment]," CMS explains in the FAQ. "This recognizes past achievements of efficient ACOs."

Unlike the Pioneer model, the next generation will also have two application cycles. The first round of applications is due June 1; the second cohort of applications are due a year later on June 1, 2016.

Clif Gaus, president and CEO of the National Association of ACOs, told FierceHealthcare this morning that he is still reviewing the details surrounding the new model and couldn't yet offer feedback on what it means for the future of ACOs.

Blair Childs, senior vice president of public affairs, Premier, a healthcare performance improvement alliance of approximately 3,400 U.S. hospitals and 110,000 other providers, says in a statement that the organization is eager to work with its members to assess the model. CMS' announcement "gives healthcare providers another Medicare payment option with substantially greater flexibility to provide innovative, high-quality care to a defined group of beneficiaries," he says.

In addition, Childs says it is important that CMS continue to provide a range of options for providers to test different payment models and organizational structures in an accountable care environment. "With this announcement, providers have even more choices, which will enable the market to both mature and evolve," he says.

For more:
- read the CMS FAQ document (.pdf)
- here's the Premier statement

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