Doomed Next Gen ACO program saved Medicare $637M last year

Medicare spending costs money
Next Gen ACOs, which agree to take on more financial risk, generated $637 million in gross savings for Medicare last year. But the program is set to expire after this year. (Getty/zimmytws)

The Next Generation accountable care organization model, which is being shuttered after this year, saved Medicare $637 million in 2020, new data find.

The data, released Thursday by the Centers for Medicare & Medicaid Services (CMS), come as ACO advocates want the agency to give organizations more options to take on financial risk. CMS has shuttered the program in favor of the Direct Contracting model.

“Many Next Gen ACOs aren’t moving into Direct Contracting and have expressed a desire to have an ACO option that allows them to more gradually move toward capitation without feeling like they are taking a step backward in their transition to value-based care payment models,” said Clif Gaus, president and CEO of the National Association of ACOs (NAACOS), in a statement.

NAACOS’ analysis of performance data showed that the Next Gen ACO program generated $637 million in gross savings to Medicare in 2020. The number declined to $230 million after accounting for shared savings paid out to the ACOs.

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An ACO agrees to take on a certain degree of financial risk in exchange for meeting certain spending and quality benchmarks. If an ACO meets the benchmarks, they get a share of any savings; but, if they do not, the ACO must repay Medicare.

But Next Gen ACOs agree to take on more financial risk in exchange for higher savings.

NAACOS reported that, overall, Next Gen ACOs generated $1.6 billion in gross Medicare savings and $836 million in net savings from 2016 through 2020.

Next Gen ACOs also in 2019 generated $519 million in gross savings and $194 million in net revenue after the shared savings payments were made.

Currently, there are 35 participants in the Next Gen program.

The Trump administration had proposed shuttering the program after the end of 2020 but kept it going for 2021 due to the COVID-19 pandemic. The administration charged that the program did not generate enough savings for Medicare and wanted to push more participants into Direct Contracting.

The Biden administration decided back in May to end the program after this year.

Gaus suggested it isn’t too late for CMS to adopt another risk-heavy option for ACOs for next year.

“CMS could use its waiver authority under the Innovation Center to create a new [Medicare Shared Savings Program] option we call ‘Enhanced Plus,’ much like it did with Track 1+, which was very popular and successful,” said Gaus, referring to a program that put ACOs on a path to take on greater risk.

The results come a few days after the agency released a new strategic refresh for its payment models. The refresh will center on developing models that have a greater impact on health equity.

Liz Fowler, head of the Center for Medicare and Medicaid Innovation, said Wednesday that another agency goal is to have models be more streamlined so there is less overlap and confusion and entice more providers to participate.