ACOs warn future of Next Gen program appears bleak

stethoscope on money
Participants in the Next-Gen ACO program are worried about its future after a critical CMS report on the program's savings. (Getty/Maudib)

The Next Generation Accountable Care Organization Program appears to be on shaky ground as the Trump administration questions its capacity to generate savings and a potential replacement revs up.

The five-year demonstration program will expire at the end of 2020 unless the Department of Health and Human Services Secretary Alex Azar decides to extend it or make it permanent. But an industry group and several participants say that the Centers for Medicare & Medicaid Services is already telling Next Gen ACOs, which take on high amounts of financial risk, that the program will not be around for 2021.

That's due to an evaluation report that found the program hadn’t saved Medicare money, said Mara McDermott, executive director for the Next Gen ACO Coalition, a group representing the 41 ACOs in the program. CMS could resume the program in 2022 or later, but no decision has been made, McDermott added.

“It is frustrating to the Next Gens because if you look at individual performance … they did improve cost savings and did improve quality,” she said.

Richard Lucibella, CEO of Accountable Care Options in Florida, also said that CMS has informed him that the agency is “likely not going to renew Next Gen because they don’t believe they have the legislative authority to do that because actuarial models indicate Next Gens haven’t generated savings.”

CMS disputes that any final decision has been made. “CMS will not be able to determine if the model can be expanded until evaluation of additional performance years of the model is completed,” the agency told FierceHealthcare.

Last month, CMS released an evaluation report examining 2016 and 2017, the first two performance years in the Next Gen program. It found that the payment model didn’t lead to “a statistically significant difference in spending,” wrote CMS Administrator Seema Verma in a blog post on Health Affairs last month.

Further, she wrote, when looking at just the second performance year "NGACOs actually led to a statistically significant increase in spending of $115.6 million across the 44 participating ACOs."

The ACO industry took umbrage with the findings.

The National Association of ACOs said the report compared Next Gen ACO spending to beneficiaries in the traditional Medicare Shared Savings Program ACO model, which doesn't require as much financial risk. Next Gen ACOs should be counted against Medicare’s fee-for-service spending, the group said.

“Although Next Gen ACOs performed modestly compared with the local comparison groups, they substantially outperformed national Medicare fee-for-service spending trends,” the group said in a statement. NAACOS added that “every other data point” on the Next Gen program has been positive.

CMS has estimated that savings from the 2018 performance year to Medicare were more than $184 million even after factoring in bonus payments. It was also premature to end a program based on just two years of data.

“As we look at the success of the overall program, those findings could change year to year,” said Allison Brennan, senior vice president of government affairs for NAACOS.

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The Next Gen ACO program started in 2016 and required participants to take on a high amount of downside risk, where the ACO must pay CMS for not meeting savings targets. However, Next Gen ACOs got a higher share of savings than those in the MSSP.

Next Gen was created under the Obama administration as the successor to the Pioneer payment model, which ended in 2016, that had ACOs take on more risk and got more savings.

Move to direct contracting

Another reason some in the ACO industry are speculating about the demise of Next Gen is the emergence of the new payment model called Direct Contracting, which goes online in 2021. 

“There is a decision-point for Next Gen ACOs around 2021, and my view is that, the agency is encouraging those organizations to take a close look at Direct Contracting,” McDermott said.

CMS denied that the launch of Direct Contracting will have any impact on the future of the Next Gen ACO program.

RELATED: NAACOS launches new task force to help doctors with new CMS payment models

Direct Contracting has three voluntary payment models which each offer some level of risk-sharing.

So far CMS has only released information on two of the models: one has providers getting back 50% of the savings they generate or paying back that amount for any losses. In another model, the provider must take on 100% of the financial risk.

CMS has not released information on the third payment model, even as applications for the implementation period are due on Feb. 25. The agency will have a second round of applications for the first performance year this spring.

However, there are still major questions around the program’s risk adjustment, financial benchmarking and other financial methodology that “are essential for an ACO to evaluate how they would fare in the model,” Brennan said.

“They are missing some important pieces of the puzzle when it comes to direct contracting,” she said. 

CMS said it expects to include that additional information this spring. ACOs could decide to hold off on making a decision. 

Lucibella said that his Florida-based ACO is likely to apply for both MSSP and Direct Contracting, and then make a decision on which to enter by the early fall.

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