South Florida Hospital News
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August 2015 - Volume 12 - Issue 2


The Next Generation ACO Model-CMS's Most Crucial Experiment Yet?

After its first two "performance years," the Medicare Shared Savings Program (MSSP), established by the Affordable Care Act, and launched in 2012 by Centers for Medicare and Medicaid Services' (CMS) Center for Medicare & Medicaid Innovation, has been met with mixed reviews. The MSSP was implemented in order to start incentivizing coordination and facilitation of care for Medicare fee-for-service beneficiaries between independent providers through provider participation in Accountable Care Organizations (ACOs). The MSSP rewards ACOs with "shared savings" if they collectively lower their growth in health care costs while meeting performance standards on quality of care and putting patients first. In results released by CMS for the MSSP's first "performance year," only about 25% of ACOs participating in the MSSP received Shared Savings. Although it may be too early to say, some believe that the MSSP, and CMS' ACO initiative as whole, is at a crossroads.

From the MSSP's inception, CMS has always had a clear intention to eventually transition ACOs into shared savings payment models where an ACO must take on financial risk per patient; that is: higher rewards but responsibility for payment of monetary losses in a performance year. In the MSSP’s first cycle (an ACO's three year contract with CMS), each ACO was given the opportunity to participate in a risk-sharing payment model. However, almost all of the participating ACOs chose the model which offered no downside risk.
In its initial proposed regulations published in April 2011, CMS required each participating ACO to accept downside risk in the third "performance year" of its contract with CMS; but after pushback from the ACOs and providers, CMS did not include the requirement in its final rule. However, it did foreshadow that it planned to require the participating ACOs to take on some downside risk in the following three-year cycle.
Concerns from ACO administrators and investors caused CMS to reconsider its original plan. High operating costs and uncertainty surrounding CMS' risk adjustment methodology, among many other things, made ACOs uneasy about the thought of taking on downside risk in the next three year cycle. As a result, CMS was faced with a dilemma. Although it has strong desire to have all MSSP ACOs participate in risk sharing payment models, requiring it could cause many ACOs to jump ship. Ultimately, in its new final rule released last month, it chose to allow MSSP ACOs to sign up for the next three year cycle under a model that does not require them to take on any downside risk.
CMS recently launched a new demonstration model called the "Next Generation" Model. Participants in the Next Generation Model must take on a significant amount of downside risk. The program will be very exclusive as CMS only expects between 15 and 20 participants. The Next Generation Model will offer, among other things, more options as to payments and more desirable benchmarks.
CMS expressly states in its published "Request For Application" paper for the Next Generation Model, that "the goal of the Next Generation Model is to test whether strong financial incentives for ACOs can improve health outcomes and reduce expenditures for Medicare fee-for-service beneficiaries. It is no secret that CMS believes that moving ACOs into risk-sharing models of payment is integral to the long-term future of its ACO initiatives. Thus, this new "test" (i.e. the Next Generation Model) is an important one.

Frederick Segal, Associate, Broad and Cassel, can be reached at (305) 373-9400 or 

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