On March 10, 2015, the Department of Health and Human Service’s (“HHS”) Centers for Medicare & Medicaid Innovation Center (“CMS Innovation Center”) announced a new Accountable Care Organization (“ACO”) Model, called the Next Generation ACO. This development comes on the heels of HHS’ announcement in January that it will increasingly base significant percentages of payments under Medicare on quality rather than the quantity of care delivered to patients as an integral part of achieving health care delivery system reform.

ACOs are groups of doctors, hospitals, and other health care providers and suppliers who provide coordinated, high-quality care at lower costs. The goal of ACOs is to provide patient-centered care, where providers in the stream of care have better information about a patient’s medical history and develop relationships with the patient to help them control their health.

The Next Generation ACO is based in part on the Medicare Pioneer ACO and the Medicare Shared Savings Program already underway. However, by using refined benchmarking methods, the Next Generation ACO offers financial arrangements with higher levels of risk and reward than those current initiatives.

Patrick Conway, M.D., Deputy Administrator for Innovation and Quality and Chief Medical Officer, Centers for Medicare & Medicaid Services said, “ACOs in the Next Generation ACO Model will take on greater financial risk than those in current Medicare ACO initiatives, while also potentially sharing in a greater portion of savings. To support increased risk, ACOs will have a stable, predictable benchmark and flexible payment options that support ACO investments in care improvement infrastructure to provide high quality care to patients. These changes are responsive to feedback from external stakeholders.”

According to CMS, the Next Generation ACO also includes tools to help improve patient engagement such as: (1) greater access to home visits, telemedicine services and skilled nursing facilities; (2) opportunities to earn a reward payment for receiving care from the ACO; and (3) a process that allows beneficiaries to confirm their care relationship with ACO providers.

CMS has indicated that it will evaluate applications based on criteria in five areas:

  1. organizational structure;
  2. leadership and management;
  3. financial plan and experience with risk sharing;
  4. patient centeredness; and
  5. clinical care model.

CMS expects approximately 15 to 20 ACOs to participate in the Next Generation ACO, which will consist of three initial performance years and two optional one-year extensions. There will be a round of applications in both 2015 and 2016. To participate in the Next Generation ACO with a January 1, 2016 start date, interested organizations must submit a Letter of Intent to CMS by May 1, 2015 and only those organizations will be able to complete an application, which is due June 1, 2015. Information about the 2017 start date will be released in spring 2016.

PLDO will be monitoring this issue and keeping our clients up to date on further announcements and initiatives by CMS. If you have questions about the Next Generation ACO, ACOs in general, or health care reform please call Attorney Jillian Jagling at 401-824-5100 or email [email protected] We welcome your comments, questions and suggestions.

Sources: Historic Announcement: HHS Sets Clear Goals and Timeline for Shifting Medicare Reimbursements from Volume to Value