Late last week, CMS' Center for Medicare and Medicaid Innovation (CMMI) sent ripples through the health care industry when it announced that it will allow the Next Generation ACO (accountable care organization) model to expire at the end of this calendar year.

While the agency will not extend the Next Generation ACO model, it is offering eligible Next Gen ACOs the option to participate in the Global and Professional Direct Contracting (GPDC) model. So, what does this mean practically for health care leaders? Below, I break down Advisory Board's four key takeaways—and what this could mean for the future of value-based care. 

The APM Participation Pathway: What you need know—and the blind spots to address

1. CMMI's decision to end the Next Gen program came as a surprise to many

The decision caught several ACOs and policy analysts off guard in part because of the timing. The Next Generation ACO model, which allows participating ACOs to take on full risk, was originally scheduled to end after 2020. However, under former President Donald Trump, CMS extended it an additional year as the health care industry focused on the Covid-19 pandemic.

After the presidential election, a new administration with its own views on value-based care took office. But so far, the Biden administration has offered little clarity into its plans for the future of value-based care. Under President Biden, CMMI has paused several payment models—including the GPDC model designed to serve as the next step for Next Gen ACOs to continue to operate in a full-risk model—but the agency has not indicated whether it plans to change or replace the models.

Policy analysts have been divided over whether CMMI should extend Next Gen for another year. ACO advocates and industry groups have urged CMMI to give Next Gen ACOs at least another year while the agency determines its next steps. But others have said extending the program would detract from resources that could go toward the next program. (There is also disagreement in terms of Next Gen overall performance, with analyses commissioned by CMS saying the program has not met standards—a statutory requirement to become a permanent model—and other analyses pushing back on the methodologies CMS used to judge the program).

CMMI's decision treads that line by ending the Next Gen program and allowing eligible participants to transition to direct contracting. But health care leaders should not read this as an endorsement of direct contracting. The Biden administration has documented concerns with the model, and CMMI's broader application pause remains in effect for non-Next Gen ACOs, at least for now.

2. But the decision didn’t reveal much about the Biden administration's philosophy toward risk

While the shift to value-based care has garnered bipartisan support, each administration has taken a slightly different approach. Under former President Barack Obama, CMMI and implemented the first round of value-based payment models. As such, the administration focused on getting providers to participate and experiment with new reimbursement models.

Under Trump, we saw an emphasis on performance and an acceleration toward risk-bearing. With the team Biden has assembled, which now officially includes CMS administrator Chiquita Brooks-LaSure, we'd expect to see a balance between participation and performance, with a new emphasis on equity that could shape how the models evaluate quality of care. But this remains to be seen. In short, the Next Gen announcement reveals little of the Biden administration's overall philosophy toward value-based payment.

3. Without further action from CMMI, expect 2022 to be a bridge year

The clock has all but run out for creating new alternative models for 2022, suggesting next year will serve as a bridge between the Trump-era value-based payment models and the yet-to-be-determined Biden era.

Per CMMI's decision, the new GPDC model will be open only to eligible Next Gen ACOs and those that had already applied and deferred their participation. While this signals that Biden's CMS wants to keep existing organizations in alternative payment models, it does little to expand the broader pool of ACOs. Currently, CMS' Medicare Shared Savings Program (MSSP) will be the only viable option for new ACOs and Next Gen ACOs that do not qualify for direct contracting in 2022.

ACO advocacy groups, including the National Association of ACOs and Americans Physician Groups, applauded CMMI's decision to allow Next Gen ACOs to apply for the Global and Professional Direct Contracting model. But some groups have also raised concerns that the direct contracting models place some ACOs at a disadvantage. As such, they’ve pushed for CMS to create a new pathway between Next Gen and the GPDC model's full capitation option.

The earliest CMMI would likely be able to design a new model or pathway would be 2023. But the agency now may need to take a more measured approach and be wary of throwing too much change at participating ACOs.

4. Time is ticking for Next Gen ACOs to decide next steps

For those ACOs that wish to remain in full- or partial-risk models, time is of the essence. Next Gen ACOs will need to demonstrate that they meet requirements to participate in direct contracting—and the deadline for submitting those documents is June 14.

ACOs also have the option to apply for the MSSP's Enhanced Track, which would enable them to stay in an alternative payment model but would reduce their risk to 75% (Next Gen ACOs currently have a choice between 80% or 100% risk). But that deadline is even sooner, with CMS requiring a notice of intent by June 7.