The 'Next Generation' ACOs: Medicare's new model rewards patients for opting in

New model will include a track that puts ACOs 'at near 100% risk'

CMS on Tuesday unveiled the Next Generation Accountable Care Organization (ACO) Model, which it hopes will provide an attractive alternate for providers wary of existing models.

After launching its Medicare Shared Savings and Pioneer ACO programs, "we started to hear from stakeholders that [said], 'You really need a next-generation model,'" says Patrick Conway, CMS's CMO and deputy administrator for innovation and quality.

How the new model works

According to Modern Healthcare, the new model uses a combination of fee-for-service and capitation. It creates four payment systems and two risk tracks for its participants, including one with almost full risk.

In a blog post for CMS, Conway said that the Next Generation ACO Model "sets more predictable financial targets." He explained, "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."

In a significant departure from existing ACO options, patients will be able to voluntarily sign up for ACOs in the model. In exchange, they will pay reduced or no co-payments for certain services, such as primary care visits. Participation in the ACO does not limit patients' choice of providers, according to Conway.

What's next?

CMS will accept applications for the Next Generation ACO Model in two rounds that conclude on June 1, 2015 and June 1, 2016, respectively. To be eligible, provider groups must serve at least 10,000 Medicare beneficiaries. Conway predicts that Pioneer ACOs and Medicare Advantage providers may be interested in the new model.

The program is slated to launch in January 2016 and grow the following year to reach between 15 and 20 ACOs, Conway says (HHS release, 3/10; Conway, CMS blog post, 3/10; Frieden, MedPage Today, 3/10; Evans, Modern Healthcare, 3/10 [subscription required]; Williams, Healthcare Dive, 3/10).

The takeaway: CMS has created a new ACO model that includes a track that puts ACOs at nearly 100% risk and allows patients to opt into the organization in exchange for lower co-pays.

The Advisory Board's take

Eric Cragun, senior director of health policy

The "Next Generation ACO Model"” is an intriguing addition to CMS's portfolio of innovative payment models. This new model will be of most interest to large provider organizations that already have developed advanced care management and population health capabilities. Many of these organizations have chosen not to participate in the existing Medicare ACO programs, but the introduction of a higher-reward ACO model more akin to capitation may lead many to reconsider participation. 

Significantly, this model offers many Medicare Advantage-like features without all the investments and challenges of launching an insurance product. For some providers that were considering launching MA plans in lieu of joining Medicare’s ACO programs, the Next Generation model may be seen as a more viable option.   

Many of the features of the Next Generation model reflect feedback that CMS has received from health care providers. For example, many high-performing organizations have had difficulty sustaining participation in the current models because those models rely on national financial benchmarks; the new model addresses this concern by incorporating regional benchmarks. Similarly, features such as higher rewards for providers, incentives for beneficiaries, and waivers from certain billing requirements each seek to address points of concern raised by providers.  

Bigger picture, in creating the Next Generation model, CMS continues to show commitment to achieving its ambitious goal of moving 50% of Medicare payments to alternative payment models by 2018.  Reaching the goal likely will require additional participation options and tweaks to existing models as well as additional stakeholder engagement. But this new model adds to the certainty that the industry will continue to shift toward accountable care and population health

Get the big picture: The field guide to Medicare payment innovation


The Affordable Care Act brought many types of changes to hospital payments.

This infographic presents an overview and assessment of the major Medicare programs accelerating the transition to population health, including the Shared Savings Program and Pioneer ACO Model.


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