Industry Groups Seek Next Gen Extension, Full-Risk ACO Options

A group of leading healthcare industry groups are calling on HHS to provide more full-risk accountable care organization (ACO) model options, including an extension of the popular Next Generation ACO Model.

“We are writing to urge HHS to extend this model through 2022 and create a permanent full risk ACO option based on Next Gen for the future. We also ask that HHS reexamine the model evaluation reports,” the 14 groups wrote to HHS Secretary Xavier Becerra.

The groups included the American Hospital Association (AHA), American Medical Group Association (AMGA), Health Care Transformation Task Force, National Association of ACOs (NAACOS), and Premier Healthcare Alliance.

The Next Generation ACO Model is slated to finish at the end of the year after getting a one-year reprieve due to the COVID-19 pandemic. The model offers ACOs a full-risk option and contains greater financial risk compared to other Medicare ACO models.

HHS had developed direct contracting options for ACOs and other healthcare organizations under the Trump administration. However, the Biden administration has paused several of the options, including the controversial Geographic Direct Contracting Model and the next wave of the Global and Professional Direct Contracting Model.

As the Next Generation ACO model, the direct contracting options offer full financial risk. However, the models also appeal to a broader range of healthcare stakeholders, including Medicaid Managed Care Organizations, and the models reimburse providers using capitation.

Healthcare industry groups have questioned whether the direct contracting options are the right fit for Next Generation ACOs seeking another full-risk alternative payment model for after the model ends at the end of the year.

The financial arrangements within the direct contracting options put ACOs “at a competitive disadvantaged as compared to other types of Direct Contracting participants,” the groups said in the letter.

They also said the financial model favors participants without historical experience in traditional Medicare, making a third, “Next Gen-like” pathways necessary.

Failing to offer a similar option would either push Next Generation ACOs to enter the Medicare Shared Savings Program through a lower risk pathway or forgo alternative payment models altogether, the groups contended.

Next Generation ACOs saved Medicare $558 million in 2019, according to partial data from CMS. The data only accounted for 37 of the 41 ACOs participating that year. The four ACOs missing from the dataset deferred financial settlement for the performance year because of the COVID-19 pandemic.

Data from the previous performance year also showed savings, with participating ACOs saving $406 million in 2018. The Medicare program netted $185 million after paying out shared savings and collecting shared losses that year.

Several analyses commissioned by CMS, however, have concluded that the Next Generation ACO Model has not yielded sufficient savings to justify making it permanent under the CMS Innovation Center’s authority.

For example, the most recent evaluation report determined that the model reduced gross Medicare spending by 0.9 percent but results in a non-significant increase in spending of 0.3 percent after accounting for shared savings and other incentive payments.

Differences between analyses may be explained by methodology, the groups stated in the letter. For instance, evaluators had compared Next Generation ACO savings to those achieved by ACOs in the Shared Savings Program and other Innovation Center Models.

Many Next Generation ACOs had also participated in other Medicare ACO models prior to joining the full-risk model, creating problems for comparison.

A separate analysis conducted by leaders at the Health Care Transformation Task Force and McDermott+Consulting in a recent Health Affairs blog post found that the Next Generation ACO Model actually produced positive grow and net savings to Medicare across all model years when ACO performance was compared to expectations set by the model benchmark.

Notably, the Medicare Shared Savings Program did not do that until the fifth year of the program.

Incorporating the discount deducted from the benchmark in the savings calculation also showed the Next Generation ACO Model outperforming the Shared Savings Program in per-beneficiary savings every year both programs have been running.

“We believe a deeper analysis – particularly using more recent data, as the model has changed significantly over time – is needed before concluding that the model has not generated savings,” the groups wrote in the letter.