Next Gen ACOs generated $62M in savings in 1st year

Accountable care organizations (ACOs) have recently caught some heat for not taking on enough risk, but a new analysis from CMS reveals the latest version of the ACO model is generating savings.

The Next Generation ACO Model saved Medicare approximately $62 million in 2016, CMS announced, while quality outcomes were maintained for beneficiaries. By comparison, the Medicare Shared Savings Program, which included more than 400 ACOs, generated $652 million in gross savings in 2016.

The results come a few weeks after CMS proposed to modify the Medicare Shared Savings Program to force more ACOs to take on downside risk sooner than originally scheduled. The proposal was like to cause more than 100 ACOs to drop out of the voluntary program, but would also likely strengthen the underlying value-based objectives.

The Next Gen model, which launched in January 2016, had stronger financial incentives to improve health outcomes and reduce expenditures than previous ACO program versions, with organizations assuming 80 percent to 100 percent two-sided risk—the highest levels of risk offered by CMS. The program started with 18 participants, with two additional cohorts that began in 2017 and 2018. The model is scheduled to run for a five-year period and has nearly 1.5 million fee-for-service beneficiaries aligned with it.

Several of the principles in the Next Gen ACO model found their way into CMS’s proposal to tighten up the financial incentives earlier in August.

“These results provide further evidence that ACOs succeed under two-sided risk,” CMS Administrator Seema Verma said in a statement. “ACOs in the Next Generation Model are being held accountable with strong financial incentives and are provided with substantial flexibility and regulatory relief.  They are delivering value and providing quality care to patients and taxpayers even in their first performance year, and we believe that these results are achievable for other ACOs under similar incentives.”

The Next Gen model saved about $11.20 in Medicare net spending per beneficiary per month. Participants are associated with 1.7 percent gross reduction in Medicare spending for aligned beneficiaries overall, or more than $100 million, which came to $62 million, or 1.1 percent reduction, after adjusting for shared savings and loss payments, according to CMS.

Quality also improved, with 11.9 percent more wellness visits per year per 1,000 beneficiaries in the model and 1.3 percent fewer acute care hospital days per month. Savings were driven by less spending in the skilled nursing facility (SNF) setting. Four Next Generation ACOs also contributed to more than half of the overall reduction in Medicare spending. Fifteen of the 18 ACOs taking part in the model had previous ACO experience.  

“These early results are promising,” CMS’s analysis concludes. “We look forward to observing results in the second performance year to observe whether this trend continues for these ACOs and is replicated in subsequent Next Generation ACO cohorts."