CMS Evaluation Finds Next Generation ACOs Led to Increased Spending in Performance Year Two

Remy Kerr, MPH, Health Policy and Research Manager

The Centers for Medicare and Medicaid Services’ (CMS) administers a number of types of accountable care organization (ACO) programs. ACOs are groups of doctors, hospitals and other providers and suppliers that voluntarily form an organization with the goal of providing more coordinated care at a lower cost to Medicare patients. Participants in ACOs share accountability in cost of care, with different ACOs establishing different risk-sharing/savings provisions. 1 CMS provides financial incentives to ACOS for lowering spending and meeting certain quality measures based on the beneficiary population. While most ACOs are upside risk only, some models include both upside and downside risk. For ACO participants in two-sided risk arrangements, participants can share in savings or be at risk if payments exceed a specified spending threshold. Medicare ACO models include Pioneer, Medicare Shared Savings Program (MSSP), Advance Payment, ACO Investment Model (AIM) and Next Generation ACOs (NGACO).

The NGACO model requires 80% or 100% upside and downside financial risk, a much higher risk compared to other models. The primary purpose of the NGACO is to test whether strong financial incentives for ACOs alongside care coordination can improve health outcomes and lower spending for Medicare fee-for-service (FFS) beneficiaries. Additionally, the model allows CMS to test additional waivers and differing approaches for determining financial benchmarks compared to the MSSP model. The current NGACO model, which began in 2016, includes three performance years and two optional oneyear extensions. CMS recently released the evaluation report for 2017 data, the second performance year of the model. Details of the report can be found below.

Performance Year Two Data In January, CMS issued the second evaluation report for NGACOs. Forty-four ACOs participated in the NGACO program in 2017, and encompassed 1.23 million beneficiaries. Twenty of the 44 total NGACOs enrolled in 100% risk for 2017. The evaluation report utilized a retrospective method to compare NGACO beneficiary cost of care to a comparison beneficiary group. The comparison group included MSSP ACO beneficiaries.

The second performance year evaluation report found a statistically significant decrease in NGACO Medicare Parts A and B spending compared to care provided outside of the model; however, when factoring in shared savings payments, the model did not result in statistically significant savings. Additionally, the second evaluation report found net spending increased by $115.6 million, a statistically significant increase.

Of interest to AMRPA members, the evaluation report noted that between 2016 and 2017, there were changes in post-acute care (PAC) spending in some settings, leading to minimal declines in gross Medicare spending. The savings were offset, however, by the shared savings payments. IRF and LTCH spending reductions within the model were statistically significant. LTCH and IRF spending decreased cumulatively by 3.48% in performance years 1 and 2, and by 3.58% in performance year 2. There were no statistically significant changes in SNF spending; however, SNF stays increased by 3.4% within NGACOs both in performance year 2 and cumulatively between both performance years. The evaluation report attributed the SNF utilization and spending changes to a possible shift toward lower acuity settings for PAC, use of preferred provider networks, and three-day SNF waivers. In regards to quality, the report also found no significant changes in quality measure outcomes. The measures evaluated were preventable hospital admissions, hospital readmissions and hospital readmissions following SNF stays. 2

As a result of the findings, CMS Administrator Seema Verma stated in a recent Health Affairs blog post that CMS has made changes to how NGACO financial benchmarks are calculated for 2019 and 2020. The baseline will incorporate two years of “prior-year” data going forward rather than one year of data. Additionally, an “attained performance adjustment” will be included. The adjustment will take into account regional expenditures for the benchmark calculation in order to adjust for local trends.

To learn more about NGACOs visit https://innovation.cms.gov/ initiatives/Next-Generation-ACO-Model/ and for the complete second year evaluation report visit https://innovation.cms.gov/ Files/reports/nextgenaco-secondevalrpt.pdf.

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