Through the announcement of its new “Next Generation ACO Model” (Next Gen Model) program on March 10, 2015, the Centers for Medicare & Medicaid Services is making good on its recently proclaimed goal to tie half of its fee-for-service Medicare payments to value-based payment methodologies by the end of 2018. The program name aptly describes it as the next step up from the Medicare Shared Savings Program (MSSP) and the Pioneer ACO Model initiatives already underway for ACOs. As with other ACO-focused initiatives administered by the federal government, the Next Gen ACO seeks to test shared savings and shared risk health care payment models, but will incorporate some significantly different features, such as: (1) a full capitation payment option beginning in 2017; (2) the option for beneficiaries to “self-align” with an ACO; and (3) direct-to-beneficiary rewards for receiving care from the ACO.

ACOs will have two opportunities to apply for the Next Gen Model – this year and in 2016. An ACO’s participation in the program will span over a total of five years consisting of three initial performance years and two optional one-year extensions.
Generally, the Next Gen Model’s participation prerequisites mimic the basic requirements applicable to applicants in the MSSP, such as the legal entity, governance structure, and ACO leadership body requirements. Like the Pioneer ACO Model, however, the Next Gen Model targets coordinated groups of providers that have more experience in managing the health of defined populations.

Some key differences to note when comparing the Next Gen Model to the MSSP and Pioneer ACO Model include the following:

• Total Participants: CMS expects to enroll 15-20 ACOs in the Next Gen Model, which is less than the 32 ACOs that were in the Pioneer ACO Model at its height (the current count is at 19) and significantly less than the 330+ ACOs participating in the MSSP.
• Minimum Number of Beneficiaries: Next Gen Model ACOs will have to have a minimum number of 10,000 aligned Medicare beneficiaries (rural ACOs in the Next Gen Model will have a reduced 7,500 aligned beneficiary requirement), in contrast to the 5,000 beneficiary minimum for the MSSP and the Pioneer ACO Model participants.
•  Payment Options: Next Gen Model ACOs may participate in one of the following four payment mechanism options to fund their operations:
  1. Normal FFS Payment;
  2. Normal FFS Payment + Monthly Per-Beneficiary Per-Month Infrastructure Payment;
  3. Population-Based Payments; or
  4. Capitation Payments (based on total estimated annual expenditures for Next Gen ACO beneficiaries).
• Shared Savings Potential: Next Gen Model ACOs in the shared risk arrangement option will have the opportunity to receive up to 80% of the shared savings they generate in the first three years of the program and up to 85% of those savings in the two extension years, whereas Pioneer ACOs and MSSP ACOs can only enjoy up to 70% and 50% of the shared savings they generate, respectively (which may be dependent on the performance year).
• Benchmarking Mechanisms: The Center for Medicare & Medicaid Innovation (“CMMI”) will provide Next Gen ACOs with beneficiary expenditure benchmarks prior to the start of each performance year, whereas the MSSP and Pioneer ACO Model update these benchmarks at the end of the applicable performance year. In addition, the Next Gen Model will not utilize a minimum savings rate like the MSSP or the Pioneer ACO Model because once the baseline benchmark has been calculated, trended, and risk adjusted, CMS will apply a discount to the benchmark that reflects: (1) the ACO quality score; (2) a regional expenditure efficiency component; and (3) a national expenditure efficiency component. In the two extension years for the Next ACO Model, CMS plans to “eliminate or further de-emphasize the role of recent ACO cost experience when updating the baseline.

Finally, it appears that CMS used some of the Next Gen Model’s planned features to inform its proposed changes to the MSSP. For instance, in the December 2014 proposed rule describing potential changes to the MSSP, CMS requested comment on whether it should waive payment conditions related to SNF 3-Day Rule, telehealth services, and certain post-acute services. These payment condition waivers exist as “benefit enhancements” in the Next Gen Model, and even non-participating providers in contracts with Next Gen Model ACO participants may be able to take advantage of them.

CMMI held its first hour-long Open Door Forum to formally announce the details of the program (available in the Request for Applications) on March 17, 2015, and will hold a subsequent Open Door Forums where CMMI staff will answer potential applicant questions about the administration of the model. But the clock is already ticking – ACOs (including MSSP participants and Pioneer ACOs) that want to participate in the first round of the Next Gen Model have less than three months to decide whether to apply to be participants because they must electronically submit a Letter of Intent (LOI) before midnight on May 1, 2015 and submit a completed Application by June 1, 2015. If ACOs want to wait another year, however, round two LOIs and Applications for the Next Gen ACO Model are due on the same dates in 2016.