CMS Introduces Next Generation of ACOs

Playing on some terminology very familiar to laboratories, the Center for Medicare and Medicaid Innovation Center (CMS Innovation Center) has announced a new accountable care organization (ACO) model titled the “Next Generation ACO Model” as part of its continuing efforts to coordinate care and reduce costs. While the new model has nothing to do with next generation sequencing technology or precision medicine, like precision medicine, it does afford some personalization or tailoring to meet the specific needs of participating ACOs. In this next generation of ACOs, the ACO can pick the level of risk best for their organization with the goal being an increased level of risk while maintaining stable benchmarking. “This model is part of our larger effort to set clear, measurable goals and a timeline to move the Medicare program—and the health care system at large—toward paying providers based on the quality, rather than the quantity of care they give patients,” said U.S. Department of Health and Human Services Secretary Sylvia M. Burwell, in the press release announcing the Next Generation ACO Model.
Structure and goals The Next Generation model includes higher risk levels and consequently also higher potential rewards. Benchmarking will be initially set based on a year of historical expenditures then will shift to using regional projections regarding trends, a risk adjustment step and then finally a discount applied based on “quality and efficiency adjustments.” The discount is based on quality, and regional and national efficiency, and can range from .5% to 4.5%. Additionally, the model includes four payment methods including capitation (available in 2017) but participants aren’t required to choose the capitation payment method. The other three payment models are fee-for-service, fee-for-service with a monthly infrastructure payment and population based payment. “This ACO model responds to stakeholder requests for the next stage of the ACO model that enables greater engagement of beneficiaries, a more predictable, prospective financial model, and the flexibility to utilize additional tools to coordinate care for beneficiaries,” said Patrick Conway, deputy administrator for Innovation and Quality and chief medical officer for CMS, in the press release. The model provides the following methods for achieving its goals:

• beneficiary choice is preserved—they don’t have to stay within the ACO for services;
• beneficiaries are rewarded for choosing providers within the ACO for their health care services (rewards for obtaining a specific percentage of care from Next Generation ACO providers; for example, a projected reward is $50/year if the beneficiary has 50% of patient encounters with ACO providers);
• “coverage of skilled nursing care without prior hospitalization”;
• more telehealth and post-discharge home services covered; and
• beneficiary ability to discuss care preferences with providers directly.

The ACOs will need a compliance officer and a CMS-approved compliance plan. CMS will share Medicare data to allow coordination and quality improvement and will provide reports that may include benchmarking, utilization, expenditures, and beneficiary alignment.
Applications CMS will accept applications for the Next Generation ACO Model in 2015 and 2016. For the first round of participation, a letter of intent must be submitted by May 1, 2015, and applications submitted June 1, 2015. Round 2 deadlines are the same dates in 2016. CMS anticipates 15-20 participants in this model and the duration is for five years—an initial three-year period with an option for two one-year extensions—with a minimum of 10,000 aligned beneficiaries. For more information on the Next Generation ACO Model, please visit CMS’s Next Generation ACO Model web page. Questions regarding this model can be directed to CMS at nextgenerationacomodel@cms.hhs.gov.
Getting a better understanding CMS held an Open Door Forum to discuss this new model on March 17 which was repeated on March 24, providing an overview of the model. You can review the forum presentation slides and other additional information on CMS’s Next Generation ACO web page. Future Open Door Forums will be held on the following dates: March 31, 2015, at 4-5 p.m. EST (focusing on the financial methodology of the ACO model); April 7, 2015, from 4-5 p.m. EST (addressing benefit enhancements and beneficiary care coordination rewards); April 14, 2015, from 4-5 p.m. EST (discussing letters of intent and the application process). Information about attending these forums or reviewing slide presentations from the forums is available on the web page.
Relevance for laboratories CMS’s continuing development of ACO models signals the anticipated importance for these models in shifting from volume to value. G2 Intelligence’s report Laboratory Services in Accountable Care Organizations reveals that interviews with industry experts indicate “ACOs will continue to grow in counts, covered lives, and reach” and that commercial ACOs may “grow more rapidly and potentially outpace government ACOs.” The development of yet another option for providers seeking to participate in ACOs may be further evidence supporting this prediction. The Report also notes that research indicates laboratory participation in ACO discussions influences the perception of the value of laboratory services in ACOs. G2 Intelligence’s ACO report thus advises laboratories to review options for ACO participation and in order to increase their value to potential ACO partners, to consider the following recommendations:

• “Engage more actively in value initiatives across the care continuum,
• Develop metrics to quantify laboratory value contribution,
• Be proactive in approaching ACOs, and
• Get a seat at the table early.”

Takeaway: ACO models continue to proliferate and are obviously a favored means of CMS for achieving a shift from volume-based to value-based reimbursement. Thus, laboratories not already considering ACO participation or affiliation may be wise to start investigating these options.