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Can Next Generation ACOs pave the way for value-based pay?


The Centers for Medicare & Medicaid Services’ (CMS) shift to alternative physician payments has been a bumpy one. But its newest model, the Next Generation Accountable Care Organization (ACO), aims to smooth the way for healthcare providers looking to make the leap to value-based payments.

The Centers for Medicare & Medicaid Services’ (CMS) shift to alternative physician payments has been a bumpy one. But its newest model, the Next Generation Accountable Care Organization (ACO), aims to smooth the way for healthcare providers looking to make the leap to value-based payments.

The Next Generation ACO is designed to resolve some of the problems that have hampered participation in CMS’s previous ACOs. In an ACO, a group of physicians, hospitals, and other healthcare providers work to provide efficient, high-quality care for a group of Medicare beneficiaries. Those ACOs that succeed are rewarded and help reduce healthcare spending. In 2014, CMS says, ACOs saved the agency $411 million. 

Despite the reported savings, some have worried about the future of Medicare’s ACOs because of high dropout rates in part of the program. The passage of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) increases the urgency of shoring up Medicare’s ACOs. The new law repeals the Sustainable Growth Rate payment formula and begins shifting Medicare providers to value-based reimbursements by 2019, either through the Merit-based Incentive Payment System (MIPS) or through alternative payment models such as ACOs. 

“All physicians must do something different no matter what,” says Kavita Patel, MD, a senior fellow at the Brookings Institution. “Whether the Next Generation [ACO] will be the choice for many doctors is not clear.”

So far, the latest evolution of ACOs is getting high marks from experts for addressing some of the concerns about benchmarking that have dogged the earlier models, for handling population risk in a fairer way, and providing new tools to entice beneficiaries to stick with their ACO.



Savings experiment

The CMS ACOs were created through the Affordable Care Act to encourage healthcare providers to rein in costs and improve quality. Groups that succeed at meeting these goals get a share of the cost savings.

The first iteration of CMS’s ACOs was the Medicare Shared Savings Program (MSSP), which allowed networks of physicians and hospitals serving at least 5,000 Medicare beneficiaries to share in the savings resulting from more efficient and higher-quality care.

The second iteration was the Pioneer ACO Program, designed to entice larger organizations-those serving 15,000 or more patients-into forming ACOs. The Pioneer ACOs could share 60% to 75% of the savings associated with improved care in their populations as long as they were willing to take on an equal share of the risk, according to CMS.

But even high-achieving healthcare organizations found it difficult to succeed in the Pioneer program and many dropped out. In fact, the number of participants dropped from 32 in 2012 to nine now, according to CMS. 

A 2015 study in the Journal of the American Medical Association found that reducing costs is possible but gets harder each year. “Leakage” of beneficiaries, who are free to seek care outside of the ACO, contributed to the uphill battle. For example, patients who have benefited from improved care for chronic conditions may opt to seek care from a competing organization. This can lower the cost of the care the competitor provides and deny the ACO the full benefit of the improved care it provided, thereby making savings harder to achieve over time, according to the study.  

Additionally, some organizations were unprepared for the costs of building the analytics and other population health infrastructure needed for the program, according to Patel. 

MSSPs, on the other hand, have proven to be popular and have grown to number more than 400, servicing more than seven million Medicare beneficiaries, according to CMS. In fact, some organizations leaving the Pioneer program switched to the MSSP model.

“Retention of ACOs in the initiatives hasn’t been an issue; rather, there’s been movement between ACO initiatives, which CMS supports,” according to an emailed statement from CMS. CMS declined Medical Economics’ request for an on-the-record interview.

But the MSSP program is one-sided. Organizations are reaping the benefits of cutting costs, but not bearing any of the financial consequences if they fail. 

“We have a lot of ACOs, but the plurality are upside only,” Patel says. “We’re spreading the idea, but not holding them accountable.”



A clearer path?

The Next Generation ACOs up the ante on shared savings and losses, allowing organizations to go in at 80% or 100%. “The Next Generation ACO is the evolution of the Pioneer ACO,” Patel says. “Each time, they are getting providers a little closer to taking on that risk side.”

Next Generation also includes several tweaks to the previous models, building on its experiences with them as well as feedback from the public and participants, according to CMS. 

One of the most significant changes is in how a provider organization’s performance benchmarks are set. Spending and quality benchmarks are based on past year performance, with adjustments based on the performance of regional competitors. The Pioneer model, by contrast, set benchmarks based on a three-year prior history and adjusted for national spending patterns. 

The new benchmarking system rewards participants if they are more efficient compared with regional competitors, says Charles Kelly, DO, president and CEO of the Henry Ford Physicians Network in Detroit, one of 21 organizations that has formed a Next Generation ACO this year. For organizations like Henry Ford that were already more efficient than competitors it was hard to meet the old benchmarks, he says. 

The new program also removes some of the guesswork associated with Pioneer’s retrospective benchmarking and patient assignment. For most organizations, reducing costs and improving care quality depends on identifying the very small cohort of patients who incur the highest healthcare costs, Kelly explains. Once identified, these patients can be targeted with evidence-based interventions to better manage their chronic conditions to reduce avoidable hospitalizations, readmissions, and complications, he says. Next Generation ACOs make this easier by identifying patient populations and benchmarks upfront. 

“You are not so much flying by the seat of your pants,” Kelly says. “You have a pretty good idea of what you have to do to break even, achieve some modest savings, or achieve major savings.”

The program also provides financial incentives to help Next Generation ACOs build the population health infrastructure they need to improve patient care. Kelly explains that Henry Ford can collect $6 per month per beneficiary-$1.5 million a year-to use as an interest-free loan to build such an infrastructure. 


Some organizations that have performed well in the MSSP also have taken the leap. Cornerstone Health Care, a multispecialty physician group based in High Point, North Carolina, has already built the analytics infrastructure to identify patients likely to need interventions in the future. It has also developed improved care models for patients with cancer, cardiovascular disease,  and other patients with complex needs, as well as those with dual Medicaid-Medicare eligibility, says internist Grace Terrell, MD, MMM, CEO of Cornerstone. 

“We saw that if our performance in the MSSP could be repeated in the Next Generation ACO, the potential benefit to Cornerstone was much higher as well as the potential benefit to patients,” says Terrell. 

The Next Generation program also recognizes that healthcare organizations “don’t always control all their costs,” says Farzad Mostashari, MD, co-founder and CEO of Aledade, an organization that partners with primary care physicians to create ACOs, and former head of the Office of the National Coordinator for Health Information Technology. It adjusts both up and down for changes in the risk level of the ACO’s patient population.

In the MSSP program, Mostashari explains, an ACO’s risk score is not adjusted upward even if the patient population gets sicker through no fault of the organization. This has deterred some ACOs from switching from MSSPs to a model in which they must accept the risk of losses, he says.

“I hope it lays a path for how CMS is going to handle two-sided risk contracts in the future,” Mostashari says.  

It also creates a clearer path away from the fee-for-service model. Next Generation ACOs can begin accumulating money for a capitated contract with downstream providers, such as dialysis centers. “That is just brilliant,” Mostashari says. “It really provides a beautiful transition path from fee for service towards Medicare Advantage-like arrangement.”


Patient, specialist incentives

Incentives and waivers that give physicians more freedom have been another draw of the new program. “Physicians are now allowed to try things they weren’t able to do before,” Patel says. “That’s why a lot of people want to do it.”

The Next Generation ACO waives the Medicare requirement that patients be admitted to a hospital for three days prior to entering a skilled nursing facility. Not all patients require such hospitalizations,
explains Danielle Mahaffey, MD, chief medical officer at CHESS, the organization that runs Cornerstone’s ACO. Avoiding unnecessary hospital stays reduces the potential for hospital-associated complications and cuts costs.  “It is looking at how to approach care in a more patient-centered way,” Mahaffey says.


The program also gives ACOs the flexibility of using virtual care visits and post-hospitalization home visits-even for those who are not homebound-something many health plans and Medicare programs do not reimburse for. “The fact that you can at least get reimbursed for the care you provide Medicare beneficiaries from home in the urban environment was attractive,” Kelly says.

With Detroit’s snowy winters, Kelly notes that seniors may find it difficult to get to their physician’s office even for routine care such as flu shots. “Seniors sometimes don’t have social supports to get them where they need to be,” Kelly says.

Home visits enable care that would not be possible during a traditional office visit. For example, a clinical pharmacist can visit a patient’s home to conduct a medication review. This allows the pharmacist to see the contents of the patient’s medicine cabinet and encourage the patient to discard potentially harmful medications. Patients and caregivers may also be more relaxed and receptive to education about medications in the home setting than during hospital discharge, Kelly says.  

Home visits may be facilitated by any licensed clinician, including paramedics or social workers, who can bring a laptop or another device and assist the patient with a virtual physician visit. “You are unlimited in your ability to innovate,” Kelly says. Next Generation ACOs also may extend these new tools to specialists and other downstream care providers they designate as “preferred providers.” 

Engaging specialists so far has been an early challenge for Henry Ford’s new ACO, says Kelly.  An analysis Patel coauthored in Circulation notes that financial incentives and differences in the way cardiologists and other specialists engage with patients have been challenges to fully integrating specialists in ACOs. Specialists engage with patients typically for a very short time with a very limited focus making it more difficult to attribute care improvements or incentives in that setting, the analysis notes. 

“They seem to be resistant,” Kelly says. “In the Next Generation model, there is really no reason for them to be resistant. They can participate in as many ACOs as they’d like.”

Multispecialty groups may have an advantage in this regard over healthcare systems, Patel says. For example, Cornerstone’s specialists have been involved with its ACO from the start, Terrell says. But that may be changing. 

“Health systems have much greater influence over specialists than they previously had,” says Eric C, Stetler, MD, MPH, a cardiologist at Oregon Health and Science University and a coauthor on the Circulation study. Stetler predicts that cardiologists’ engagement in ACOs going forward will be largely driven by their health systems.  


Patients served by ACOs will also have the opportunity to earn a $50 payment if they choose to keep their care within their ACO and its preferred providers. 

“It creates a ‘what’s in it for me’ for the beneficiary,” says Kelly, “It helps you deal with leakage.”

How much these new care models will help reduce costs and improve quality isn’t yet clear, notes Patel. Study results so far have been mixed. A 2015 study published in the Journal of Evaluation in Clinical Practice of clinician pharmacist home visits to 245 discharged patients covered by Medicare Advantage plans did identify potential medication problems, but didn’t reduce 30-day readmissions. A Health Affairs study evaluated a home health visit program offered to Medicare Advantage plan members in five states and found reduced admissions to hospitals, a lower risk of nursing home admission, and mixed effects on emergency department use. 

“I still think we are in the toddler phase we just don’t know what we are doing,” Patel says.

Still, the results of this new CMS experiment are likely to influence care outside of the Medicare system as well. 

“There is a lot the private and commercial payers could learn from Medicare,” says Mostashari. “I’m not seeing much evolution on the commercial side.” 

Additionally, even those who see more room for improvement in the Next Generation say the new model is an important signal that Medicare’s ACOs are here to stay.

“Almost as important [as the changes],” Mostashari says, “is the signal that it sends that CMS is dead set on iterating the program as necessary to create a sustainable model.” 

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