A Detailed Analysis of the Next Generation ACO Model

by | Published on May 14, 2015 | Resources, Articles | 0 comments

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Medicare Accountable Care Organizations (ACOs) comprise groups of doctors, hospitals and other healthcare providers and suppliers who work collaboratively to provide coordinated, high-quality care and chronic disease management at lower costs to their Original Medicare beneficiaries. Their payment environment moves away from pure fee-for-service or FFS and is tied to accomplishing healthcare quality goals and outcomes that result in cost savings, which is bound to have a significant impact on billing for healthcare services. This March, CMS announced the next generation ACO Model that offers healthcare providers more opportunities to coordinate beneficiaries’ care while maintaining the highest quality standards consistent with other Medicare programs and models. CMS is adding this new model to its existing set of ACO models such as:

  • Medicare Shared Savings Program (Shared Savings Program)
  • Pioneer ACO Model
  • Advance Payment ACO Model
  • ACO Investment Model
  • Comprehensive End Stage Renal Disease (ESRD) Care Initiative

This latest shared-savings payment and delivery care model will start from January 1, 2016. Core Principles of the ACO Model As per the CMS announcement, the goal of the new model is to test whether strong financial incentives for ACOs can enhance health outcomes and reduce expenditures for Original Medicare fee-for-service (FFS) beneficiaries. Its core principles include:

  • Protecting the freedom of Medicare FFS beneficiaries to find the services and providers of their choice
  • Engaging beneficiaries in their care by providing benefit enhancements that directly enhance patient experience and reward those seeking care from ACOs
  • Developing a financial model having long-term sustainability
  • Utilizing a benchmark set up with a proper planning, which rewards quality, improvement and attainment of efficiency while transitioning away from ACO’s current expenditures when setting and updating the benchmark
  • Supplementing a prospective claims-based alignment process with a voluntary process to mitigate fluctuations in aligned beneficiary populations while respecting beneficiary preferences
  • Smoothing ACO cash flow as well as supporting investment in care improvement capabilities through alternative payment mechanisms

How the New Model Differs From Others The major differences are discussed below.

  • Risks and Rewards Higher – The new model provides financial arrangements with higher levels of risks and rewards than existing ACO initiatives. So, only those organizations with a strong background and proven record in accountable care will find the program beneficial. According to CMS, approximately 15 to 20 ACOs are expected to participate in the new model that involves three initial performance years and two optional one-year extensions.
  • New Perks for Participation – To address increased risk, participating ACOs will have a stable, predictable benchmark and flexible payment options. New perks will be made available for the participants as well such as additional coverage of telehealth and post-discharge home services, coverage of skilled nursing care without prior hospitalization, and payments to beneficiaries for receiving care from ACOs.
  • New Incentives for Patients – In the case of other ACO models, patients will not be required to participate in the ACO and therefore won’t be penalized for visiting non-ACO providers. With the new model, beneficiaries may receive reward for receiving majority of their care from ACO providers so that participating providers can retain more control over costs and quality of care.
  • Different Payment Options – There would be a selection of payment mechanisms within the new model to enable a graduation from fee-for-service (FFS) reimbursements to capitation. In the second year of participation, participants will have the choice to participate in full capitation.
  • Earn Savings – There is a common criticism against existing ACO programs that it is becoming more and more difficult for participants to earn savings each year. The new model addresses this problem by incorporating a relative efficiency discount.

The existing participants in the Medicare Shared-Savings Program (MSSP) and Pioneer ACO Model can apply to participate in the new model. However, they cannot participate in both the new model and the MSSP/Pioneer ACO model at the same time.

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