Are These the ACOs for a New Generation?

Medicare Advantage provides hints on how CMS's Next Generation ACO model will work.

CMS unveiled its hotly anticipated blueprint for the Next Generation ACO model this week, and named the 21 organizations that are prepared to join the new program, but many questions are still left to be answered.

One thing we do know, is that the federal government is rapidly dialing up the risk meter for healthcare organizations that are willing to try the new program.

Most critically, the 21 organizations chosen to kick off the model are able to take as much as 100% risk, and beneficiaries are able to "voluntarily align," with an ACO. That means they will still be able to access care from any doctor or hospital that accepts Medicare, but that the ACO will work with them to try to coordinate care better, even if patients decide to go outside their preferred network.

But electing a preferred network is a key change. Even though it appears to obligate the patient to do nothing, if nothing else, it makes attribution for the networks somewhat stickier and clearer. In some ways, it's similar to Medicare Advantage, although MA programs restrict where patients can receive care.

Not for the Inexperienced
The Next Generation ACO model is optional and by application only for all providers, as well as for patients. For CMS, incorporating more risk into Medicare payments is a top goal, while prospective attribution, though not as sticky as some providers would prefer, is viewed as a positive change from the retrospective attribution of previous Medicare ACO incarnations.

In that sense, says Bill Bithoney MD, consulting managing director in BDO's Healthcare Advisory practice, there were few surprises within the announced specifics of the program and its participants.

"What surprised people who haven't followed this or who haven't really paid attention—is the high level of risk it's possible to take," says Bithoney. "CMS is clearly moving on a pathway to having more providers at risk. That's the biggest dramatic thing. [Next Generation] ACOs can take up to 100% risk as opposed to Medicare Shared Savings, for example, which has only a 2% or 1% downside. What we're seeing is CMS moving more toward a Medicare Advantage-like 100% risk profile."

A second track choice allows organizations to take up to 80% of shared savings—or losses.

Bithoney, who has managed a Medicare Advantage ACO, and who now specializes in the development of ACOs, adds that the change in attribution that allows the patient to designate an ACO is a big improvement over prior CMS offerings, such as the Pioneer ACO program and Medicare Shared Savings.

"The attribution change is a huge benefit," he says. "If you know who [the patients] are before you begin to be responsible, you can design programs for intervention."

For instance, if you know that of the population attributed to your organization (based on a patient opt-in through CMS's Voluntary Alignment form) 20% are diabetics and that 9.8% of those are at high risk of myocardial infarction based on other risk factors, an organization can design a specific program to modify obesity and diabetes and congestive heart failure and immediately intervene on those patients.

"You know where your risks are," quips Bithoney.

Knowing those risks has proved to be a problem under previous Medicare ACOs.

There are four possible payment mechanisms under the Next Generation ACO model.

• One is with normal FFS claims.
• One is normal FFS plus an additional per beneficiary, per month payment that is recouped against shared savings or in addition to losses (which would allow for investment in infrastructure to manage these patients).
• One offers a mechanism for population-based payments, similar to the Pioneer program, under which providers are paid a reduced FFS amount and a per-beneficiary, per-month payment equal to the FFS reduction percentage.
• One makes capitation an option in year two of the program, which runs for three years to 2018, with two optional performance years in 2019 and 2020.

Bithoney is encouraged that CMS has introduced the possibility of prospective payment to assist with infrastructure development. That money can be used for activating networks, cloud computing, meaningful use (although that's "effectively over")—whatever organizations need to exchange data across the continuum.

"These things run on actionable intelligence," says Bithoney. "They really do depend on prospective attribution of patients so they can address risks."

The More the Better
Jim Giordano, a partner with Kurt Salmon and former hospital CEO who helps healthcare organizations develop and implement value-based payment and population health management strategies, is gratified that there are many CMS models now that will allow health systems to participate in value-based purchasing. But he says the Next Generation ACO program is only for organizations that have already demonstrated maturity with the concept.

"They have already made investments to build strong infrastructures, and many have experience with Pioneer or other ACOs," he says. 

Despite the ability to take 100% upside or downside risk, he calls Next Generation ACOs a stepping stone to two-sided risk, but not the final destination. A Medicare Advantage plan, for example, might represent one "final destination," in that patients have skin in the game in the form of disincentives for leaving their network for care.

Regarding maturity of the organizations that undertake the Next Generation challenge, he says they'll be more successful if they've already demonstrated success under less risky structures.

"The real opportunity for gainsharing comes when the ACO is treated as part of a portfolio that includes other risk arrangements," says Giordano. He adds that two-sided risk structures have the potential to change some liability issues, so additional considerations regarding malpractice and corporate structure must be addressed.

For his part, Bithoney agrees that culture change is tough to achieve without multiple risk arrangements—or at least having a significant book of business across the organization under risk arrangements of some kind.

"Some who participated in [Bundled Payments for Care Improvement] have said if they do one bundle, it doesn't change the tenor of the entire organization. It may just reach one department and not transform care by penetrating the organization," he says. "So we've told people to take multiple bundles and build the infrastructure that addresses benchmarks for care in the EMR."

He dismisses concerns that multiple benchmarks might sow confusion among clinical staff—essentially creating several classes of treatment protocols for patients. He says it doesn't really work that way.

"These are typically benchmarks you would want to meet anyway, regardless of payer," he says. "If you can meet them, you'll do well."

He predicts that as risk structures mature, more and more providers will develop insurance components, and the reverse is true as well, with traditional insurers beginning to own pieces of the care continuum.

He says because of the unsustainability of fee-for-service healthcare, for those who have not felt the reach of risk contracts either with commercial payers or with CMS, it’s only a matter of time.

"Ultimately, population health and value-based purchasing will win out because it must."