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Next Gen ACO Model Saves $62M in First Year

Analysis  |  By Steven Porter  
   August 27, 2018

The success story reinforces the need for more downside risk, the CMS administrator argues.

The first cohort of accountable care organizations in the Next Generation model reduced Medicare spending by 1.7% in their first year, about $100 million, according to an annual report released publicly Monday by the Centers for Medicare & Medicaid Services.

After adjusting for shared savings and loss payments to participating ACOs, the model resulted in net savings of 1.1%, or $62 million, according to the report and related materials released to coincide with CMS Administrator Seema Verma's appearance with the Accountable Care Learning Collaborative at Western Governors University.

Verma took the occasion to advocate again for ACO models that include downside risk earlier than later.

"These results provide further evidence that ACOs succeed under two-sided risk," Verma said in a statement noting that Next Generation ACOs enjoy "substantial flexibility and regulatory relief" in exchange for taking on the added risk.

"They are delivering value and providing quality care to patients and taxpayers even in their first performance year, and we believe that these results are achievable for other ACOs under similar incentives," she added.

Some industry groups, such as the National Association of ACOs (NAACOS), have said the Trump administration's push to require downside risk earlier is "misguided," "naïve," and likely to result in significantly fewer participants.

NAACOS President and CEO Clif Gaus released a statement Monday afternoon applauding CMS for using "the gold standard" methodology to evaluate the Next Generation ACO model.

"The results clearly show that Next Gen ACOs, which include mostly experienced Medicare ACOs, collectively saved Medicare money while maintaining quality," Gaus said. "It's important to note that these ACOs have traveled a long way under various models in transitioning to value-based payment care, and we are glad to see CMS recognizing their success." 

The more financial risk providers are willing to take, the more flexible CMS will be. #ACLCWebinar — Administrator Seema Verma (@SeemaCMS) August 27, 2018

The first cohort in the Next Generation model, for performance year 2016, included only 18 ACOs. But a second and third cohort formed in 2017 and 2018. There are 51 ACOs participating in the model today. By comparison, the Medicare Shared Savings Program (MSSP) has more than 10-times as many ACOs, 561 this year, most of them in tracks that do not include downside risk.

Gaus urged CMS to take a comparably thorough look at MSSP ACOs, arguing that the program has never been subject to a formal evaluation.

"[W]e believe a rigorous independent evaluation would demonstrate that MSSP ACOs have saved billions of dollars while significantly improving quality," Gaus said.

In releasing the report Monday, CMS noted that the Next Generation ACO model entails the highest levels of risk currently included in an ACO initiative offered by the agency.

Editor's note: This story has been updated to include a statement from NAACOS President and CEO Clif Gaus.

Next Generation ACOs - First Annual Report by HLMedit on Scribd

Steven Porter is an associate content manager and Strategy editor for HealthLeaders, a Simplify Compliance brand.


The model that includes the highest levels of risk for participating ACOs saved 1.1% on Medicare spending.

Trump administration officials argue the success of the Next Generation model serves as further evidence in favor of requiring downside risk.

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