Will new Medicare ACO model enable providers to truly manage care?

Medicare's new “Next Generation” accountable care organizations program has raised hopes among many healthcare providers that the Obama administration is listening to them as it pushes ahead toward value-based payment models.

But the ACO initiative announced last week leaves open questions about whether hospitals and physicians will have enough control over patients' utilization patterns and tendencies to roam outside the ACO network, undermining quality and cost-control efforts. At least one health system that has been a Medicare ACO leader said it may bypass the new ACO initiative in favor of diving deeper into the waters of pure capitated payment.

The Next Generation ACO program will start in January, building on the administration's goal to have half of Medicare spending in some type of value-based contract by 2018. But CMS Chief Medical Officer Dr. Patrick Conway said many details of the program are not yet available, such as how much financial risk participants would take on. The agency expects that up to 20 ACOs will join the new program in its first two years.

Andrew Croshaw, president of Leavitt Partners Consulting, said the new ACO model is a significant development for the transition to value-based care. “You're essentially saying to the market, 'This is where we are moving from a methodology and payment standpoint,' ” he said.

Similar to the current Medicare Pioneer and Shared Savings ACO programs, provider groups that meet quality and spending targets will keep some of the program's savings. But Next Generation contracts will use a new formula to calculate savings targets that won't exclusively rely on ACOs' historical performance—an approach that critics say is unfair to providers already delivering low-cost care. Participating ACOs also will be able to take on full-risk capitation by year two.

In some ways, the new program is like the fully capitated Medicare Advantage program, in which private health plans offer HMO-like products. But the CMS made it clear that, unlike Advantage, Medicare beneficiaries participating in ACOs still will be able to see any Medicare provider they wish without a penalty.

“From that perspective, it's still got one foot on both sides of the line,” said Matt Fisher, a healthcare attorney at Mirick, O'Connell, DeMallie & Lougee.

But unlike previous Medicare ACOs, Next Generation ACOs will be able to offer financial incentives to keep patients in the provider network. If beneficiaries commit to seek care through their ACO, the ACO can pay them $50 in cash every year, fully funded by the CMS.

The government said this would provide a long-term incentive for beneficiaries to get their care in the ACO network. Perhaps more importantly, Next Generation ACOs also will be able to waive patients' copayments for some services and offer broader access to telehealth and skilled-nursing facilities.

“I don't know how much $50 is really going to encourage people to go one way or another,” Fisher said. “In this day and age, $50 doesn't even cover a phone bill.”

Even so, Melissa Jackson, a senior policy director at the American Hospital Association, praised the administration for adding the features. The government “acknowledges there should be some kind of incentive to keep beneficiaries in the ACO,” she said.

The changes seek to address criticisms of Medicare's accountable-care initiative launched under the Affordable Care Act. The Shared Savings model has more than 400 participating organizations. A smaller group of Pioneer ACOs agreed to more sophisticated and risky payment models; their ranks have declined from 32 to 19 as hospitals and medical groups have struggled with the rules.

“As we continue to advance, we are trying to learn from those that did drop out,” HHS Secretary Sylvia Mathews Burwell said last week in the Bronx. “We're integrating the feedback that we're getting.”

The Next Generation ACO initiative appears to target advanced integrated delivery systems such as Intermountain Healthcare in Salt Lake City, which sat out the previous programs, Leavitt Partners' Croshaw said.

At least 50% of the new ACOs' patients have to be covered under outcomes-based contracts by the end of year one. Croshaw added that some ACOs that exited the Pioneer program could be lured back. Current Pioneer and Shared Savings ACOs are allowed to switch to the Next Generation model.

But Montefiore Medical Center in New York City, the most financially successful of the Pioneer ACOs, may bypass the latest version of Medicare accountable care.

Montefiore CEO Dr. Steven Safyer said he would review the option but added that Montefiore is working aggressively to expand its fully capitated payment contracts. Montefiore aims to have all its Medicare and Medicaid patients under full capitation by 2018.

“We believe that comprehensive coverage, integrated coverage, reinforces integrated care,” Safyer said. “The two go hand in hand.”

The CMS will accept letters of intent for the first round of Next Generation ACOs until May 1. Applications are due June 1.

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