The latest iteration of Medicare's accountable care experiment paves the way for more doctors and hospitals to evolve toward starting their own Medicare Advantage plans, stoking a trend that's already well underway.
That's not to say all health systems interested in managing population health will start applying for insurance licenses. Some progressive systems such as Dartmouth-Hitchcock in Lebanon, N.H., are content to pursue value-based payment models with the help of private insurers. However, the launch of the Next Generation ACO model makes it clear the federal government wants providers to take more financial risk in Medicare now that they have some experience.
“It's full risk and full capitation, and I think that's really where CMS wants to go,” said Dr. Bill Bithoney, a healthcare managing director at consulting firm BDO and a former hospital executive.
ACOs are a staple of the delivery reforms embedded in the Affordable Care Act. Primary-care offices, specialists, acute-care hospitals, nursing homes and other post-acute facilities are expected to work together to manage care for a set group of patients. If groups can lower costs and achieve high quality scores, they're rewarded with a share of Medicare's savings.
Providers have embraced the opportunity for shared savings based on good performance, known as upside risk. But they have been less eager to accept downside risk, or paying penalties if certain performance thresholds aren't met. Only 1% of Shared Savings ACOs were in two-sided risk models last year. The percentage is higher for 2016, but still only about 5%.
The CMS built the Next Generation program in response to providers' dissatisfaction with the more stringent Pioneer ACO model, but it also wanted to make accepting full risk as palatable as the easier incentives of the Shared Savings program, which now has 434 participants. The new model prospectively assigns Medicare beneficiaries to ACOs and allows waivers for things such as limits on telehealth services and the rule requiring a three-day inpatient hospital stay before Medicare pays for skilled nursing.
One of the biggest differences is that Next Generation participants, starting in 2017, can choose capitated payment, meaning Medicare would pay the ACOs a per-member, per-month lump sum, and providers would then be responsible for any care that patients need.