Next Generation ACO model hasn't saved money, study finds

The experimental Next Generation Accountable Care Organization model didn't save Medicare money during the first two performance years, according to an analysis released Friday from the agency.

Rather than reducing Medicare spending, the Next Generation ACO model, which is now in its fifth and final year, added $93.9 million to net Medicare spending during 2016 and 2017, the first two years of the program, the analysis found. The study, which was conducted by researchers at the University of Chicago and commissioned by the CMS, said the increase wasn't statistically significant although at first glance it appears to be a blow for supporters of the model who claimed its been saving Medicare money.

But the results from the study are more complicated, according to David Muhlestein, chief research officer at Leavitt Partners. Medicare can save at most about 1% on spending for beneficiaries in the program because that's how much they take from the ACOs at the beginning of performance years. The fact that the program was a wash for the agency in the first two years doesn't make a huge difference because the bar for saving is so low, he said.

"Is the program ever going to solve our cost issues in Medicare? No. It's all pretty minor," he said.

Another aspect of the study to consider is it's looking at how the Next Generation ACOs performed compared to other providers including Medicare Shared Savings Program participants, which is the permanent and large Medicare ACO program. The study method is an attempt to understand the difference Next Generation ACOs have made on costs but Next Generation ACOs are told the benchmark to reach targets before or at the beginning of performance years. This information acts as a guide for ACOs to know if they are on the right track. The study drastically changes the benchmark and how they are being evaluated, Muhlestein said.

"That's a bit misleading," he said. "People know their benchmark and they are working around their benchmark. You can't just change the targets halfway through performance years.

The Next Generation ACO model is an experimental project from the CMS Center for Medicare and Medicaid Innovation that forces organizations to take on substantial downside risk.

According to the study, Medicare was unable to achieve savings during the first two years of the program—2016 and 2017—because they had to pay out more in savings than they recouped. In fact, before accounting for the payouts CMS had to make, the model actually decreased Medicare spending by $123.18 million during the first two years.

In a Health Affairs blog post, CMS Administrator Seema Verma said the findings show the importance of evaluating results of value-based payment models after shared savings are handed out. "If shared savings payouts were not considered, the (Next Generation ACO) model would appear to have decreased spending across performance years one and two; the net values provide the full story," she said.

Although Muhlestein said the findings from the study can't be compared to the CMS database because it's looking at different benchmarks entirely.

The CMS hasn't announced if it will make the project a permanent part of the Medicare program, although the changes made to the Medicare Shared Savings Program in late 2018 resemble somewhat the Next Generation model because ACOs are forced to take on higher levels of downside risk the longer they are in the program.

In addition to the analysis, the CMS also released data from 2018 participants of the Next Generation model. Of the 50 Next Generation ACOs that participated in 2018, 38 got bonuses for reaching cost and quality targets while the remaining 12 had losses and were forced to return money to the CMS. Overall, CMS estimates it saved $184.6 million two years ago.

In 2018, the CMS had to pay about $285 million in shared savings to ACOs that hit targets and received almost $64 million from ACOs that experienced losses, according to the agency.

Southwestern Health Resources Accountable Care Network, which was jointly formed by Texas Health Resources and UT Southwestern Medical Center, achieved $36.4 million in shared savings in 2018, which was the largest amount of all the participants in the program. In second place was Trinity Health ACO, which achieved $22.4 million in shared savings.

Partners Community Physicians Organization, which is part of Partners Healthcare, lost $17.2 million in 2018 from the program. The organization lost the most of any group and is no longer participating in the program. Hill Physician Medical lost $11.2 million. It's also no longer in the program. Money lost must be returned to the CMS.

The participation for this year in the model is down compared to 2018. There are currently 41 ACOs in the model. Experts and the National Association of ACOs said much of the drop can be attributed to ACOs moving to the Medicare Shared Savings Program because it has similar features as the Next Generation ACO model.