Health Law Daily Next Generation ACOs reduce spending by $100M, improve quality of care
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Tuesday, August 28, 2018

Next Generation ACOs reduce spending by $100M, improve quality of care

By Victoria Moran, J.D., M.H.A.

The 2016 cohort of 18 Next Generation Accountable Care Organization (NGACO) generated an estimated $100 million reduction in Medicare Parts A and B spending, or $62 million after adjusting for shared savings/loss payments. CMS issued an evaluation report detailing the first performance year of the NGACO model, detailing gross reductions in Medicare spending and improved utilization and quality of care. The savings were mainly associated with reductions in skilled nursing facility (SNF) spending and reductions in utilization of inpatient hospital days and outpatient evaluation and management (E&M) visits. CMS hopes the NGACO principles can be adopted for use with the ACOs in the Medicare Shared Savings Program.

The NGACO model and participants. CMS and the Centers for Medicare & Medicaid Innovation launched the NGACO model in January 2016 as part of a series of initiatives to test alternative payment models on the Medicare program. Unlike other ACO models, the NGACO model includes higher levels of shared financial risk with participants selecting either 80 percent or 100 percent risk sharing. The NGACOs take on the risk for losses; there are no minimum savings or loss requirements. Participating ACOs are offered a prospective determined population of beneficiaries and predictable financial targets allowing for greater ability to manage the population and plan to achieve benchmarks. The participants can choose from several payment mechanisms to facilitate cash flow. There are also three optional benefit enhancements related to SNF admissions, telehealth care, and post-discharge home visits made possible by conditional waivers for certain payment requirements.

There were 18 participants in 2016 and 15 NGACOs had prior Medicare ACO experience. The NGACOs served 477,197 Medicare beneficiaries in 2016. Fifteen NGACOs chose the 80-percent shared risk option (initially seven selected the 100-percent option, but took advantage of the mid-year option to reduce to shared risk), and nine selected the FFS payment mechanism. Ten NGACOs implemented the SNF benefit enhancement, which waives the 3-day hospital stay requirement, which may indicate a focus on post-acute care associated with reduced spending while beneficiaries are in SNF settings.

Reductions in spending. The cohort of NGACOs reduced Medicare Parts A and B spending for their beneficiaries by an estimated $100.09 million in 2016 (1.7 percent), or $18.20 per beneficiary per month. After adjusting for shared savings/loss payments, the net reduction in spending was an estimated $62.12 million (1.1 percent net savings). There was a significant decline in spending in the SNF setting, which may be related to efforts to engage with SNFs as part of a broader post-acute care strategy. Four NGACOs accounted for 57 percent of the reduction in spending. There were no significant declines in Medicare spending for other post-acute care, acute care hospitals, and outpatient or durable medical equipment spending. CMS’s shared savings payments to NGACOs totaled $37.97 million in 2016. The overall reduction in spending is likely due to reduced SNF spending and reduced utilization of inpatient hospital days and outpatient E&M visits.

Improved utilization and quality of care. While there was no significant change in the number of acute care hospital admissions, there was a significant reduction in acute care hospital days (1.3 percent) and in nonhospital E&M visits (1.5 percent). The number of beneficiaries with annual wellness visits also increased by 11.9 percent, signifying improved quality of care.

Primary care providers were reported as critical for this model because of their focus on preventative care and comprehensive approach to care management. In addition, partnerships with SNFs and post-acute facilities are essential. Some reported limitations of the analysis include the impact on modeling of the variation in Medicare spending among the study sample and influence of spillover and other value-based purchasing models.

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