Next Generation ACOs saved Medicare $667M, but model's still losing money

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The Next Generation ACO Model has saved Medicare $667 million in the last four performance years, but the model is operating at a loss with performance payouts, according to an evaluation of it released Oct. 21.

The model, established by CMS, is in its fourth year. It is testing whether strong financial incentives, flexible payment options and tools to support care management improve care quality and lower costs for Medicare beneficiaries. Participating ACOs assume 80 percent or 100 percent upside and downside risk.

The evaluation, commissioned by CMS, was conducted by researchers at the NORC at the University of Chicago, an independent, nonpartisan research institution.

Six key findings from the evaluation:

1. While the model has saved Medicare money, after factoring in $909 million in shared savings performance payouts, the model is associated with $243 million in net losses. The losses mean net Medicare spending increased by 0.4 percent over the four performance years.

2. Cumulatively over the four years, Next Gen ACOs reduced acute care spending by 0.9 percent, skilled nursing facility spending by 2 percent and other post-acute care spending by 3.9 percent.

3. The report found that gross spending reductions increased over time, with the largest reductions in spending seen in the fourth performance year. Researchers said this could be explained by several ACOs exiting the model or performance improvements by the ACOs that remained in the model for consecutive years. 

4. By the end of the fourth performance year,62 organizations had participated in the model. Twenty five of them left by the end of performance year four.

5. In terms of quality, researchers found that cumulatively across the four performance years there was no evidence of a reduction in unplanned 30-day readmissions or hospital readmissions from a skilled nursing facility.

6. Researchers did find that more Next Gen ACOs reduced the number of beneficiaries hospitalized with ambulatory care-sensitive conditions over time. In particular, 6 percent of participating ACOs in the first performance year reduced the number of ambulatory care-sensitive condition-related hospitalizations, compared to 22 percent in performance year four.

Access the full report here

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