Next Generation ACOs Cut Medicare Spending

Next Generation ACOs (NGACO) have been associated with model-wide reductions in spending without declines in quality, according to a new report from CMS. Based on their first performance year (2016), the participating NGACOS reduced Medicare spending by approximately $100 million.

 

The savings appeared to be associated with reductions in hospital and skilled nursing facility costs.

 

One analyst noted that these results show that the NGACO program “actually does what Medicare was hoping it would do around the cost and quality of care.” (“Next Gen ACO Savings Could Bolster Medicare ACO Changes,” HFMA Compass, August 27, 2018)

 

An independent study confirmed that most of the spending decline resulted from post-acute care spending, mostly skilled nursing facilities. Also, the number of inpatient hospital days as well as nonhospital evaluation and management visits dipped. Annual wellness visits increased 12 percent.

 

These authors noted that the NGACOs were continuing to develop their approaches to an evolving model in the program’s first year and may improve on their initial results. For instance, specific approaches allowed three NGACOs also to cut home health spending. Their findings suggest that there are multiple pathways across various care settings for ACOs to total lower Medicare spending. (“Next Gen ACO Savings Could Bolster Medicare ACO Changes,” HFMA Compass, August 27, 2018)

 

Some industry experts believe that the results in the CMS report confirm that ACOs that take downside risk tend to perform better than those in upside-only risk models.

 

CMS has proposed a rollout of a replacement for the Shared Savings Program to Pathways to Success, where the 516 existing Medicare ACOs must switch into one of two tracks and take on downside risk within two years. (See last two iProtean blogs.)

 

Many provider organizations have resisted the proposed rapid movement to Pathways to Success, noting they need more time in the upside-only models. The new report, however, gives policymakers more evidence to point to should they decide to finalize their proposals despite pushback from these provider organizations.

 

But requiring ACOs to move to downside financial risk in 2019 would cause more than 70 percent of those that responded to a May 2018 poll conducted by the National Association of ACOs to leave the program. (See last two iProtean blogs.) It has been suggested that upside-only ACOs who have not invested in the needed infrastructure or have not derived shared savings will leave the Shared Savings Program. (“Next Gen ACO Savings Could Bolster Medicare ACO Changes,” HFMA Compass, August 27, 2018)

 

 

 

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Our upcoming advanced Mission & Strategy course, Due Diligence on Deals, features Dan and Marian who discuss the pitfalls and advantages of due diligence during mergers, consolidation and partnerships.

 

 

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