The Advisory Board Company’s Perspective on CMS’s Next Generation ACO Announcement | Healthcare Informatics Magazine | Health IT | Information Technology Skip to content Skip to navigation

The Advisory Board Company’s Perspective on CMS’s Next Generation ACO Announcement

January 12, 2016
by Mark Hagland
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Rob Lazerow of The Advisory Board Company shares his insights on the now-fully-unveiled Next Generation ACO program

On Monday, Jan. 11, the federal Centers for Medicare & Medicaid Services (CMS) fully unveiled the new Next Generation ACO program, revealing both the details of the program’s parameters, and the list of 21 accountable care organizations (ACOs) that had joined the program, which was officially fully launched on Jan. 1.

As noted in this publication’s report on the unveiling on Monday, the Next Generation ACO Program now joints the Pioneer ACO Program and the Medicare Shared Savings Program (MSSP) as programs that patient care organizations nationwide can join and participate in, around accountable care concepts and principles.

The Advisory Board Company, the Washington, D.C.-based research, technology, and consulting firm, on Tuesday provided some background information to Healthcare Informatics, for the purpose of contexting the recent developments at CMS. Prepared by Eric Cragun, senior director, health policy, and Adam Lustig, senior analyst, health policy, at The Advisory Board Company, the points provided by the organization include this statement, and the following takeaway points: “The commercial market is still not keeping pace with public-payer ACO programs, which are seeing an increasing number of providers accepting two-sided risk for penalties and bonuses.  Some early takeaways:


  • CMS’ newest two-sided risk model, the Next Generation ACO, attracted 21 participants for CY16 and most of these ACOs have experience in MSSP or the Pioneer Model.
  • Eight of the 21 ACOs in the Next Gen Model come from the Pioneer Model, where organizations were accustomed to payment under a two-sided risk arrangement. Seven Next Gen ACOs come from MSSP.
  • 147 ACOs that joined MSSP in 2012 or 2013 renewed participation in MSSP for 2016-2018. Those cohorts had a combined 220 ACOs when they started, so about two-thirds renewed participation in MSSP.
  • CMS announced that 22 ACOs have joined Track 2 or Track 3 for 2016-2018, but did not announce the breakdown between the two tracks; previously only three ACOs were in Track 2.
  • 100 ACOs joined MSSP for the first time in 2016. Net all of the changes plus some attrition, the total number of MSSP ACOs is up slightly in 2016, from 405 on Jan. 1, 2015 to 434 on Jan. 1, 2016.”


In addition, on Tuesday, Rob Lazerow, practice manager, Research and Insights, at The Advisory Board Company, spoke with HCI Editor-in-Chief Mark Hagland, to share his perspectives on the unveiling of the Next Generation ACO program, and the ongoing progress of all of CMS’s ACO programs. Below are excerpts from that interview.

What was your overall reaction to yesterday’s unveiling of the details and parameters of the Next Generation ACO Program yesterday?

When I think about that announcement, I actually zoom out and look at a number of announcements as well. Because Medicare shared also what 2016 would look like for their accountable care programs more generally. And I took away that providers do remain committed to accountable care and are participating in these programs. And overall, participation in these programs is increasing. And what we’re seeing now is that CMS is allowing a number of options, including track 1 of the MSSP, with shared savings but no downside risk; all the way to the full-risk option under the Next Generation ACO model. So providers have a range of options and are choosing how they want to participate. And we’re seeing more organizations now elevating the amount of risk they want to take. CMS had expected 15-20 to participate, so with 21 participating, we’re right on the money. And now 22 organizations have signed up for either track 2 or track 3, both involving downside risk, in the MSSP program, and at the end of last year, only two organizations were taking downside risk at the end of last year. Track 3 is brand new and involves higher risk, and higher reward.

It seems that in certain ways, the Pioneer ACO Program is teetering a bit right now, including through the loss of fully half of its participant organizations. Do you think that the creation of the Next Generation ACO Program is CMS’s answer to the problems that have beset Pioneer?

We need to remember that Pioneer was the first of the ACO programs to launch after the Affordable Care Act was launched, following the precursor, the physician group practice demonstration project. And of the 32 that signed up with Pioneer were in the demo or had had experience with population health. What we’re seeing in Pioneer is the challenges of figuring out the nuts and bolts of the payment model, and issues around benchmarking, and whether to be regional or national, and how to handle that; and some of those issues are in the MSSP, too. Now, as we’ve seen organizations exit the Pioneer model, it doesn’t mean they’re abandoning population health overall. We’ve seen some organizations moving to MSSP or Next Generation or working with commercial payers. So Pioneer was a starting place. And organizations are learning and branching out.

Are you worried at all about the Pioneer Program?

I think we have to keep in mind that Pioneer was an experiment from the Innovation Center, and was meant to help organizations learn how to contract with Medicare on population health, and they’re continuing to evolve from there. I’d be interested in CMS’s opinion on that.

Looking at the Next Generation ACO, overall, were you pleased with the details and requirements that were revealed yesterday?

To me, what’s interesting about the Next Generation program is that it responds to a lot of the feedback CMS had heard about some of the early iterations around ACO. First, they wanted more risk and more reward. Most MSSP organizations were in track 1, which had a maximum bonus of 50 percent of the savings Generation generated, and that’s assuming that an organization was perfect on their quality scores; track 2 bumped it to 60 percent. So provider leaders said, give us more risk and more reward. And Next Generation ACO program offers providers between 80 and 85 percent on the shared-savings option, or a full-risk option that would 100 percent. So that is a full two-sided risk model, so if organizations go over their expenditure target, they would owe CMS money. And track 1 of the MSSP program was a bonus-only world.

So the first response on the part of CMS was around risk and reward; the second was around attribution. And the Next Generation model provides prospective attribution, so the ACO leaders find out at the beginning of the year rather than at the end of the year, who their patients are. And finally, providers said, give us an option to control who our providers are, so CMS bent to that. It’s not a closed-panel HMO model, but there are some, albeit limited, financial incentives, to reward Medicare beneficiaries to stay within network.

So if Mrs. Smith, the patient stays within network, she gets lower co-pays?

I believe it’s a financial bonus.

Given that, do you think next Generation ACO program will be the most successful of these programs?

Well, that’s the million-dollar question. If you look at the 21 participating organizations, many of them have experience in the Medicare Advantage program. I think the program offers these providers a lot of the tools and elements they requested, which is a meaningful evolution of the ACO program.

Were you surprised by any of the details revealed yesterday?

One thing interesting to see was the high rate of the renewal rate of the early MSSP ACOs who were up for renewal after their first three-year contract, and more than two-third renewed for another three years in the MSSP. To me, that demonstrates the commitment of organizations to this program, even if they haven’t qualified for bonus so far.

You sound pretty optimistic about all this. Would you describe yourself as optimistic, overall?

I think that both CMS and providers acknowledge that population health is the direction they’re heading, and are actively working to find the right financial model and sustainable operating environment and business model. And what we’re seeing right now is continued innovation, both on the payment model and the delivery model, and the participants are continuing to make forward progress.

What would you say to the skeptics and naysayers out in the industry about what’s being learned right now?

Yes, to be clear, the Advisory Board is not partisan or political; we’re here to help members respond to what’s out there and craft their strategy. And what we’ve seen this past year is that CMS is committed to making transition. And they’ve suggested that they’re willing to continue to adapt the programs themselves, as well as to look at ways to continue to encourage providers to move forward. And sometimes that’s through things like the mandatory bundled-payments model or the provisions of MACRA. So we’re seeing a lot of momentum behind this transformation of payment models. But we need to remember that it’s fundamentally restructuring providers’ payment models and incentives, and that’s not a “flip the light switch” kind of thing. So it doesn’t surprise me that this is happening gradually. It takes time to put things in place, let alone create changes through improving quality and lowering costs. It takes time, and we’re still in the building phase of transformation. So I think it’s too soon to either declare victory or defeat right now. And our role is to advise healthcare executives on all this.

What are providers learning about how to leverage IT and data and analytics for all this?

I am not an IT expert; my role is to look at broad trends. But there absolutely is an IT and analytics component, especially as they need to segment their populations—and that involves effective delivery and efficient resource utilization. And it also involves providing clinicians with the resources to do care management and care coordination, and there’s a CRM element of that that requires a big IT backbone. And the need to share comprehensive medical information, and to understand referral and care patterns, and the quality of care being provided.

And marrying clinical and claims data is particularly challenging, isn’t it?

Yes, because providers need to understand their populations; and some of that involves understanding broad trends around health status, as well as social factor trends. So providers are having to learn to manage broad, diverse sets of data.

Overall, what do you think have been the biggest challenges in all these programs?

I would offer two challenges. One is figuring out what is a nationally scalable population health contacting model, and how you make sure you’re holding providers to the right benchmarks for holding providers accountable, how you establish the benchmarks and maintain hem over time. And second, how do you make sure everyone’s interacting with each other? How do these models all fit together, and collectively, how do you make sure referrals to the highest-providing performers in the market?

What will happen in the Next Generation ACO Program and overall, in the next couple of years?

Well, I think it’s too soon to say about Next Generation. But overall, we’ll see more providers move into population health, as well as increases in risk they’re taking on. We’ll see more providers taking on downside risk, including via tracks 2 and 3 in the Next Generation program; they’ll experience that one-sided shared savings is probably insufficient.

So some will move from the MSSP program into Next Generation ACO, then?

Yes. And you look at Next Generation ACO, some had been in the Pioneer program, some in MSSP, and we’ll see more organizations taking on more risk and they move up the learning curve.


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