Next Generation ACOs Saved Medicare $62M By Cutting Skilled Nursing Spending

The Next Generation Accountable Care Organization (ACO) Model netted Medicare about $62 million in net savings in its first year of operations — and cutting spending in skilled nursing facilities was a key driver for the decrease.

Centers for Medicare & Medicaid Services (CMS) Administrator Seema Verma first announced the news in a webinar hosted Monday by the Accountable Care Learning Collaborative (ACLC) at Western Governors University.

Most of the reductions came from decreases in hospital and SNF spending; the almost $62 million represents a net reduction of approximately 1.1% in overall Medicare spending. SNFs were the most common type of institutional provider in the model, according to the first annual report evaluating the Next Generation ACO model.


Next Generation ACO providers reduced spending for beneficiaries by $100.08 million in the first performance year (PY 2016) the report said. Most of that spending decline could be attributed to decreased Medicare spending on post-acute care, especially spending cuts in SNFs that hit the threshold for statistical significance at $16.61 million.

CMS also found reductions in the number of inpatient hospital days and non-hospital evaluation and management visits per month, as well as increases in the number of yearly wellness visits by Next Generation providers.

The Next Generation ACO program has 51 ACOs participating, according to CMS. The model allows the provider groups to take on higher levels of financial risk and reward than they can under the current Pioneer Model or the Medicare Shared Savings Program (MSSP).


It’s all part of Verma and the Trump administration’s vision for the future of ACOs and the overall health care industry.

In the current landscape, around 11% of providers are in some sort of value-based agreement, Verma said Monday, but even in that portion, “the level of risk that providers are taking is relatively small.” The vast majority of providers are in a fee-for-service system, she said.

When it came to ACOs, the risk-sharing — or lack thereof — became an issue, particularly since CMS saw an increase in expenditures, rather than the desired reductions. Of about 561 ACOs, 460 were not taking on any risk, Verma added.

CMS aims to change that with the new Pathways for Success program, which overhauls the ACO program by, among other things, reducing the amount of time an ACO can stay in a program without taking on downside risk to two years.

“When providers took on risk, the results were better,” she said on the ACLC webinar. “What we’re trying to do is transition the structure to encourage providers to take on risk because that’s going to deliver better outcomes.”

That outcome may not be so simple to achieve: Earlier this year, 71% of ACOs involved in the Medicare Shared Savings Program indicated that they’d rather leave the initiative entirely than assume risk.

Written by Maggie Flynn

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