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Accountable Care Organizations (ACOs)

What are the different types of ACOs?

Overview: The largest effort in payment innovation in Medicare is a portfolio of accountable care organization (ACO) programs that include the Medicare Shared Savings Program (MSSP), Next Generation model, and Comprehensive ESRD model. ACOs are groups of physician group practices, hospitals, and other health care providers who come together voluntarily to give coordinated high-quality care to their patients.

Since the MSSP began in 2012, it has grown from 27 ACO participants to 561 in 2018 at its peak participation rate. In 2019, MSSP participants declined modestly to 518 participants. The two other Medicare ACO programs, the Next Gen and ESRD models, were created by the Center for Medicare & Medicaid Services (CMMI) and opened for participation in 2016. Together, all of these Medicare ACOs care for a combined 12.3 million Medicare beneficiaries, or about one out of every five Medicare patients.

Medicare Shared Savings Program (MSSP)

Total number of participants: 518
2019 status:  2019 participation for new or re-entering ACOs begins July 1. CMS modified the MSSP through the "Pathways to Success" final rule for contract periods beginning in 2019 and beyond that will impact new ACOs or those renewing subsequent contract agreements.
2017 performance at a glance: MSSP ACOs generated $1.1 billion in gross savings in 2017 based on CMS calculations. After accounting for shared savings payments owed to ACOs that met quality and financial targets, these ACOs produced $314 million in net savings for Medicare. 60 percent of ACOs saved money in 2017, with 34 percent earning shared savings. 

Overview:  The MSSP is the largest of Medicare’s ACO programs. The MSSP began in 2012 with distinct "tracks" that offer different participation options to allow ACOs to assume varying levels of risk and potential reward. For all tracks, a spending benchmark is established based on a risk-adjusted, weighted average of Medicare Parts A and B spending for attributed beneficiaries over a three-year period directly preceding the start of the ACO contract. In order to share in savings with Medicare, ACOs must meet a minimum savings rate (MSR). ACOs participating in MSSP track 1+, 2, or 3 are also subject to pay Medicare back if they spend above a minimum loss rate (MLR), which is calculated in the same fashion as the MSR. Track 1 MSSP ACOs face no formal downside risk and are thus not responsible for paying back Medicare for spending over their targets but are also eligible for less rewards than the other tracks. The final sharing/loss rate, or percentage of total dollars spent under the MSR or over the MLR that the ACO receives from or pays Medicare, will depend on which track the ACO has selected to participate in, along with performance on quality metrics. Final losses or shared savings are then capped at a percentage of the total benchmark, which is known as the performance payment limit.

2019 changes: On Dec. 21, CMS published a final rule that redesigns the MSSP, including an accelerated pace for participating ACOs to take on additional financial risk. 
The redesign, called "Pathways to Success," retires the current four tracks and replaces them with two new BASIC and ENHANCED tracks effective July 1, 2019. The BASIC track has a “glide path” for ACOs to progressively move from a shared savings-only model to higher degrees of financial risk and potential reward by progressing through Levels A through E. The ENHANCED track has the highest degree of financial risk and potential reward.  The new tracks and levels have similarities to most of the existing tracks as follows:

Current MSSP Track Equivalent under Pathways to Success
Track 1 BASIC Level A and B
Track 1+ BASIC Level E
Track 2 No equivalent
Track 3 ENHANCED track

ACOs in the BASIC track progress from shared savings-only to risk-based models under mandated timeframes that apply differently depending on previous program experience, ACO type, and revenue. Levels A and B of the BASIC track are shared savings-only models; after a maximum of two or three years, ACOs gradually assume more risk over time as they progress through the BASIC track’s five levels. BASIC Level E and the ENHANCED track would qualify as Advanced alternative payment models (APMs) under the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015. The Pathways to Success rule decreases the amount of time an ACO can stay in a shared savings only track from the current six years to a maximum of two or three years, depending on certain factors such as experience and revenue. 

The Pathways to Success rule implements a number of additional program changes, including longer contract periods (from three to five years); expanded coverage of telehealth services and SNF three-day rule waivers; updated benchmarking methodology; increased choice and flexibility regarding beneficiary assignment methodology; and beneficiary engagement flexibilities. 

CMS Resources

Next Generation ACO Model

Total number of participants: 51
Status: No current application available
2017 performance at a glance: Next Generation ACOs generated $337 million in gross savings in 2017, according to performance data published by CMS. After shared savings payouts to eligible ACOs, the program netted Medicare $162 million in savings for 2017. 44 ACOs participated in the program, with 32 earning shared savings payments.
Overview: The Next Generation, or “Next Gen” model started in 2016. It is based on an initial 3-year agreement period with the option to extend for two additional years. At this time the model does not accept applicants on an annual basis, but on Dec. 15, 2016, CMS announced it will be reopening applications for an additional round of participants to start in the 2018 performance year. It differs from the MSSP in a number of ways, most notably in that it features prospective beneficiary assignment, higher levels of risk and reward (up to 100%) and a selection of payment mechanisms from which participants may choose.

CMS Resources

Comprehensive ESRD Care Model

Total number of participants: 37
2018 status: Not currently soliciting new applicants
2016 results at a glance: Achieved $75 million in savings, and after $51.1 million in shared savings payouts, the demonstration yielded a net savings of $23.9 million.
Overview: ​The Comprehensive ESRD Care Model is an ACO model designed specifically to improve care for Medicare beneficiaries with End-Stage Renal Disease (ESRD) through enhanced care coordination between providers and patients. Groups of dialysis clinics, nephrologists and other providers join together to create ESRD Seamless Care Organizations (ESCOs) and are collectively held accountable for clinical quality outcomes and financial outcomes measured by Medicare Part A and B spending, including all spending on dialysis services for their aligned ESRD beneficiaries. Non-large dialysis organizations (Non-LDOs) (e.g. chains with fewer than 200 dialysis facilities, independent dialysis facilities, and hospital-based dialysis facilities) have the option of participating in a one-sided track or a two-sided track with a higher sharing rate. Large Dialysis Organizations (LDOs), which have 200 or more dialysis facilities, must participate in a risk-bearing model.

CMS Resources

ACOs and MACRA: Do all ACOs count as Advanced APMs?

Under MACRA, a number of incentives are available to practices who join Advanced APMs, including exclusion from Merit-Based Incentive Payment System, a 5% annual lump-sum bonus of total Medicare reimbursements from 2019 through 2023, and a 0.5% higher annual payment update starting in 2026. For a list of models that currently qualify as an Advanced APM, visit CMS Quality Payment Program (QPP) webpage. For more information on APMs and MACRA in general, visit our MACRA page.

MGMA Advocacy

Other Resources

  • CMS Administrator Seema Verma announces 2018 ACO results
  • 2018 MSSP ACO results  
  • 2017 MSSP ACO results 
  • Center for Medicare & Medicaid Innovation homepage

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