Next Generation ACO: A Friendlier, Improved ACO?

The Department of Health and Human Services (“HHS”) announced a new accountable care organization (“ACO”) program, the “Next Generation ACO,” on March 10, 2015.  The Next Generation ACO is billed as an advancement and improvement from the previous Pioneer ACO and Medicare Shared Savings Programs.  The Next Generation ACO also directly connects to HHS’ recently announced goal of a major shift to alternative payment models (namely payment for quality as opposed to volume), which is reflected in the payment and risk options that will be available to participants.

HHS hopes that the Next Generation ACO will be more attractive to participants and has attempted to respond to comments and critiques from the other ACO programs.  Specifically, more predictable financial targets will be used, which will, per HHS, hopefully create greater opportunities for provider and beneficiaries to coordinate care and produce higher quality care.  Participants will also be able to take on greater performance risk, which means the rewards can be higher as well as the potential downside.  However, more predictable benchmarks and flexible payment options will be utilized to enable the changing performance risk options.

Other changes included in the Next Generation ACO are more tools to create direct engagement between each ACO and the beneficiaries that it serves.  Tools include more coverage for home visits, telehealth services and skilled nursing facilities.  Coordinated care needs to encompass a variety of care settings and options as views continue to change about the traditional office visit.  Next Generation ACOs will also be able to provide rewards to beneficiaries that receive care within the ACO.  While a response contained in Frequently Asked Questions about the new model suggests that rewards are limited to $50 per year, the direct suggestion to provide rewards to encourage behavior is a new direction.  Another important change is the ability of beneficiaries to confirm care relationships within the ACO, which will aid ACOs in identifying which beneficiaries will be included in their performance calculations.

Four different payment mechanisms will be available for Next Generation ACO participants to choose from.  One option will be a capitation payment mechanism that is separate and distinct from the risk arrangement that a participant will select.  Capitation is one of the primary alternative payment methodologies being explored in other areas.  It is possible to interpret the new capitation option as a test pilot for changing Medicare as a whole.

The announcement indicated that there will be two rounds of applications, at least initially.  For organizations that want to enter the program for 2016, a letter of intent must be submitted by May 1, 2015 and a full application by June 1, 2015.  The second round will occur in the spring of 2016.

As suggested above, the Next Generation ACO demonstrates an apparent effort by HHS to continue pushing a change in the way Medicare and the federal government pays for healthcare.  The payment models and attention on increased risk are clearly intended to help drive the goal of shifting Medicare into a quality based system and minimizing the role of fee for service.  However, that goal is also undercut at the same time by other statements about how the Next Generation ACO will operate.  The program is still within Original Medicare.  That means beneficiaries still have the entire Medicare network to choose from and cannot be forced to receive care solely from the ACO that the particular beneficiary falls under.  It is difficult to claim that fundamental change is being encouraged, when a safety net is left in place.

Another piece of note in the Next Generation ACO is the ability for participants to reward beneficiaries for seeking care within the ACO’s network of providers.  Beneficiary inducements have long been contained on the list of suspect actions that concern the Office of the Inspector General (the “OIG”) within HHS.  Providers participating in Medicare generally need to be very careful when giving monetary benefits because such items can easily run afoul of the beneficiary inducement provisions in the civil monetary penalties statute.  The OIG provided guidance that gifts or other benefits may be provided, if the annual amount does not exceed $50 per person.  This guidance can be seen as the basis for stating that Next Generation ACOs could give up to $50 in coordinated care rewards each year to beneficiaries.  While the encouragement to provide rewards sounds good, will $50 be enough to actually influence a beneficiary’s decisions?  Should changes in the law be made to enable greater rewards?  These are good questions to ask and ones that likely will not be easily answered.

The discussion about rewards leads to one other option item.  How will fraud and abuse laws be applied to the Next Generation ACO?  Will HHS promulgate waivers as it did for both the Pioneer ACO program and the Medicare Shared Savings Program?  The emphasis on increased coordination of care among a larger spectrum of providers suggests that such waivers will likely be needed.  While it may be possible to structure arrangements within the dictates of current fraud and abuse statutes and regulations, now would seem to be an ideal time to experiment with loosening restrictions on that front as well.  On one level, the concern about fraud and abuse is that providers or others would unnecessarily inflate services provided in order to bill for more money.  However, when the payment paradigm shifts to quality of quantity, arguably there is downward pressure on churning through services because doing so will lead to loss as opposed to profit.  From this perspective, the fraud and abuse laws are not in sync with where healthcare is going.  If programs such as the Next Generation ACO are meant to be experiments, why not broaden that experiment to these areas as well?

Overall, the announcement of the Next Generation ACO continues the recent line from HHS that it wants to change how healthcare is delivered and paid for.  It will be up to the organizations that submit applications to make it succeed, but there is still work to be done in fleshing out the program and determining what is needed for success.  While no model will be perfect at first, the key is to keep forging ahead and refining processes as lessons are learned.

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About Matt Fisher

Matt is the chair of Mirick O'Connell's Health Law Group and a partner in the firm's Business Group. Matt focuses his practice on health law and all areas of corporate transactions. Matt's health law practice includes advising clients with regulatory, fraud, abuse, and compliance issues. With regard to regulatory matters, Matt advises clients to ensure that contracts, agreements and other business arrangements meet both federal and state statutory and regulatory requirements. Matt's regulatory advice focuses on complying with requirements of the Stark Law, Anti-Kickback Statute, fraud and abuse regulations, licensing requirements and HIPAA. Matt also advises clients on compliance policies to develop appropriate monitoring and oversight of operations.
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