ACOs: The Next Generation


On March 10, 2015, the Centers for Medicare & Medicaid Services (CMS) Innovation Center released its newest model in alternative care delivery: the Next Generation ACO Model. This new version of accountable care organization (ACO) builds upon the experiences from the Pioneer ACO Model and the Medicare Shared Savings Program (MSSP) to set more predictable financial targets, enable providers and beneficiaries to better coordinate care, and provide overall high quality care. 

According to a CMS blog post, “ACOs are a critical part of achieving the Department’s goals of delivery system reform nationally – aimed at better care, smarter spending and healthier people.” CMS expects approximately 15 to 20 ACOs to participate in the Next Generation ACO Model.

The Next Generation ACO Model provides an alternative to the Pioneer ACO Model and MSSP. Some of the features of the Next Generation Model include:

(i) Increased beneficiary engagement, such as by offering reward payments of up to $50 per year to beneficiaries receiving a certain percentage of their care from the ACO;

(ii) Allowing for better planning and more predictable financial targets by using a prospective financial model with the potential for capitated payments and fee-for-service;

(iii) Formally recognizing and defining the role of providers outside the ACO that nevertheless contribute to ACO goals, such as Preferred Providers and Affiliates; and

(iv) Providing additional tools to manage care for beneficiaries, such as additional coverage for telehealth (through a waiver of the requirement that beneficiaries be located in a rural area and at a specified type of originating site to be eligible for telehealth services), post-discharge home services (through waivers to allow “incident to” claims for home visits to non-homebound beneficiaries by licensed clinicians under the general supervision of Next Generation providers), and skilled nursing care without prior hospitalization (through a waiver of the three-day inpatient stay requirement prior to admission to a skilled nursing facility or acute-care hospital).

CMS is also considering waivers of additional fraud and abuse laws, although such waivers will be issued separately and are not currently in place.

The Next Generation ACO Model offers two different risk sharing arrangements, each with a higher shared savings rate than what is currently offered by the MSSP or Pioneer program. Aggregate savings and losses will be capped at 15 percent of the benchmark.

ACOs currently participating in the MSSP or Pioneer program may apply for the Next Generation program, but an ACO can only participate in one model. Likewise, an individual or group of ACO providers/suppliers identified by a single Tax Identification Number must be exclusive to either the Next Generation ACO Model or the MSSP and cannot participate in both programs, except that this rule does not apply to Next Generation Preferred Providers or Affiliates, which may also participate in the MSSP.

Organizations interested in participating in the first application round for the Next Generation ACO Model must submit a letter of intent by May 1, 2015 and an application by June 1, 2015. The letter of intent and other information about the Next Generation ACO Model are available here.

For additional information about ACOs or regulatory issues involving the healthcare industry, please contact: 

Kenya Woodruff214.651.5446



Jennifer Kreick


Lisa M. Prather

Lauren White


Email Disclaimer