News Release
December 21, 2018 

NAACOS Statement on CMS’s Final ‘Pathways’ Rule and Next Generation ACO Results

WASHINGTON – Clif Gaus, chief executive of the National Association of Accountable Care Organizations (NAACOS), released the following statement in reaction to today’s final “Pathways to Success” rule from the Centers for Medicare & Medicaid Services (CMS) which makes numerous significant changes to the Medicare Shared Savings Program. 

“We appreciate CMS’ effort in the final rule to provide greater stability to the Medicare Shared Savings Program with five-year agreement periods and more flexibility through waivers for telehealth and skilled nursing facility stays. We look forward to working with CMS to ensure that the Medicare Shared Savings Program, which has a track record of saving taxpayer hundreds of millions of dollars while demonstrably improving care for patients, continues to attract new participants and reap savings.” 

“We are very pleased CMS returned shared savings rates for many ACOs back to the historic precedent of 50 percent for some and 40 percent for others, increased the proposed one-sided risk term for certain low-revenues ACOs to three years, and made steps forward in needed risk adjustment policies.” 

“We will continue to advocate on certain provisions that CMS opted not to change in the final rule, such as the retention of a two-year period in the no-risk model for many ACOs and the distinction between high and low revenue ACOs. These policies may present challenges to providers who want to participate in this important, yet voluntary, Medicare program. NAACOS believes there needs to be movement toward greater risk, and that movement requires an appropriate and reasonable glide path to encourage participation and success.” 

Size of shared-savings rates
“We strongly support CMS’s decision not to reduce shared savings rates to as low as 25 percent. CMS’ final rule sets the savings rates at either 40 or 50 percent, and we look forward to working with CMS to monitor any impact that this decreased rate may have for new ACOs wanting to join the program.” 

A survey of NAACOS members after the proposed rule was released found reduced shared-savings rates for no- and low-risk ACOs was the most troubling aspect of CMS’s proposed changes. According to a 2016 NAACOS survey, ACOs invested an average of $1.6 million into operational costs. 

Length of shared savings-only models
“We are pleased that CMS modified its proposed policy to only allow two years in a one-sided model to allow three years for certain low-revenue ACOs. We remain concerned, however, that CMS retained the two-year limit for other ACOs. Becoming a well-functioning ACO takes time and requires building of IT infrastructure, hiring care coordinators, changing the culture of providers, among other tasks.”  

Under CMS’s proposed rule, many ACOs would have just a single year of performance data available to them before evaluating the required move to risk in their third year of the program. 

High-low distinction
“Although we are pleased that CMS finalized a new, limited exception to its high-low policy, we remain concerned that the high-low revenue ACO distinction could deter providers who want to embark on the path of value-based care and could unintentionally harm physician-led ACOs. We urged CMS in the rulemaking process to provide an equal playing field for all ACOs and will continue to advocate for changes to this policy.” 

A NAACOS analysis of how ACOs would be classified under CMS’s proposed definitions found almost 20 percent of physician-led ACOs would be considered high revenue ACOs. Furthermore, federally qualified health centers and rural health clinics would also have a fair proportion of high revenue ACOs. 

Risk adjustment
"We are pleased CMS recognizes for the first time the need for modifications on risk adjustment. It is good that in the final rule there will be no cap on downward adjustment but wish the cap of 3 percent would have increased to 5 percent in 5 years, as we proposed." 


Medicare’s most advanced ACOs – those in the Next Generation (Next Gen) Model – generated $337 million in gross savings including discounts to Medicare last year, according to 2017 performance data made public today from CMS. After accounting for shared savings paid to ACOs for holding down costs and hitting quality targets as well as shared losses paid back to the government, the Next Generation program netted at least $165 million to Medicare last year alone. Last year, 44 Next Gen ACOs participated in the program, serving 1.2 million Medicare patients.  

“These results are another important data point proving the ACO model is hitting its goals of improving the quality of care and lowering health costs,” Gaus said. “The Next Generation Model comprises some of the most advanced ACOs in the country, leveraging sophisticated care coordination techniques and cutting-edge technology.” 

NAACOS also urges the Center for Medicare and Medicaid Innovation (CMMI) to move forward with developing and releasing more details on an advanced ACO model that will replace the Next Gen Model and build on its success. The Next Gen program is slated to run through 2020, and CMS has promised to release the next iteration of that program before then. NAACOS urges the agency to solicit stakeholder feedback as part of its process to develop and finalize key program elements. 

Eighteen Next Gen ACOs saved Medicare $63 million in 2016, the first year of the program, after accounting for incentive payments earned for hitting spending and quality targets, according to an independent evaluation of results released in August by CMMI. 

“If Shared Savings ACOs are the farm system for more advanced models like the Next Gen Model, CMS should seek out ways to encourage ACO growth,” Gaus said. “CMS should continue to evaluate this recent data, which show ACOs save money and improve quality.” 

ACOs are a market-based solution to help lower the cost of health care spending, where groups of doctors, hospitals and other providers agree to care for a set of patients. ACOs are incentivized to lower costs by spending less than pre-determined targets and hitting quality measures, earning the right to share generated savings. Next Gen ACOs can earn a higher rate of savings – up to 100 percent generated for Medicare – compared to ACOs in the MSSP. But they also are subject to higher losses should they not meet spending targets. Next Gen ACOs are provided more waivers and flexibility, such as for use of telehealth and skilled nursing facility stays without a hospital discharge first, than those in the MSSP. 

The Medicare ACO program, including the Next Gen Model and the MSSP, is the largest value-based payment model in the country and an essential tool in moving the health system toward better value.