Providers must see potential for financial success in order to engage with and succeed in a value-based model and success largely depends on an effective population health program. The Centers for Medicare & Medicaid Services (CMS) recently announced their Next Generation Accountable Care Organization (ACO) Model. According to the CMS website, its goal is "to test whether strong financial incentives for ACOs, coupled with tools to support better patient engagement and care management, can improve health outcomes and lower expenditures for Original Medicare fee-for-service (FFS) beneficiaries."[ 1] While details are still pending, it appears that this program meets many of the requirements for success under a value-based contract while providing flexibility for participants to implement some aspects of the program progressively over time to best suit their environment. Most importantly, it will allow participants to innovate.

Financial success requires a benchmark methodology that allows high performing organizations to succeed and does not punish them for past success. The proposed benchmark methodology appears to focus on performance relative to regional benchmarks, and over time, de-emphasize historic performance. This approach is directionally encouraging and the details may make potential participants more comfortable.

The level of potential reward in the Next Generation ACO Model aligns with its risk options. Moreover, the magnitude of the upside potential, up to 85% sharing rate or 100% of Part A and B risk, will help providers fund the infrastructure needed for population management and better mitigate the fall in revenue from decreases in utilization.[ 2]

Success in a value-based model requires the implementation of a population health program focused on coordinating and managing care across the continuum. Patient engagement is an important component of all such programs. The new ACO model supports population management in several ways by:

  • Facilitating the identification of at-risk populations to allow the ACO to focus its resources accordingly. Prospective attribution and voluntary beneficiary alignment are important supporting model parameters.
  • Providing the ability to manage care and optimize care coordination across the continuum and help ensure the most appropriate use of resources. The Next Generation ACO Model provides the greatest opportunity in this area, especially for innovation. Since maintaining patient care within the ACO provider network is important, beneficiaries who receive at least a certain percentage of their services from ACO providers and suppliers, preferred providers, and affiliates will be rewarded though financial incentives. Other model parameters that promote in-network care include the ability to designate preferred providers and to offer services with low or no co-payments.

Finally, the model supports better patient engagement and the opportunity to optimize resource utilization. Designation of preferred providers allows ACOs to establish cooperative programs and promote higher value services. ACOs that elect to receive capitation payments can implement innovative payment models that may better align incentives among network constituents. Greater access to telehealth and home visits and waiving the three-day acute hospital stay requirement prior to admission to a skilled nursing facility will improve patient engagement, permit better care, and enable more cost efficient resource utilization.

This Next Generation ACO Model will also allow provider organizations experienced in value-based care and population management to align the management of at-risk CMS beneficiaries with their other at-risk populations. Increasing the total number of value-based lives will help them reach the scale needed to optimize efficiency. Hopefully, the program details will be viewed favorably and will encourage participation.

1Retrieved March 15, 2015, from
2Retrieved March 15, 2015, from

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Jonathan Niloff

About the author

Dr. Jonathan Niloff is Vice President and Chief Medical Officer, Population Health, Studiomaca. He was the founder and chief medical officer for MedVentive, which is now a part of Studiomaca. In his current role, he is responsible for the strategic development of population health analytics and solutions. Dr. Niloff has over 25 years of health care experience as a physician, medical director, professor, author and health care technology innovator.