Evaluation on NGACO Model Finds Spending Reductions Grow Over Time

The United States Centers for Medicare and Medicaid Services (CMS) recently funded a report by NORC at the University of Chicago, for an evaluation and review of the Next Generation Accountable Care Organization (NGACO) Model. One of the primary goals of the NGACO Model was to see whether strong financial incentives, in addition to providing tools to support patient engagement and care management, would improve the value of health services and reduce spending for Medicare fee-for-service (FFS) beneficiaries.

The NGACO Model

NGACO’s financial risk-sharing arrangements varied from prior ACO models in that NGACOs earned shared savings if Medicare spending for their aligned FFS beneficiaries was lower than a benchmark set by CMS. NGACOs shared losses if their costs exceeded the benchmark. Each NGACO’s benchmark was calculated by CMS based on the NGACO’s historical expenditures, expenditures in its region, and projected spending in the performance year. NGACOs were able to choose between several different risk sharing models: 1) 80% (partial) or 100% (full) two-sided risk for shared savings or losses; and 2) risk caps of shared savings or losses between 5% and 15% of benchmark expenditures. In performance years five and six, NGACOs had the option of signing an amendment to avoid liability for shared losses during the PHE in exchange for a cap on shared savings of 5% of the benchmark.

There were also six benefit enhancements that allowed NGACOs a greater flexibility in the delivery of care: 1) a waiver of the three-day hospital stay rule for skilled nursing facility (SNF) admission; 2) the expansion of covered locations for telehealth; 3) post-discharge home visits by non-physicians under the general supervision of a NGACO physician; 4) cost-sharing support for Medicare Part B services; 5) a chronic disease management reward; and 6) care management home visits.

According to the report, 62 NGACOs participated over the course of the model, with 35 remaining at the end of the final performance year: 11 from the 2016 cohort (of 18), 11 from the 2017 cohort (of 28), and 13 from the 2018 cohort (of 16). In the final performance year (2021), the model included beneficiaries from 28 states and 90 hospital referral regions (HRRs), a decline from the maximum of 127 HRRs in performance year three.

Evaluation of the NGACO Model

The report addressed several questions about whether, how, and for whom the NGACO Model achieved its goals, including what the impact was of the NGACO Model on Medicare spending, utilization, and quality of care and which combinations of factors were associated with reductions in Medicare spending (and which ones were associated with a lack of Medicare spending reductions).

Overall, the report found that over the six year performance period, gross spending declined by 1.9% ($270.30 per beneficiary per year or $1.7 billion in the aggregate) when compared to the comparison group. Gross spending reductions increased over time, with the largest spending reduction in performance year six. The report believes that the increase in gross spending reductions over time may be connected to three factors: 1) NGACOs’ learning and improvement strategies; 2) a selection effect, where higher-performing NGACOs were more likely to remain in the model; or 3) potentially larger spending reductions among NGACOs in the context of the COVID-19 PHE in performance years five and six, although NGACO and comparison groups in our evaluation were similarly exposed to the pandemic.

The report also found that net spending did not decline overall, as shared savings paid to the NGACOs across the performance years exceeded the cumulative reduction in gross spending. It wasn’t until performance year six where net spending declined for the first time (by 2.4%). Additionally, NGACOs that remained in the Model reduced cumulative gross spending by 2.2% while NGACOs that withdrew from the model had a nonsignificant increase in cumulative spending of 0.1%.

Quality of Care

When it came to quality of care, the evaluation did not see any significant cumulative or decline in the three measures considered: hospitalizations for ambulatory care-sensitive conditions (ACSCs); unplanned 30-day hospital readmissions; or hospital readmissions from SNFs.

Beneficiary Characteristics

The evaluation also considered how the sociodemographic and clinical characteristics of beneficiaries, as well as their degree of engagement with the model and involvement in selected other Innovation Center models, impacted the outcomes. NGACOs saw “substantial beneficiary turnover,” with less than 40% of beneficiaries staying in the model from when their NGACO joined the model and more than 60% of beneficiaries joining the model in the later participation years. For NGACO beneficiaries who remained in the model continuously, gross spending reductions were greater over time (from 1.8% in performance year two to 4.1% in performance year six).

Factors Associated with Lack of Spending Reductions

The evaluation found six pathways that included different combinations of structural, contextual, provider, and beneficiary characteristics that accounted for nearly half of NGACO performance years not associated with spending reductions.

• Larger hospital-affiliated NGACOs in more concentrated hospital markets with higher baseline Medicare spending
• Larger hospital-affiliated NGACOs in markets with higher Medicare Advantage (MA) penetration and lower baseline Medicare spending; their provider networks comprised mostly employed primary care providers and few specialists
• Smaller hospital-affiliated NGACOs in more concentrated hospital markets with lower baseline Medicare market spending and lower MA penetration; their provider networks comprised mostly employed PCPs and few specialists
• Larger physician practice NGACOs in more concentrated hospital markets; their provider networks comprised mostly contracted PCPs and more specialists
• NGACOs (multiple types and sizes) in more concentrated hospital markets with lower MA penetration; their provider networks comprised mostly contracted PCPs and few specialists
• NGACOs (multiple types and sizes) in more concentrated hospital markets with higher MA penetration and lower baseline Medicare spending; their provider networks comprised mostly contracted PCPs and more specialists

Two common features in pathways for NGACO performance years that did not reduce spending were: operating in more concentrated hospital markets and operating in less expensive markets. The combination of operating in less expensive markets and markets with higher MA penetration presented particularly steep barriers to reduced spending.

Complete Report

For access to the complete evaluation and review, click here.