The Department of Health and Human Services (HHS) is striving to link 50% of Medicare payments to alternative payment models by 2018. One of the primary alternative payment models offered to Medicare providers is the Next Generation Accountable Care Organization (NGACO). Due to the potential large risk exposure for organizations considering this model, they should work with an actuary to understand the critical elements driving financial success (or failure). In this article, Milliman’s Charlie Mills, Cory Gusland, and Noah Champagne identify five key financial considerations that all ACOs should review before committing to the program. The considerations are ranked by the authors’ perceived importance, with one being the most important.
5. ACO’s CY2014 experience is the baseline for the first three performance years
4. Risk score changes are capped at 3% from the baseline year to each performance year
3. First dollar savings and losses
2. The 2016 benchmark trends are likely understated
1. In order to achieve savings, participants must outperform trended baseline less discount