Next Generation Accountable Care Organization (ACO) Model Fact Sheet


Medicare Accountable Care Organizations (ACOs) provide coordinated, high-quality care and better value to Medicare beneficiaries.  Building on experience from the Pioneer ACO Model and the Medicare Shared Savings Program (MSSP), the Next Generation ACO Model offers a new opportunity in accountable care—one that sets predictable financial targets, enables greater levels of financial risk so that providers have more opportunities to coordinate beneficiaries’ care, and maintains the highest of quality standards consistent with other Medicare programs and models.  This is in accordance with the Department of Health and Human Services’ “Better, Smarter, Healthier” approach to improving our nation’s health care and setting clear, measurable goals and a timeline to move the Medicare program — and the health care system at large — toward paying providers based on the quality rather than the quantity of care they provide to patients.  CMS is adding the Next Generation ACO Model to its existing portfolio of ACO models:

  • Medicare Shared Savings Program (Shared Savings Program)
  • Pioneer ACO Model
  • Advance Payment ACO Model
  • ACO Investment Model
  • Comprehensive End Stage Renal Disease (ESRD) Care Initiative

This document includes background information on ACOs, a summary of the Next Generation ACO Model, information on eligibility and the application process for the model, and general information on the CMS Innovation Center.

Medicare ACO Background

Medicare ACOs are comprised of groups of doctors, hospitals, and other health care providers and suppliers who come together voluntarily to provide coordinated, high-quality care at lower costs to their Original Medicare patients. ACOs are patient-centered organizations where the patient and providers are true partners in care decisions.  Participating patients will see no change in their Original Medicare benefits and will keep their freedom to see any Medicare provider.  Provider participation in ACOs is also voluntary.  When an ACO succeeds in both delivering high-quality care and spending health care dollars more wisely, it will share in the savings it achieves for the Medicare program.

The goal of care coordination is to ensure that patients, especially those with chronic conditions, get the right care at the right time while avoiding medical errors and unnecessary duplication of services.  Any patient who has multiple doctors has experienced the frustration of fragmented and disconnected care: lost or unavailable medical charts; duplicated medical procedures and tests; difficulty scheduling appointments; or having to share the same information repeatedly with different doctors.  ACOs are designed to lift this burden from patients, while improving the partnership between patients and doctors in making health care decisions.  Medicare beneficiaries will have better control over their health care, and providers will have better information about their patients’ medical history and better relationships with patients’ other providers.  For providers, ACOs hold the promise of realigning the practice of medicine with the ideals of the profession—keeping the focus on patient health and the most appropriate care.

Medicare beneficiaries whose doctors participate in an ACO will still have freedom of choice among providers and can still choose to see providers outside of the ACO.  Patients choosing to receive care from providers participating in ACOs also will, as in Original Medicare, have access to information about how well their doctors, hospitals, or other caregivers are meeting quality standards.

Summary of the Next Generation ACO Model

The Next Generation ACO Model is an initiative developed by the Center for Medicare & Medicaid Innovation Center (CMS Innovation Center) for ACOs that are experienced in coordinating care for populations of patients.  It will allow these provider groups to assume higher levels of financial risk and reward than are available under the current Pioneer Model and Shared Savings Program (MSSP).  The goal of the Model is to test whether strong financial incentives for ACOs can improve health outcomes and lower expenditures for Original Medicare fee-for-service (FFS) beneficiaries. Core principles of the Model are:

  • Protecting Medicare FFS beneficiaries’ freedom to seek the services and providers of their choice;
  • Engaging beneficiaries in their care through benefit enhancements that directly improve the patient experience and reward seeking care from ACOs;
  • Creating a financial model with long-term sustainability;
  • Utilizing a prospectively-set benchmark that: (1) rewards quality; (2) rewards both improvement and attainment of efficiency; and (3) ultimately transitions away from an ACO’s recent expenditures when setting  and updating the benchmark;
  • Mitigating fluctuations in aligned beneficiary populations and respecting beneficiary preferences by supplementing a prospective claims-based alignment process with a voluntary process;
  • Smoothing ACO cash flow and supporting investment in care improvement capabilities through alternative payment mechanisms.

The Next Generation ACO Model includes strong patient protections to ensure that patients have access to and receive high-quality care.  Like other Medicare ACO initiatives, this Model will be evaluated on its ability to deliver better care for individuals, better health for populations, and lower growth in expenditures.  In addition, CMS will publicly report the performance of the Next Generation ACOs on quality metrics, including patient experience ratings, on its website.

The CMS Innovation Center

The CMS Innovation Center was created by the Affordable Care Act to test innovative payment and service delivery models to reduce program expenditures while preserving or enhancing the quality of care for CMS beneficiaries.

Working in concert with the Shared Savings Program, the CMS Innovation Center is testing a number of ACO models and has sponsored learning activities that help providers form ACOs and improve their results.  More information on all of these initiatives is available on the CMS Innovation Center website at


CMS expects approximately 15 to 20 ACOs to participate in the Next Generation ACO Model with representation from a variety of provider organization types and geographic regions.  The Model will consist of three initial performance years and two optional one-year extensions.  Specific eligibility criteria are outlined in the Request for Applications found at the Next Generation ACO Model web page.

Application Process

For round one consideration, interested organizations must submit a Letter of Intent (LOI) no later than 11:59 p.m. EDT May 1, 2015.  Round one applications will be made available in March, 2015 and must be submitted electronically no later than 11:59 p.m. EDT June 1, 2015.  Round two Letters of Intent and applications will be made available in March, 2016.  The round two Letter of Intent must be submitted electronically no later than 11:59 p.m. EDT May 1, 2016, and the application no later than 11:59 EDT p.m. June 1, 2016.

To file an LOI and complete the online application, interested organizations may access the instructions at the Next Generation ACO Model web page.

CMS staff will review applications for the applicant organization’s ability to meet criteria identified in the solicitation.

Additional Resources

More information about the Next Generation ACO Model, including the Request for Applications, is available on the CMS Innovation Center website at the Next Generation ACO Model web page.  Any questions about the Model can be directed

About the author

John Lynn

John Lynn

John Lynn is the Founder of, a network of leading Healthcare IT resources. The flagship blog, Healthcare IT Today, contains over 13,000 articles with over half of the articles written by John. These EMR and Healthcare IT related articles have been viewed over 20 million times.

John manages Healthcare IT Central, the leading career Health IT job board. He also organizes the first of its kind conference and community focused on healthcare marketing, Healthcare and IT Marketing Conference, and a healthcare IT conference,, focused on practical healthcare IT innovation. John is an advisor to multiple healthcare IT companies. John is highly involved in social media, and in addition to his blogs can be found on Twitter: @techguy.