ACO Results

By November 14, 2017Commentary

It is good to keep track of the actual results from all the health care system innovations which will supposedly fix the big three health care problems:  cost, access and quality.  One of the these is accountable care organizations, which CMS in particular was betting on to reduce spending on the FFS side of Medicare.  Results from the most recent performance year were released by CMS in the last month and there was a resulting article in the New England Journal of Medicine on why the results seem underwhelming.   (NEJM Article)   There were 432 Medicare ACOs in 2016, most of which only took upside risk, meaning they got a bonus for creating savings, but didn’t get penalized for excess spending.  Only 22 ACOs were in tracks that included some downside risk.   About 56% of all ACOs generated “savings” of about $652 million in total, but CMS paid out bonuses of $691 million, meaning it cost more to have the ACOs than they saved.  That is because there is no collection from the ACOs that “lost” money, or didn’t meet the spending benchmarks.  If all 432 ACOs were at risk, CMS would have saved money on a net basis.  The longer an ACO is in the program, the more savings it seems to generate, giving hope for the future.  The 73 ACOs participating since 2012 generated almost $300 million in savings and the 74 that started in 2013, $204 million.  The 105 that began in 2016, on the other hand, only saved $5 million.  And those few ACOs in the more advanced tracks are generating large savings.

The NEJM perspective piece identifies both economic and financial reasons why ACOs may not meet expectations.  The authors identify three primary types of ACOs, which may be affected differently by these reasons.  One is an integrated delivery system model, one is composed of independent physician practices and one is a coalition of hospital model.  In the first performance year about 30% of the participants from each of the models generated savings.  It stayed at that level for the integrated delivery system participants, but increased to 47% for the hospital coalitions and 51% for the physician group models.  Issues with better performance noted by the authors include weak incentives, particularly when there is no downside risk, a limited percent of total patients being in the ACO model, which complicates management; inertia in large organizations and resistance to change; uneducated providers who don’t know what to do to better manage care and lack of institutional resources, like IT systems, to support ACO work.  What is encouraging is that some ACOs appear to get better at managing care as they participate for a longer period of time.  CMS should continue to encourage best practice sharing among the ACOs to help the laggards improve.  And if more ACOs have both commercial and Medicare members, they are incented to pay more attention to their care management activities.

Kevin Roche

Author Kevin Roche

The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry through Roche Consulting, LLC. Mr. Roche is available to assist health care companies through consulting arrangements and may be reached at khroche@healthy-skeptic.com.

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