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ACO Cost Savings

By January 30, 2018Commentary

Medicare is banking on accountable care organizations to help stabilize spending growth in its fee-for-service arm.  CMS has had success in attracting a number of groups to become Medicare ACOs and more of these groups are taking both upside and downside risk, which creates incentives for behavior change among clinicians and may encourage better care management.  A study published in Health Affairs examines the sources of ACO spending reductions to date.   (HA Article)    The researchers used data through 2014, the third year of the Medicare ACO program.  They were particularly interested in changes in so-called “ambulatory care sensitive” hospitalizations, as one theory was that better management of beneficiaries overall health might reduce avoidable inpatient stays.  They compared utilization and spending for a cohort of beneficiaries before and after they became cared for by an ACO and with a group not in an ACO.  As usual, the analysis had various health status and other adjustments to try to isolate the effects of being in an ACO.  There were three patient cohorts–those who became associated with an ACO starting in 2012, those who started in 2013 and those in 2014.

For the 2012 cohort, ACO participation was associated with about a $300 annual reduction in spending in 2014, or 3%.  For the 2013 cohort, the spending reduction in 2014, was $111, or about 1%, and for the 2014 cohort its was 41%.  This suggests that greater spending reductions occur the longer a patient has been cared for in an ACO.  Reductions in inpatient hospital use for each cohort was smaller than the reduction in spending and there was no significant change in ambulatory care sensitive admissions.  Breaking that down by diagnosis, for the 2012 cohort, COPD or asthma admissions showed a 4.8% decrease, but for congestive heart failure and diabetes admissions actually rose about 3.5%.  Spending and hospital use changes were proportionately the same among both high-risk and low-risk beneficiaries in the 2012 cohort, but occurred largely among low-risk ones for the 2013 cohort.  The authors interpret these results as suggesting that ACO savings are not the result of better care management that reduces the need for preventable admissions.  It appears instead that the savings are driven by reductions in service usage across several categories, especially post-acute care.  It may also be that the ACO structure doesn’t actually do that good a job of improving care management or that beneficiaries are already getting generally appropriate care.

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