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Medicare ACO Performance

By March 30, 2018Commentary

CMS has pinned its cost control hopes in the Medicare FFS arm to accountable care organizations.  According to an Avalere analysis, those hopes may be leading to higher spending.  (Avalere Analysis)   In 2010 the Congressional Budget Office projected savings of about $1.7 billion in Medicare spending from 2013 to 2016 due to enrollment of beneficiaries in ACOs.  CMS had similar projections.  Avalere looked at actual spending for beneficiaries in the 561 organizations participating in the Medicare Shared Savings Program, the largest component of the ACO initiative.  The problem stems from the fact that most of these groups have selected track 1 of the program, under which they get payments for meeting certain targets, but have no downside risk or penalties for failing to meet the targets.  Avalere finds that in fact Medicare spending increased about $380 million over this period, because of the savings payments and the lack of penalties for not hitting targets.  Many ACOs did not achieve savings, so didn’t get bonus payments, but also weren’t doing anything to control Medicare costs.  There is some reason for hope, however, as Avalere also found that the longer an ACO was in the program, the better their performance on controlling costs appeared to be.  And ACOs in their fourth year of participating in the program actually saved CMS $152 million.  And those few ACOs which participated in downside risk through tracks 2 and 3 saved a total of $60 million over 5 years.  So the lesson would appear to be that it would be good to force ACOs to sign up for multi-year participation, and, at least after a couple of years of participation, to require that they take risk in regard to spending targets, so that they are fully incentivized to watch spending carefully.

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