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Medicare ACO Savings

By November 13, 2018Commentary

Studies have come to conflicting answers on the extent to which the accountable care organizations participating in Medicare’s shared savings program have actually produced any savings to share.  CMS’ own analysis suggests possibly not, but may not have used the best methodology.  A new analysis carried by the New England Journal of Medicine finds that some ACOs may in fact be producing savings.   (NEJM Article)  The authors used fee-for-service Medicare claims from 2009 to 2015 to compare the annual spending for patients who were and weren’t in ACOs, and before and after the ACO was initiated.  They analysed the ACOs by cohort, based on the year they started participating in the shared savings program, and compared physician-led ACOs with those that were sponsored by a hospital/health system.  The cohorts were ACOs that started in 2012, 2013, and 2014.  There were an average of about 1840 beneficiaries in each physician-led ACO and 4021 beneficiaries in each hospital one.  Generally the control group and the ACO group were well-matched on various characteristics.

For the 2015 year, the 2012 cohort of physician-led ACOs saved an average of $474 per beneficiary; the 2013 cohort saved $342 per beneficiary and the 2014 cohort, $156.  It is very important to observe that the longer an ACO participates, the more it seems to reduce spending, which suggests that learning occurs and there is an improvement in care management that results in lower utilization.  Note also that these figures are after the shared savings payments.  In comparison, hospital ACOs had much lower savings, the 2012 cohort $169, the 2013 cohort $18 and the 2014 cohort actually added an average $88 in spending.  But at least the hospital ACOs also appeared to improve over time.  The physician ACOs saved by reducing inpatient, post-acute and home health care, while adding to office-based outpatient care.  ER use also declined, but there was no change in the number of hospitalizations for ambulatory-care sensitive conditions or 30-day readmission rates.  Hospitals ACOs had no significant changes in category spending.  In total, according to this analysis physician ACOs saved CMS a net $256 million, while bonus payments to hospital ACOs more than offset any savings.  The participant ACOs covered in this study had no downside risk, but the physician ones still were motivated to change practice patterns and produce cost savings.  Hospital ones not so much.

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