April 24, 2015

First Major Medicare ACO Study ‎Shows No Savings Difference Between Integrated and Independent Providers

In April 2015, the New England Journal of Medicine published its first study on Medicare Accountable Care Organizations (ACOs). Titled, “Performance Differences in Year 1 of Pioneer Accountable Care Organizations,” the study examined whether the first of cohort of Medicare ACOs, the so-called Pioneer ACOs, were able to deliver savings to Medicare while delivering population health care within the traditional Medicare program for the first time.

The principal finding of the study was that the Pioneers delivered a $29 per quarter (1.2 percent) savings to the Medicare program. The study suggests that the main source of savings was decreased spending “on acute inpatient care, hospital outpatient care, and post-acute care, particularly skilled nursing facilities.” But these saving were partially offset by increased spending on outpatient care. The study also suggests that the ACOs provided slightly higher quality of care.

Not surprisingly, savings were higher among ACOs in areas with higher baseline spending, a reflection of wider geographic and historical concerns with health care spending. The study also notes the high attrition of Pioneers, with 13 of the 32 original participants leaving the program. Interestingly, the study authors found no difference in performance between Pioneers “with financial integration between hospitals and physician groups” and those without financial integration. This finding, albeit an isolated one, implies that the provider consolidation underway throughout the health care sector might be less important to population health success than some have suggested.  

While the study authors characterize the level of savings as “modest,” it can be reasonably speculated that these estimated savings, based on the Year 1 performance of the Pioneers, lay a favorable foundation for increasingly better performance in future years as the ACOs and their affiliated providers adjust their models and further disrupt established behaviors. The study concludes with some recommendations on how the Medicare Shared Saving Program (MSSP) model could be tweaked to more fairly reward all ACO participants.

The timing of the report is important. CMS has just commenced a new round of applications for the MSSP and several entities are currently making final determinations on whether or not to participate. The deadline for filing a Letter of Intent to participate in the MSSP is May 29.    

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