Medicare shared-savings ACOs cut $1 billion in costs over three years

By Shelby Livingston
August 29, 2017 - Modern Healthcare

Accountable care organizations participating in the CMS' Medicare shared-savings program reduced spending by about $1 billion in three years, HHS' Office of Inspector General reported Tuesday.

Most of the 428 ACOs in the first three years of the shared-savings program reduced Medicare spending compared to their benchmarks, and a small group of those ACOs produced "substantial" savings.

The majority of the ACOs—82%—also improved the quality of care they provided, based on data from the CMS on 33 individual quality measures. They outperformed fee-for-service providers in 81% of the quality measures.

"While policy changes may be warranted, ACOs show promise in reducing spending and improving quality," the OIG report concluded.

The report shows that the initiative launched under the Affordable Care Act to cut spending, improve care quality and pay doctors based on value rather than volume is working. The findings come just weeks after the Trump administration canceled other alternative payment model experiments, including two mandatory bundled-payment programs, and rolled back another.

The report adds to the growing body of evidence showing that while ACO performance varies widely, ACOs are improving the quality of care overall, said David Muhlestein, chief research officer at Leavitt Partners. Cost savings—the bulk of which are concentrated among just a few ACOs—have trailed improvements in quality, he said, but there's promise for both.

"It's not just about getting paid differently," he said. "It's about providing care differently, and it takes time."

Clif Gaus, president and CEO of the National Association of ACOs, said that beyond the positive cost and quality performance results, the report also shows "a huge acceptance" of the program by physicians and hospitals. The positive findings are also evidence that ACOs should be allowed to remain in one-sided risk contracts instead of being required to enter two-sided risk arrangements, he said.

"This year's report is further proof that one-sided ACOs are doing well," he said. The vast majority of ACOs in the program participate in one-sided risk contracts. But CMS limits one-sided risk ACOs to two contract terms, or six years.

To control the cost of Medicare spending, the CMS implemented several alternative payment models under the ACA. These models, including the shared-savings program, aim to reduce costs while rewarding providers for delivering quality care.

The Medicare shared-savings program is one of the agency's largest attempts to overhaul how hospitals and doctors are paid. Launched in 2012, it accounted for $168 billion in Medicare expenditures over the first three years of the program.

Under the program, groups of doctors, hospitals and other healthcare providers coordinate care for patients and work to reduce unnecessary spending. There were 428 participating shared-savings program ACOs serving 9.7 million beneficiaries in the first three years. Each ACO served an average 18,500 beneficiaries in 2015. ACOs sign three-year contracts with Medicare under the program.

The shared-savings program ties financial incentives to a provider organization's performance on reducing costs compared to a benchmark and hitting quality targets. In the first three years, there were 33 quality targets. Successful ACOs keep a share of the savings they generate for Medicare.

The OIG found that one-third of participating ACOs reduced spending enough to receive a portion of the savings during the first three years of the program. These ACOs reduced spending by about $2.8 billion from 2013 to 2015. Of that amount, the ACOs received $1.3 billion in shared-savings payments, or about $4.8 million each for every year they earned shared savings. They use that money to invest in new care programs, provide incentives to providers to improve quality, or update their electronic health records.

Two-thirds of participating ACOs, or 282 ACOs, reduced spending for at least one of the years they participated in the program. The remaining 146 ACOs did not reduce spending, and they exceeded their benchmarks in spending for each of the years they participated in the program.

In 2015 alone, 57% of ACOs that were in the program for three years reduced spending, while 46% of ACOS in the program for one year reduced spending in 2015. That finding shows that more established ACOs are learning how to achieve greater savings over time, the OIG report stated.

A small group of ACOs, characterized as "high-performing," reduced spending by an average $673 per beneficiary between 2010 and 2015 for key Medicare services, the report found. Other ACOs increased spending by $707 per beneficiary while fee-for-service providers increased spending by an average of $673 per beneficiary.

In total, ACOs reduced spending by $3.4 billion in the first three years of the shared-savings program. About half of that figure was generated by just 36 ACOs. But ACOs that exceeded their benchmarks increased spending by about $2.4 billion during the three-year period, meaning the net reduction in spending across all ACOs was $1 billion.

Participating ACOs also improved the quality of care they delivered to patients. In the program, each ACO receives an overall quality score ranging from 0 to 100. In 2014, ACOs had an average quality score of 86. That figure increased to 91 in 2015.

Moreover, 74% of participating ACOs achieved a quality score of 90 or higher in 2015, up from just 29% in 2014.

ACOs showed the most improvement on two quality measures: They increased the percentage of beneficiaries who were screened for depression from a median of 26% in 2013 to 46% in 2015. ACOs also increased the portion of beneficiaries screened for a fall risk from 35% in 2013 to 59% in 2015, the report stated.

Participating ACOs outperformed fee-for-service providers on most measures. For example, ACOs performed better than 90% of all fee-for-service providers on lowering hospital readmissions.

The number of ACOs participating in the shared-savings program also grew between 2013 and 2015, the OIG report said. While 220 ACOs participated in the program in 2013, that number grew to 333 in the second year and 392 in the third year. The report said a total of 36 ACOs dropped out in the first three years. While ACOs served just 10% of Medicare beneficiaries in 2013, they served 19% of all Medicare members by 2015.

Gaus noted that the majority of ACOs participate in the one-sided risk track of the shared-savings program.