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Expanding ACO’s Beyond Medicare

With positive evidence of cost savings, perhaps it’s time to create ACO’s for all payers.

In 2012, the Center for Medicaid and Medicare Services (CMS) implemented a novel program in their efforts toward achieving the Triple Aim: Thirty-two organizations with experience in care coordination enrolled in the Medicare Pioneer accountable care organization program. During the first two years, Pioneer organizations were judged on 33 quality measures with a shared savings and risk payment policy. This article evaluated year one performance of Pioneer ACOs by comparing outcomes and cost for beneficiaries seeking care with Pioneer ACOs versus those with non-ACO providers.

Source: Christiaan Triebert (Flickr/CC)

Source: Christiaan Triebert (Flickr/CC)

The cost savings of Pioneer ACOs during this first year was estimated to be $118 million with an adjusted per beneficiary savings of $29.20. There were no significant changes in readmission rates or hospitalizations for patients with COPD and CHF. Participants in Pioneer ACOs did show a slight increase in the rate preventative services for diabetes.

ACOs have been proposed as an alternative payment method to fee-for-service with the hope of leading to cost-savings. The study’s primary finding of an overall cost savings was primarily due to the performance of organizations with high spending prior to enrollment with those that were already efficient seeing less savings. Thus, inefficient organizations actually received higher incentives. The program runs the risk of making the current incentive structure vulnerable to gaming and creates a perverse disincentive for efficient organizations to participate. In order to encourage organizations to stay in the program, CMS should adjust benchmarks and account for unique patient case mixes.

Once adjusted, I would encourage policymakers to look at the possibility of ACOs beyond the Medicare populations—though Medicare is the single largest payer in the US, it constitutes only a fraction of overall health care spending. Moreover, ACOs should go beyond including physicians and hospitals and include social workers, the public health department, housing providers, and even the county jail.

This “total needs” ACO model is currently being used by Hennepin Health in Minnesota to address its Medicaid population. In its first year of implementation, Hennepin Health saw a savings of 1 million dollars and reduced emergency department visits by 20%.

ACOs have the capacity to be successful in improving patient outcomes and cost savings. However in order to get buy-in from organizations, the formula for shared savings and risk should be adjusted for the benefit of both the organizations and CMS.

commentary by Sharmistha Dev


BACKGROUND: In 2012, a total of 32 organizations entered the Pioneer accountable care organization (ACO) program, in which providers can share savings with Medicare if spending falls below a financial benchmark. Performance differences associated with characteristics of Pioneer ACOs have not been well described.

METHODS: In a difference-in-differences analysis of Medicare fee-for-service claims, we compared Medicare spending for beneficiaries attributed to Pioneer ACOs (ACO group) with other beneficiaries (control group) before (2009 through 2011) and after (2012) the start of Pioneer ACO contracts, with adjustment for geographic area and beneficiaries’ sociodemographic and clinical characteristics. We estimated differential changes in spending for several subgroups of ACOs: those with and those without clear financial integration between hospitals and physician groups, those with higher and those with lower baseline spending, and the 13 ACOs that withdrew from the Pioneer program after 2012 and the 19 that did not.

RESULTS:Adjusted Medicare spending and spending trends were similar in the ACO group and the control group during the precontract period. In 2012, the total adjusted per-beneficiary spending differentially changed in the ACO group as compared with the control group (-$29.2 per quarter, P=0.007), consistent with a 1.2% savings. Savings were significantly greater for ACOs with baseline spending above the local average, as compared with those with baseline spending below the local average (P=0.05 for interaction), and for those serving high-spending areas, as compared with those serving low-spending areas (P=0.04). Savings were similar in ACOs with financial integration between hospitals and physician groups and those without, as well as in ACOs that withdrew from the program and those that did not.

CONCLUSIONS:Year 1 of the Pioneer ACO program was associated with modest reductions in Medicare spending. Savings were greater for ACOs with higher baseline spending than for those with lower baseline spending and were unrelated to withdrawal from the program. PMID: 25875195

McWilliams, JM, et al. N Engl J Med 2015; 372 (20): 1927-36.

Sharmistha Dev, MD, MPH
About Sharmistha Dev, MD, MPH

Sharmistha Dev is a clinical instructor at University of Michigan Department of Emergency Medicine and Department of Internal Medicine. She earned her Master of Public Health and medical degree from University of Illinois at Chicago. She tweets at @DrSDev. Contact: Facebook | Twitter | More Posts