Medicare Shared Savings ACOs Save Money, Improve Quality

John Commins, August 30, 2017

With Medicare spending projected to grow to $1.4 trillion by 2027, the federal government is looking for alternative payment models to slow spending growth, and a new report suggests those efforts are delivering.

Accountable care organizations in Medicare’s Shared Savings Program reduced net spending by nearly $1 billion and improved quality metrics over the first three years of the program, a federal audit shows.

“While policy changes may be warranted, ACOs show promise in reducing spending and improving quality,” the Office of the Inspector General for the Department of Health and Human Services said in its review issued this week. “However, additional information about high-performing ACOs would inform the future direction of the Shared Savings Program as well as other alternative payment models.”

Medicare spending is projected to hit $1.4 trillion in 2027, which is more than double the $689 billion spent on the program in 2016. The Shared Savings Program is one of the largest alternative payment models, accounting for $168 billion in Medicare expenditures over its first three years, from 2013-2015.

OIG analyzed beneficiary and provider quality, spending and utilization data over the first three years of the program, which involved 428 ACOs and 9.7 million beneficiaries.

“During that time, most of these ACOs reduced Medicare spending compared to their benchmarks, achieving a net spending reduction of nearly $1 billion,” OIG said. “At the same time, ACOs generally improved the quality of care they provided, based on CMS data on quality measures.”

ACOs improved their performance on 82% of the individual quality measures, and outperformed fee-for-service providers on 81% of the quality measures. In addition, a subset of high-performing ACOs reduced spending by an average of $673 per beneficiary for key Medicare services during the review period.

That contrasts other Shared Savings Program ACOs and the national average for fee-for-service providers showed an increase in per beneficiary spending for key Medicare services.

The OIG report also found that:

  • The number of ACOs grew over time, with 220 ACOs participating in 2013, increasing to 333 in 2014, and 392 in 2015. A total of 36 ACOs dropped out of the program in the first 3 years.
     
  • In 2015, ACOs served 7.3 million beneficiaries, up from 3.7 million in 2013, 19% of all Medicare beneficiaries in 2015, compared to 10% in 2013 ACOs served 9.7 million unique beneficiaries over the first 3 years.
     
  • Each ACO served an average 18,500 beneficiaries in 2015, compared to 16,700 in 2013.
     
  • ACOs served less than 1% of Medicare beneficiaries in Hawaii and 49% of beneficiaries in Vermont in 2015. ACOs were more likely to serve beneficiaries in States along the East Coast and in parts of the Midwest.
     
  • The composition of ACOs also changed over the 3 years. The percentage of ACOs that were made up solely of physicians decreased, as more ACOs began including other entities such as hospitals and nursing homes.
     
  • In 2013, 42% of ACOs were made up solely of physicians; this decreased to 34% of ACOs in 2015. Of the ACOs that were made of both physicians and other entities, 75% included hospitals in 2015. These ACOs also commonly included home health agencies (39%), nursing homes (33%), and hospices (32%).
     
  •  ACOs made available more primary care physicians and specialists to their beneficiaries over time. In 2015, ACOs had one primary care physician for every 166 beneficiaries, compared to one primary care physician for every 178 beneficiaries in 2013. Similarly, ACOs had one specialist for every 463 beneficiaries in 2015, compared to one specialist for every 611 beneficiaries in 2013.
John Commins

John Commins is a senior editor at HealthLeaders Media.

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