Instead of Saving $1.7 Billion, ACOs Cost Medicare $384 Million

Accountable care organizations (ACOs) are supposed to represent an innovative way to cut costs and improve care. But a new study found that on at least one of those counts, ACOs may be doing more harm than good.

The Medicare Shared Savings Program (MSSP) increased federal spending by $384 million between 2013 and 2016, according to an analysis from consulting firm Avalere Health — despite a 2010 estimate from the Congressional Budget Office that the program would save $1.7 billion over that time period.

“The Medicare ACO program has not achieved the savings that CBO predicted because most ACOs have chosen the bonus-only model,” Avalere senior vice president Josh Seidman said in a statement announcing the results.


The MSSP includes several “tracks,” with most of the 561 operating ACOs falling under Track 1, which does not require participants to accept any downside risk; these ACOs share in any savings they generate but do not face any penalties for not meeting goals. In Tracks 2 and 3, the ACO must repay Medicare losses associated with their operations, with a greater shared savings incentive for taking on the added risk.

In fact, Avalere found that ACOs on Tracks 2 and 3 saved the government $60 million over a five-year span, while Track 1 ACOs cost Medicare $444 million.

“While data do suggest that more experienced ACOs and those accepted two-sided risk may help the program to turn the corner in the future, the long-term sustainability of savings in the MSSP is unclear,” Avalere director John Feore noted in the findings.


The Washington, D.C.-based firm’s data joins an already mixed body of research into the efficacy of ACOs and the MSSP, which was introduced as part of the Affordable Care Act in 2010. The Department of Health and Human Services (HHS) last year found that ACOs saved $1 billion between 2013 and 2015, while a team from Harvard Medical School determined that most of the savings came from simply shifting residents out of skilled nursing facilities — and not by reducing hospitalizations, a key goal of the program.

Even within Avalere’s numbers, there were some positive signs. ACOs that participate in the MSSP still saved $1.6 billion compared to benchmark projections, with that figure increasing each year. In addition, the negative numbers may simply be a matter of growing pains: ACOs that reached their fourth year ended up saving the government a total of $152 million.

“These results suggest that CBO’s initial projections may not have taken into account the time it takes for ACOs to gain experience with the program and to start to produce consistent savings,” Avalere noted.

Written by Alex Spanko

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