Savings Success in ACOs Takes Time, and Risk Might Not Matter

Accountable care organizations (ACOs) need time to work out their growing pains before producing savings for the government, according to a new study from a top health care consulting firm — and a major assumption about risk might not actually be true.

ACOs active for four years or longer accounted for just about all of the $314 million in savings generated by the Medicare Shared Savings Program (MSSP) in 2017, the Washington, D.C.-based Avalere Health reported last week.

“Provider experience in managing population health, creating data infrastructure, and changing behavior appear to be crucial factors in the success of accountable care organizations,” John Feore, a director at Avalere and a co-author of the analysis, said in the report.


ACOs work by encouraging providers across the spectrum to work together, splitting set reimbursements from the Centers for Medicare & Medicaid Services (CMS) with the goal of reducing inefficiencies and preventing costly mistakes and other events, such as rehospitalizations. Within the MSSP program, providers can participate in certain “tracks,” with more than 90% opting for the risk-free Track 1 — under which they only reap shared savings and do not have to repay Medicare for any losses incurred during their operations. Tracks 2 and 3, meanwhile, include the possibility for either a gain or loss.

In Avelere’s analysis, participants in all three tracks saved money, with $291 million in savings coming from Track 1, $5 million from Track 2, and $18 million from Track 3.

“Avalere found that the assumption of downside risk does not appear to be a reliable predictor of an ACO’s success,” the firm observed.


The efficacy of ACOs has become the subject of debate in the long-term health care community, with studies reaching vastly different conclusions about their ability to save the government money. The National Association of ACOs (NAACOS) last month released a report claiming that the organizations saved Medicare $1.84 billion, more than double an estimate of $954 million from CMS. That study came on the heels of an August proposal from CMS to reduce the length of time that ACOs can decline to take on risk from six years to two, among other overhauls.

“ACOs can be an important component of a system that increases the quality of care while decreasing costs; however, most Medicare ACOs do not currently face any financial consequences when costs go up, and this has to change,” CMS administrator Seema Verma said in a statement announcing that initiative, called “Pathways to Success.”

In fact, Avalere released an analysis earlier this year showing that the MSSP actually increased federal spending by $384 million between 2013 and 2016, despite an estimate from the Congressional Budget Office that it would cut costs by $1.7 billion over that span. Still, the two reports from Avalere aren’t at odds with each other: That three-year window isn’t long enough for most of the ACOs to begin realizing savings, according to the most recent analysis, with the Avalere team noting that 2017 was the first year in which the MSSP generated any savings.

“These results are showing that that might not necessarily be as important as has been highlighted in the past,” Avalere senior associate Gabriel Sullivan told Skilled Nursing News. “Maybe it’s less of a risk focus that’s connected to ACO success, and more just the experience in the program.”

The typical ACO begins reducing government spending in its third year of operation, the team found, with about $3 million in savings — compared to $20.3 million and $25.7 million in costs during the first two years. By the time an ACO turns four, the savings number falls to $115 million, according to Avalere, with $74.7 million in savings during year five.

The greatest savings came in the fourth year due to an adjustment in CMS’s benchmarking structures, Sullivan said, but he also attributed the overall improvements to care coordination, information technology practices, and the general knowledge of the operational challenges in ACO space.

“I think it’s also just understanding how the program works, because the shared savings program is complicated. There are a lot of ins and outs to the program,” he said.

Written by Alex Spanko

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