ACOs Generated Slight Medicare Savings from 2013 to 2016 in New Calculation

Accountable care organizations (ACOs) have generated a slight reduction in overall Medicare spending, a new analysis found — adding another viewpoint to a growing and occasionally contradictory body of research.

The Medicare Payment Advisory Commission (MedPAC) determined that ACOs led to a 1 to 2 percentage-point drop in Medicare outlays between 2013 and 2016, though the agency also acknowledged that accurately determining the program’s success is a difficult task.

“We found that decisions about how the treatment and comparison groups are defined can affect the magnitude and validity of estimates of program savings,” MedPAC observed in its June report to Congress, which the agency released at the end of last week.


Under the auspices of the Medicare Shared Savings Program (MSSP), ACOs look to rein in overall government health care spending by encouraging providers across the spectrum to work together. If the cost of caring for the patients within the ACO falls below a set benchmark, providers in the group could potentially receive shared-savings bonuses; if the ACO fails to meet the benchmark, operators could be on the hook for penalty payments.

Since launching in 2012, the MSSP program has grown to include 432 ACOs caring for 7.9 million beneficiaries by 2016, according to MedPAC. But whether or not the organizations actually save money has been a somewhat controversial topic in the space, with a variety of studies reaching multiple conclusions.

For instance, a May study from the United Hospital Fund determined that ACOs in New York State generated a net loss to the government of $70 million in 2017, or $75 per enrolled beneficiary; a 2018 probe by consulting firm Avalere Health pegged the loss between 2013 and 2016 at $384 million, compared to a projected $1.7 billion savings over that span.


But the program itself remains young and under constant experimentation from the Centers for Medicare & Medicaid Services (CMS), which has worked to encourage ACOs to take on greater amounts of risk — a move that officials hope would lead to more cost savings.

In addition, that same Avalere study found that ACOs that made it into their fourth year of operation saved the government $152 million, indicating that the organizations may simply need time to achieve the efficiencies and relationships necessary to make the model work.

Even how researchers determine ACO success remains a point of discussion and difficulty. In response to the United Hospital Fund study, the National Association of ACOs (NAACOS) pointed out that the estimated losses were based on CMS’s spending targets — a method that the trade group says is inaccurate.

“While true, looking at ACO performance compared to CMS-set spending targets is an overly simplified, wrong way to judge ACOs,” David Pittman, health policy and communications advisor for NAACOS, told SNN in an e-mail. “It doesn’t compare what Medicare spending would be like in the absence of ACOs. This method shows large savings driving by ACOs.”

Using the latter method, analytics firm Dobson DaVanzo & Associates determined that ACOs actually saved the government about $2.7 billion between 2013 and 2016 in a NAACOS-commissioned report issued last December.

MedPAC similarly used that “counterfactual” method of determining ACOs’ gains and losses.

“Benchmarks and counterfactuals differ because benchmarks are set in advance and designed to create incentives for individual ACOs and to fulfill policy goals,” MedPAC wrote. “Counterfactual analysis is done after the fact using trends in expenditures for beneficiaries in comparison groups.”

Still, MedPAC — a non-partisan arm of the federal legislative branch that advises Congress on Medicare matters — noted that its savings estimates did not account for bonus payments awarded to top performers.

“The program will generate net savings only if MSSP bonus payments (shared savings) are less than spending reductions resulting from lower service use,” MedPAC wrote.

NAACOS celebrated the determination in a statement provided to SNN, noting that while the savings were described as “modest” in the MedPAC report, one or two percentage points could mean billions on the scale of the Medicare program.

“No other payment innovation by CMS has generated the cost-saving results as ACO programs,” NAACOS president Clif Gaus said in the statement. “Today’s MedPAC report ends debate on whether or not ACOs save money and provides further evidence that Congress and CMS should enact positive changes to increase participation to help increase savings already yielded.”

MedPAC prepares two annual reports to Congress, with the most recent June release dedicated largely to its plan for a unified, site-neutral post-acute payment system; in a separate section of the report, the agency also alleged that PAC providers use resident assessments to boost payments instead of accurately capturing patient needs.

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