ACO Success

Last week, CMS Admininstrator Verma was bragging in Health Affairs blog about the accelerated savings coming from the shared savings program:

overhauled the Shared Savings Program, which is Medicare’s main program for ACOs, under a final rule titled, “Pathways to Success.” The overhaul was based on an analysis of the program’s first six years of operation as well as lessons learned from testing of Medicare ACO initiatives by the Center for Medicare and Medicaid Innovation (Innovation Center); the first ACOs began participation under the redesigned Shared Savings Program in July 2019.

Pathways to Success will put ACOs on a quicker path to taking on real risk, with downside risk generally required after two years for new ACOs, while offering ACOs more flexibilities to coordinate care and innovate. For example, in the Pathways to Success final rule, the Centers for Medicare & Medicaid Services (CMS) implemented new statutory authorities increasing ACOs’ flexibility to offer telehealth services and incentive payments to beneficiaries for taking steps to achieve good health….
n 2018, the Shared Savings Program generated $739.4 million in total net savings across 548 ACOs. ACOs that received shared savings payments had decreases in inpatient, emergency room, and post-acute care spending and utilization, while ACOs that increased spending relative to their targets tended to show increases in these areas.

ACOs taking accountability for cost increases, or “downside risk,” continued to perform better than ACOs that did not; ACOs taking on downside risk showed an average reduction in spending relative to their targets of $96 per beneficiary, compared to $68 for ACOs that did not take on downside risk….
The performance data for 2018 also shows that ACOs led by physicians (which tend to be “low-revenue” ACOs since they provide mostly outpatient services) continued to perform better than ACOs led by hospital systems (which tend to be “high-revenue” ACOs since they provide inpatient and outpatient services). In 2018, low-revenue ACOs showed an average reduction in spending relative to targets of $180 per beneficiary, compared to just $27 for high-revenue ACOs.

This is good news.

Accountable Care Organizations were one of the major cost containment strategies built into the ACA. The idea would be that provider organizations with their front line knowledge of patients and needs would be able to save money while holding quality constant or better compared to fee for service Medicare. The first round of ACOs had modest but consistent success.

The major rule revision is normal policy making. A policy is proposed. It is implemented. Some things work as expected. Some things don’t work as expected. There are a couple of happy surprises and a couple of unhappy surprises. Learning happens. And then the policy making apparatus tries to shift implementation to take into account the learning that had occurred.

One of the big lessons from the first round was that moving further upstream of the healthcare spend produced bigger savings. Right now, post-acute care is the major piggy bank of ACO savings. From an economic and organizational point of view this makes sense. Post-acute care is seldom owned by the ACO stakeholders. Taking a dollar out of post-acute care spending makes the ACO contract holder better off. Taking a dollar of spending out of the stakeholder’s own practice puts the contract holder in a net loss position. This same logic applies to why physician led ACOs may be saving more money than hospital led ACOs. The docs don’t own the hospital so a dollar out of the hospital spend is pure gravy.

The next big step on ACOs is to get away from treating post-acute care as the only big piggy bank. I think there is a significant opportunity for ACOs, especially physician led ones, to focus on vulnerable populations and to also continue to redesign their care flow so that more people are kept out of the hospitals more often.

The ACO program is a modest success and it looks to be able to build on those successes going forward. This is good news.

DISCLOSURE: Last week, a team that I’m on submitted two manuscripts on ACO finances, management and serious illness care. Numerous Duke Margolis colleagues are constantly writing about and getting funded for work on ACO structures.