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Health Affairs Releases “Half A Decade In, Medicare Accountable Care Organizations Are Generating Net Savings” A Two-Part Health Affairs Blog

Washington, DC, September 21, 2018 – A Medicare program begun in 2012 to coordinate health care and be accountable for patients’ health saved Medicare $313 million in 2017, the first time the program generated net savings for the federal government, a two-part blog post released Thursday and Friday by Health Affairs reports.

The post, by Leavitt Partners and the Duke-Margolis Center for Health Policy, analyzed the most recent annual results of the Medicare Shared Savings Program (MSSP) that the Centers for Medicare & Medicaid Services (CMS) released on Aug. 30, 2018. Understanding this program’s performance provides significant insight into health care reform’s overall progress to improve quality and reduce costs, say the blog’s authors. Moreover, these results inform how CMS can improve the program, as the agency recently proposed a regulation (called Pathways to Success) that would overhaul the MSSP.

The blog post, which Leavitt Partners and the Duke-Margolis Policy Center write annually, analyzed CMS’ public data with proprietary data collected by Leavitt Partners and identified the following key takeaways:

  1. The Medicare Shared Savings Program saved Medicare money for the first time, calculated as how much money these organizations spent on health care compared to expenditure targets set by Medicare, while keeping health care quality at the same or higher level. Net program savings in 2017 exceeded $313 million (about $35 per beneficiary). Studies comparing these organizations to similar organizations not in the program instead of the targets set by Medicare suggest the savings may be even higher.
  2. Sixty percent of the organizations, called Accountable Care Organizations (ACOs), saved money compared to the expenditure targets set by Medicare, and a third had savings high enough to receive bonuses from CMS for saving substantial money while maintaining high quality. Improvement happened for organizations regardless of the state they operated in or the patient populations they served.
  3. Organizations that had been in the program for longer were more likely to save money, as were organizations led by physician groups (as opposed to hospitals).
  4. The quality of health care delivered by the average ACO remained high, and was even higher in those organizations led by physician groups (as opposed to hospitals).
  5. Despite these takeaways, there were still many differences in financial success of any given ACO across states, sizes, organizational structures, and other traits examined. Factors that are harder to measure, such as organizational capabilities, appear to have a larger effect on financial success, suggesting there more opportunities to learn about ACO success.

These findings have important policy implications, especially given CMS’ proposed overhaul of the program, which would require ACOs to be responsible if they spend more money than their target spending amount (and pay it back to CMS).

The 2017 MSSP results show that the longer an ACO stays in the program, the more likely it is to achieve shared savings. “Many of the ACOs that have been in the MSSP for a long period of time have made substantive changes to how they deliver care and are now starting to see the financial benefit for themselves and for Medicare,” said David Muhlestein, chief research officer at Leavitt Partners and a visiting policy fellow at the Duke-Margolis Center.

Although participation in the advanced versions of the program is increasing, the majority of ACOs only receive bonuses if they save Medicare money (the first stage of the program), although Medicare’s proposed regulations would change that.

“It takes time for ACOs to change the way they deliver care to make it more efficient and higher quality. We see the average ACO’s results jump substantially after they have been in the program for three years,” said William Bleser, research associate at the Duke-Margolis Center. “This has implications for the how Medicare structures the program in the future. Providers need time to figure out how to better care for their patients in a way that reduces costs, which takes time to learn. If Medicare asks ACOs to be financially responsible if their spending is higher than expected before the ACO has been in the program for three years, it could result in some ACOs prematurely leaving the program, unless further steps are taken to help ACOs get to savings faster.”