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What Have We Learned About ACOs?

This summer CMS released the 2015 quality and financial performance results for 392 Accountable Care Organizations participating in the fourth year of the Medicare Shared Savings Program.  The ACOs are located across the country, with the heaviest concentration in the south, and have been in business between 1-4 years. 

In 2015 these ACOs collectively generated total program savings (inclusive of all savings and losses relative to financial benchmarks) of $429 million, or about 0.6% of the $72.9 billion cost of the beneficiaries in the MSSP program.  Of participating ACOs, 119 (31%) earned shared savings by meeting quality standards and holding their spending far enough below their financial benchmarks.  Overall quality scores were high, averaging over 90% across 33 CMS quality measures.   

What have we learned about ACOs after four years of performance data?

The Benchmark Matters.  To date, an ACO’s spending benchmark has been based on the historical cost of caring for its patient population.  Those ACOs that received shared savings were generally located in higher cost markets and had higher benchmarks than those that did not share in savings.  As a result, the ACOs that earned shared savings bonuses actually had higher average spending per beneficiary ($10,555) than those that did not ($10,187).   Beginning in 2017, CMS will begin moving to a system that incorporates regional benchmarks, and some currently successful ACOs could see their benchmarks rebased lower.  

Experience matters.  Though there was substantial variation in financial performance and quality results, the more experienced ACOs had marginally better quality scores and a greater likelihood of achieving shared savings.  This suggests that care transformation is difficult and takes time to get it right. It requires redesigning delivery systems, investing in infrastructure and health information technology, and creating new partnerships.  It also requires cultural redesign at all levels of the organization.  This degree of change takes years to accomplish.  

Physician-led ACOs do Better. There are basically three categories of ACOs: physician-led, hospital-led, and integrated (physician-hospital partnership).  Physician-led and integrated ACOs had higher quality scores and were more likely to earn shared savings than large, hospital-led organizations.  Moreover, smaller groups, including small physician groups without hospitals, generally had performed better than larger groups led by hospitals.  This is somewhat surprising, given that hospitals have more access to capital to invest in technology and infrastructure than physician groups.  It might be explained by the ability of small groups to make changes faster, and also by the inherent incentives physician groups have to reduce hospital and ER admissions and actively manage post-acute care. 

No Relationship Between Cost and Quality.  Though overall ACO quality scores were high, they were uncorrelated with cost savings.  There has been no observed relationship between an ACO’s quality performance and its ability to achieve cost savings.  This suggest a need for much better evidence of what type of clinical delivery improvements will meaningfully improve care quality while also restraining costs.  To date, however, it’s not evident from the data that quality improvement and cost reduction are goals that can be simultaneously achieved. 

Conclusion.  For over a century medicine has been practiced as a craft, in which individual physicians, organized around their specialty, create a customized solution for each patient based on their personal knowledge and training and a core ethical commitment to the patient.  The evolving model, driven by regulatory and payment reform, is a team-based practice, organized around patient or disease state, where groups of peers, treating similar patients in a shared setting, execute coordinated care delivery processes using agreed upon clinical guidelines and disease management protocols.

ACOs represent an early stage of this challenging transition.  They are not likely to be the final model, nor can anyone yet foresee what that model will turn out to be.  The healthcare market will eventually stabilize, but it easily could be several years before the turmoil begins to resolve and we start to perceive what the dominant delivery model ultimately will look like. 

John McCracken, PhD