Four reasons that could explain ACOs' sluggish savings

November 8, 2017, The Dartmouth Institute for Health Policy & Clinical Practice
Four reasons that could explain ACOs' sluggish savings
Data are from the Centers for Medicare and Medicaid Services (CMS) public releasefile and the National Survey of ACOs (NSACO) (N=137; cohort consistent over all3 years). The NSACO response rate was 71% among eligible ACOs. Physician-groupACOs are ACOs consisting only of physician groups and no other provider types. Hospital-coalition ACOs are ACOs that are not integrated delivery systems and that include a hospital. Mean number of clinicians is the number of full-time-equivalentprimary care and specialty clinicians participating in the ACO. Proportion of ACOs achieving savings comes from publicly available CMS data. Credit: New England Journal of Medicine, Dartmouth Institute

Despite aggressive targets set by the Medicare for the spread of value-based payment arrangements, such as accountable care organizations, achieving lower spending growth has proved extremely challenging. In an article in the November issue of the New England Journal of Medicine, Dartmouth Institute Professors Valerie Lewis, Elliott Fisher, and Carrie Colla offer four explanations—two economic and two organizational—as to why the nearly 1,000 organizations operating as ACOs have generated limited savings. As the authors note, even in the third year of Medicare ACO contracts, fewer than half of ACOs received a bonus for reduced savings.

Through the lens of diversity:

Medicare sets few constraints on the forms ACOs can take, and they are remarkably diverse—including both longstanding integrated health systems and relatively recently formed entities, such as hospitals and private physician practices that have come together to pursue ACO contracts.

In order to understand the performance of ACOs in context of such diversity, The Dartmouth Institute team paired data from the Centers for Medicare and Medicaid Services and the National Survey of ACOs to compare performance in the first three years of ACO contracts for three types of ACOs: integrated delivery systems, out-patient-physician-practice ACOs and coalitions of independent hospitals and practices. In the first year of ACO contracts, approximately 30% of ACOs in each group received bonuses. After that, the trends differ: The percentage of integrated delivery systems receiving bonuses remaining constant, while among hospital coalitions that 30% figure held steady in year two but jumped to 47% in year three. Meanwhile, the percentage of physician-group ACOs achieving savings increased steadily to 43% in year two and 51% in year three.

Economic and Organizational Barriers

The authors then identified four cross-cutting reasons for the failure of ACOs to achieve savings:

  • Weak incentives/no downside risk (economic): Nearly all participants in the Medicare Shared Savings program, receive a bonus if they generate savings but bear no financial responsibility for losses. It's possible sharing in downside risk could result in greater behavior changes among providers and, as a result, greater savings.
  • Not enough patients covered by ACO-like contracts (economic): The authors note that until providers reach a tipping point in the number of patients covered by ACO-like contracts, it will be hard for organizations to generate substantial savings, as initiatives that generate savings in the care of a provider's ACO patients will reduce income from its fee-for-service patients.
  • Knowledge development: Outpatient-physician-practice ACOs and some newer hospital-coalition ACOs in particular may need time to explore care management models or learn how to improve care transitions.
  • Complexity/laying a foundation: Most ACOs are not pre-existing organizations but a collection of independent providers. These ACOs have to do a great deal of foundational work to set up a functional ACO so progress toward generating savings may be delayed as a result. (*The authors note that institutional complexity probably affects integrated organizations as well as "overcoming inertia in these systems may be like trying to turn a large battleship."

In light of the diversity of ACOs, the authors recommend a flexible approach to motivating and rewarding providers.

"The ACO experiment has yielded results that are underwhelming to date," said lead author Valerie Lewis, PhD. "In thinking through refinements or redesign, policymakers should give careful consideration to the diversity of ACOs. The balance of pushing hard enough with incentives while also allowing time for ACOs to grow and develop is tricky, but getting this right could ultimately lead to more successful programs—and greater savings."

Explore further: ACOs serving high proportions of minority patients lag in quality performance

More information: New England Journal of Medicine (2017). DOI: 10.1056/NEJMp1709197

Related Stories

ACOs serving high proportions of minority patients lag in quality performance

January 23, 2017
New research by The Dartmouth Institute finds that Accountable Care Organizations (ACOs) serving a high proportion of minority patients performed significantly worse on many quality-of-care measures than other ACOs. While ...

Affordable Care Act payment reform achieves early gains: study

April 13, 2016
Accountable care organizations that joined the Medicare Shared Savings Program (MSSP) when it launched in 2012 achieved modest savings while maintaining or improving performance on measures of quality of patient care in 2013, ...

Medicare ACOs have achieved savings in providing care to patients with multiple conditions

June 21, 2016
There are now over 700 Accountable Care Organizations (ACO) in place across the country, covering 23 million Americans and making them one of the largest health care payment and delivery reforms underway in the United States. ...

First survey of ACOs reveals surprising level of physician leadership

June 2, 2014
In spite of early concerns that hospitals' economic strengths would lead them to dominate the formation of Accountable Care Organizations (ACOs), a new study published in the June issue of Health Affairs reveals the central ...

Hospitals participating in accountable care organizations tend to be large and urban

March 7, 2016
 A new study led by researchers from the The Dartmouth Institute for Health Policy and Clinical Practice examines the extent and ways in which accountable care organizations (ACOs) involve hospitals in their operations. ...

New health care model saving money, report says

September 10, 2015
A new model of health care run by doctors and hospitals is growing and saving money in the taxpayer-funded Medicare program, according to a new report from the federal government. However, experts say most patients still ...

Recommended for you

Calcium and Vitamin D supplements are not associated with risk of heart attacks

February 16, 2018
New research from the University of Southampton has found no association between the use of calcium or vitamin D supplementation and cardiovascular events such as heart attacks.

Study shows options to decrease risk of motor vehicle crashes for adolescent drivers

February 16, 2018
Adolescents who receive comprehensive and challenging on-road driving assessments prior to taking the license test might be protected from future motor vehicle crashes, according to a University of Alabama at Birmingham study ...

Being a single dad can shorten your life: study

February 15, 2018
The risk of dying prematurely more than doubles for single fathers compared to single mothers or paired-up dads, according to a study of Canadian families published Thursday.

Keeping an eye on the entire ageing process

February 15, 2018
Medical researchers often only focus on a single disease. As older people often suffer from multiple diseases at the same time, however, we need to rethink this approach, writes Ralph Müller.

Study suggests possible link between highly processed foods and cancer

February 14, 2018
A study published by The BMJ today reports a possible association between intake of highly processed ("ultra-processed") food in the diet and cancer.

Gov't says health costs to keep growing faster than economy

February 14, 2018
U.S. health care spending will keep growing faster than the overall economy in the foreseeable future, squeezing public insurance programs and employers who provide coverage, the government said Wednesday.

0 comments

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.