A new data-based analysis on the forward evolution of accountable care organizations (ACOs) has just been published, and it will surely add to the broad discussion around ACO development that is echoing across the federal policy landscape. Published on Oct. 25 in the Health Affairs Blog, “Medicare ACO Results for 2018: More Downside Risk Adoption, More Savings, and All ACO Types Now Averaging Savings” was written by a large team of healthcare policy researchers: Jonathan Gonzalez-Smith, William K. Bleser, David Muhlestein, Robert Richards, Mark B. McClellan, and Robert Saunders.
“In late September 2019, the Centers for Medicare and Medicaid Services (CMS) released the performance results for the sixth year (2018) of Medicare’s flagship Accountable Care Organization (ACO) program, the Medicare Shared Savings Program (MSSP),” the authors write. “Over the last several years and from a variety of different angles, we have tracked the progress of this program, which has generally shown good quality of care and outcomes, and modest but increasing cost savings over time, relative to CMS benchmarks.”
And, they state, “The program’s 2018 performance builds on previous results. In 2017, the MSSP achieved net savings for Medicare relative to its benchmarks for the first time. In 2018, net savings per capita have more than doubled to $73 compared to $35 last year. Because counterfactual studies suggest that performance against financial benchmarks substantially underestimates true savings, actual savings in 2018 were likely significantly larger and appear to be growing over time. These increased savings occurred in the context of significantly greater adoption of ‘downside’ financial risk, with participation in downside risk doubling from 8 percent last year to 17 percent this year. Further, now all types of ACOs are achieving net savings on average – including physician-led, hospital-led, and integrated ACOs, as well as small, medium, and large ACOs (based on membership).”
What’s more, the researchers cite the following “additional key findings:
Physician-led ACOs, which have led the MSSP in net savings per capita for years, continued their success by increasing last year’s per capita savings by 65 percent (to $114). Over 15 percent of these ACOs are in downside risk arrangements.
Hospital-led ACOs averaged net savings per capita for the first time ever ($43), and 16 percent were in downside risk models.
Small, medium, and large sized ACOs had similar savings per capita, so all sizes were finding paths to success. However, there remains concern that small ACOs are more hesitant to accept downside risk, likely due to fewer covered lives and smaller cash reserves.
ACOs that accepted downside risk were more likely to achieve shared savings than those in upside-only risk arrangements, suggesting that greater financial accountability for cost is associated with a stronger commitment to, or more confidence in, making the care transformation necessary for success.
Generally, this year’s results are consistent with those seen in previous years: larger ACOs do not necessarily perform better overall (although larger size may be beneficial for physician-led ACOs); physician-led ACOs achieve higher rates of shared savings and total net savings compared to hospital-based ACOs but have trouble staying in the program longer; and, having a lower benchmark makes it more difficult to achieve shared savings.”
Looking at recent developments, the researchers document that “significantly more ACOs participated in some form of downside risk than in prior years, with 17 percent of all ACOs in a two-sided risk model compared to 8 percent in 2017. This significant increase, driven in part by CMS creating Track 1+ in 2017, shows increasing willingness on ACOs’ part to transition to downside risk – an important development for the program,” particularly in light of net savings increases that they document in their study.
Importantly, the authors note, “Notably, net program savings per capita doubled from 2017. This is the second year of positive net program savings relative to benchmarks. Net program savings exceeded $739 million (about $73 per beneficiary), and gross program savings relative to benchmarks increased to $1.7 billion (not shown). The overall proportion of ACOs that achieved savings and received a shared savings bonus also increased in 2018, indicating that more ACOs are contributing to the positive net program savings.”
Still, they acknowledge, “However, despite all ACO types now averaging net savings, performance still varied widely, limiting our ability to draw clear implications from our findings. For example, though physician-led ACOs saved $114 per beneficiary on average, 74 of 246 (30 percent) experienced net losses.”
Interestingly, the researchers note that, “With Pathways to Success, CMS introduced the concept of categorizing ACOs by “revenue status” to offer flexibility to some organizations less prepared to take on downside risk”—and that, now, “74 percent of physician-led ACOs are low-revenue versus 13 percent of hospital-led ACOs. Size is less strongly associated with revenue status,” they write: “Low-revenue ACOs are more likely to achieve shared savings than high-revenue ACOs (49 percent versus 28 percent; not shown) and, on average, saved more ($180) per beneficiary relative to benchmark compared to high-revenue ACOs ($27). Many low-revenue ACOs are also physician-led, which supports the finding in Exhibit 3 that physician-led ACOs often have greater per-beneficiary savings than other ACOs. However, in the coming year, over a quarter of physician-led ACOs will be high-revenue, meaning a large portion will likely face a quick transition to downside risk, which may impact their performance or ability to remain in the program.”
And while size per se does not seem to correlate with success, specific benchmark does. As the authors note, “the shared savings rate for different groups of ACOs based on their per capita benchmark. Similar to prior years, ACOs with higher benchmarks were more likely to receive a shared savings bonus. Several factors may be at play here, including more opportunities for ACOs with higher-risk patients or in high-cost areas to reduce spending. Additionally, under the recent Pathways to Success reform, regional expenditures (how much an ACO spends compared to its region) will have a greater and earlier impact on benchmarks. As a result, more efficient ACOs will be penalized less over the coming years due to a decreasing percentage of the benchmark being based on prior performance.”
A very important element of the authors’ analysis is this: “A major finding in MSSP’s sixth year is that the percent of ACOs in downside risk contracts has more than doubled from the previous year, reaching 17 percent,” they write. “This occurred alongside an increase in the net savings per ACO (Exhibit 7). While ACOs moving to downside risk are a self-selected group, some ACOs were required to enter downside risk beginning this year, and others will face such requirements in the years ahead. The higher savings rate suggests such pressure may be good for Medicare savings, provided that potentially successful ACOs do not leave early as a result. However, these findings may not perfectly predict what will happen under Pathways to Success, since ACOs that voluntarily adopted risk under MSSP may be different than ACOs mandated to adopt risk in Pathways to Success.”
The researchers write that “Our analysis of ACO performance relative to spending benchmarks shows greater savings per ACO and increasing savings to the program, suggesting that ACO capabilities are maturing along with the MSSP. The net program savings per capita increased to $73 per beneficiary, compared to $35 last year. While this is a positive development, it translates to very modest savings (only 0.67 percent of Medicare’s total benchmarks per ACO beneficiary) and does not yet provide substantial evidence that these models sufficiently contain costs. As noted earlier, performance compared to the benchmark is different than performance compared to counterfactual, and has underestimated true savings to Medicare, so the program’s actual impact may be greater. As in previous years, ACOs are also able to deliver high quality across measures of care processes, outcomes, and beneficiary experience.” Ultimately, they state, “ACOs in downside risk tracks had a greater savings rate, which suggests that future per-ACO savings will continue to increase. However, our findings also reaffirm that developing the capabilities to succeed as an ACO requires sufficient time and resources. Policy reforms that make participation easier could help, such as more predictable benchmarks or other program simplifications. Smaller organizations may find the accelerated transition to downside risk in Pathways to Success steep, leading to high-dropout rates and less overall impact on Medicare spending and beneficiary quality of care.”
And, they write, “To ensure ACOs remain in the program under downside risk, CMS should continue to take steps to accelerate their success – including more predictability in performance goals, enhanced data sharing, and other technical support to build the competencies they need to succeed. Adequate on-ramps are needed, especially for smaller, resource-constrained organizations and physician-led ACOs that are showing higher rates of success with enough time and support.”
