Premier Analysis: Combined ACO and Quality Efforts Could Save Billions More

March 25, 2022
An analysis by experts at Premier Inc. finds that health system ACOs that participate in focused inpatient quality improvement efforts could achieve higher cost savings

By Seth Edwards and Aisha Pittman

Health system accountable care organizations (ACOs) that also participate in focused inpatient quality improvement efforts achieve costs savings of $1,721 per beneficiary, per year, according to a new PINC AI analysis. If all health systems performed at this level, the U.S. could save $16,922,197,000, or 1 percent of annual Medicare hospital expenditures. PINC AI is a division of our organization, Premier Inc., an alliance based in Charlotte, N.C.

Mean Facility Medicare Spending Per Beneficiary Amount (Observed Cost) / 100 Percent of Medicare Claims, 2017-2019

              Non-ACO/non-QUEST ACO/QUEST    Difference* (all figures in thousands)

2017: $20,914.91                       $18,913.12       $2,001.79

2018: $21,195.72                       $19,551.54       $1,644.18

2019: $21,542.86                       $19,821.24       $1,721.62

*Difference between QUEST-ACO hospitals and non-QUEST/non-ACO hospitals

Hospitals in ACOs are doubly incented to focus on quality improvement and cost reduction

To bend the healthcare cost curve, Congress and the Centers for Medicare & Medicaid Services (CMS) have pushed providers toward value-based care and value-based purchasing programs that tie payment to outcomes and savings.

For instance, the inpatient Value Based Purchasing (VBP) program is mandatory for most hospitals and bases a portion of payment on improvement or achievement of quality, cost containment, patient experience and safety of care outcomes. Similarly, the Medicare Shared Savings Program (MSSP) is a voluntary total cost of care model that holds providers accountable for the quality and costs of an attributed population.

Hospitals that participate in both programs are doubly incented to improve the quality and efficiency of care, as they are subject to VBP in the inpatient setting and are accountable for cost and quality experience across the continuum of care.

This overlap suggests that health systems could be more successful if they focus on the synergies of these payment programs and target their interventions for success within both. However, in many health systems, work being done to improve the cost of care in the hospital setting is often separate and siloed from that of a larger accountable care organization participating in MSSP. Unless all ACO participants are pulling in the same direction, improvement efforts may not be as successful as they could be if the efforts were synergistically linked.

How can provider leaders move forward to control cost and improve quality?

QUEST was created by Premier Inc. in 2008 as an inpatient quality improvement collaborative designed to help health systems reliably deliver the most efficient, effective and caring experience for every patient, every single time. Through QUEST, approximately 350 health systems volunteered to transparently share data and define a common framework of top performance in the areas of total cost reduction and improved efficiency, mortality, evidence-based care delivery, readmissions and harm prevention.

To focus cost and quality improvement efforts, QUEST participants follow eight performance improvement steps:   

·      Step 1: Establish Mission and Goals: Health systems need to define their goals for improving quality, patient safety, patient experience of care, and cost and efficiency. 

·       Step 2: Define Measures: In order to assess the impact the participants have on healthcare quality, the collaborative establishes a clearly defined set of measures that member hospitals work towards.

·       Step 3: Collect Actionable Data: PINC AI collects data to provide snapshot of current performance levels. Using this data, Clinical Improvement Advisors conduct assessments to determine capabilities and gaps, as well as drivers of sub-optimal outcomes. Improvement coaches use this data to work on specific improvement activities with each organization.

·       Step 4: Transparently Share Data: Using a defined measurement process, we track performance metrics in real time compiling easy-to-understand dashboard reports that are then shared transparently among all participants, allowing participants to evaluate their performance against others.

·       Step 5: Analyze and Drive Change Through Collaboratives:  High-performing hospitals serve as best practice resources to other collaborative members in achieving results within their organization.

·       Step 6: Share Best Practices and Innovations: PINC AI provides a range of best practice sharing activities in both 1:1 and in impactful group learning forums.

·       Step 7: Evaluate Performance Results: To analyze and track performance improvement over time, PINC AI trends cohort performance and gleans insights that are shared with member hospitals.

·       Step 8: Implement Programs to Sustain Gains: To hard wire processes and sustain gains achieved, QUEST implements leadership and culture change programs with proven methods for building and sustaining a culture of safety and quality.

QUEST was launched to support health systems as they transitioned to a reforming care delivery and payment environment and aligns closely with the hospital inpatient value-based purchasing (VBP) program. In fact, the proportion of those who received positive payments under VBP for the QUEST cohort was 59.3 percent, in contrast to the non-QUEST cohort with 40.7 percent for performance year 2021. This represents a significant difference of 18.6 percentage points in performance.

QUEST participants have also reported avoiding more than 200,000 deaths and saving $18 billion in costs over the course of the program’s first 10 years, and peer reviewed research found that QUEST collaborative members achieved mortality rates that are 10 percent lower than non-participants. These results are consistent with the goals of both the hospital VBP program, as well as the MSSP.

Study methods

To test whether ACOs that aligned with focused inpatient quality improvement programs outperformed others, PINC AI data scientists compared Medicare spending per beneficiary (MSPB) among health system ACOs that also participate in the QUEST performance improvement collaborative against non-ACO, non-QUEST health systems.

Specifically, PINC AI examined Medicare claims for 2017-2019 housed within the Chronic Condition Warehouse’s Virtual Research Data Center, representing 144,431,148 unique beneficiaries. Researchers focused on general acute care and critical access hospitals, which resulted in a minimum of 4,829 hospital providers per year studied.

PINC AI identified 233 hospitals participating in QUEST and an ACO by linking inpatient claims to the relevant year’s MSSP beneficiary file. The data science team calculated the per beneficiary cost estimates using CMS’ price standardization methodology for allowed amounts to enable comparisons across geographic areas. To calculate potential savings PINC AI multiplied the average number of Medicare-funded U.S. hospitalizations (n=9,459,026) obtained from the Medicare Inpatient Hospitals by Geography and Service files (2017-2019) by the average difference in mean per episode (MSPB) cost ($1,789) between the hospitals in QUEST with ACOs and hospitals that are not in QUEST and do not have an ACO (non-ACO/non-QUEST).

Important to note, PINC AI data scientists focused exclusively on the MSPB calculation for this analysis, which is specific to an episode of care with an anchor admission in a hospital. Other areas of measurement, such as quality outcomes or avoided conditions, were not evaluated, so total impacts to population health may be much more significant.


By leveraging a structured, performance-improvement approach, QUEST members showed demonstrably lower cost of care per case than those that are not in the collaborative. This cost per case metric impacts hospitals’ performance on the MSPB measure in the VBP program and contributes to lower total cost of care for the ACO. 

The analysis proves that ACOs that may be struggling to achieve cost savings should align with inpatient providers who are focused on improving quality, safety and cost reduction in the acute care setting. A targeted, data-driven performance-improvement approach like the QUEST collaborative can jump start hospitals’ inpatient quality and cost initiatives and carry over to benefit the ACO.

Seth Edwards is vice president of population health, and Aisha Pittman is vice president of policy, at the Charlotte-based Premier Inc.

Sponsored Recommendations

A Cyber Shield for Healthcare: Exploring HHS's $1.3 Billion Security Initiative

Unlock the Future of Healthcare Cybersecurity with Erik Decker, Co-Chair of the HHS 405(d) workgroup! Don't miss this opportunity to gain invaluable knowledge from a seasoned ...

Enhancing Remote Radiology: How Zero Trust Access Revolutionizes Healthcare Connectivity

This content details how a cloud-enabled zero trust architecture ensures high performance, compliance, and scalability, overcoming the limitations of traditional VPN solutions...

Spotlight on Artificial Intelligence

Unlock the potential of AI in our latest series. Discover how AI is revolutionizing clinical decision support, improving workflow efficiency, and transforming medical documentation...

Beyond the VPN: Zero Trust Access for a Healthcare Hybrid Work Environment

This whitepaper explores how a cloud-enabled zero trust architecture ensures secure, least privileged access to applications, meeting regulatory requirements and enhancing user...