Healthcare News & Insights

Study: Accountable Care Organizations provide little to no savings

If your hospital is part of an accountable care organization (ACO), don’t count on any type of bonus payment coming your way for helping to lower costs.

A new Health Affairs study, found ACOs that improved diabetes outcomes by as much as 10% had little to no effect on cost savings. That’s a far cry from the annual $2.5 million in shared savings payments each organization was projected to earn in the first three years.

This news is disappointing for hospitals that were looking to receive these bonus payments under the Shared Savings Program.

The simulation found that a 10% improvement in performance of diabetes quality measures only reduced Medicare costs by 1%. After the costs of additional tests and visits intended to improve performance were added in, the savings decreased or disappeared altogether.

Shared savings program

Medicare’s Shared Savings Program, which was created by the Affordable Care Act, provides financial incentives for providers and organizations that meet specified standards for quality performance. To participate in the program, providers and hospitals have to form an ACO, which is held accountable for the overall cost and quality of care for a defined patient population.

What the simulation found was that in order for providers and hospitals to share in the savings they achieve in Parts A and B of the Medicare program, the savings must exceed 2% in a given year. And in order to achieve 2% or greater savings, ACOs will have to lower their costs via other quality improvement activities such as through improved use of information technology and care coordination.

The simulation

The simulation used the Archimedes model to see what would happen if the Shared Savings Program was implemented in an average ACO.

Researchers used a simulated Medicare population, aged 65 to 75 with type 2 diabetes, and data from the National Health and Nutrition Evaluation Survey. The treatment methods were based on clinical trial results, and care costs were based on Medicare costs.

The reason the researchers chose patients with type 2 diabetes is because this population has the largest at-risk population covered by the measures and under the Shared Savings Program can be expected to have the largest impact.

In addition to the fact that the simulation only looked at type 2 diabetes patients, the study had other limitations, such as:

  • benefits to other conditions weren’t included
  • calculations for the effect of treating biomarkers were done to exact specifications of the measurement goals — patients typically progress beyond them, and
  • researchers assumed all patients could reach the goals with treatment.

The study authors recommended that over time, the Centers for Medicare & Medicaid Services (CMS) consider an incentive based on the overall effect on health outcomes, not just on individual performance measures.

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