« Posts

OIG Reports on ACO Cost Savings and Quality Gains

Over the first three years of the Medicare Shared Savings Program (2013-2015), 428 Accountable Care Organizations (ACOs) served 9.7 million beneficiaries. Most of these participating ACOs reduced Medicare spending compared to their benchmarks, resulting in a net spending reduction of nearly $1 billion, according to an August report from the Office of the Inspector General (OIG).


Under the Medicare Shared Savings Program, healthcare providers form ACOs and agree to be accountable for the total cost of care for assigned Medicare beneficiaries, with the potential to share in Medicare savings or losses. In the first three years of the program, ACOs reported data on 33 quality measures to CMS.


Some of the key findings in the study include:

  • One-third of ACOs reduced spending enough to receive a portion of the savings. These 154 ACOs earned $1.3 billion, roughly $4.8 million on average for every year they earned shared savings.
  • Of the $3.4 billion in reduced spending over the three years of the program, about half, or $1.7 billion, was generated by 36 ACOs.
  • ACOs participating in the program longer were more likely to reduce spending and by greater amounts than other ACOs, suggesting that more established ACOs are learning how to achieve greater cost savings over time.
  • ACOs generally improved the quality of care they provided, based on CMS data on quality measures.


With respect to quality, OIG found that:

  • ACOs improved their performance on 82 percent of the individual quality measures.
  • ACOs outperformed fee-for-service providers on 81 percent of the quality measures.


With respect to cost, OIG found that:

  • A small subset of ACOs showed substantial reductions in Medicare spending—an average of $673 per beneficiary for key Medicare services—while providing high quality care including inpatient hospital and skilled nursing facility care.
  • ACOs had a high use of primary care services, reducing utilization and costs of other care.
  • In contrast, fee-for-service providers experienced an increase in beneficiary spending for key Medicare services.


The report highlighted a number of features that set “high-performing” ACOs apart, including providing the highest number of primary care visits compared to other ACOs and serving a larger number of beneficiaries, many of whom had more health conditions and other risk factors associated with higher spending. High-performing ACOs also were more likely to include only physicians, OIG added.


In its summary, OIG noted that with any payment reform, it will take time for organizations to integrate changes into operations in order to improve quality and lower costs. “While policy changes may be warranted, ACOs show promise in reducing spending and improving quality.” It called for additional information about high-performing ACOs to help the future direction of the Shared Savings Program and other alternative payment models.



(Sources: “ACOs Show Promise in Generating Savings, Quality Gains for Medicare, OIG Says,” AHLA Weekly, September 1, 2017; OIG report “Medicare Shared Savings Program Accountable Care Organizations Have Shown Potential for Reducing Spending and Improving Quality,” August 2017. Read the full report here.)





Check your library for the advanced Finance Course, Financial Risks & Strategic Implications of APMs, featuring Marian Jennings and Seth Edwards. In this course, Marian and Seth discuss the financial risks of ACOs and bundled payments, the strategic risks of not participating in an alternative payment model, clear trends and the characteristics of organizations that have successfully implemented one or more alternative payment models.


Coming soon: Strategic Issues for Boards featuring speakers on cyber-security and the Medicare Access and CHIP Reauthorization Act of 2015.



For a complete list of iProtean, now part of Veralon courses, click here.



For more information about iProtean, now part of Veralon, click here.