Medicaid/Medicare Medicare Supply of Medical Services

Do ACOs reduce spending?

Medicare’s Shared Savings Program (MSSP) is a program that created accountable care organizations (ACOs).  Providers in get bonuses if they are able to reduce health care costs and also maintain quality.  In theory, the program makes sense, increase reimbursement for high-quality, low-cost providers.  The key question, however, is whether it works.

A recent study in NEJM by McWilliams et al. (2016), used a difference-in-difference approach to compare patient quality of care and cost among patients assigned to ACO providers compared to those who were not.  Note that ACO election is determined administratively and patients do not commit to seeing only providers in that ACO.  Using Medicare claims data from 2008-2013, the authors find that:

Adjusted Medicare spending and spending trends were similar in the ACO cohorts and the control group during the precontract period. In 2013, the differential change (i.e., the between-group difference in the change from the precontract period) in total adjusted annual spending was −$144 per beneficiary in the 2012 ACO cohort as compared with the control group (P=0.02), consistent with a 1.4% savings, but only −$3 per beneficiary in the 2013 ACO cohort as compared with the control group (P=0.96). Estimated savings were consistently greater in independent primary care groups than in hospital-integrated groups among 2012 and 2013 MSSP entrants (P=0.005 for interaction). MSSP contracts were associated with improved performance on some quality measures and unchanged performance on others.

The authors also comment on the larger improvement form primary care groups noting that “independent physician groups have stronger incentives to lower inpatient and hospital outpatient spending than groups integrated with hospitals because their shared-savings bonuses are not offset by forgone profits from reductions in hospital care.”  This is a point I with co-authors Tom MaCurdy and Diana Zheng in our 2011 report to CMS.

In short, the effect of ACOs on spending was very modest.  Likely the ACOs that joined early were more motivated or more able to reduce cost than those that joined later, brining into question the generalizability of any cost savings ACOs can generate.



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