Health Law Daily Medicare shared savings ACOs show potential to reduce spending, improve quality
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Wednesday, August 30, 2017

Medicare shared savings ACOs show potential to reduce spending, improve quality

By Jeffrey H. Brochin, J.D.

The Office of Inspector General (OIG) reviewed all Accountable Care Organizations (ACOs) that participated in the Medicare Shared Savings Program, established by section 3022 of the Affordable Care Act (ACA) (P.L. 111-148), during the first three years of the innovative program. The purpose of the study was to determine the extent to which the ACOs reduced spending and improved quality of services during the study period. The results showed that most Shared Savings Program ACOs reduced Medicare spending while improving the quality of care, and these results were deemed to be encouraging as CMS looks to alternative payment models to reduce Medicare’s spiraling costs (OIG Report, OEI 02-15-00450, August, 2017).

Background. Medicare spending is expected to grow to $1.4 trillion by 2027, more than double the $689 billion in spending in 2016.To help control the expected increase and promote quality and healthy populations, CMS has implemented several alternative payment models that reward providers for the quality and value of their services. The goal is to incentivize ACOs to provide higher quality care, fewer unnecessary services, and appropriate preventive services to keep patients healthier and lower costs.The Medicare Shared Savings Program is one of the largest alternative payment models—accounting for $168 billion in Medicare expenditures over the first three years of the program.As part of the program, health care providers form ACOs and enter into a 3-year contract with Medicare. Providers in each ACO coordinate to reduce Medicare costs and improve quality of care.

How OIG conducted the review. Over the first 3 years of the program, 428 participating Shared Savings Program ACOs provided care to 9.7 million beneficiaries. The OIG based their study of the participants on the following data provided by CMS: (1) Shared Savings Program performance year results by ACO for each of the three years, related to cost savings and quality; (2) spending and utilization summary data, by service, for each ACO’s performance years and benchmark years; (3) summary data on average spending and utilization for all fee-for-service providers for each year; and (4) provider and beneficiary data.

The study combined these data files and analyzed complex sets of data to provide new information on key areas of spending, utilization of services, and quality.

Description of ACOs. The OIG analyzed CMS’s beneficiary data from multiple sources to determine the total number of beneficiaries in ACOs and other beneficiary characteristics. They analyzed CMS provider data to determine differences among ACOs in their composition and in their provider-to-beneficiary ratios.

Analysis of spending. The research analyzed CMS’s performance year results to identify reductions in Medicare Parts A and B spending for the first three years of the program, and then determined the number of ACOs that reduced spending—relative to their benchmark—in at least one of the three years. CMS calculated a risk-adjusted benchmark for each ACO by determining the average annual spending per beneficiary and adjusting for beneficiary health status. CMS further adjusted this amount for factors such as projected growth in Medicare fee-for-service spending. The researchers then determined the number of ACOs that exceeded their benchmarks in the years they were in the program, and they also determined the extent to which ACOs reduced spending enough to receive a portion of the savings.

Analysis of quality measures. The study analyzed CMS’s data on 33 quality measures to determine the extent to which ACOs improved quality in the first three years of the program. Data for the quality measures came from patient surveys, Medicare claims, and clinical data reported by the ACOs, and was used to determine whether ACOs’ overall quality scores and the scores on individual measures improved over time.

Analysis of Medicare spending and utilization. The study defined high-performing ACOs as ACOs that had both reductions in spending and high quality scores (an overall quality score of 90 or above) in 2014, 2015, or in both years, and determined average spending and utilization rates for key services from 2010 to 2015. Those years encompassed the three years prior to the ACOs’ contract period and the three performance years.

The OIG did not independently verify the original data that CMS provided on spending, utilization, shared savings, and the quality scores that the OIG used in their analyses.

Key findings. The study determined that during the first three years of the program, most of the ACOs reviewed reduced their Medicare spending compared to their benchmarks, achieving a net spending reduction of nearly $1 billion. One-third of the ACOs reduced spending enough to receive a portion of the savings. ACOs participating in the program longer were more likely to reduce spending and by amounts greater than other ACOs. This suggests that more established ACOs are learning how to achieve greater cost savings over time.

At the same time, the ACOs generally improved the quality of care they provided based on CMS’s data on quality measures. As alternative payments models continue to be developed, these high-performing ACOs will be more closely studied to understand the strategies they are employing in achieving their success rates.

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