Study Finds Pioneer ACOs Reduce Utilization, Stem Spending Without Compromising Care
The first wave of accountable care organizations (ACOs) is positioned well to achieve the touted goal of “bending the cost curve,” according to a study published May 4 in the online edition of the Journal of the American Medical Association. When compared to general Medicare fee-for-service (FFS) beneficiaries, beneficiaries affiliated with Pioneer ACOs “exhibited smaller increases in total Medicare expenditures and differential reductions in utilization of different health services, with little difference in patient experience,” the study concluded. Savings achieved Researchers from the Centers for Medicare & Medicaid Services (CMS) and the Centers for Medicare and Medicaid Innovation undertook a difference-in-differences approach to analyze data from the first two years of the Pioneer ACO model. Launched by CMS in 2012 as a test of population health management, this model “targets more experienced organizations with greater incentives for motivating the care transformation necessary to improve outcomes,” note the authors. During the first two performance years, Pioneer ACOs’ total spending for their 1,481,970 affiliated beneficiaries increased approximately $385 million ($280 million in the first year, $105 million in the second) less than spending of similar FFS beneficiaries. The researchers attributed this to “decreases in inpatient utilization among ACO-aligned beneficiaries, although greater decreases […]
The first wave of accountable care organizations (ACOs) is positioned well to achieve the touted goal of “bending the cost curve,” according to a study published May 4 in the online edition of the Journal of the American Medical Association. When compared to general Medicare fee-for-service (FFS) beneficiaries, beneficiaries affiliated with Pioneer ACOs “exhibited smaller increases in total Medicare expenditures and differential reductions in utilization of different health services, with little difference in patient experience,” the study concluded.
Savings achieved Researchers from the Centers for Medicare & Medicaid Services (CMS) and the Centers for Medicare and Medicaid Innovation undertook a difference-in-differences approach to analyze data from the first two years of the Pioneer ACO model. Launched by CMS in 2012 as a test of population health management, this model “targets more experienced organizations with greater incentives for motivating the care transformation necessary to improve outcomes,” note the authors. During the first two performance years, Pioneer ACOs’ total spending for their 1,481,970 affiliated beneficiaries increased approximately $385 million ($280 million in the first year, $105 million in the second) less than spending of similar FFS beneficiaries. The researchers attributed this to “decreases in inpatient utilization among ACO-aligned beneficiaries, although greater decreases in primary care evaluation and management office visits, and smaller increases in the use of tests, procedures, and imaging services, also were related to the observed differential changes in spending.” In an accompanying editorial, Lawrence P. Casalino, M.D., Ph.D., professor of health care policy and research at Weill Cornell Medical College, notes that the study reveals that while achieving these savings, beneficiaries reported that “timeliness and ease of obtaining care, access to specialists, and clinician communication, was at least as high as for beneficiaries in the fee-for-service Medicare and Medicare Advantage programs.” The study acknowledges that not every ACO achieved savings—one third of Pioneer ACOs didn’t—but posits there were many reasons for those failures, including the fact that some ACOs may need more time to achieve efficiencies in managing populations and CMS may need to tweak ACO design elements to provide better opportunities for improvement and better engage beneficiaries. Casalino points out that the first-year savings of $280 million represents a reduction of 4 percent. “This amount may seem small,” he notes, “but if this rate of savings could be sustained, and achieved throughout a large part of the U.S. health care system, it would be more than enough to ‘bend the cost curve’ so that health care expenditures do not continue to increase as a percentage of the gross domestic product and the federal budget.” For Mark McClellan, M.D., Ph.D., senior fellow and director of the Health Care Innovation and Value Initiative at the Brookings Institution, who also penned an accompanying editorial, the study indicates real progress and highlights the need for ongoing analysis. “This early evidence moves the effects of ACOs from speculation to reality and highlights the importance of further evaluation as alternative payment models are refined,” writes McClellan. “Payment reform moving away from FFS is now part of the policy landscape, but the exact form it will take is less clear.”
Recommendations for further action Casalino’s editorial states that for broader success, ACOs “need stronger incentives, closer ongoing connections with patients, better logistical support from Medicare, and regulatory relief.” For example, participants must be given reason to believe they “will be at least as well off financially” by participating in ACOs as the status quo and ACOs that achieve success in reducing costs and improving quality should be rewarded—which means that ACOs failing to achieve these goals will in effect be penalized by lower payment increases. Casalino also contrasts Medicare ACOs, where patients can get care outside the ACO to private payer arrangements in which patients are incentivized to stay within the network to obtain care. He argues CMS should do more to encourage patients to seek care within the ACO rather than outside it and to do so should allow waivers of patient cost-sharing amounts like copays and deductibles and other patient incentives and, most importantly through providing better care than available outside the ACO. McClellan recommends in his editorial that further efforts to reduce spending and improve care could include models that have “more significant payment reform after at ‘startup’ period in shared savings.” He indicates current models are a “long way from capitated payments that would put health care organizations at full risk for their spending results.” He notes the opportunity to include prescription drug coverage plan in the mix could further improve results because “there is considerable evidence that more effective medication use can improve outcomes and lower health care costs.” Acknowledging that payment reform “is not easy,” McClellan concludes, “[n]onetheless, an increasing number of diverse health care organizations are demonstrating that it is possible.”
Laboratories’ role in ACOs. How can laboratories get in on the action and share in benefits of cost reduction? G2 Intelligence recommended in its report Laboratory Services in Accountable Care Organizations that laboratories should “shift the focus from operational efficiencies to clinical effectiveness” and “develop metrics to capture the true value of laboratory services in ACOs in terms of system-wide contribution to the cost savings and improving patient outcomes and population health.” Doing so will help laboratories convince ACO management to “allocate proper financial compensation for laboratory contribution.” To obtain G2 Intelligence’s report, Laboratory Services in Accountable Care Organizations, please call customer service here. Takeaway: Early evidence shows ACOs can achieve cost reductions while not sacrificing patient care. But more work lies ahead and experts predict further reform and greater risk sharing will be needed to build on these early successes.
Savings achieved Researchers from the Centers for Medicare & Medicaid Services (CMS) and the Centers for Medicare and Medicaid Innovation undertook a difference-in-differences approach to analyze data from the first two years of the Pioneer ACO model. Launched by CMS in 2012 as a test of population health management, this model “targets more experienced organizations with greater incentives for motivating the care transformation necessary to improve outcomes,” note the authors. During the first two performance years, Pioneer ACOs’ total spending for their 1,481,970 affiliated beneficiaries increased approximately $385 million ($280 million in the first year, $105 million in the second) less than spending of similar FFS beneficiaries. The researchers attributed this to “decreases in inpatient utilization among ACO-aligned beneficiaries, although greater decreases in primary care evaluation and management office visits, and smaller increases in the use of tests, procedures, and imaging services, also were related to the observed differential changes in spending.” In an accompanying editorial, Lawrence P. Casalino, M.D., Ph.D., professor of health care policy and research at Weill Cornell Medical College, notes that the study reveals that while achieving these savings, beneficiaries reported that “timeliness and ease of obtaining care, access to specialists, and clinician communication, was at least as high as for beneficiaries in the fee-for-service Medicare and Medicare Advantage programs.” The study acknowledges that not every ACO achieved savings—one third of Pioneer ACOs didn’t—but posits there were many reasons for those failures, including the fact that some ACOs may need more time to achieve efficiencies in managing populations and CMS may need to tweak ACO design elements to provide better opportunities for improvement and better engage beneficiaries. Casalino points out that the first-year savings of $280 million represents a reduction of 4 percent. “This amount may seem small,” he notes, “but if this rate of savings could be sustained, and achieved throughout a large part of the U.S. health care system, it would be more than enough to ‘bend the cost curve’ so that health care expenditures do not continue to increase as a percentage of the gross domestic product and the federal budget.” For Mark McClellan, M.D., Ph.D., senior fellow and director of the Health Care Innovation and Value Initiative at the Brookings Institution, who also penned an accompanying editorial, the study indicates real progress and highlights the need for ongoing analysis. “This early evidence moves the effects of ACOs from speculation to reality and highlights the importance of further evaluation as alternative payment models are refined,” writes McClellan. “Payment reform moving away from FFS is now part of the policy landscape, but the exact form it will take is less clear.”
Recommendations for further action Casalino’s editorial states that for broader success, ACOs “need stronger incentives, closer ongoing connections with patients, better logistical support from Medicare, and regulatory relief.” For example, participants must be given reason to believe they “will be at least as well off financially” by participating in ACOs as the status quo and ACOs that achieve success in reducing costs and improving quality should be rewarded—which means that ACOs failing to achieve these goals will in effect be penalized by lower payment increases. Casalino also contrasts Medicare ACOs, where patients can get care outside the ACO to private payer arrangements in which patients are incentivized to stay within the network to obtain care. He argues CMS should do more to encourage patients to seek care within the ACO rather than outside it and to do so should allow waivers of patient cost-sharing amounts like copays and deductibles and other patient incentives and, most importantly through providing better care than available outside the ACO. McClellan recommends in his editorial that further efforts to reduce spending and improve care could include models that have “more significant payment reform after at ‘startup’ period in shared savings.” He indicates current models are a “long way from capitated payments that would put health care organizations at full risk for their spending results.” He notes the opportunity to include prescription drug coverage plan in the mix could further improve results because “there is considerable evidence that more effective medication use can improve outcomes and lower health care costs.” Acknowledging that payment reform “is not easy,” McClellan concludes, “[n]onetheless, an increasing number of diverse health care organizations are demonstrating that it is possible.”
Laboratories’ role in ACOs. How can laboratories get in on the action and share in benefits of cost reduction? G2 Intelligence recommended in its report Laboratory Services in Accountable Care Organizations that laboratories should “shift the focus from operational efficiencies to clinical effectiveness” and “develop metrics to capture the true value of laboratory services in ACOs in terms of system-wide contribution to the cost savings and improving patient outcomes and population health.” Doing so will help laboratories convince ACO management to “allocate proper financial compensation for laboratory contribution.” To obtain G2 Intelligence’s report, Laboratory Services in Accountable Care Organizations, please call customer service here. Takeaway: Early evidence shows ACOs can achieve cost reductions while not sacrificing patient care. But more work lies ahead and experts predict further reform and greater risk sharing will be needed to build on these early successes.
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