One of the central pieces of the Patient Protection and Affordable Care act was Section 3022, which created the added a new section 1899 to the Social Security Act that requires the Secretary of the Department of Health and Human Services (HHS) to establish the Shared Savings Program.
The program is intended to encourage providers of Medicare-covered services and supplies (e.g., physicians, hospitals and others involved in patient care) to create a new type of health care entity, an accountable care organization (ACO), that agrees to be held accountable for improving the health and experience of care for individuals and improving the health of populations while reducing the rate of growth in health care spending.
In proposing this new model and framework, HHS asserted that “Studies have shown that better care often costs less, because coordinated care helps to ensure that the patient receives the right care at the right time, with the goal of avoiding unnecessary duplication of services and preventing medical errors.” A recent study published in Health Affairs, however, found that ACO’s “that improved diabetes outcomes by as much as 10% achieved minimal or no cost savings, results of a published simulation showed.”
The simulation found that a 10% clinical improvement would create just 1.22% in savings for Parts A and B -- well below the level needed to trigger savings sharing, reported MedPage Today. Under the Shared Savings Program noted above, the savings must exceed 2% in a given year in order for an ACO to receive the “shared savings.”
The results may be troubling considering the Centers for Medicare and Medicaid Services (CMS) projected that the ACOs would save an average of $800 million total for all participating organizations and about $2.5 million per organization. This is especially true considering a recent survey from the Commonwealth Fund showed three-quarters of hospitals are not considering ACO participation at all.
In a separate study, however, conducted by the Agency for Healthcare Research and Quality (AHRQ), bundled payments did curb healthcare spending, reported FierceHealthcare. The RAND research, which looked at single institutional providers, such as hospitals and skilled nursing facilities, concluded "there is weak but consistent evidence that bundled payment programs have been effective in cost containment without major effects on quality." The study found that moving from fee for service to a bundled payment model led to a 10 percent reduction in spending and utilization.
Previously, results from the Physician Group Practice Demonstration -- a pilot precursor to ACOs -- supported the conclusion from this recent study “that savings must come from nonmeasured activities.” The doctors who achieved savings in that program did so “through infrastructure and environmental factors, investments in care management, more intensive diagnostic coding, changes in market conditions, and previously favorable cost trends. Furthermore, only six in 10 primary care practices achieved savings in that demonstration program.”
ACO’s May Not Save Money
“Our analysis indicates that the savings needed to generate these payments will have to come from activities other than improvements in the clinical quality measures,” David Eddy, MD, PhD, founder and chief medical officer emeritus at the health-modeling company Archimedes, and Roshan Shah, associate scientist at Archimedes, wrote.
The authors used their Archimedes model to simulate what would occur if the Shared Savings Program were implemented in an “average” ACO. They used data from the National Health and Nutrition Evaluation Survey to track patient information for hemoglobin, blood pressure, low-density lipoprotein, stroke, heart attacks, and other complications of diabetes. The effects of treatments were based on clinical trial results.
Eddy and Shah studied patients with type 2 diabetes, “a disease that includes the widest range of adverse events and the largest performance measures, who thus could have the largest impact on the Shared Savings Program.” While a 10 percentage-point improvement in performance under these measures would lead to a 4.1% drop in adverse events, it only generated 1.22% in savings, they found.
“However, the savings are diminished or become cost increases when the cost of the visits and tests needed to improve performance is included,” Eddy wrote. “The net effect is that the savings in Parts A and B, if any, are very likely to fall below the 2% limit that CMS has set for sharing savings in the one-sided option.”
“Furthermore, ACOs would only share 50% or 60% of those savings even if they hit the 2% threshold. Also, the care required to generate improved outcomes will likely necessitate more use of prescription drugs, which are covered under Medicare Part D -- which is not included in Shared Savings' cost calculations. So Medicare will spend more in Part D,” MedPage Today noted.
ACOs also face start-up costs that the CMS estimates to be about $1.7 million per organization. “Given that the savings that can be expected from preventing downstream events will be small to nonexistent, accountable care organizations will need to cut costs in other ways,” Eddy wrote. “Over time, CMS should consider an incentive based on the overall effect of health outcomes, not just on individual performance measures.” The results cannot be extrapolated to other conditions, Eddy told MedPage Today. “Each condition has to be analyzed on its own.”
In light of the results, the private marketplace with consumer choice should be the driver of cost savings and quality improvement, Grace-Marie Turner, president of the Galen Institute, a right-leaning health policy research organization in Alexandria, Va., told MedPage Today.
“I have been concerned since the beginning of the debate over the health law that ACOs offer more hope than promise,” Turner wrote in an e-mail. “The financial structure is basically the same as HMOs, which were rejected by millions of Americans in the 1990s.”
ACO’s are being embraced by public and private sector payers. It is important that we don’t reject this model before it has just begun to gain traction. With additional education of providers, that promise of savings despite what the critics predict may well be achieved.