ACOs that Garner Shared Savings Increase

October 6, 2016

This article originally appeared in HRMA ( on Aug. 30, 2016.


Aug. 30—The share of Medicare accountable care organizations (ACOs) earning shared savings increased 3 percentage points in 2015—to nearly one-third—among other improvements noted in recently released data.

In performance year 2015 (PY15), 31 percent of ACOs (120 out of 392 ACOs) generated savings above their minimum savings rate (MSR), according to the latest ACO data from the Centers for Medicare & Medicaid Services (CMS). This is a small but steady improvement from the two previous years, during which 28 percent (92 out of 333) had shared saving in PY14 and 26 percent (58 out of 220) had shared savings in PY13.

However, the still-low share of ACOs generating shared savings drew concerns from some industry advocates. For instance, the National Association of ACOs (NAACOS) said it was “disappointed” in the 2015 shared savings because it means few ACOs are getting repaid for the substantial investments they have made to coordinate care and lower healthcare spending.

“We are a little surprised more didn’t get over the hurdle,” Jeffrey Spight, president of Collaborative Health Systems (CHS), a division of Universal American, said in an interview.

The results for CHS’s partner ACOs, which are primary care physician operated, were better than the national average, with 10 out of 24 garnering shared savings and another eight achieving lower levels of savings in 2015.

The latest CMS data identified 83 ACOs that reduced healthcare costs compared to their benchmark, but they didn’t qualify for shared savings because they didn’t meet the minimum savings threshold.

Premier saw 13 of the 26 ACOs it works with obtain shared savings, although smaller ACOs (with around 20,000 beneficiaries) had wider variation in their results, said Seth Edwards, principal of population health.

“You can have a very high cost case that can skew your spending for the overarching group,” Edwards said.

The shared savings results came as ACOs face a $1.6 million average cost, according to a June NAACOS survey of 144 Medicare ACOs.   

Despite the low overall rate of shared savings, industry observers expect the appeal of ACOs to increase.

Leading health systems “are seeing it as a way to really differentiate themselves in a very competitive marketplace,” said Andrei Gonzales, MD, director of value-based reimbursement initiatives at McKesson Health Solutions. “Without these sorts of measures, it’s hard to say how good a health system is or a provider practice is at managing their patients.”

Sixty-three percent of the 350 hospitals McKesson surveyed earlier this year are now part of an ACO, and another 47 percent of hospitals that are not in an ACO are expected to join one within five years.

Among other new ACO results was that half of the 12 remaining Pioneer ACOs garnered shared savings. However, four Pioneer ACOs generated losses, and the losses of one were large enough that the ACO owed money to Medicare.

CMS touted results that showed ACOs with more experience in either the Pioneer ACO model or the Medicare Shared Savings Program (MSSP) tend to perform better over time. In PY15, 42 percent of ACOs that started in 2012 garnered shared savings, compared with 37 percent that started in 2013, 22 percent that started in 2014, and 21 percent that started in 2015.

In addition, 45 percent of practices in the ACO Investment Model garnered shared savings. The test model offers select Shared Savings Program ACOs pre-paid savings. The shared savings rate of all other ACOs was only 29 percent.

Overall Savings

Medicare’s more than 400 ACOs generated their largest savings yet for the federal government in 2015, with more than $466 million in total. That was a 36 percent increase from overall savings in 2014.

MSSP ACOs generated $429 million in savings, whereas Pioneer ACOs generated $37 million in total model savings. No Track 2 MSSP ACOs, which face two-sided risk, owed CMS losses.

The Pioneer results followed the introduction of new financial benchmarks that compared the ACOs’ spending to their initial years in the model.

Among the quality results were that all 12 Pioneers improved their quality scores from the first performance year—four years ago—by more than 21 percentage points.

MSSP ACOs that reported quality in 2014 and 2015 improved on 84 percent of the quality measures that were reported in both years.

How They Did It

Spight, of CHS, said his ACOs achieved savings through reduced admissions, readmissions, and emergency department (ED) use. That echoed the findings of an August study in JAMA Internal Medicine, which found enrollment in a Medicare ACO was linked to reductions in health spending, as well as fewer ED visits and hospitalizations.

Although some ACOs are focusing on improving the quality of their post-acute networks, most ACOs have derived savings from reducing overall utilization, as opposed to just changes in the sites of care.

“I wouldn’t credit most of the savings to provider steerage,” Spight said. “More of it is that we’re just getting our hands around people who are chronically ill.”

Conversely, Premier sees its members obtaining ACO savings from reduced length of stay and lower average cost of hospital stay per day, as well as from improved post-acute networks.

“Utilizing care management and other steps can help beneficiaries receive care in places that are most appropriate for their condition,” Edwards said.

The largest shared savings, nearly $42 million, were garnered by the Memorial Hermann ACO, which brought its three-year shared savings to nearly $200 million. Nishant Anand, MD, physician-in-chief at the ACO, credited care management, coordinated care, and better data use for the savings. Specific savings sources included reduced year-over-year admissions and ED use.

The latest results provide continued confirmation of some key takeaways from the earlierMedicare Physician Group Demonstration project, said Francois de Brantes, executive director for the Health Care Incentives Improvement Institute. Specifically, already efficient medical groups face disadvantages in producing significant incremental savings from their baseline, and physician group practices unaffiliated with hospitals can generate more savings because they don't worry about facility revenue reductions.

“The ACO program simply confirms these findings,” de Brantes said in emailed comments.

An initial analysis by Premier found the percentage of an ACO’s savings was somewhat related to the size of its historical benchmark.

“In groups that have smaller populations, as well as lower benchmarks, it can be very challenging,” Edwards said.

Similarly, an analysis by Ashish Jha, a Harvard health policy researcher, concluded that per capita benchmarks for the ACOs that garnered savings were $10,580 and their actual spending was $10,140. Meanwhile, ACOs that didn’t garner savings had average benchmarks of $9,601 and actual spending of $9,901.

In June, CMS finalized rules to allow ACOs to benchmark their results to regional Medicare spending, rather than national, but only after their first three-year contract.

Edwards said he expects the benchmark changes will be very helpful to those ACOs with lower benchmarks. But even with those changes, the Medicare ACO model will continue to tighten the benchmarks, Anand noted. To address those increasing cost pressures, his ACO hopes to derive new savings from increased efficiencies in its post-acute care network.

“We’ll have to get even deeper into [post-acute] to be successful,” Anand said in an interview.

CMS said it has received “strong interest” from providers to participate in a second MSSP agreement period starting in 2017.

New and renewing ACOs will be announced near the end of 2016.

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