ACOs Led By Independent Physicians Save Medicare ‘substantially’ More Money, CBO Says

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Dive Brief:

• Accountable care organizations led by independent physicians save Medicare more money than other types of ACOs, according to a new Congressional Budget Office review of existing research.
• Independent physician-led ACOs have clear financial incentives to reduce hospital care to lower spending, while hospital-led ACOs — which earn more revenue when patients are admitted — do not, the CBO found. Hospitals also have less direct control over what services patients receive.
• ACOs with a larger proportion of primary care providers also saved Medicare more money, along with ACOs whose initial spending was higher than their peers in the same region, according to the report.

Dive Insight:

ACOs are groups of providers that assume responsibility — and occasionally, financial risk — to care for a group of patients. ACO programs in Medicare have been operating for more than a decade. Some models produce small net savings, but the organizations haven’t been a major contributor to slowing growth in per-person Medicare spending, according to past CBO research.

In addition, some ACO models tested by the CMS have actually increased federal spending, highlighting the need to improve results — especially as CMS looks to bring all 34 million beneficiaries in traditional Medicare into value-based arrangements by 2030.

The largest ACO program in Medicare, the Medicare Shared Savings Program, includes almost 11 million beneficiaries covered by 480 ACOs. Participating ACOs receive a portion of the savings they generate compared to a benchmark, while ACOs with spending exceeding the benchmark might have to pay a penalty.

Medicare ACOs led by independent physicians are associated with “substantially larger” savings, according to the CBO’s report.

The findings are important in light of a shift toward hospital-owned ACOs, which the CBO found don’t reduce spending as much as ACOs led by other providers.

Hospital-aligned beneficiaries increased from 61.2% in 2013 to 69.3% in 2021, according to a study published in JAMA late last year.

A number of factors are limiting ACO savings, including weak financial incentives like low shared savings rates. That has a particular impact on large health systems and hospitals, which would lose fee-for-service revenue if they pushed patients away from care in their facilities without commensurate reimbursement from Medicare, the CBO said.

The CBO is nonpartisan and doesn’t make policy recommendations. However, the office did point to suggestions from researchers and other experts to increase ACO savings, such as making participation more attractive by bumping incentive payments or temporarily limiting downside risk. Regulators could also exclude providers that elect not to participate by excluding them from other savings programs, like the 340B drug discount program for hospitals.

Regulators have recently revamped Shared Savings in a bid to revitalize provider interest after growth plateaued about five years ago, adding benefits like up-front payments to certain providers and making changes to promote more risk-sharing.

Last year, regulators updated Shared Savings again to include more people who receive care from nurse practitioners, physician assistants and clinical nurse specialists, and changed benchmark methodology to encourage ACOs to care for medically complex beneficiaries.