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Year One Results from Medicare Shared Savings Program: What it Means Going Forward

The Medicare ACO results recently released by CMS suggest the accountable care experiment is moving forward, but much more work is needed. The news release includes an extension of preliminary Pioneer ACO data released last July, as well as unreleased results from the first two rounds of the Medicare Shared Savings Program (MSSP)—April 2012 and July 2012 start dates. As reported in July, participants in the Pioneer ACO program have found notable success in delivering higher quality care than industry benchmarks and lowering costs overall, but just over a third were able to reduce spending enough to qualify for shared savings. A new independent evaluation estimates that the program saved Medicare $147 million in its first year, a figure higher than initially reported by CMS. Of the 23 Pioneer participants who stayed in the program after the first year, nine had significantly lower spending growth relative to Medicare fee for service. From the standpoint of CMS, these results suggest great potential for ACOs to bend the overall cost growth curve.

The reported outcomes for 114 MSSP participants that began in 2012 quite closely mirror the Pioneer experience, with overall reductions in spending but not significant enough in most cases to qualify participants for shared savings. Last week’s release reported that 54 of the Medicare Shared Savings Program ACOs had spending below their budget benchmarks, but only 29 reduced spending by enough to qualify for shared savings. These ACOs produced shared savings of $126 million, while Medicare will see $128 million in total trust fund savings. The other 60 MSSP participants experienced spending above their benchmark.

It is unclear how many of the MSSP participants will owe money back to CMS. Four of the 114 ACOs agreed to downside risk in return for potentially larger share of any savings generated, two of which were unable to reduce spending. CMS has not yet stated whether or not these ACOs were significantly enough below their budget benchmark to require repayment.

All but five of the 114 participants “satisfactorily reported” on their quality measures—a requirement to be eligible for shared savings in year one of the program. Unfortunately, two of those five ACOs were eligible for shared savings and will not receive their portion of savings. CMS has not yet released detailed performance results at either the program or individual ACO level, but we can anticipate that overall quality improved relative to national baselines, similar to the Pioneer first year experience. Beginning in year two, the MSSP participants will be responsible for meeting quality thresholds in order to be eligible for shared savings.

Looking Ahead for MSSP Participants

Although only 25 percent of MSSP participants received shared savings in year one, these initial reports suggest significant progress in the move toward more accountable health care payment and delivery for Medicare beneficiaries. Initial health spending data from these ACOs and the overall low spending growth for Medicare over the past several years bodes well for the financial sustainability of the MSSP and Pioneer Program from a CMS perspective. At the same time, many individual ACOs are struggling to keep their head above the water.

The transition to accountable care is a multi-year enterprise that involves great level of clinical and organizational transformation that many ACOs are simply not well equipped to handle. A number of program participants report difficulty forming the governance structures necessary to succeed as an ACO, appropriately interpreting data they receive from CMS and reconciling with their internal data, effectively collecting and reporting quality measures, developing IT systems that are able to support clinical transformation, and creating incentives for providers and patients to be engaged and committed to the ACO enterprise. For these reasons, it is unreasonable to expect a majority of ACOs to be able to satisfy both criteria for shared savings—reducing costs and improving quality—in their first, or perhaps even second or third year.

Some of these challenges are particularly notable for smaller or physician-led ACOs that often enter the program with less capital and support mechanism to succeed as an ACO. For many of these ACOs the central question is whether the long-term return on investment can be positive, given the considerable startup costs, clinical transformation investment, and additional resources required to create a new ACO or transform an existing practice.

While CMS does have an Advance Payment ACO Model to assist these physician-led practices, through an upfront fixed payment, as well as upfront and monthly variable payments based on the number of historically-assigned beneficiaries, program participation has slowed. The Advance Payment Model only has 35 participants, despite the fact that smaller and physician-led ACOs now make up over half of Medicare ACO programs. Further expansion of the program could turn the transformation to accountable from a dream to a reality by giving ACOs the tools to implement delivery change, improve their health data collection and analysis, and build in financial incentives for providers to drive further change.

Potential Changes to Medicare ACOs

Despite these challenges, the Medicare ACO program continues to grow. Following the announcement of 123 new MSSP participants that began on January 1 of this year, there are now more than 360 Medicare ACOs in 47 states, DC, and Puerto Rico covering over 5 million Medicare beneficiaries. As the first round of ACOs approaches the end of its three-year cycle, CMS is expected to release new regulations that will likely take effect in 2015 or 2016.

The Center for Medicare and Medicaid Innovation has solicited comments on a Request for Information around the second round of applications for the Pioneer ACO Model and new ACO models that encourage greater care coordination and financial accountability. The RFI asks important questions about Pioneers’ ability and willingness to move to population-based payments, as well the possibility of the broader Medicare ACO program offering capitation with insurance risk, better incorporating Medicare Part D spending, assuming accountability for Medicaid population, moving to provider-led community ACOs approaches responsible for wider population groups, and opportunities for ACOs to adopt commercial contracts.

These questions approach critical issues to consider in further development of Pioneer ACOs. Similar questions should be asked now about the Medicare Shared Savings Program. These include addressing potential issues related to calculations and adjustment of financial benchmarks and baselines, revising attribution models to ensure the appropriate patient population is captured, and creating financial incentives to increase engagement and loyalty from both providers and patients.

As CMS begins to release their proposed regulations for the next round of ACOs we will begin to have a better idea of what issues can be adequately addressed and which are ultimately left on the table for ACOs to resolve on their own. In either case, the first year results from MSSP and follow-up data on Pioneer ACO performance suggests Medicare ACOs are on the right track and can continue to move providers closer to greater accountability for health care costs and quality.

  • Larry Kocot is a visiting fellow in the Economic Studies program at the Brookings Institution. He is examining the challenges of access, quality, and financing that face the U.S. health care system. He is also a senior attorney with Epstein, Becker & Green, LLC.

  • Dr. Farzad Mostashari is a visiting fellow of the Engelberg Center for Health Care Reform at the Brookings Institution. Dr. Mostashari's work covers a range of topics related to helping clinicians improve care and patient health through health IT, focusing on small practice transformation by developing innovative payment models that can better support these types of practices. This work will include expanding the reach of the Accountable Care Organization (ACO) Learning Network, a Brookings-Dartmouth project that provides participating organizations the tools necessary to successfully implement accountable care.

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