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Insights

Sep 18, 2014

ACO Performance Results Demonstrate Savings to Medicare, Minimal Savings to Individual ACOs

Published

Sep 18, 2014

On Sept. 16, CMS released aggregate financial and quality results from Performance Year (PY) 2 of the Pioneer program and PY1 of the Medicare Shared Savings Program (MSSP).

In addition, CMS issued a report outlining the results for each MSSP accountable care organization (ACO) in the first three cohorts. In total, the 23 Pioneer and 220 MSSP ACOs generated program savings of $372 million for the Medicare Trust Fund, while concurrently qualifying for shared payments of $445 million. These ACOs serve approximately 4.6 million beneficiaries. 

Overall, almost half of the MSSP ACOs in the first three cohorts reduced costs; however, only approximately one quarter (53 of 220) earned shared savings in PY1. Notably, two ACOs generated substantial savings but were unqualified to share in those savings because they failed to report on quality measures. In addition, one Track 2 (risk-bearing) ACO overspent its target and owed nearly $4 million to CMS. 

Pioneer ACOs generated an estimated savings of $96 million, with 11 ACOs qualifying for shared savings payments of $68 million. Three ACOs incurred shared losses and three deferred reconciliation until completion of PY3. Notably, Pioneer ACOs achieved 0.45 percent lower spending growth than Medicare fee–for-service. 

In general, ACOs in both the MSSP and Pioneer programs performed well against quality and performance measures in PY1 and PY2, respectively. 

Both the MSSP and Pioneer programs financial performance in PY1 and PY2, respectively, were modest. Only roughly one quarter of MSSP ACOs and about half of the Pioneer ACOs were able to qualify for shared savings. Relatedly, a recent report on the results of the Physician Group Practice Demonstration, a predecessor to the shared savings program, implied that initial savings to Medicare’s ACO programs were unlikely. As such, these results from CMS reflect findings from the report. Further, the majority of ACOs that earned shared savings only earned modest payments, which may not be sufficient to address the upfront start-up costs (CMS estimates about $2 million) associated with forming an ACO. 

Of particular note, a majority of the MSSP ACOs that achieved savings (39) were concentrated in areas of the country known for excess capacity and that exhibit large variances in spending. Accordingly, these regions may have had much inefficiency to address in their first year of the program compared to their lower cost peers. Based on these initial results, it will be interesting to see whether savings will continue to materialize in the coming years of the demonstration. 

As the number of ACOs continues to rise (123 more ACOs were added to the demonstration in 2014), it will be important for CMS to take steps to ensure viability of the program by addressing challenges faced by those ACOs that generated cost savings but did not qualify to share in those savings. Moreover, with per capita spending in the Medicare program flattening in the near term, additional cost-saving measures may be difficult to implement. Due to the need for large upfront investments and the transition to risk-bearing tracks in the coming years, it will be important that CMS addresses issues with program requirements in the forthcoming proposed rule. 

The MSSP proposed rule is expected in the coming weeks and is expected to address a number of key program challenges. CMS is revising the proposed rule as requested by the Office of Management and Budget after an initial review. The proposed rule will apply to ACOs that join or renew starting Jan. 1, 2016. 

View CMS’ MMSP aggregate financial and quality results.

View CMS’ MSSP ACO report.

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