Evaluating Accountable Care Organization Cost Savings: Is It Worth It?

A stethoscope on American currency.
A stethoscope on American currency.
Accountable Care Organizations (ACOs) are increasingly taking responsibility for health care management, record-keeping, and payment.

Healthcare systems have been expanding, not only with regard to the numbers of people covered, but also the complexity of care across a lifespan. At the same time, healthcare has been shifting from traditional fee-for-service models to value-based systems that evaluate outcomes and costs.

The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) was a prime driver of the transition to value-based systems, by repealing the traditional sustainable growth rate (SGR) methodology for updating calculations for the Medicare physician fee schedule.1 In its place, MACRA set standards for annual flat fee updates over the course of a decade, with a 2-track fee schedule update called the Quality Payment Program, which will be implemented in 2019 and provide new tools, models, and resources to help providers make the best decisions for individual patients.1,2

Accountable Care Organization Models

Accountable Care Organizations (ACOs) are increasingly taking responsibility for healthcare management, recordkeeping, and payment.1,2 These organizations generally take on administrative functions that support care management and risk analysis designed to keep costs down. 

In adapting to Medicaid changes, multiple states have adopted different types of ACO systems. A recent issue of JAMA Internal Medicine featured coverage of 3 variations of ACO payment models. McConnell, et al 3 conducted an assessment of Oregon’s federally funded Coordinated Care System compared with Colorado’s Medicaid Accountable Care Collaborative (ACC), while McWilliams and colleagues4 reviewed the Medicare Shared Savings Program (MSSP) used by many ACOs to manage post-acute care.

Oregon vs Colorado Systems

In 2012, the state of Oregon moved to a network of 16 Coordinated Care Organizations (CCOs) largely funded by $1.9 billion in federal aid. Colorado reorganized in 2011 into 7 Regional Care Collaborative Organizations (RCCOs) that receive support for matching Medicaid patients with providers. The McConnell study evaluated the care provided for a total of 782,882 patients in the 2 systems — 452,371 from Oregon and 350,511 from Colorado.3

Both programs demonstrated reductions in expenditures from 2010 to 2014, with key differences in methods. “The reforms were similar in their regional focus and emphasis on primary care, but the Oregon program was more comprehensive in its scope of benefits covered as well as its use of global budgets and downside financial risk as a mechanism for cost control,” the investigators wrote. Oregon made substantial investment in data infrastructure and the hiring of new personnel support for administration and training to implement the program.

The demographics were similar in the 2 state cohorts: 55% female overall, with a mean age of 16.74 (standard deviation [SD] 14.41) that was slightly lower in the Colorado group. There was no significant difference in standardized monthly expenditures per patient member between the 2 groups after adjusting for demographics and health risk ($2.00; 95% CI, −$0.79-$4.78); however, costs in Oregon than in Colorado were higher in the second year of implementation ($4.37; 95% CI, $0.01-$8.73).

Coordination of care in both states resulted in reduced utilization of primary care services. In Oregon, this translated into improvements in 3 out of 4 measures of access to care, including well-child care visits for children age 3 to 6, well-care visits for adolescents, and preventive ambulatory care for adults, which improved by 2.7%; (95% CI, 1.2%-4.2%), 6.8% (95% CI,  5.2%-8.3%), and 1.3% (95% CI, 0.3%-2.2%), respectively, compared with Colorado. Oregon also showed improvement in reduction of visits to the emergency department and preventable hospitalization. Low-value care measured by treatments for asthma and pharyngitis in children, and appropriate imaging for low back pain did not improve in Oregon, except for avoidance of uncomplicated headache. The investigators noted that corresponding savings were not as significant as might be expected from so much federal funding, and that “CCOs may need more time to fully implement changes that translate to greater savings.”3

The McConnell analysis did not attribute these improvements in utilization in either state solely to ACO implementation of cost containment, but suggested that the study period of 2010 to 2014 may have been a time of “historically low national health spending growth.”3 Despite this, the programs seem to be working and the researchers expect that they may become more important in the current environment in which healthcare spending growth appears to be increasing (5.3% in 2014 vs 2.9% in 2013).5

The Medicare Shared Savings Program (MSSP)

Management of waste spending associated with post-acute care was addressed by McWilliams’ review4 of the MSSP implemented by ACOs, which found that MMSP participation in 2014 resulted in a 9% reduction in waste spending compared with local nonparticipating healthcare professionals. This reduction was largely derived from reduced patient discharge to care facilities, shorter facility stays, and reduced utilization of inpatient acute care. Cost savings increased with longer participation in ACOs, although it took longer for later entrants to achieve the same benefits as earlier entrants. According to the McWilliams assessment, “Spending reductions in postacute care were achieved without ostensibly compromising or improving the quality of care for ACO patients, based on mortality, readmissions, and use of highly rated SNFs.”4

Too Early to Measure Success

A commentary6 by Carrie H. Colla, PhD and Elliott S. Fisher, MD, MPH noted that the investigators found that, “all 3 programs show some degree of success, although the results continue to be modest in magnitude.” They agreed with the McConnell and McWilliams assessments, which contend that such a large transition in how the use of medical services is determined, made accessible, implemented, and paid for requires a long-term commitment to new practices.

ACOs have good potential for success in improving the quality of and access to care, and with continued evaluation and adaptation, these models promise to provide sustainable reform of healthcare costs and management for the future.

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  1. MACRA: Delivery System Reform, Medicare Payment Reform. Centers for Medicare and Medicaid Services. www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/MACRA-MIPS-and-APMs/MACRA-MIPS-and-APMs.html. Accessed July 5, 2017.
  2. Resources for the Medicare Access and CHIP Reauthorization Act of 2015. American Academy of Family Practitioners. www.aafp.org/practice-management/payment/medicare-payment.html. Accessed July 5, 2017.
  3. McConnell KJ, Renfro S, Chan BK, et l. Early performance in medicaid accountable care organizations: a comparison of Oregon and Colorado. JAMA Intern Med. 2017;177:538-545.
  4. McWilliams JM, Gilstrap LG, Stevenson DG, Chernew ME, Huskamp HA, Grabowski DC. Changes in postacute care in the medicare shared savings program. JAMA Intern Med. 2017;177:518-526.
  5. Martin AB, Hartman M, Benson J, Catlin A; National Health Expenditure Accounts Team. National health spending in 2014: faster growth driven by coverage expansion and prescription drug spending. Health Aff (Millwood). 2016;35:150-160.
  6. Colla CH, Fisher ES. Moving forward with accountable care organizations: some answers, more questions. JAMA Intern Med. 2017;177:526-528.