That’s how much waste the Medicare Shared Savings Program (MSSP) cut out of the healthcare delivery system in 2018. Accountable care organizations (ACOs) generated these savings, which increased by 135 percent from 2017. In addition to contributing sizable savings, ACOs also aim to enhance the patient experience, improve population health, and address the physician-burnout crisis. These four criteria are often referred to as the “Quadruple Aim” of healthcare.
Leading this charge from volume-to-value transition are physician-led ACOs, which statistically see far better savings than hospitals, according to the New England Journal of Medicine.
Before we analyze why this is the case, let’s take a step back and examine how ACOs work.
What Are ACOs?
ACOs are healthcare entities that bear both the clinical and financial responsibility of a defined population. In other words, providers in ACOs offer high-quality, coordinated care to their patients — with an emphasis on the chronically ill — by ensuring “patients get the right care at the right time, while avoiding unnecessary duplication of services and preventing medical errors,” according to the Centers for Medicare & Medicaid Services (CMS).
While most ACOs operate under fee-for-service payment models, their incentive structure is ideally geared toward alternative payment arrangements that reward risk by attributing patients to an ACO. The ACO is then reimbursed if they “save” payers and patients money by delivering better health outcomes. In turn, the ACOs distribute these shared savings among the participating physicians.
This raises the question: Can ACOs drive the “Quadruple Aim”?
David Nash, MD, MBA, FACP, thinks they can. In an op-ed for MedPage Today, the dean of the Jefferson College of Public Health wrote, “The evidence shows that, collectively, MSSP ACOs have measurably improved quality and saved money for the Medicare program; moreover, spillover effects from these ACOs appear to be changing care delivery more broadly and [lowering] cost growth in local healthcare markets.”
Why Physician-Led ACOs Perform Better
“In 2018, low-revenue ACOs showed an average reduction in spending relative to targets of $180 per beneficiary, compared to just $27 for high-revenue ACOs,” noted CMS Administrator Seema Verma in a blog post for Health Affairs. To clarify, physician-led ACOs are often referred to as “low-revenue” while hospital-based ACOs are referred to as “high-revenue.”
So, why were savings so much greater for physician-led ACOs?
To start, physician-led ACOs have no incentive to “feed the beast.” Hospital-based ACOs pursue decreased costs and improved outcomes just like physician-led ACOs. However, they must also maintain the significant investments made into their brick-and-mortar infrastructure. In today’s healthcare environment where consolidation is rampant, hospitals often rely on employing independent providers to create leverage against the payers to negotiate higher fee-for-service rates to support this infrastructure. However, in the value-based world, this strategy backfires as you set up a system meant to drive volume back to the hospital for care that can oftentimes be appropriately delivered elsewhere — if in fact it’s necessary at all — at the expense of ACO performance and cost reduction efforts.
What Are the Key Takeaways?
What is interesting is the advantage that hospitals have, given their financial situations. Success in ACOs requires an investment in new infrastructure, which comes at a cost. Even though hospitals have deeper pockets, the investments made by physician-led ACOs are more effective as there are fewer barriers to implement. In a sense, these provider-led groups are nimbler, and that agility counts for a lot in this rapidly changing landscape. In hospital systems, policy changes require sweeping reforms that can bottleneck and slow down the process.
This responsiveness is a huge advantage to these ACOs as longevity is a critical factor in success, according to one study. The faster an ACO can shift their strategy and approach (and react to patient needs), the more likely they are to stay up-to-date and, as a result, increase their chances at longevity. How the recently implemented Pathways to Success model, which replaced MSSP, will reward or hinder this agility this remains to be seen. For now, it appears physician-led ACOs can indeed drive population health and value-based care initiatives while supporting the ambitious “Quadruple Aim” of healthcare.
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A version of this article originally published on October 11, 2018.