Tianna Tu, BA

Because hospitals and health systems sponsored the majority of new accountable care organizations (ACOs) from 2010 to 2015, they influenced priorities and strategies of the policies designed to drive ACO adoption. In recent years, however, the majority of new ACOs have been sponsored by physician groups. This shift means that policies need to be developed with the characteristic strengths and weaknesses of physician-led ACOs in mind. Using data from the Leavitt Partners ACO database, we analyzed the types of providers becoming ACOs over time to look at their numbers and market potential. Because the market potential for further growth of physician group—led ACOs is much stronger than for hospital- or health system–led ACOs, policy makers need to create programs and policies that facilitate physician-led ACOs’ success by helping them develop the capacity to take on risk, finance investments in high-value healthcare, and partner with other organizations to provide the full spectrum of care.

New accountable care organizations (ACOs) are increasingly led by physician groups rather than hospital systems.

In 2018, physician group—led ACOs represented approximately 45% of all ACOs, hospital-led ACOs accounted for approximately 25%, and joint-led ACOs represented 30%.

There is greater market potential for new physician-led ACOs than for those led by hospital systems, so physician-led ACOs will likely be the dominant type of ACO in the future.

Because hospitals and health systems sponsored many early ACOs, policies, payment models, and care delivery models initially focused on building competencies for these groups. However, these policies and strategies may need to be reconsidered as the model moves forward.

From 2010 to 2015, hospitals or health systems sponsored the majority of new accountable care organizations (ACOs). This allowed them to influence the priorities and strategies of policy makers as they created regulations and polices designed to drive these organizations. However, in recent years, the ACO market has seen a shift in leadership as physician group organizations have begun to lead the majority of new ACOs (

). This trend, and the significantly higher market potential for physician groups, suggest that they will continue to lead a significant number of new ACOs. With this change, policy makers and practitioners must consider the unique needs and opportunities of physician groups in the transition to value-based care.

ACOs consist of healthcare providers that accept responsibility for the cost and quality outcomes of a defined population. The defining characteristic of an ACO is the contract that establishes the provider group as being financially accountable for value. However, the type of care delivery changes that can be implemented to achieve ACO goals is determined by an ACO’s organizational structure.

In response to the policy environment, many early ACOs were large organizations that included hospitals, had prior experience with risk-based contracts, and had access to capital to invest in new technologies and start-up costs.

 For example, of the 10 participants in the Physician Group Practice Demonstration—the precursor to the Medicare Shared Savings Program (MSSP)&mdash;8 were hospital affiliated, 8 had experience with performance-based payment arrangements,

 and 8 had prior access to, or funding for, electronic health records (EHRs) and other information technology (IT) systems to track data. Because many early ACOs were hospital affiliated, policies, payment models, and care delivery models originally focused on building competencies for similar organizations. However, these policies and strategies may need to be reconsidered as the model moves forward.

Presently, ACOs range from large integrated delivery systems to hospitals with partner practices to multispecialty physician groups to small primary care physician groups.

 To understand changes in care delivery, it is important to understand the organizations participating, their characteristics and capabilities, and new participants attracted to these models. Our study reveals that physician groups—rather than hospitals or health systems&mdash;are becoming the dominant type of ACO and represent the largest potential type of organization to join the model. We use a simplified provider type to separate ACOs into 3 categories: hospital-led ACOs, physician group—led ACOs, and ACOs that are led by both a hospital and physician group. ACOs with hospitals are generally well financed, include an established health IT (HIT) infrastructure, and either have implemented or are experimenting with sophisticated data analytics systems.

 In contrast, average physician group ACOs tend to have less sophisticated HIT capabilities and data analytic tools

 and tend to be smaller, averaging a patient population of 20,000 lives, whereas ACOs with hospitals average 44,000 lives. ACOs across and within these groups have varying needs, competencies, and capabilities.

Data on ACO provider types were obtained from the Leavitt Partners ACO database, which tracks organizations that are participating in accountable care payment arrangements and includes information on organizational structure.

 Hospital affiliation or ownership by an ACO in the database has been previously validated through surveys.

 Determination of whether the ACO is physician, hospital, or jointly led is based on qualitative assessment of the broader organization, not just the providers participating in an ACO contract. For example, a health system consisting of hospitals and physicians may participate in the MSSP but may only list primary care physician practices on the official participant list. Because no hospitals are officially listed as participants, some evaluators would consider this “physician led,” but we consider this to be jointly led because the health system, including the hospitals, established and directs the ACO. Physician-led ACOs, then, should be viewed as organizations that are involved in ACOs that do not involve hospitals directly in the payment arrangement or in the broader organization. The data include all ACOs in the database with information on their provider type, which represented 1221 of 1334 ACOs as of the end of 2018. For this paper, we track only the year of their first contract and include organizations that subsequently dropped out of all ACO programs in the aggregate estimates. Estimates of total market size are derived from Torch Insight,

 a commercial healthcare data aggregator.

Figure 1 provides an overview of the types of providers that are becoming ACOs over time. The figure should be interpreted as the percentage of ACOs that fall into each category for each year. In 2010, 22% of ACOs were led by physician groups only, 63% of new ACOs were led by both a hospital system and a provider group, and 16% were led by hospital systems only; 79% of all ACOs in 2010 included a hospital in the ACO’s structure.

By 2016, the market changed, and 55% of new ACOs did not have a hospital participant. This continued into 2017, when 62% of all ACOs were physician group—led ACOs, although in 2018, only 45% were. The broader trend has been for the proportion of both hospital-led ACOs and joint hospital and physician group–led ACOs to decline.

In the aggregate in 2018, physician group—only ACOs represented approximately 45% of all ACOs, whereas hospital-led ACOs accounted for approximately 25% and joint-led ACOs represented 30%. This indicates that although physician-led ACOs represent the majority of new entrants, they are a minority of total ACOs, but they may become the dominant type of ACO in the country within the next few years if the trend of new entrants continues. A figure representing overall ACOs is available in the 

Estimating the market potential for ACOs is challenging, but we performed back-of-the-envelope calculations to get a sense for ACOs’ market penetration and potential. We first estimated that health systems or independent hospitals that included short-term acute care hospitals could potentially form an ACO and that physician groups with at least 15 providers could potentially form an ACO (based on the minimum number of physicians for the smallest ACOs). Ongoing consolidation could decrease this total market potential when larger groups or health systems combine, or it could increase this number as smaller physician groups merge to become large enough to enter into an accountable care contract. Also, some physician groups are owned by hospital systems, which may decrease the market potential for potential physician-led ACOs that do not include a hospital.

 We estimate that as of December 2018, 28% of existing health systems or independent hospitals were participating in an ACO of the more than 1700 hospitals or systems that could potentially form an ACO. In comparison, only 6% of the more than 8200 physician groups that are large enough to ultimately form an ACO have done so. 

Although 45% of ACOs now comprise physician groups without a hospital partnership, the market potential for further growth of physician group—led ACOs is much stronger than for hospital- or health system–led ACOs. Our market potential estimates are admittedly rough and should be viewed as only directionally correct, but they suggest that there is more room for physician-led ACOs to develop than for ACOs that include hospitals. The sheer number of physician groups suggests that the dominant type of provider moving forward that has the potential to bear risk will not be hospital based. Additionally, the Medicare Access and CHIP Reauthorization Act, which is targeted to physicians, may further the adoption of ACO models by physician groups so that they can avoid the Merit-based Incentive Payment System and potentially receive the additional 5% boost from participating in an advanced alternative payment model.

 with control over much of the care spectrum were early adopters of the ACO model, physician groups are increasingly becoming the predominant provider type involved in accountable care. As physician groups tend to have less experience managing risk, less access to capital, lower overhead, and less-integrated EHRs,

 policy makers need to understand how increased numbers of physician group—led ACOs will necessitate changes in policy initiatives.

Physician-led ACOs have done better at achieving savings and improving quality scores despite less access to capital, less experience managing risk, and less sophisticated HIT systems.

 MSSP results have consistently shown that smaller, physician-led ACOs are more likely to earn shared savings than hospital-led or integrated hospital and physician group—led ACOs.

 From a business perspective, physicians are able to focus on eliminating costly hospital admissions without suffering a drop in inpatient revenue.

 ACOs with hospitals may struggle with decreasing inpatient admissions, which can cause issues with maintaining capital-intensive inpatient facilities.

Although physician group ACOs tend to achieve better savings results, lack of capital is a major barrier to market entry and the building of competencies for success. Physician group ACOs often lack the capital to invest in sophisticated HIT systems, data analytics, and other technology capabilities.

 Without technology, care coordination and management are significant challenges, although some can be met with key management partners.

Financial risk may be another concern as more physician groups enter the ACO market. With little capital or experience in managing care and costs across populations, smaller physician group organizations may not be capable of adequately managing risk. Provider groups in the 1990s attempted to assume full capitation risk and eventually suffered massive financial losses.

 Policy makers should be wary of pushing too much risk onto physician-led ACOs too quickly and consider initiatives that promote risk management among smaller organizations. The Advanced Payment Model demonstration program and ACO Investment Model did furnish capital to physician-led ACOs, but these programs have been closed to new entrants, and restarting a similar model could be considered.

 The recent Pathways to Success program does limit the amount of risk that smaller organizations must bear through a “low-revenue” option, and it is apparent that CMS is seriously considering the differences between ACOs with and without hospitals.

 Despite this focus, recent ACO dropouts have disproportionately been physician led, suggesting the need for policies that support physician group success under accountable care models.

As physician-led ACOs are increasingly forming and have significant market potential, it will be important to create programs and policies that facilitate their success. Much work has been done in identifying the skills necessary to successfully manage a patient population,

 such as modernizing technology and accelerating real-world evidence to learn from successful organizations,

 but more is needed, including learning how to finance necessary investments for smaller groups. Policy makers should encourage the development of tools to evaluate physician-led ACOs and continue to assess how vendors and ACO enablers or management partners can help these organizations succeed.

 CMS is focusing on reducing the length of time that providers can be in an upside-only ACO arrangement while giving additional time to “low-revenue” providers—a measure they believe is a proxy for physician-led ACOs and rural hospitals.

 But even with a delay before 2-sided risk is required, there is a continued need to quickly help organizations develop the competencies to succeed. This can be encouraged with additional investment in peer learning communities, sharing examples of successful organizations, and policies that favor the use of ACO enablers (organizations that work with many ACOs to help them be successful and share in the financial success).

Additionally, policies should encourage and facilitate physician-led ACOs to partner with other organizations. By definition, physician-only ACOs will not provide the whole spectrum of necessary medical care. Mechanisms need to be created to help physician groups work effectively with hospitals, postacute care providers, pharmacies and pharmacists, mental and behavioral healthcare providers, and others.

 Policy makers can identify barriers, such as antikickback and Stark laws, that inhibit partnerships across organizations but do not result in consolidation and resulting price increases—in late 2019, HHS did propose changes

 to these laws, which, if adopted, may encourage these partnerships.

Physician groups are becoming the dominant type of new entrant into the ACO space and have been the most successful in achieving savings to date. It is uncertain whether this trend will continue, given the Trump administration’s push to move ACOs to take on risk earlier, which may hinder the participation of smaller physician group ACOs. Policy makers, vendors, and developers of payment programs must recognize that physician-led ACOs have unique needs and opportunities to address care for patients, and they should create policies that focus on identifying the skill sets necessary for physician-led ACOs to manage the full spectrum of care while concurrently eliminating barriers to partner with other providers and break down care silos.

 Leavitt Partners (DM), Salt Lake City, UT; The Dartmouth Institute at Dartmouth College (DM, CHC), Lebanon, NH; Margolis Center for Health Policy at Duke University (DM), Durham, NC; University of Utah (TT), Salt Lake City, UT.

 Dr Muhlestein is employed by Leavitt Partners, which provides consulting services around accountable care organizations (ACOs) and sells ACO-related data. Ms Tu was a contracted employee at Leavitt Partners. Dr Colla reports no relationship or financial interest with any entity that would pose a conflict of interest with the subject matter of this article.

 Concept and design (DM, CHC); acquisition of data (DM); analysis and interpretation of data (DM, TT, CHC); drafting of the manuscript (DM, TT); critical revision of the manuscript for important intellectual content (DM, TT, CHC); statistical analysis (DM); administrative, technical, or logistic support (DM); and supervision (DM).

 David Muhlestein, PhD, JD, Leavitt Partners, 299 S Main St, Ste 2300, Salt Lake City, UT 84111. Email: david.muhlestein@leavittpartners.com.

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Articles

Since 2015, the majority of new accountable care organizations (ACOs) have been led by physician groups rather than hospital systems. This shift requires policies that address the characteristic strengths and weaknesses of physician-led ACOs.

Accountable Care Organizations Are Increasingly Led by Physician Groups Rather Than Hospital Systems

This paper analyzes whether hospital participation in an accountable care organization (ACO) impacts a hospital’s quality improvement and cost reduction outcomes in other value-based purchasing (VBP) programs, including the Hospital Value-Based Purchasing Program (HVBP), the Hospital Readmissions Reduction Program (HRRP), and the Hospital-Acquired Conditions (HAC) Reduction Program. 

Using VBP performance data and Leavitt Partners’ ACO data, 2 analyses were performed: 1) a descriptive comparison of VBP performance of hospital ACOs compared with non-ACO hospitals, and 2) a longitudinal analysis of hospitals that became part of an ACO during the second year of performance data. 

In the descriptive analysis, we compared VBP scores for hospital ACOs with non-ACO hospitals. To estimate the effect that becoming an ACO had on a hospital, we evaluated the performance of hospitals that became part of an ACO to all hospitals that never became part of an ACO.

For fiscal year 2016, hospital ACOs performed better than non-ACO hospitals for the HRRP, but not on the HVBP and the HAC Reduction Programs. Longitudinal analysis, however, reveals that results are varied, with evidence that hospitals joining ACOs did increasingly better than their peers for the HRRP, but had inconsistent results year-over-year with the HVBP. 

Despite similar goals, hospital participation in an ACO is not correlated with improved performance in all Medicare VBP programs. Organizations pursuing accountable care and also attempting to maximize Medicare VBP program performance must recognize the differences in program objectives and create strategies unique to each.

	Critiquing the effectiveness and overlap of value-based purchasing (VBP) programs is essential for shaping health reform. This paper analyzes whether hospital participation in an accountable care organization (ACO) impacts a hospital’s quality and cost improvement outcomes in other Medicare VBP programs. The following learnings can influence practice and policy decisions: 

		Despite similar goals, variation exists in hospital ACO participation and VBP program outcomes. Organizations must build strategies unique to the differing program objectives. 

		High ACO hospital readmissions reduction scores may signify that ACO-participating hospitals will focus priorities on measures that overlap between programs. 

		Scoring methodology changes may contribute to lack of correlation between program performance.

Since the passage of the Affordable Care Act (ACA), CMS has undertaken several initiatives to encourage providers to assume more financial and clinical responsibility for the care of the Medicare patients they serve. Although different in implementation, many of these initiatives overlap in terms of desired outcomes. Broadly speaking, accountable care organizations (ACOs) and value-based purchasing (VBP) programs seek to drive healthcare quality improvements and cost reductions. This paper analyzes whether hospital participation in an ACO program, Medicare, or otherwise correlates with a hospital’s outcomes in CMS-implemented value-based payment programs, including the Hospital Value-Based Purchasing Program (HVBP), the Hospital Readmissions Reductions Program (HRRP), and the Hospital-Acquired Conditions (HAC) Reduction Program.

ACOs are provider-led healthcare entities that bear responsibility for the financial and clinical outcomes of a patient population by coordinating care across providers.

 Although all ACOs strive to reduce costs and improve outcomes, the market is varied in terms of ACO organizational structure, ownership, and patient focus.

 ACOs are generally led by hospital providers, physician groups, or a combination of the two that seek to improve the care they provide, whether it is inpatient, outpatient, or both. Within the ACO model, provider behavior change and delivery reform is promoted through financial responsibility. Organizations and insurers enter into a contractual or risk-based agreement that is associated with the financial and clinical outcomes of a defined population; thus, accountable care entities are often classified by the payers with whom they share financial responsibility. Although patients are attributed to an ACO via their primary care physician, the risk-bearing entity is typically the hospital or provider group. As of January 2016, there were 838 ACOs, many of which have accountable care contracts with both public and private payers.

 There are 1217 total ACO-payer contracts: 32% of are commercial contracts, 51% are government, and 17% are government and commercial.

The ACO model was first legislatively encouraged within the Medicare program through the ACA, and Medicare ACOs make up a significant portion of the ACO market.

 Medicare ACOs are created by attributing patients—based on actual utilization of primary care services&mdash;to ACO organizations that will include the spectrum of healthcare providers, including physicians and hospitals. The current Medicare accountable care models are the Pioneer ACO program, which commenced in January 2012, and the Medicare Shared Savings Program (MSSP), which began in April 2012; a third program, the Next Generation ACO model, began in 2016.

Commercial payers and their provider partners have also formed commercial variations of the ACO model, including commercially developed quality measures.

 To date, the level of commercial ACO activity is greater than both of the federal programs combined, measured in either individual contracts or total covered lives.

 State-level ACO dynamics are also becoming increasingly prevalent, as Medicaid agencies struggle to find politically feasible ways to control the costs of their expanding healthcare assistance programs. Several states have adopted Medicaid versions of the ACO model, with many more either running pilot programs or actively exploring legislation that would enable accountable care initiatives.

The amount of financial risk absorbed by an ACO varies from incentive payments to upside-only bonus arrangements, and to upside- and downside contracts and full capitation. The 2 most common models are either a shared savings—including upside- and double-sided arrangements&mdash;or partial or full capitation.

 In shared savings, ACOs that spend below project costs share in a portion of earned savings; if also sharing in risk, ACOs pay a penalty for spending above projections.

 Most Medicare ACOs to date are in an upside-only shared savings model. However, some Pioneer and Next Generation ACOs have assumed more comprehensive financial responsibility in models that enable capitation, where organizations bear greater degrees of upside- and downside risk for spending compared with a negotiated rate. The private market reflects the most diversity among payment models.

Hospital Value-Based Purchasing Programs in Medicare

Similar to ACOs, providers participating in VBP programs have financial incentives that are linked to provider performance on specific care measures. Depending on a provider’s success in meeting pre-established quality and efficiency targets, they are either rewarded bonuses or penalized through reduced Medicare reimbursements. Although VBP initiatives vary across health settings, this analysis focuses on 3 hospital-based VBP strategies, which are summarized below.

In contrast to the optional ACO program, as authorized by the ACA, participation in Medicare VBP programs is mandatory for all eligible hospitals that accept Medicare payments.

 Participation is based on providing acute care and primarily includes short-term acute care hospitals and critical access hospitals, although some specialty hospitals are also included; federal Veteran’s Administration and Department of Defense hospitals are not. For each program, CMS adjusts the reimbursement rate for all services at a hospital. For example, doing poorly on readmission reductions could result in a hospital receiving only 99% of total eligible Medicare payments for all inpatient services provided to all Medicare beneficiaries. Thus, VBP program penalties represent a significant government effort to improve care quality. A summary of VBP penalties and metrics for each payment year is included in 

Under the HVBP, CMS provides incentive payments to hospitals for the quality of care they provide to Medicare patients. Quality is rewarded by how closely best clinical practices are followed and how well the hospital enhances a patient’s hospital stay experience.

 The program applies to payments on or after October 1, 2012, and affects payment for inpatient stays in 2985 hospitals across the United States.

Medicare provides quality incentive payments based on one of 2 available methods—either how well the hospital performs on each measure relative to the national average (achievement), or how much the hospital improves performance on each measure compared with their baseline (improvement).

 To assess total performance, CMS compares both a hospital’s achievement and improvement scores for each applicable HVBP measure and assigns final scores based on the higher of the two. Scores are then aggregated to create a composite score, from which incentive payments are determined.

 Hospitals are either penalized for poor performance or receive bonus payments for good performance. The size of the HVBP incentive has increased over time, from 1% of total Medicare payments in 2013 to 1.75% in 2016 (Table 1). Payment adjustments have ranged from 0.99% to 1.01% in 2013, to 0.9825% to 1.03% in 2016.

The HRRP provides a financial incentive for hospitals to reduce preventable readmissions.

 For the HRRP, specified conditions include heart attack, heart failure, pneumonia, total hip and knee repairs, and chronic obstructive pulmonary disease conditions. Rather than employing a reward system as in the HVBP, the HRRP incentive is based on a financial penalty for excess avoidable readmissions—which is a measure of the hospital’s readmission performance compared with the risk-adjusted national average.

 This excess readmissions ratio is then multiplied by the sum of base-operating DRG payments per specified condition, from which a final penalty is calculated.

Although the original fiscal year (FY) 2013 penalty could lead to a maximum of a 1% reduction on a hospital’s Medicare Diagnosis-Related Group reimbursement, the penalty increased to 2% in FY2014 and was capped at 3% in FY2015.

 Payment adjustments are based on a percentage of total payments, meaning that adjustments ranged from 0.99 to 1.0 in FY2013 to 0.97 to 1.00 in FY2015.

Hospital-Acquired Condition Reduction Program

The HAC Reduction Program is intended to improve inpatient safety by imposing financial penalties on hospitals that perform poorly with regard to hospital-acquired conditions, which are specified through CMS rule-making each year.

 Hospital HAC performance is assessed based on a hospital’s total HAC score, which ranges from 1 to 10, with 10 indicating the poorest performance. Total scores are determined by a weighted average of 2 domains: 1) patient safety, and 2) healthcare-associated infections—although other measures will likely be added in the future.

 From FY2015 onward, Medicare’s acute inpatient prospective payment system (IPPS) hospitals that rank in the highest quartile of total HAC scores (score of 7 or higher) will receive a 1% DRG payment reduction for all discharges.

Value-based purchasing data were obtained from Medicare’s acute IPPS final rule data files for FY2013 through FY2016.

 For the HVBP and the HRRP, 4 years of payment adjustment and performance data were available (FYs 2013, 2014, 2015, and 2016). For the HAC Reduction Program, 2 years of penalty data were available (FY2015 and FY2016). Because the amount of the potential penalties or bonus payments changed over time (1% of total payments in FY2013 to 3% beginning in 2015), to compare year-over-year performance, we normalized the penalties for each year to show trended data. After normalization, the mean of each year’s value is 0, with a standard deviation of 1.

Data on hospital participation in ACOs were obtained from the Leavitt Partners ACO database, which tracks organizations that are participating in accountable care arrangements and includes information on the hospitals participating in each arrangement and when the ACO went into effect. From this data, we were able to assign the quarter in which a hospital first became part of an ACO. Of the 3950 hospitals for which we were able to obtain any VBP data, 1566 are affiliated with or owned by an ACO in the Leavitt Partners database, and are thus considered to be a part of an ACO. We controlled for hospital characteristics based on number of beds, region, and ownership. Data were obtained through the end of November 2015.

We sought to understand whether ACO participation is correlated with better scores or improvements for the Medicare VBP programs. We performed 2 primary analyses: 1) a descriptive comparison of the VBP performance of hospitals that are participating in ACOs compared with those that are not, and 2) a longitudinal performance analysis of hospitals that newly become part of an ACO. In the descriptive analysis, we compared the various VBP scores for all hospitals that were part of an ACO with all hospitals that were not part of an ACO, using the most recent year (FY2016) data. We estimated raw scores and also adjusted for a variety of hospital demographic factors. The descriptive analysis was conducted for all 3 VBP programs, while the longitudinal analysis was limited to the HVBP and the HRRP due to lack of published historical data on the HAC Reduction Program. Because the HVBP scoring methodology changes each reporting year, we also repeated the analysis, retaining the second year methodology for subsequent years.

To estimate the effect that becoming an ACO had on a hospital, we evaluated the performance of hospitals that became part of an ACO during the time period for which performance data was obtained during the second year of our data against all hospitals that never became part of an ACO. Because the underlying performance data is based on data collected several years in advance, we identified hospitals that became ACOs during the performance period that led to the final performance year (PY) score for FY2014. Historical data were only available for the HVBP and the HRRP. For the HVBP, we used hospitals that became ACOs in calendar year 2012 (517 hospitals), which corresponds to performance data that affected FY2014 payments. For the HRRP, we used hospitals that became an ACO from July 2011 to June 2012 (351 hospitals), which corresponds to performance data that affected FY2014 payments. In both cases, we compared these hospitals with the 2384 hospitals that were never part of an ACO. 

The average performance of all hospitals participating in ACOs compared with those that are not participating in ACOs for FY2016 is available in 

. For the HVBP and the HRRP, a higher score is better, while for the HAC Reduction Program, a lower score is better. Hospitals participating in ACOs did worse than non-ACO hospitals for the HVBP (

 =.072), and worse for the HAC Reduction Program (

 <.001). When adjusting for hospital characteristics (beds, region of the country, ownership and teaching status), the direction of the difference remained, but the significance changed; hospitals in ACOs still did worse for the HVBP (

 = .028), and worse for the HAC Reduction Program (

 = .28). It should be noted that the differences for the VBP scores are very small because the actual scores tightly cluster around 1.00; however, even very small differences do correspond to significant differences in performance with these programs.

The results of the comparison of ACOs that newly joined ACOs during the second reporting year compared with non-ACO hospitals can be seen in 

 for the HRRP. For the HVBP, ACO hospitals outperformed non-ACO hospitals during year 1, although the difference is not significant (

= .30). During year 2, hospitals that joined an ACO in 2012 did significantly better than non-ACO hospitals (

= .005), but did not maintain that improvement into year 3 and did worse (

= .03). For the HRRP, ACO hospitals did slightly worse than non-ACO hospitals in year 1 (

= .06). For the most recent performance period, hospitals that participate in an ACO did better than their peers for the HRRP, but did worse on the VBP and HAC programs.

 compares the HVBP performance of hospitals joining ACOs during the second reporting year with non-ACOs, using only second reporting year methodology for all 4 years. If assessment methodology had remained constant from FY2014, hospitals that joined ACOs would have consistently outperformed non-ACO hospitals in PY2 (

Despite similar goals to improve healthcare quality and costs, variation exists in hospital participation in an ACO and VBP program. For FY2016, ACO-participating hospitals performed better than non-ACO hospitals for the HRRP, but not on the HVBP and the HAC Reduction Program. Longitudinal analysis, however, reveals that results are more varied, with evidence that hospitals joining ACOs did increasingly better than their peers for the HRRP, but had inconsistent results year-over-year with the HVBP.

High ACO hospital HRRP scores may signify that ACO-participating hospitals will first focus their priorities on value-based measures that overlap between programs. Reducing readmissions improves a hospital’s HRRP scores, the efficiency score in the HVBP, and clinical outcomes. Reduced readmissions also increases the possibility that an ACO will share in savings by reducing costs. MSSP ACOs are measured on their ability to reduce readmissions, and ACOs scored consistently high on this measure for the first year of the program.

 Although performance varied on other quality measures, most participants earned the maximum points possible for readmissions reductions. As ACOs have focused on readmissions to reduce costs, it is likely that ACO-participating hospitals will continue performing well on readmissions within the HRRP, as the ACO has increased incentive to reduce readmissions.

ACO-participating hospitals performed better than non-ACO hospitals from PY1 to PY2 for the HVBP, but performed worse from PY2 to PY3. The significant decrease in comparative performance during the last performance period indicates that ACO participation and VBP outcomes might not necessarily correlate. Part of this change, however, may be driven by changes in methodology between performance years of the HVBP. During each new performance period, the measured domains of the program have different weight contributions to a hospital’s overall score; new domains and additional measures are also included each year (Table 1).

The impact of the FY 2015 changes seemed quite strong as year-over-year correlation dropped from 0.61 (PY1 to PY2) to 0.42 (PY2 to PY3). Had the HVBP methodology remained consistent, hospitals that joined ACOs would have consistently outperformed non-ACO hospitals. As CMS continues to expand its focus on VBP arrangements, it must be sure that it rewards and penalizes based on factors that are truly associated with better care.

The descriptive analysis reveals that hospitals that are not a part of an ACO outperform ACO-participating hospitals in the HAC Reduction Program. Although there is a possibility that ACO hospitals see higher-acuity patients and are thus at risk for a higher frequency of hospital acquired conditions, it is difficult to assess causation on the poor performances of ACO hospitals compared with non-ACO hospitals. Various studies have suggested that the HAC Reduction Program scoring methodology is itself flawed and that the outcomes scores do not adequately reflect improvement.

 More comprehensive performance results may provide a clearer picture of the impact of ACO participation on HAC Reduction Program outcomes. 

Analyzes whether hospital participation in accountable care organizations is associated with a hospital’s quality and cost improvement outcomes in other Medicare value-based payment programs.

Tianna Tu, BA

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