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Rob Mechanic: ACO Savings Look Good Compared With Other Payment Models

Compared with other payment models, like bundled payments or the Comprehensive Primary Care Program, accountable care organizations (ACOs) have done a better job of saving money, said Rob Mechanic, MBA, senior fellow at the Heller School of Social Policy and Management at Brandeis University and executive director of the Institute for Accountable Care.


Compared with other payment models, like bundled payments or the Comprehensive Primary Care Program, accountable care organizations (ACOs) have done a better job of saving money, said Rob Mechanic, MBA, senior fellow at the Heller School of Social Policy and Management at Brandeis University and executive director of the Institute for Accountable Care.

Transcript

How have ACOs compared with other payment models when it comes to improving care and reducing costs?

So, ACOs first of all—just starting out with the Medicare program and all the different payment models in the Medicare program—the ACO program is by far the largest of any of them. We have bundles and patient-centered medical home, and other things; ACOs in the traditional Medicare program now cover about 30% of all the beneficiaries that are eligible. This is by far the this by far the largest program.

There’s been a narrative coming from the administration that ACOs haven’t saved money and that’s just not true. So, it turns out the way the program is measured is there’s a budget target called a benchmark and if an ACO’s spending is below that benchmark they get a shared savings payment; but the benchmarks, and it’s well documented in the research community, systematically underrepresent what the savings are. So, when CMS does formal evaluations, they don’t look at benchmarks. What they do is something a standard research method called a counter factual, where you compare change in spending for the patients who are attributed to the ACO to a matched cohort—geographically and clinically matched cohort—it's called a difference in differences model. So, when you look at that, for example, according to the benchmark method historically from 2013 to 2015 CMS measures savings as $960 million. But with a differences-in-differences approach, and there's been a recent study by Harvard published in New England Journal [of Medicine], savings were $1.6 billion, and a study commissioned by [National Association of ACOs] by Dobson Davanzo found $1.8 billion in savings.

When you look at the net savings to the government—so now you subtract out shared savings payments made to the ACOs—CMS would say in that period ACOs cost the program $340 million. But the Harvard study would tell you the program saved $360 million and the Dobson Davanzo study says it actual saved about $550 million. So ACOs have saved money.

Going forward, it's interesting because there has been a rash of new evaluations released and so if we run through the CMS contractor independent evaluations Pioneer ACOs saved the program money, Next Generation ACOs saved the program money, bundled payment for care improvement after 4 years no savings with the exception of joint replacement bundles and congestive heart failure admission bundles. [Comprehensive Primary Care] Plus doesn't have an evaluation, but it's predecessor the Comprehensive Primary Care Program saved money but not enough to offset the payments extra payments that the Medicare program made. So, the track record so far is ACOs look pretty good compared with the alternatives. 

 
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