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Measuring the Cost Implications of the Collaborative Accountable Care Initiative in Texas
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Measuring the Cost Implications of the Collaborative Accountable Care Initiative in Texas

Vivian Ho, PhD; Timothy K. Allen, PhD; Urie Kim, BBA; William P. Keenan, BA; Meei-Hsiang Ku-Goto, MA; and Mark Sanderson, PhD
A private accountable care organization model with an embedded care coordinator and a list of recommended providers yields cost savings similar to initiatives with risk-based contracts.
Table 1 provides descriptive statistics comparing the treatment and control groups. Prior to the implementation of the CAC initiative, the MCNT clinic treated 8266 Cigna patients in 2009, and 7171 patients after the initiative was introduced. The experiences of these patients were compared with that of 180,278 Cigna patients treated by other providers in north Texas in 2009, and 185,561 patients in 2010 to 2011. Patients treated by the MCNT clinic were slightly older than patients covered by Cigna in other parts of north Texas, which translated into slightly higher risk scores. These differences are accounted for in the regression analyses. The truncation of medical spending in a given 6-month period, at $100,000, was necessary for only 5 observations in the sample. All of these observations were in non-MCNT clinics, and spending exceeded $1 million in each case.

The first row of Table 2 indicates that overall, the average 6-month expenditures declined between 2009, and 2010 to 2011, for patients covered by Cigna in the Dallas–Fort Worth area in both MCNT and non-MCNT clinics. The difference-in-differences analysis tests whether the decline in spending for MCNT under the CAC initiative was greater than the decline for non-MCNT clinics, after controlling for other factors that might explain observed spending patterns during the study period.

After implementation of the CAC initiative, average healthcare spending fell substantially for patients associated with an MCNT clinic, but declined only slightly for enrollees in the control group. Overall, from 2010 to 2011, statistical estimates indicated that the intervention was associated with a $128.30 (P <.001) decrease in average spending per enrollee per 6-month period, relative to what spending would have been without the intervention (Figure and Table 2). This decrease was a 6.5% reduction compared with what the spending would have been without the intervention. Further analysis indicates that most of the cost savings achieved by MCNT occurred during 2011. Spending per 6-month period did not change significantly between 2009 and 2010, but fell by $236.13 from 2009 to 2011.

Because only a portion of the care coordination fees were included in the 2010 and 2011 claims, the estimates do not include all of the costs associated with the CAC initiative. After subtracting all the fees paid in 2010 and 2011, the average overall net savings per 6-month period in 2010 to 2011 was $106.25 (5.7%).

This reduced spending was evident in multiple BETOS service categories—procedures, durable medical equipment, and “other” spending—although there were noticeable differences in the percentage reductions in spending across these BETOS categories. Average spending on procedures fell 10.2% between 2009 and 2011, while spending for durable medical equipment fell 13.4% and spending on “other” services fell 22.5%. The “other” services BETOS category is heterogeneous and includes ambulance services, as well as chemotherapy and other drugs. In most categories, the spending declines were larger in magnitude in year 2 of the intervention compared with year 1. Moreover, the decline in spending was statistically significant for all 7 BETOS categories in 2011 versus 2009.

Inpatient and outpatient facility payments and other medical service payments for MCNT enrollees all experienced significant cost savings relative to the control group. The average 6-month cost savings were larger in magnitude in 2011 than in 2010. The percentage declines in inpatient and outpatient facility spending were similar in magnitude (8.4% and 7.9%, respectively), while other medical services fell 16.7 percentage points. There was no significant decline in professional payments for patients covered by MCNT.

When we estimated cost savings using normalized prices, the estimated average 6-month savings over the period 2010 to 2011 fell to 3.7%. Therefore, some of the cost savings from the CAC initiative resulted from changes in service utilization. Of the remaining savings, approximately half resulted from using sources that had lower average costs per service.

The sensitivity analyses yielded cost savings estimates that were consistent with the main result. Limiting the sample to patients who were continuously covered by Cigna from 2009 through 2011 yielded an estimated average 2-year cost savings of 5.1% (–$103.76; P <.001). Omitting the adjustment for cost sharing implied an estimated cost savings of 6.8% (–$128.12; P <.001). Omitting the propensity weights implied an estimated cost savings of 8.1% (–$142.80; P <.001).

DISCUSSION

The 2-year estimate of 5.7% average net cost savings from the CAC initiative may seem large when compared with initiatives such as BCBS Massachusetts Alternative Quality Contract, which reportedly saved 2.8% over a similar time span; however, most of the patients with 2 years of utilization under the BCBS intervention were from practice groups that had prior experience managing risk-based contracts.27 For patients treated by physician practice groups with no prior experience with risk-based contracts, the 2-year BCBS estimated savings was 8.2%, and, similar to the CAC initiative, the cost savings amount was substantially larger in the second year compared with the first year.

Limitations

We would have liked to continue the analysis of MCNT and the CAC initiative beyond 2011; however, MCNT joined a larger integrated care organization, USMD Health System, in 2012, so data from later years may not be comparable. We shared our study results with MCNT’s managers and asked them to comment on their experience with the CAC initiative. The managers stated that MCNT devoted additional unquantified resources, including analytics and managers’ time, which were not fully covered by the care coordination fee paid by Cigna. MCNT managers stated that they were willing to do this because they recognized a change from volume to value among payers. Therefore, they viewed these additional costs as an investment in population health, which would be essential for future business.

Cigna bore additional costs to develop predictive models to assist MCNT and to develop the collaborative incentive relationship. Since then, Cigna has since been able to apply the tools developed for the MCNT relationship to over 140 incentive arrangements. Therefore, the marginal administrative cost of providing these tools to MCNT was likely minimal. It is possible that some other change in MCNT practices that occurred simultaneously with the CAC initiative could explain the cost savings identified in this study; however, MCNT management could not think of any other major changes in the practice that could explain the study results. Some offices expanded their hours during this time period, but the MCNT physicians could not see a link between this change and the measured savings.

Among BETOS categories, the 2-year average decline in spending for evaluation and management was statistically insignificant between 2009 and 2011, even though this category accounts for the most dollars spent among the 7 service categories. When spending was categorized by site and type of care, there was also no statistically significant average decline in professional payments from 2009 to 2011. Large and statistically significant reductions were observed for inpatient and outpatient facility spending, as well as other medical service payments. There was a similar finding when a risk-based contract was implemented among several hundred physicians by a health maintenance organization in the 1990’s.40 A conclusion in that study was that physician practices were less likely to decrease spending on services resulting in direct reimbursement to their own offices, and more likely to cut spending on services delivered to their patients by other healthcare providers. Results such as these suggest that physician-owned ACOs, such as MCNT, may be more effective in reducing spending than hospital-led ACOs.11,41

It is possible that the CAC initiative led MCNT physicians to provide services in their clinics that lowered the need for more expensive services from outside providers. This might have been accomplished through preventive medicine or by performing procedures and tests in their offices that could have been referred. It is also possible that patients were referred to less expensive in-network or out-of-network providers or encouraged to use nurse practitioners instead of doctors or urgent care centers instead of emergency departments. Unfortunately, we do not have sufficient data to test these hypotheses.

A recent survey of private ACOs found that these organizations differ significantly in features, such as patient attribution and performance measurement and targets.8 Given the many features in which contracts between physician practices and insurers can differ, more extensive comparisons of the Cigna approach, relative to other ACO and medical home models, should be conducted. The upfront funding of coordinated care and local benchmarking may be highly effective tools in achieving cost savings for many other physician practices.

CONCLUSIONS

Although many studies describe the potential advantages of ACOs, only a handful of papers document the actual performance of these organizations. We found that after 2 years, a private ACO model with an embedded care coordinator and a list of recommended providers led to an estimated average of 5.7% net cost savings compared with what costs would have been without the initiative. Both upfront funding of coordinated care with local benchmarking or the responsiveness of a physician-owned ACO versus a hospital-led ACO may have contributed to these cost savings. Given the wide variety of organizational and contractual differences across private ACOs, future research should aim to distinguish between these 2 potential cost-saving mechanisms and others to determine which ACO models are most cost-effective.

Acknowledgments

Dr Ho acknowledges support from the Kuwait Foundation Fellow endowment at Rice University’s Baker Institute.

Author Affiliations: Rice University’s Baker Institute for Public Policy (VH, MHK-G), Houston, TX; Department of Economics (VH), Rice University, Houston, TX; Department of Medicine, Baylor College of Medicine (VH), Houston, TX; Cigna (TA, UK, WPK, MS), Hartford, CT.

Source of Funding: None.

Author Disclosures: Dr Allen, Mr Keenan, and Ms Kim are employees of Cigna, and Dr Sanderson was a Cigna employee during the course of this study. Medical Clinic of North Texas physicians subject to the study were contracted as in-network by Cigna for agreed-upon reimbursement of covered services and additional incentives related to the collaborative accountable care arrangement. The remaining authors report no relationship or financial interest with any entity that would pose a conflict of interest with the subject matter of this article.

Authorship Information: Concept and design (TKA, VH, MS); acquisition of data (TKA, MHK-G, VH, UK, WPK); analysis and interpretation of data (TKA, MHK-G, VH, UK, WPK, MS); drafting of the manuscript (VH, MS); critical revision of the manuscript for important intellectual content (TKA, VH, UK, MS); statistical analysis (TKA, MHK-G, VH); administrative, technical, or logistic support (VH, WPK); and supervision (VH, MS).

Address Correspondence to: Vivian Ho, PhD, Rice University, 6100 Main St, MS 40, Houston, TX 77005. E-mail: vho@rice.edu.
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