Report: ACOs Not Living Up to Cost-saving Potential

September 25th, 2015

Four years after the program started, data show that Medicare accountable care organizations still are not living up to their cost-saving promise.

An analysis from Kaiser Health News shows that CMS paid 353 ACOs $60 billion for 6 million Medicare beneficiaries – and while progress was made in reducing hospitalizations, 45% of the groups cost more than projected. Overall, paying bonuses to the top-performing ACOs resulted in a $3 million loss to the Medicare trust fund.

One of the biggest issues so far with the ACOs is that most have not opted to accept risk – only 7% signed up for the high risk/high reward deal that would result in the ACO repaying Medicare for losses incurred by patients. In fact, only three ACOs that cost more than expected had to repay Medicare. CMS is giving the ACOs six years to participate without accepting any risk.

But not all the news is negative. A new study in JAMA Internal Medicine shows that the ACOs in the Pioneer program reduced the number of low-value services performed in the first year of the program. “During its first year, the Pioneer ACO program was associated with modest reductions in low-value services, with greater reductions for organizations providing more low-value care. Accountable care organization–like risk contracts may be able to discourage use of low-value services even without specifying services to target,” the study authors wrote.

But Medicare is now in a difficult position: If ACOs are required to accept risk from the start, more ACOs may drop out of the program and others may think twice about forming. Not requiring risk acceptance could mean less incentive for the ACOs to save money for Medicare. So while ACOs may not be realizing the dream of overall savings for Medicare, there is evidence that overall quality of care is improving for patients.