Study: Accountable Care Organization Savings May Evaporate

ACOs will need more robust IT and better care coordination to reap the benefits of the Medicare Shared Savings program, according to Health Affairs report.

Michelle McNickle, Associate Editor of InformationWeek Healthcare

October 11, 2012

4 Min Read

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Accountable care organizations participating in the Medicare Shared Savings program will have to look elsewhere if they hope to actually share in the savings, according to a recent report in Health Affairs. The authors used a simulation model to analyze the effects of the Savings program and found that a ten-percentage-point improvement in performance on diabetes quality measures, for example, would reduce Medicare costs by only 1%.

CMS's accountable care program is the first federal program of its kind to incorporate pay-for-performance incentives. An ACO is a team of doctors, hospitals, and providers working together to bring care to at least 5,000 Medicare beneficiaries for at least three years. The goal of an accountable care organization is to lower costs through higher-quality care. In theory, healthier patients mean fewer expensive tests, surgeries, and medical procedures, and fewer admission rates. ACOs do away with the traditional "performance" element of care, and instead, providers are rewarded for demonstrating improvements in care.

However, after calculating the costs of performance improvement like additional tests and visits, the Health Affairs analysis found that savings decrease more and can even turn into additional costs. Report authors David Eddy, MD, founder and CMO, and Roshan Shah, associate scientist at healthcare modeling firm Archimedes, concluded that achieving additional savings would need to happen through other means, like the increased use of technology and care coordination.

"The important question is to what extent an improvement in the performance of measures translates into a reduction of cost or a savings, which can then be shared by the ACO," said Eddy, in an interview with InformationWeek Healthcare. "That’s the question we set out to measure."

The authors used a tool called the Archimedes model to simulate what would occur if the Shared Savings Program was implemented in an "average" accountable care organization. The model, said Eddy, was designed almost 20 years ago and is able to analyze a wide variety of populations. It takes into account important risk factors and characteristics of the population, as well as care processes and how the care is delivered.

The population in their analysis focused on patients with Type 2 diabetes. The study calculated the effects of improving performance on the ACO measures that are most directly related to quality and cost using this population. According to the report, diabetics are the largest at-risk group covered by these measures, making it a perfect case study in which the Shared Savings Program could have the largest impact.

[ For the latest development on Meaningful Use, see Meaningful Use Stage 2 Rules Finalized. ]

After creating the simulated Medicare patient population--complete with providers following protocols based on how this group should be treated--researchers noted a 10-percentage-point improvement in each of the measures, and then calculated what the effect on cost would be.

That's the point at which the investigators saw the 1% reduction in cost, not counting the prevention of downstream events. When they factored in re-admissions, for example, which are associated with heart attacks, strokes, and other diabetes complications, the savings were "eaten up to some extent by the cost of performing the interventions that were called for to improve quality," said Eddy.

"If you're going to do a better job of controlling blood pressure or the glucose levels of those with diabetes as called for with those [quality] measures, you'll have to have visits with physicians, and there are tests and drugs involved," he continued. "When you take those costs into account, the potential savings get smaller and in some cases turn into costs, depending on what measure you're talking about."

In addition, the cost of drugs covered under Medicare Part D could go up and further decrease any savings that may occur to Medicare or may be shared with the ACO, Eddy said. "So given the potential savings are not there, or are pretty small depending on what measure, it's important for ACOs to understand they're going to have to achieve the savings elsewhere in their programs--simply improving performance on the diabetes measures won't save a lot of money."

InformationWeek Healthcare brought together eight top IT execs to discuss BYOD, Meaningful Use, accountable care, and other contentious issues. Also in the new, all-digital CIO Roundtable issue: Why use IT systems to help cut medical costs if physicians ignore the cost of the care they provide? (Free with registration.)

About the Author(s)

Michelle McNickle

Associate Editor of InformationWeek Healthcare

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