Accountable Care Organizations: Early Results and Future Challenges

In the Medicare Shared Savings Program, interim results from CMS for the first 2 cohorts of ACOs showed that 29 of the 114 organizations lowered spending sufficiently enough to generate shared savings while 2 organizations had shared losses [20].This suggests that the great majority of ACOs spent close to their target. Final results on spending and quality are pending.

Results from the Medicare Physician Group Practice Demonstration

Ten provider organizations entered one-sided ACO-type contracts with Medicare in 2005 via the Physician Group Practice Demonstration. In this contract, organizations shared in savings provided that their spending was at least 2% below target and they achieved threshold performance on certain quality measures, most of which were process metrics.

In year 1, only one organization decreased spending enough to earn a shared savings, but after 3 years, five organizations had generated shared savings, although half of the savings were awarded to one organization [21].A recent analysis showed that 4 organizations sustained shared savings by the end of the program, with savings concentrated in acute care, readmissions, and beneficiaries who are dually eligible for Medicaid. Across the 10 organizations, financial performance ranged from average savings of $866 to increased spending of $749 per beneficiary per year [22].In total, about $78 million in savings were generated by this demonstration. Although a positive finding, this is a relatively small amount in the context of total Medicare expenditures [23,24].

On quality, all organizations met threshold performance on at least 29 of the 32 measures by the end of 5 years [21]. Most of these were process measures focused on coronary artery disease, diabetes, heart failure, hypertension, and preventive care [25].

Early Results from Commercial ACO Contracts

One of the early commercial ACO contracts to be evaluated was the Blue Cross Blue Shield of Massachusetts Alternative Quality Contract (AQC) [26].Initially implemented in 2009, the AQC is a multi-year contract that pays provider organizations a risk-adjusted global budget over the continuum of care. Seven organizations in Massachusetts entered the contract in the first year, and 4 more entered in 2010. Enrollees in HMO plans were prospectively attributed to their ACO by their designation of a primary care physician. The AQC is a two-sided contract that offered an additional 10% of an organization’s budget as a bonus for performance on 64 quality measures, half outpatient measures and half inpatient. Budget growth rates were tied to inflation and terms of its growth were negotiated with the organizations [27].

Over the first 2 years, the contract was associated with a decrease in medical spending of about $90 per enrollee per year, a –2.8% change (–1.9% in year 1 and –3.3% in year 2) [28].These savings were concentrated in procedures, imaging, and tests in the outpatient facility setting, and were largely explained by lower prices achieved by referring patients to less expensive providers. They were also concentrated in organizations that entered the AQC from fee-for-service, rather than prior risk contracts, and driven by enrollees with the highest expected spending. Over the second year, decreases in volume for certain services, such as percutaneous coronary interventions, began to contribute more to the savings [29].However, medical savings in the first 2 years were exceeded by non-claims payments, including shared savings and quality bonuses [27,28].The AQC was also associated with improvements in outpatient quality, including chronic care management measures (3.7 percentage points increase per year), adult preventive measures (0.4 percentage points per year), and pediatric quality measures (1.3 percentage points per year). Outcome measures such as hemoglobin A1c, LDL cholesterol, and blood pressure also showed an upward trend in the early years [28].Inpatient quality measures have yet to be examined.