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ACOs and Other Value-Based Purchasing Models Have Yet to Cut Costs

A new study found population-based value-based purchasing models, like ACOs, have yet to implement the right incentives to moderate the growth in total cost of care.

Value-based purchasing and accountable care organizations

Source: Thinkstock

By Jacqueline LaPointe

- Accountable care organizations (ACOs) and other population-based value-based purchasing models have not decreased total cost of care or generated quality improvements at the market level, a new study found.

The Healthcare Financial Management Association (HMFA), Leavitt Partners, and McManis Consulting conducted a study of commercial data from 2012 to 2014 and Medicare data from 2007 to 2015 to determine if early value-based purchasing models impacted the total cost of care.

The analysis showed that the efficacy of the alternative payment models in decreasing costs and improving care quality has yet to be proven, and no statistically significant correlation existed between the penetration of value-based purchasing models and growth in the total cost of care for Medicare or commercial payers in over 900 markets.

“Many healthcare providers began making changes in how they provided care for patients during the years of this study,” explained David Muhlestein, Chief Research Officer at Leavitt Partners. “But the penetration of value-based payments was generally quite low and appeared insufficient to drive market-level changes in cost growth for Medicare or commercial payers.”

Population-based value-based purchasing models may be responsible for millions of lives. But the number of patients attributed to the alternative payment models only increased from 1.7 percent in 2012 (when the Medicare Shared Savings Program launched) to 5.6 percent by the end of 2014.

READ MORE: Best Practices for Value-Based Purchasing Implementation

Researchers elaborated that the period studied may have been too early to study the effects value-based purchasing models had on the total cost of care.

“While there are now 480 ACOs participating in the Medicare Shared Savings Program (MSSP), the largest of the Medicare ACO programs, only a fraction of this number were started during 2012 (65 total), the first year of the program,” they wrote.

“While numbers increased over the remainder of the data period, less than half of the current total were active by the end of 2014 (207 total). Even in 2017, with 480 active MSSP ACOs, only 9 million Medicare beneficiaries were attributed to an MSSP patient population, just over 15 percent of the 55.5 million beneficiaries nationally.”

Value-based purchasing penetration may have been a challenge, but so were the limited incentives offered under the alternative payment models, the study stated.

First, few providers engaged in population-based value-based purchasing models with downside financial risk, which hindered the models from reducing costs and improving quality.

READ MORE: Exploring Two-Sided Financial Risk in Alternative Payment Models

“Looking again at current data for the MSSP program, more than 90 percent of the 480 ACOs participating in the program as of 2017 are in Track One of the program (i.e., they have one-sided, or ‘upside,’ risk only),” researchers wrote. “The Center for Medicare & Medicaid Innovation (CMMI) has introduced more advanced ACO programs, including the Pioneer ACO and Next Generation ACO, that require provider organizations to take downside risk, but the number of participating organizations in these models is quite low.”

Only eight organizations stayed in the Pioneer ACO programs, and 58 organizations have joined the Next Generation ACO initiative.

A qualitative study revealed that health system and hospital leaders favor an incremental approach to taking on downside financial risk.  But the analysis indicated that “in the few programs and markets where some level of downside risk has been assumed, it can drive change in organizational behavior and care delivery.”

In addition, the study also found that few population-based value-based purchasing models offered incentives beyond the system-level. The provider organizations interviewed stated that provider compensation still hinges on productivity, rather than care quality or efficiency.

Interviews also said data analytics and care management infrastructure costs delayed the production of a positive return on investment under value-based purchasing models.

READ MORE: Key Capabilities for Population-Based Alternative Payment Models

While value-based purchasing models had little impact on total cost of care reduction, the market structure did, the study uncovered.

Healthcare costs were lower in markets with “well-organized provider networks.” These low-cost markets tended to have between two and four health systems with good geographic coverage competing. The markets also typically had at least one integrated delivery system as a competitor.

Additionally, physicians in these low-cost networks tended to be employed by a health system or in close alignment with a system.

In contrast, higher cost markets generally had a large number of provider groups compared to the size of the population.

Researchers also pointed out that lower-cost markets typically had a mechanism for sharing information among employers and other care purchasers. Organized employer coalitions, state reporting agencies, and other mechanisms allowed for the exchange or public reporting of care quality and cost information.

“These findings suggest that the type of competition may be more important than how much competition is in a market,” stated HFMA President and CEO Joseph J. Fifer, FHFMA, CPA. “This research is a valuable addition to the debate about the impact of consolidation on total cost of care.”

In light of these findings, researchers recommended that stakeholders continue to develop and implement value-based purchasing models that include incentives to control total cost of care. They also suggested that stakeholders consider the balance the benefits of competition with the benefits of market integration, as well as support healthcare transparency within markets.

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