Physician-Led ACOs Saved More Than Hospital ACOs in 2018

October 16, 2019 - Physician-led accountable care organizations (ACOs) in the Medicare Shared Savings Program (MSSP) produced nearly seven times the savings per beneficiary than hospital-led ACOs, a new analysis revealed.

The analysis released Tuesday by consulting firm Avalere found that low-revenue ACOs, which is a new designation that applies to most physician-led ACOs under the recently launched overhauled MSSP, generated $180.41 in savings per beneficiary in 2018.

In contrast, high-revenue ACOs, which were mostly hospital-led and accounted for 57 percent of all MSSP ACOs in 2018, produced an average of $26.76 in savings per beneficiary.

“All ACOs strive to reduce spending while improving quality in the new value-based world,” John Feore, associate principal at Avalere, stated an emailed press release. “However, the financial incentives to reduce hospital spending are stronger for ACOs that don’t receive a substantial amount of revenue from hospital admissions.”

CMS announced earlier this month that the 548 ACOs participating in the MSSP in 2018 saved a total of $739 million after shared savings payments were distributed to qualifying ACOs. Two-thirds of the ACOs saved compared to their spending benchmark, and 37 percent saved enough to earn shared savings payments.

The federal agency also found that physician-led ACOs outperformed their hospital-led peers.

Given the success of physician-led ACOs, CMS is confident that the providers will succeed under new MSSP rules, which grant them greater flexibilities compared to hospital-led ACOs.

Under the overhauled MSSP, which CMS named Pathways to Success, ACOs are divided by the amount of revenue they generate. The agency explains that physician-led ACOs will tend to be low-revenue ACOs because they provide primarily outpatient services, while hospital-led ACOs will more likely qualify as high-revenue because they offer inpatient and outpatient services.

Low-revenue ACOs will be able to participate under upside-only risk for an additional year compared to high-revenue ACOs.

Avalere found that 43 percent of ACOs participating in MSSP in 2018 were considered low-revenue according to Pathways to Success rules.

CMS intends for the new revenue designations to help ACOs generate more savings. The agency expressed concerns prior to the MSSP overhaul that ACOs in the program were not taking accountability for their costs through downside risk and that was leading to increasing spending on the program.

Pathways to Success requires new high-revenue ACOs to assume downside risk within two years of program participation, while low-revenue ACOs have the option to take three years.

But Avalere found that time may be the key to generating greater savings.

The analysis found that ACOs in their first performance year in 2018 increased Medicare spending, while all other ACOs reduced spending that year.

The highest-performing ACOs were also the organizations with the most experience, the data showed. ACOs in their sixth year of MSSP participation generated average savings of $141.48 per beneficiary in 2018 compared to $122.68 for those in their fifth year, $84.51 for those in their fourth year, $50.30 for those in their third year, and $56.41 for those in their second year.

ACOs in their first year of MSSP participation incurred an average of $20.20 per beneficiary in 2018.

“As we have found in previous research, ACOs with experience tend to perform better than newer ACOs,” explained Gabriel Sullivan, consultant at Avalere. “The infrastructure investments required to start an ACO, along with the necessary care coordination efforts, beneficiary engagement, and provider education initiatives take time to produce results.”

Stakeholders have used the research as evidence for modifying Pathways to Success rules. Some have argued that two to three years is not enough time for ACOs to build the capabilities and infrastructure needed to succeed as a risk-based ACO. Others have also voiced concerns that the accelerated path to risk could discourage participation in the program.

MSSP participation has decreased since CMS finalized Pathways to Success, according to a report from the National Association of ACOs (NAACOS). They found that participation fell for the first time in 2019 since the program launched in 2012 and less than half the number of new ACOs joined.

CMS remains optimistic that greater accountability through downside risk will lead to improved, more efficient care. The agency reported earlier this month that MSSP ACOs assuming downside risk in 2018 produced average savings of $96 per beneficiary compared to $68 per beneficiary for ACOs that did not take on downside risk.