What It Takes for Medicare ACOs to Earn Shared Savings

October 20, 2021 - The majority of accountable care organizations (ACOs) participating in the Medicare Shared Savings Program earned shared savings last year despite dealing with a global pandemic that altered healthcare utilization patterns.

2020 was actually a record year for the Medicare ACOs. Net program savings exceeded $1.86 billion compared to benchmarks and ACOs generated about $190 in net savings per attributed beneficiary, up from $85 to $88 the previous year.

Savings coupled with high-quality scores (despite the pandemic) led to an increase in the number of ACOs earning shared savings last year. According to a new analysis from researchers at Margolis Center for Health Policy at Duke University and Leavitt Partners, 67 percent of Shared Savings Program ACOs earning shared savings in 2020, up from 50 to 57 percent of ACOs the previous year.

How did more ACOs in the Shared Savings Program earn shared savings during one of the rockiest years for healthcare providers? The analysis published in the Health Affairs blog examined 2020 performance data and Milliman Torch Insight data and uncovered some shared characteristics among the Medicare ACOs that hit were rewarded for their performance in 2020.

What Medicare ACOs looked like in 2020

Researchers said the group of Medicare ACOs participating in the program last year differed compared to prior years. First off, there were fewer ACOs participating in the Shared Savings Program in 2020 compared to the previous year, with about a 5 percent difference. However, the Medicare ACOs had slightly more experience in the Shared Savings Program (4.4 years in 2020 versus 3.9 years in 2019 and 3.4 years in 2018).

READ MORE: 10 ACOs with the Highest Shared Savings Payments in 2020

They were also larger compared to previous years. The analysis found that the average size of the Medicare ACOs increased to approximately 20,700 attributed beneficiaries, resulting in a program total of about 10.6 million attributed beneficiaries, or around 28 percent of traditional Medicare beneficiaries. In 2019, there were only about 10 million beneficiaries attributed to the Shared Savings Program.

Additionally, there were more ACOs in downside risk tracks. About 37 percent of ACOs adopted downside risk last year, up from 33 percent in 2019. This was a result of full implementation of the Pathways to Success overhaul, which emphasizes greater downside risk adoption, among other changes, and the fact that slightly more ACOs in upside-only risk tracks dropped out of the Shared Savings Program compared to participants in downside risk tracks, the analysis showed.

In 2020, Medicare ACOs in the Shared Savings Program were also more likely to be led by a physician group versus a hospital or integrated organizations (46 percent versus 27 percent and 27 percent). The ACOs were also split between low revenue (51 percent) and high revenue (49 percent).

Shared savings trends

In 2020, physician-led ACOs were most likely to receive a bonus and generate shared savings compared to hospital-led and integrated ACOs, the analysis found.

“These findings are consistent with findings in previous years in which physician-led and smaller ACOs were more likely to generate shared savings,” researchers wrote. “Physician-led ACOs received bonuses and generated savings at rates of 70 percent and 85 percent, compared to hospital-led ACOs at 66 percent and 78 percent, respectively, and integrated ACOs at 63 percent and 85 percent, respectively.”

READ MORE: How Top Accountable Care Organizations Save Year After Year

Researchers also pointed that their hypothesis that Medicare ACOs have an initial learning curve and need a period of one to three years to acclimate to the Shared Savings Program seems to be true, at least according to 2020 performance results. They found that ACOs that were more experienced seemed more likely to reach savings. This trend was most noticeable once Medicare ACOs hit the third year of participation. About 52 percent of the ACOs in their third year achieved shared savings. After that, 83 percent of fourth year ACOs generated savings.

In a similar vein, the analysis showed that Medicare ACOs with more than one value-based contract earned shared savings compared to those with fewer contracts. Approximately 64 percent of ACOs with one contract received bonus payments compared to 86 percent of those with four or more contracts. Additionally, 80 percent of ACOs with one contract also generated savings for the Medicare program compared to 95 percent of ACOs with four or more.

Researchers also reported that when Medicare ACOs participated in value-based payment programs outside of Medicare, they were more likely to receive bonuses and generate savings.

“Increased payer participation and number of contracts both led to greater success in generating savings for ACOs. This may indicate that there are potential spillover effects from other contracts and payers that lead ACOs with greater VBP involvement to be better positioned to achieve savings,” they wrote in the analysis.

Medicare ACOs in downside risk tracks were also more likely to earn shared savings despite the belief that most provider organizations are risk averse. About 88 percent of the Medicare ACOs in downside risk tracks generated shared savings bonuses in 2020 versus just 55 percent of ACOs in upside-only risk tracks.

Future of Medicare ACOs, shared savings

READ MORE: 4 Key Strategies for Accountable Care Organization Success

It was tricky evaluating Medicare ACO performance in 2020 because of the COVID-19 pandemic. Not only did healthcare utilization patterns shift, but CMS also implemented a number of regulatory flexibilities to maintain access to high-quality care during the pandemic. Fortunately, Medicare ACOs weathered the storm and delivered record savings to CMS, to boot.

However, participation in the Shared Savings Program is down and the trend is unlikely to reverse over the next year as CMS continues to pause new entrants.

“Suspending ACO models rather than finding ways to build on them is a missed opportunity to advance better care,” researchers stated in the analysis.

“CMS should un-pause participation in ACO-like models and could consider continuing an upfront-savings option like the recently ended ACO Investment Model, which successfully increased MSSP expansion to rural areas, underserved areas, and new areas with low ACO penetration—while saving Medicare money and decreasing unnecessary use,” they advised. “There are also opportunities to take steps to support advanced ACOs in multipayer contexts, which the Health Care Payment Learning and Action Network (LAN) aims to encourage. Such multipayer efforts will also create a better environment when the Center for Medicare and Medicaid Innovation (the Innovation Center) rolls out its next round of models.”

Researchers also recommended longer performance periods for better utilization and population health measurement, updated performance measures and pandemic-related quality boosts, and benchmark calculation refinements to reflect non-pandemic performance more accurately.