Medicare Shared Savings Program ACOs show promise in cost reduction, quality improvement, OIG finds

Medicare written on paper with a stethoscope
Medicare Shared Savings Program ACOs achieved $1 billion in net savings to Medicare in the program's first three years. (Getty/Design491)

Accountable care organizations under the Medicare Shared Savings Program show promise in both quality improvement and cost reduction, according to a new report.

The Department of Health and Human Services Office of Inspector General analyzed (PDF) payment and quality data from the Centers for Medicare & Medicaid Services for the first three years of the program and found that the Shared Savings Program ACOs achieved $1 billion in net savings to Medicare over three years and improved care quality more quickly than fee-for-service organizations.

ACOs in the program longer achieved higher cost savings than new ACOs, which indicates that these organizations are learning over time how to save more, according to the OIG. A third of the 428 ACOs reduced spending enough to earn back some of the savings, and the highest-performing ACOs reduced spending by an average of $673 per beneficiary during the program’s first years.

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The studied ACOs overall improved on 82% of 33 quality measures since the start of the program, and outperformed fee-for-service providers on 81% of measures.

The results suggest that ACOs are beneficial, but the highest-performance organizations should be further examined to determine what they’re doing to put themselves above the rest. The findings also highlight that the benefits of new payment models may not appear overnight.

“With any major payment reform, time may be needed for organizations to make  changes to improve quality and lower costs,” the OIG said. “While policy changes may be warranted, ACOs show promise in reducing spending and improving quality.”

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Spending on Medicare is expected to reach $1.4 trillion by 2027, making reviews of alternative payment models like ACOs crucial, according to the OIG.

The number of ACOs operating across the country is growing, but for that growth to continue it must be easier for providers to balance multiple alternative payment models at one time.

Studies have shown that effective ACOs can reduce readmissions, spending and hospitalizations. The jury is still out with some physicians as to whether the model truly works, as some studies have shown significant doctor turnover and enrollee churn.