4 reasons ACOs may generate limited savings

ACOs may generate sluggish savings early on, according to a new study. (jansucko/iStock/Getty Images Plus/Getty Images)

Accountable care efforts are beginning to pay off, but there are several reasons why these new models may initially generate sluggish savings, according to a new study.

Researchers at the Dartmouth Institute for Health Policy and Clinical Practice compared ACO performance in the first three years at three different types of ACOs: integrated delivery systems, outpatient-physician-practice ACOs and coalitions formed by independent hospitals and practices. Their findings were recently published in the New England Journal of Medicine. 

The study found that in the first year of the contracts, about 30% of ACOs in each group earned bonuses. In year two and three, however, the savings were more varied. Savings at integrated delivery systems remained mostly the same over years two and three, but hospital coalitions saw savings of about 30% in year two and 47% in year three.

Physician group ACOs saw savings increase each year, 43% in the second year and 51% in the third. 

RELATED: How NYC Health + Hospitals found ACO success, reducing Medicare costs and earning millions in savings 

The study identified four reasons some groups earn "slugglish" savings: 

  1. Weak incentives or limited downside risk: Medicare Shared Savings Program ACOs, for instance, earn bonuses for generating savings but don't bear financial losses. Greater downside risk sharing could lead providers to improve quality more quickly.
  2. Not enough patients enrolled in an ACO: Providers must reach a "tipping point" in ACO enrollment to generate significant savings.
  3. Limited knowledge: Some hospital coalition or physician organization ACOs may need more time to build new care management models and explore improvements.
  4. Foundational work may delay savings: Most ACOs are not pre-existing organizations, so the foundational work to create them could hold back initial savings.

RELATED: Pioneer, Next Generation ACOs saved Medicare millions 

Medicare places few constraints on what form an ACO must take, so it's vital for policymakers to examine the performance of such programs and allow for flexibility, according to the researchers. 

"In thinking through refinements or redesign, policymakers should give careful consideration to the diversity of ACOs," lead author Valerie Lewis, Ph.D., said in an announcement. "The balance of pushing hard enough with incentives while also allowing time for ACOs to grow and develop is tricky, but getting this right could ultimately lead to more successful programs—and greater savings."