The government's 2010 savings projection for ACOs under the Medicare Shared Savings Program was off by several billion dollars, according to a new report.
The March 29 report by Avalere found that accountable care organizations in the program operating in Track 1 models, which do not bear any financial risk, increased federal spending by $444 million from 2012 to 2016. At the same time, ACOs in risk-bearing tracks reduced spending by $60 million, a total $384 million increase in spending during that time period.
The Congressional Budget Office (CBO) in 2010 projected that the program would produce $1.7 billion in net savings during this time, a $2 billion difference.
Researchers say this is mostly due to many ACOs resisting the move into risk-based tracks, where they run the chance of losing money, along with other factors the government didn't take into consideration. However, the industry is showing signs of a shift.
According to the Centers for Medicare & Medicaid Services, 561 organizations (PDF) are participating in the Shared Savings Program for 2018 and cover more than 10 million patients. A large majority of the participants (82%) are in the non-risk based Track 1 model, but that's a decline from 91% last year (PDF) due to the introduction of Track 1+, a new risk-based model.
The Medicare Payment Advisory Commission (PDF) has also found that the number of participants in the program has been consistently growing.
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Organizations take time to get used to the program, the report said. ACOs that participate in the program longer also gain more experience and perform better, seeing greater savings.
"ACOs in their fourth performance year produce net savings to the federal budget, totaling $152 million," the report said. "These results suggest that CBO’s initial projections may not have taken into account the time it takes for ACOs to gain experience with the program and to start to produce consistent savings."
The agency reported in October that the Shared Savings Program reduced gross Medicare spending by $652 million in 2016. However, the agency paid more in shared savings than it saw in net returns.
The Avalere analysis also found that the program has produced $1.6 billion in program savings compared to benchmarks over the span of the program.
How will lawmakers, White House respond?
Avalere said that lawmakers, and the administration, are focused on convincing reluctant organizations to take on more risk in order to reduce costs in the overall healthcare industry.
John Feore, director at Avalere and one of the authors of the report, told FierceHealthcare that Congress has already taken steps to improve the program and push organizations into risk-bearing tacks, including a 5% advanced APM bonus under MACRA.
"There are many organizations that still haven't even looked at this," he said.
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Feore added that the Department of Health and Human Services (HHS), under the new direction of Secretary Alex Azar, will also likely take steps later this year to encourage ACOs to advance to more risky models and reduce spending. Azar has previously indicated he is more willing to make organizations take on financial risk than his predecessor, Tom Price.
"We could see them run something through the Innovation Center, like a demonstration program from smaller and rural Track 1 ACOs to receive additional incentive payments if they accept downside risk," he said.
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He added the CMS Innovation Center has broad authority to waive existing Medicare requirements and rules, including reimbursements, for its programs.
But ACOs could continue dragging their feet. In a letter to CMS Administrator Seema Verma, the National Association of ACOs asked the agency to allow certain organizations in Track 1 contracts that began the program early to remain and not be forced into risk-based contracts starting next year. The program currently only allows organizations to stay in non-risk tracks for two agreement periods, or six years, before being moved into another model, but NAACOs said that some ACOs still need more time.
"Many ACOs remain in Track 1 because they are unprepared to assume risk requiring them to potentially pay millions of dollars to Medicare, which is simply not practical or feasible for most of these organizations," the organization said in the Feb. 22 letter.