ACOs saved Medicare $755M from 2013 to 2017, new analysis finds

Woman paying for a prescription at a pharmacy
A new report found accountable care organizations saved Medicare $755 million over a four-year period. (Getty/Tom Merton)

Accountable care organizations (ACOs) lowered Medicare spending by $755 million from 2013 to 2017, a new analysis found.

The analysis, released Tuesday by analytics firm Dobson, DaVanzo & Associates, comes as ACOs are working to meet new federal regulations from the Centers for Medicare & Medicaid Services (CMS) to make them take on financial risk at a faster rate.

“Time and again, ACOs have proven superior to Medicare’s other value-based care initiatives,” said Clif Gaus, president and CEO of the National Association of ACOs, the industry’s top lobbying group that commissioned the study.

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The analysis found that net federal savings for the Medicare Shared Savings Program (MSSP), which oversees the 518 ACOs in the program, was $755 million from 2013 to 2017.

RELATED: ACOs linked to consolidation of physician practices, study finds

The gross savings from ACOs for that same time period was $3.5 billion. The net amount comes after paying quality bonuses to ACOs for hitting spending targets and quality measures.

The analysis found that gross savings have increased every year that was studied. In 2013, ACOs delivered $357 million in gross savings for CMS, but in 2017 that number reached $930 million.

Dobson’s analysis was based on public files from CMS as well as data on provider participation and spending for assigned and unassigned Medicare beneficiaries.

The analysis is the latest finding of savings for the ACO program. Data from the Medicare Payment Advisory Commission found that ACOs can lower Medicare spending by a rate of 1% to 2%.

RELATED: Physician-led ACOs generated almost 7 times more savings than hospital-led ACOs: Avalere

"ACOs have consistently since the beginning saved money," said Rob Mechanic, executive director of the Institute for Accountable Care. "It has been fairly consistent year-to-year." 

He added that ACOs tend to perform better the longer they are in the program. 

"It is an indication that CMS ought to continue to invest in this model because it has been the strongest performer of the various payment models they have tested," Mechanic said.

CMS announced back in September that ACOs generated $739.4 million in net savings in 2018.

In July, CMS launched a new program called Pathways to Success expected to replace MSSP. The program requires new ACOs to start taking on financial, or downside, risk earlier.

RELATED: A dip in new arrivals of ACOs has some in industry wary of a new trend

An ACO just starting out can choose to only take on upside risk, which means the ACO gets a share of any savings from meeting cost targets but doesn’t pay the government anything for missing those targets. Eventually, the ACO will also have to take on downside risk, where the organization must pay back Medicare if it doesn’t meet spending targets.

In the previous MSSP, an ACO could take on only upside risk for six years before taking any downside risk. Now, under Pathways to Success, a new ACO must adopt downside financial risk after three years.

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