NEJM study says independent physician ACOs saved Medicare more than hospital-integrated ACOs

A stethoscope and paper money.
Physician group ACOs spent $300 less than providers that weren't in an ACO. (Getty Images/utah778)

The number of independent physician practices is decreasing as hospital groups constantly acquire and consolidate them. In 2012, nearly half of physicians worked at independent practice; by 2016, fewer than a third did (PDF).

But physician groups can play an integral role in decreasing Medicare spending, according to a study released Wednesday in the New England Journal of Medicine (NEJM).

Using Medicare claims data, the researchers found physician group ACOs spent $300 less per beneficiary compared to physician groups not in ACOs. Hospital-integrated ACOs also spent less than hospitals not in ACOs, though only $37 per beneficiary.

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Laura Hatfield, Ph.D., an associate professor of healthcare policy at Harvard who authored the analysis, said it’s important to use nonparticipating physicians and hospitals as a comparator rather than the benchmark to determine “what would have happened in the absence of the program.”

Physician groups in ACOs saved the Medicare program $256.4 million over that three-year time span. Hospital-integrated ACOs, on the other hand, spent $111.8 million more because bonus payments exceeded their reduction in spending.

"Groups that are driven by physicians rather than hospitals are able to take better advantage of the incentive structure that’s established by the Medicare ACO program," Hatfield said.

RELATED: Focus on advanced primary care improves success of ACOs, study finds

These findings also echo prior research that independent physician practices can save Medicare money.

Avalere Health and the Physicians Advocacy Institute have found that the same service can cost Medicare far more when performed in a hospital outpatient department rather than a physician’s office. For instance, a colonoscopy costs Medicare about $413 in a physician’s office, but $1,090 in a hospital outpatient department.

A study in the American Journal of Managed Care found similar results for Medicare spending on chemotherapy (PDF).

“Although we didn’t directly make any causal conclusions about what consolidation’s impact might be, it suggests that independent physician groups are either more agile or their incentives are better aligned with the program to reduce spending,” Hatfield said.

One way to increase market competition—and keep hospital systems from gobbling up independent physician practices—is by making payment rates in Medicare site-neutral, according to both Hatfield and co-author J. Michael McWilliams, M.D., Ph.D., the Warren Alpert professor of Health Care Policy and a professor of medicine at Harvard Medical School.

“Payment differentials have almost surely contributed [to] a lot of the hospital physician consolidation that’s going on,” McWilliams said, adding they may even be “chiefly responsible.”

It's also important that the Department of Justice and the Federal Trade Commission enforce antitrust law, he added.

RELATED: CMS data shows ACOs saved Medicare $314M in 2017

The study also found one-sided models “may be effective in lowering Medicare spending,” which runs contrary to what some experts have said—as well as CMS’s efforts to make ACOs take on more risk.

McWilliams believes “imposing downside risk is risky.”

Many researchers, as well as the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS) and the Congressional Budget Office, have conducted analyses showing net savings in Medicare, "so characterization of the program as a failure is certainly at odds with the evidence,” he said.

“There’s been a lot of talk about how the MSSP is in need of fixing, but it doesn’t seem to be broken” for physician-group ACOs, McWilliams said. Although some parts of the program, like the shared-savings rate, could use improving, he said CMS should be careful not to interfere with what has been successful. 

“It has not been a home run, but there are no home runs in healthcare," he added. 

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