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

Physician-led accountable care organizations generated nearly seven times more savings for Medicare last year compared to more high-revenue ACOs typically led by hospitals, a new analysis finds.

The analysis released Tuesday from the consulting firm Avalere found that low-revenue ACOs, which are typically led by physicians, generated $180 in Medicare savings per beneficiary in 2018. High-revenue ACOs, which are typically led by hospitals or health systems, generated $26 per beneficiary.

“All ACOs strive to reduce spending while improving quality in the new value-based world,” said John Feore, associate principal at Avalere, in a statement. “However, the financial incentives to reduce hospital spending are stronger for ACOs that don’t receive a substantial amount of revenue from hospital admissions.”

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Overall, there were 548 ACOs that generated $739 million in Medicare savings in 2018, according to the Centers for Medicare & Medicaid Services.

Last year, there were 235 ACOs that were low revenue and 313 were high revenue, Avalere said.

The Centers for Medicare & Medicaid Services classifies an ACO as either low or high-revenue based on a threshold of revenue in Medicare Parts A and B. The classification, part of the new “Pathways to Success” ACO program, is to distinguish which ACOs are led by physicians and hospitals.

The analysis also found that in 2018, first-year ACOs didn’t generate any savings and in fact increased Medicare spending per beneficiary by $20.

However, savings radically increased based on the more experience an ACO has.

For example, an ACO in the second year of operation generated $56 in savings per beneficiary last year while an ACO with six years of experience generated $141 per beneficiary, the analysis said. That's, in part, because ACOs often have growing pains the first year or so, officials said. 

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“The infrastructure investments required to start an ACO, along with the necessary care coordination efforts, beneficiary engagement and provider education initiatives take time to produce results,” said Gabriel Sullivan, an Avalere consultant, in a statement.

The consulting firm’s analysis was based on federal data provided by CMS.

“Pathways to Success,” which went into effect on July 1, calls for new ACOs to take on financial risk earlier in the program.

Under the previous program, an ACO could take on “upside” risk, where they get a share of any savings but don’t pay for any cost overruns, for six years before taking on “downside” financial risk where they have to pay for missing cost savings targets. Under Pathways, an ACO must take on downside risk after three years.