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ACOs Saving Some Money, But Medicare Is Short On Details

By Jenny Gold

January 31st, 2014, 5:00 AM

Accountable care organizations are saving some money, though what exactly that means is still unclear.

The Centers for Medicare and Medicaid Services announced Thursday that overall, provider groups involved in Medicare ACO programs saved a total of $380 million in the first year. Sounds like a lot of money, but CMS declined to explain which hospitals were winners and which were losers, how it compared to expectations and how much the participants invested in coordinating care. Also missing is the scale of the savings; CMS did not provide the context of total spending by the ACOs.

“If these results and savings continue, this will be a phenomenal success story for the Medicare program,” said Jon Blum, principal deputy administrator at CMS.

Of the 114 Shared Savings Program ACOs in the first year, 54 had lower spending than projected. But just 29 generated enough savings to qualify to keep some of it, which totaled $126 million for the provider networks and an additional $128 million for the Medicare Trust Fund.

The Pioneer ACOs, high-performing organizations which take greater risks, were measured separately. Of the 23 Pioneer ACOs in the program, nine had significantly lower spending growth and also did well on their quality measurements. The Pioneer program generated a total of $147 million in gross savings.

Those numbers add up to $401 million, not $380 million, but CMS did not explain the discrepancy. It’s also unclear whether the savings figures factored in any losses from some of the ACOs that did not do well. And the agency did not release information about which ACOs saved money and which did not.

So what exactly do today’s numbers tell us?  “Well, some number of ACOs were able to save some money in the first year. And it’s not a lot of money compared to overall spending, but it’s a start,” says Chas Roades, chief research officer at The Advisory Board Company consulting firm. “I don’t think anyone expected huge savings in the first year. So it’s a start.”

There are already 360 ACOs within the Medicare program serving about 5.3 million beneficiaries (about 12 to 13 percent of all people with Medicare). The number of ACOs has been growing by about 100 organizations each year. But David Muhlestein of consulting firm Leavitt Partners says more recent additions to the program have mostly been very small physician groups rather than large hospital systems.

For provider networks still considering whether or not to become an ACO (which Muhlestein calls “ACOs-in-waiting”), today’s news is actually “a net negative.” That’s because the savings, when averaged over the approximately 1.6 million lives covered by those ACOs, were only about $80 per person for the year, or a little less than 1 percent of spending.

“It’s not insignificant, but it’s not what you’d consider a huge success,” says Muhlestein. He adds that it’s unclear whether the savings covered the cost of the ACOs’ initial investment in information technology, nurse care coordinators, and any other upfront costs to become an ACO.

That gives the ACOs-in-waiting little incentive to become an ACO right away, he says. Instead, they’re more likely to sit on the sidelines for another year or so to find out what works and what doesn’t. “They’re on the diving board and watching, and this isn’t going to convince them to jump any sooner,” he says.

Montefiore Medical System in the Bronx saved Medicare a total of $24 million in the first year, of which it kept $14 million, according to Steve Rosenthal, vice president of network management at Montefiore, which is part of the Pioneer program.  The system spent 7.2 percent less than its benchmark in the first year, or about $100 per Medicare beneficiary per month. That’s the best of any ACO in the Medicare programs, Rosenthal adds.

As an example of success, he offers the case of a patient named John who drives a cab in the Bronx for 12-hour shifts, six days a week. Before he came to Montefiore, John was an out-of-control diabetic who had visited the emergency room 42 times in a single year, mostly because it was difficult for him to make it to doctor’s appointments.  Montefiore set him up with a diabetes control manager who helped him monitor blood sugar levels, take meds and eat healthier. Within the first year of the program, John made only one visit to the emergency room.

Montefiore was already well into the world of coordinating care by the time it joined the Pioneer program in 2011. “The secret sauce is about 17 years in experience of managing population health,” Rosenthal said. “We were an ACO before there was a term for it. And what we’ve learned over those years is there are no magic bullets.”

Instead, he says success comes down to a careful analysis of clinical data, claims, and helping physicians manage the most complicated patients.

3 Responses to “ACOs Saving Some Money, But Medicare Is Short On Details”

  1. maria says:

    I have come to conclude that you cannot rely on data from the current administration in power weather it is Democrats or Republicans. They tent to bend or show data that supports their party ideologies. Time has come for true leaders to show up and admit what is wrong with the system and for once care about the average Joe as opposed to their agendas.

  2. Theresa says:

    Story says– Montefiore Medical System in the Bronx saved Medicare a total of $24 million in the first year, of which it kept $14 million, according to Steve Rosenthal, vice president of network management at Montefiore, which is part of the Pioneer program. The system spent 7.2 percent less than its benchmark in the first year, or about $100 per Medicare beneficiary per month. That’s the best of any ACO in the Medicare programs, Rosenthal adds.

    So…how does Rosenthal know this? DId the reporter attempt to verify this claim? Check it against CMS data–story says no specific data were reported.

  3. Edward D Shanshala II says:

    The efforts of ACO’s and other health care reform activities warrant careful consideration as they are all important to enhancing the patient experience, improving individual health and community wellness, and obtaining a favorable return on the investments we make into the supply side of healthcare economics.
    That said, I firmly believe and think I would garner support from the general public and economists that we need to not only consider supply side economics, that we need to carefully look at demand side economics.
    Although the demand side of health care economics is a mouthful and at first blush appears fraught with complexity, it perhaps is not quite so difficult. In fact each of us as one of over 300 million Americans encounter this on a daily basis and perhaps do not realize or reflect on it and the power of the multiplier affect each of us can have on this, the demand side of health care economics.
    Each morning I like you awake, head to the bathroom, look into the mirror and brush my teeth amongst other morning activities. As I look into the mirror, I reflect upon the fact that “I am” the demand side of healthcare economics. Until recently I did little to consider the possibilities of me and others affecting the demand side of healthcare economics. I am not talking about rationing, fad diets, training programs and the like; rather, I am talking about how I like you could become more mindful of our life in general and in our health in specific. I ask myself, where do I see myself in 5, 10, 20, 30+ years? Does how I live my life (all facets not just diet and exercise), get me to my goals?
    Imagine if each of 300 million Americans stopped for a moment to reflect on their own life, a life that will have an author, an author that for my life I prefer to be me rather than the default of my circumstances. The power that each of us have to take one more step, perhaps one less bite, to think and act toward our life goals in a more mindful manner, a manner that enables for a longer higher quality of life, not for its own sake but so each of us reach our life goals.
    So that is my challenge and I suggest a challenge that if each of us were to consider and embrace, would result in a better life experience, healthier self and enhanced community wellness even before we take on a role of being a patient. We, each of us have the potential to affirmatively affect the demand side of healthcare economics, multiplied by 300 million Americans.
    Man on the moon in ten years, move over. It is time for a bigger vision of American, the challenge is laid before us, aren’t each of us worth the personal investment? Join me, I dare you.
    Each of us is the “Beacon on the Hill”.

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