NCPA - National Center for Policy Analysis

Accountable Care Organizations Struggle to Lower Costs

July 18, 2013

Lowering health care costs is tougher than improving the quality of care, according to first-year results from a key pilot program under the federal health law. All of the 32 health systems in the so-called Pioneer Accountable Care Organization (ACO) program improved patient care on quality measures such as cancer screenings and controlling blood pressure. But only 18 of the 32 managed to lower costs for the Medicare patients they treated, says the Wall Street Journal.

  • Two hospitals lost money on the program in the first year.
  • Seven have notified the Centers for Medicare and Medicaid Services that they intend to move to another program where they will face less financial risk.
  • Two others have indicated they intend to leave the program.

ACOs are an emerging concept in which hospitals and groups of doctors contract to care for a specified population of patients, with the goal of improving quality and lowering costs by better coordinating care.

  • In general, ACOs are shifting to a system that pays doctors to keep people healthy, as opposed to the volume of services they provide.
  • To do this, many systems emphasize preventive care to stave off costly hospitalizations.

As outlined in the Affordable Care Act, health systems that lower the cost of care for a large group of Medicare beneficiaries, while meeting 33 quality measures, stand to split the savings with Medicare. The systems chosen as Pioneers were supposed to serve as models, since they were already experienced in providing such value-based care.

  • The Pioneers were able to slow cost increases, according to the initial indicators.
  • On average, costs for the more than 669,000 Medicare beneficiaries treated in the 32 Pioneers grew by only 0.3 percent in 2012, compared with 0.8 percent growth for typical Medicare beneficiaries.

The ACO concept has spread quickly. Another 250 health care systems have set them up under Medicare's Shared Savings Program, which is similar except that those ACOs aren't required to share in any losses, as Pioneers are. They stand to share only in the savings in the first two years. Of the 18 Pioneers that saved money, 13 saved enough to be able to split their savings with Medicare, generating a gross savings of $87.6 million in 2012.

Source: Melinda Beck, "Mixed Results in Health Pilot Plan: Program Members Raise Quality of Care but Struggle to Lower Costs," Wall Street Journal, July 16, 2013.


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