ACOs Show Promise in Slowing Medicare Spending


Accountable care organizations (ACOs) have the potential to slow the growth of Medicare spending, particularly for high-risk, high-cost patient groups, according to a new study published in The Journal of the American Medical Association

The study, which compared Medicare beneficiaries receiving care from physicians participating in the Physician Group Practice Demonstration (PGPD) with beneficiaries receiving care primarily from non-PGPD physicians in the same regions, found modest overall savings associated with PGPD practices ($114 annually per beneficiary), and significant savings among those patients dually eligible for Medicare and Medicaid ($532 annually per beneficiary or 5 percent). 

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Dual-eligibles are a particularly vulnerable population, noted lead author Carrie Colla, PhD, Dartmouth Institute for Health Policy and Clinical Practice, Geisel School of Medicine at Dartmouth, Lebanon, New Hampshire. These patients are overwhelmingly poor, have little social support. They also consume a disproportionate share of health spending in both Medicare and Medicaid because they tend to have multiple, severe conditions that are often complicated by co-existing psychiatric disorders. According to Colla and the other study authors, the "results suggest that while some care management or coordination programs have failed to demonstrate savings, ACOs and similar shared-savings contracts have the potential to improve care for this high-cost group."

According to the study, participants found ways to achieve savings through the creation of programs addressing chronic care management, use of patient registries, development of case coordination teams and implementation of electronic medical records. The bulk of the PGPD savings were achieved through a reduction in acute care hospitalizations ($381), procedures ($55) and home health care ($28). The cost reductions were similar across diagnosis groups, suggesting that savings came from better care management overall and not from changes in disease-specific interventions.

Also of note, the study showed wide variation in PGPD incentive structures and thus significant payment differences across sites. "The variation both in levels and changes in risk-adjusted spending across the participating organizations was remarkable," the authors said. "We know little about why some succeeded and others failed to achieve savings. One hypothesis is that organizations beginning with higher spending levels have greater opportunities to achieve savings."

The study results underscore the need for timely evaluation of current payment reforms, the authors said. In addition, they urge further studies of the institutional factors that "lead to either success or failure in effecting changes in health care practices."

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