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Medicare ACOs Continue to Achieve Savings: How Can CMS Strengthen the Program?


Key takeaways:

  • Medicare accountable care organizations (ACOs) have proven to be a successful and innovative platform for healthcare providers to achieve savings and improve quality of care.
  • PINC AIPopulation Health Management Collaborative (PHMC) member ACOs continue to achieve savings at a higher rate than the national average.
  • Federal policymakers should consider ways to strengthen and increase participation in Medicare ACO programs.

In performance year 2021, 563 accountable care organizations (MSSP and NGACO ACOs), and Direct Contracting Entities (DCEs) generated more than $3.9 billion in total savings by improving care coordination and focusing on providing high-quality, more efficient care. Despite ongoing challenges with record labor shortages, unprecedented margin pressures and the COVID-19 pandemic, PINC AIPopulation Health Management Collaborative (PHMC) member ACOs and DCEs outperformed national ACOs and DCEs in generating savings and shared savings for the seventh year in 2021.

Nationwide results are exemplary but Premier’s data-driven PHMC members continue to outperform these national results in generating savings and building on Premier’s successful history.

In 2021, Premier’s PHMC ACOs and DCEs included over 50 health systems, which have formed 53 Medicare Shared Savings Program (MSSP) ACOs, five Next Generation ACOs, and one Global and Professional Direct Contracting entity. Together, these ACOs and DCEs include over 100 hospitals and thousands of clinicians working together to align, measure and share best practices and improve population health management.

During the pandemic, a 2020 Premier survey found that providers in ACOs and other alternative payment models (APMs) utilized advanced population health and value-based care capabilities to navigate the COVID-19 pandemic by managing care in the community and sustaining revenue streams outside of fee-for-service reimbursement. In performance year 2021*, PHMC members continued to prove that establishing a well-planned value-based care delivery process and model can lead to success:

  • 85 percent of Premier’s collaborative members generated savings to Medicare in 2021 compared to 80 percent of the nation.
  • 58 of the 59 PHMC ACOs are health system/hospital owned/operated, which is a trend counter to the widely accepted assumption that health system led ACOs are not successful at generating savings, which a recent PINC AI analysis debunked when accounting for all factors.
  • Premier PHMC member MSSP ACOs achieved $332 in savings per beneficiary compared to $254 for all other high-revenue ACOs, the vast majority of which are health system/hospital owned and operated.
  • Premier members in two-sided risk models also earned shared savings at a higher rate (89 percent) than the national average for ACOs in two-sided risk models (85 percent).

Results like these accomplished by Premier’s PHMC ACOs and DCEs reinforce the value of participation in value-based care and how it is essential in helping providers deliver high-quality care at lower costs. According to a recent survey, 67 percent of providers indicated value-based care is better at providing high-quality care to patients than other models. Many studies have shown that value-based care prevents hospital readmissions and reduces emergency department visits. These prevention efforts lead to more affordable care for all.

Additionally, hospitals and health systems are facing unprecedented financial pressures. These results are indicative of the paradigm shift many organizations are considering as they leverage population health to alleviate margin pressures, while positioning the health system for future reimbursement models. Through population management, health systems can help ensure their patients receive the right care, at the right place, at the right time.

Recognizing the success of ACOs and DCEs at improving quality while lowering costs, the Centers for Medicare & Medicaid Services (CMS) set a goal of moving all Medicare fee-for-service beneficiaries into an accountable care relationship by 2030. To accomplish this, Congress and CMS should adopt new policies and flexibilities that will help strengthen and increase participation in the MSSP and other value-based care programs. In Premier’s opinion, these should include:

  • Extend the Advanced APM Incentive Payments and ensure incentives for APM adoption can be reasonably met. The Advanced APM Incentive Payments have been a critical tool for clinicians in offsetting the costs associated with shifting to APM participation and have allowed APMs to offer expanded services to patients. It is essential that Congress consider multi-year solutions that would create predictability for providers participating in Advanced APMs.
  • Utilize MSSP as an innovation platform for testing new payment and care delivery flexibilities, such as primary care capitation or higher levels of risk. MSSP ACOs should not have to leave this permanent program to take on more advanced risk or to utilize new flexibilities or enhancements being tested under other models.
  • Eliminate the arbitrary high-low revenue distinction in MSSP. Eliminating this distinction will ensure that higher performers are encouraged to participate in the program regardless of provider type and will allow providers to more effectively collaborate in ways that best meet the needs of their populations.
  • Provide ACOs with the flexibilities and tools needed to better integrate specialists into total cost of care arrangements. CMS should explore providing ACOs with more tools (e.g., data) and flexibilities to better facilitate coordination of specialty care, such as through “shadow bundles.”
  • Establish sustainable benchmark methodologies. Currently, benchmarks are set partially based on an ACOs past performance – meaning that ACOs must continue to achieve savings year-over-year, which may be unsustainable for efficient ACOs. Modifying benchmarking methodologies to address this ratchetting effect will ensure the program remains a sustainable option for ACOs long term.
  • Incentivize participation of rural providers by addressing model design flaws that may discourage their inclusion. This includes adopting more sustainable financial methodologies, providing new opportunities for upfront funding and establishing a longer glide path to risk.

In following these approaches, CMS has a much greater likelihood of achieving its 2030 goal.

It’s important to note that ACOs and other APMs incentivize providers to work together with aligned incentives focused on ensuring patients receive the right care at the right time. Rather than individual providers being responsible only for the treatments and services they themselves provide, groups of clinicians and other providers in the community are, together, focused on and responsible for the quality, wellness and total cost of care.

Premier plans to continue efforts to advocate for ACOs and help providers hone their strategies for success in all Medicare fee-for-service, network level, total cost of care models (MSSP, ACO REACH).

*Methodology: Comparative analysis completed using an internal roster of Premier's Population Health Management Collaborative Advanced members and the publicly available results files for performance year 2021 from the Medicare Shared Savings Program, Next Generation ACO Model, and the Global/Professional Direct Contracting Model.

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