CMS Headlines: ACOs Generate Savings, but is it Enough?

CMS announced that Accountable Care Organizations (ACOs) participating in the Medicare Shared Savings Program generated net savings of $739.4 million last year, and data suggests that physician-led ACOs continued to perform better than hospital-led ACOs.  The savings came from 548 ACOs, which served around 10.1 million Medicare beneficiaries last year.  Of these, 66 percent generated savings for Medicare by reducing their costs compared with benchmarks set by CMS.  Additionally, 37 percent generated enough savings to collect shared savings payments.[i]

The Medicare Program is the second largest social insurance program in the United States with a total expenditures of $741 billion in 2018.[ii]  A ten percent savings would generate $74.1 billion.  The $739.4 million savings generated in 2018 is a 0.1 percent savings for the system annually.  Medicare costs $2.03 billion each day, so the heralded ACO savings would cover only about 8 hours and 45 minutes of Medicare’s expenses.

Make no mistake, the savings generated are a good start, but they are only a start.  In a previous blog on this site titled Continuous Performance Improvement:  There Is No Comfort Zone, the point that was established held that the future of efficient health care holds no space for resting on the achievement of a certain level of performance today.  ACO physicians must not only continue to improve their savings rate, but they must also continue to improve the quality outcomes for the patient.

Keep in mind that a one percent savings for Medicare would be $7.41 billion, a number that is a long way from the current $739.4 million.  Furthermore, the system is still struggling with emergency room overuse, physician office access, and sticky readmission rates.  On the other hand, most ACOs are performing respectably with the CMS key performance indicators; however, the numbers suggest that the American health system and the doctors that drive it need to be serious about change.

The ACO data showed that hospital-led organizations were not as efficient as physician-led groups.  This is not surprising since many hospitals still see themselves as the center of the community health care system.  Additionally, as long as hospitals are paid for having patients in beds there is still a lingering incentive to produce volume-based care.  Furthermore, as long as hospital-dependent specialists are paid by procedural piecework, it will be difficult to break that volume-driven habit.  There is a clear measure of truth in Healthcare Finance and Delivery Consultant Jed Constantz’s relevant comment that “primary care is an investment and everything else is an expense.”[iii]

Nonetheless, the ACO savings show encouraging progress and are something to be celebrated as long as CMS continues to push for performance improvement.  The ACO finally puts responsibility for clinical outcomes, monetary balance, and financial incentives in the same place.  Most of us will still say “press on.”



[iii] Personal conversation

Craigan Gray

About the Author

Craigan Gray, MD, MBA, JD

Dr. Craigan Gray, Salient Healthcare’s Chief Medical Officer, brings rich experience from private practice, hospital leadership, and governmental health-benefit programs. Prior to joining Salient, Dr. Gray was director of North Carolina’s $12 billion Medicaid program. His time as VPMA at Bon Secours Our Lady of Bellefonte Hospital in Kentucky was distinguished by moving the facility into the top-quality performance tier for Health Grades and CMS health quality indicators. Dr. Gray is a Stanford University trained Obstetrician/Gynecologist. In addition to an MD degree, Dr. Gray holds an MBA degree and a JD degree. He is a Certified Physician Executive and is published in various medical journals.

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