Cutting Through the Cloud on Obamacare Savings

One of the law’s programs is generating big savings, but that doesn’t mean it’s working across the board.

DENVER, CO - MARCH 26: Registered nurse Susan Eager pays a house call visit to a patient on March 26, 2012 in Denver, Colorado. The Supreme Court began hearing three days of arguments over the 2010 health care overhaul Monday which will affect the entire health industry. Eager works for the Dominican Sisters Home Health Agency, a non-profit that performs thousands of home visits each year for needy patients. The agency, funded by private donations and grants, says it helps keep patients living in their homes longer, saving federal programs like Medicare millions of dollars each year. It provides home health care without charge to people with chronic diseases and gives preventative services usually not currently covered by insurance.
National Journal
Clara Ritger
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Clara Ritger
Jan. 31, 2014, 1:52 p.m.

A pro­gram cre­ated un­der Obama­care is sav­ing Medi­care hun­dreds of mil­lions of dol­lars, but only a few par­ti­cipants are re­spons­ible for the lower costs.

Ac­count­able-care or­gan­iz­a­tions — new net­works de­signed to im­prove health care qual­ity and lower costs — saved more than $477 mil­lion last year, ac­cord­ing to an of­fi­cial at the Cen­ters for Medi­care and Medi­caid Ser­vices.

Of that total, $204 mil­lion was gen­er­ated in dir­ect sav­ings to the Medi­care pro­gram, with the re­main­ing $273 mil­lion go­ing back to the ACOs.

ACOs were cre­ated un­der the Af­ford­able Care Act, with the goal of bet­ter co­ordin­at­ing care and shift­ing the health care sys­tem to­ward a pay­ment sys­tem based on out­comes, rather than the num­ber of pro­ced­ures per­formed.

In or­der to en­tice pro­viders to take a chance on the new pay­ment mod­el, Medi­care al­lows them to share a por­tion of the sav­ings they gen­er­ate for the Medi­care pro­gram.

Of the 114 or­gan­iz­a­tions des­ig­nated as ACOs, 54 had lower spend­ing last year than ex­pec­ted. Only 29 ACOs saved enough money and met care-qual­ity re­quire­ments to qual­i­fy for shared sav­ings. Those ACOs saved Medi­care $128 mil­lion and were able to keep $126 mil­lion in sav­ings them­selves.

Pi­on­eer ACOs, a second and more ag­gress­ive mod­el, gen­er­ated $76 mil­lion in sav­ings for Medi­care and kept $147 mil­lion, the CMS of­fi­cial said. Of 23 Pi­on­eer ACOs, eight achieved “sig­ni­fic­ant” sav­ings over tra­di­tion­al Medi­care.

The total sav­ings from stand­ard ACOs and Pi­on­eer ACOs adds up to far more than the $380 mil­lion CMS re­por­ted last week, but the agency did not of­fer a com­ment about the dis­crep­ancy. It also de­clined to of­fer fur­ther in­form­a­tion about how it cal­cu­lated the Medi­care ACO data.

But the Pi­on­eer ACO re­port cre­ated for CMS iden­ti­fies how they gen­er­ated sav­ings for the Medi­care pro­gram. The ana­lysts at L&M Policy Re­search de­term­ined the sav­ings by com­par­ing the av­er­age spend­ing per be­ne­fi­ciary by the ACO with the av­er­age spend­ing per be­ne­fi­ciary in the ACO’s loc­al Medi­care fee-for-ser­vice mar­ket.

The re­port—cre­ated in Novem­ber and em­bar­goed un­til Thursday—had slightly dif­fer­ent num­bers from CMS: Eight of 32 ACOs gen­er­ated sig­ni­fic­ant sav­ings, they con­cluded. A CMS of­fi­cial ex­plained that six Pi­on­eer ACOs have switched to the shared sav­ings pro­gram and three have dropped out al­to­geth­er.

CMS has not heard of any ACOs drop­ping out of the shared-sav­ings pro­gram, the of­fi­cial said, which would mean only three ACOs over­all have dropped out since the pro­gram’s in­cep­tion.

While on av­er­age the Pi­on­eer ACO pro­gram saved Medi­care roughly $20 per be­ne­fi­ciary — a “small col­lect­ive im­pact in slow­ing total Medi­care spend­ing growth,” the re­port says — 23 ACOs did not dif­fer sig­ni­fic­antly in total Medi­care spend­ing per be­ne­fi­ciary com­pared with the stand­ard care of their loc­al mar­ket.

Eight ACOs had sig­ni­fic­antly lower growth in total spend­ing per Medi­care be­ne­fi­ciary. Those eight spent on av­er­age between $32.58 and $102.21 less per month per be­ne­fi­ciary than if the be­ne­fi­ciary had re­ceived sim­il­ar care in the loc­al mar­ket. In total, those eight Pi­on­eer ACOs gen­er­ated $155.4 mil­lion in sav­ings to the Medi­care pro­gram in their first year.

But that sav­ings was off­set by the par­tic­u­larly poor per­form­ance of one Pi­on­eer ACO, which cost the Medi­care pro­gram $8.5 mil­lion more than if those be­ne­fi­ciar­ies had re­ceived sim­il­ar care in the loc­al mar­ket, the re­port says. With that in­cluded, the Pi­on­eer ACO pro­gram saved Medi­care $146.9 mil­lion.

The re­port did not dir­ectly identi­fy the win­ners and losers in the pro­gram. But it said the eight ACOs that achieved sig­ni­fic­ant cost re­duc­tions “var­ied in geo­graph­ic loc­a­tion, size, or­gan­iz­a­tion­al struc­ture and av­er­age Medi­care spend­ing in their mar­kets, sug­gest­ing that ACOs can achieve lower spend­ing growth un­der a range of mar­ket con­di­tions and or­gan­iz­a­tion­al struc­tures.”

Sig­ni­fic­ant re­duc­tions in out­pa­tient and phys­i­cian spend­ing ac­coun­ted for much of the sav­ings, the re­port found. Nearly half of the Pi­on­eer ACOs re­duced out­pa­tient spend­ing growth. All eight ACOs that saved money over­all out­per­formed their loc­al mar­ket in lower­ing phys­i­cian spend­ing growth, and an ad­di­tion­al three—loc­ated in Bo­ston—saw slower rates of growth in phys­i­cian spend­ing but not in their over­all spend­ing totals.

Slower spend­ing in 2012 could also be the res­ult of high­er per-be­ne­fi­ciary spend­ing in 2011 com­pared with the loc­al mar­ket, the re­port says, with six of the eight that achieved sav­ings hav­ing high­er spend­ing levels than the loc­al mar­ket in the pre­vi­ous year.

The ACO pro­gram is still young, and many groups in­dic­ated in the re­port that they were still work­ing to co­ordin­ate ser­vices and make the trans­ition smooth for be­ne­fi­ciar­ies. CMS said on a press call Thursday they would re­lease fur­ther de­tails on the pro­gram, and spe­cif­ic in­form­a­tion about the Medi­care ACO data, later this year.

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