July 25, 2019


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MedPac.jpgProviders involved in the hard work of practice transformation have seen firsthand that a population health-based approach to care delivery can make a huge difference for patients and the quality of care they receive. There are also tremendous financial benefits to practices that change how care is delivered. Recently, the Medicare Payment Advisory Commission (MedPAC) published a report validating the strong financial performance of accountable care organizations in the Medicare Shared Savings Program.  

MedPAC’s detailed and rigorous analysis shows that ACOs reduce Medicare spending by 1-2 percentage points over a four-year period compared to similar beneficiaries not in an ACO. The MedPAC analysis, published in its June 2019 Report to the Congress, builds on and confirms earlier literature showing that actual savings from ACOs are likely higher than calculated by CMS. A National Association of ACOs (NAACOS) study from 2018 showed nearly twice the savings compared to CMS’s calculations. 

Caravan Health ACOs have often showed even stronger financial performance, with 1 percent savings accumulating per year using our population health methodology. In 2017, Caravan Health ACOs earned more than $54 million in savings to Medicare – more than $200 per patient. This was more than twice our 2016 total savings of $26 million.  

How Did MedPAC Calculate These Results? 

MedPAC used a more accurate method than CMS to estimate real savings. CMS compares ACO spending to an ACO-specific benchmark to determine if an ACO has earned savings or losses. That benchmark is established in advance using a combination of historical and regional spending information. In contrast, MedPAC used a counterfactual approach, requiring them to construct a similar group of non-ACO patients and compare the actual costs of ACOs as compared to their non-ACO counterparts.  

MedPAC carefully controlled for factors such as beneficiaries that change enrollment status throughout the year. Their analysis found that accounting for reassigned beneficiaries could show a large swing in costs or savings. CMS assigns beneficiaries to an ACO based on where the Medicare beneficiary gets their primary care services. Healthier beneficiaries are more likely to stay with the same primary care provider consistently, while sicker, costlier beneficiaries have more medical visits, making a change in attribution more likely. Savings estimates can vary depending on whether the patient was in the ACO all year or just part of the year.  

MedPAC Recommends Some Policy Changes 

Ultimately, MedPAC recommends moving to prospective beneficiary attribution so that the ACO knows what population they are responsible for and limit any potential selection biases that could affect financial results.

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