ACOs, Population-Based APMs Most Effective at Lowering Costs

If CMS aims to lower healthcare costs and improve quality, then the agency should use more population-based alternative payment models, like accountable care organizations (ACOs), according to a new analysis.

The analysis of the evaluations for more than a dozen CMS value-based initiatives over the past eight years showed that no other alternative payment model came close to the cost savings associated with ACO models.

For example, the Medicare Shared Savings Programs has demonstrated significant savings ($1.2 billion in 2019), as has the Next Generation ACO Model ($62 million in Performance Year 1). Meanwhile, specialty-specific models (e.g., Comprehensive Primary Care, Comprehensive Primary Care Plus) and bundled payment models (e.g., Bundled Payments for Care Improvement, Oncology Care Model) have not demonstrated proven savings.

In fact, some initiatives like the Bundled Payments for Care Improvement, Comprehensive ESRD Care Model, and the ongoing Comprehensive Primary Care Plus have resulted in either losses or increased Medicare spending.

“This could be a result of clinicians in ACOs examining patients’ total cost of care, enabling tradeoffs between sites of care such as nursing homes versus patients’ homes and being incentivized to choose care patterns that better manage long-term outcomes, especially for high-need, high-cost patients,” explained Clif Gaus, ScD, lead author of the analysis and president and CEO of the National Association of ACOs (NAACOS).

“Making providers accountable for the whole patient and total costs incentivizes a delivery system to identify problems early and intervene to prevent long-term consequences,” Gaus added. “These incentives and the close clinical relationship to the patient through data may be the reason ACOs produce better results and why they are the best model for health care in the decades to come.”

ACOs and other population-based alternative payment models may also prove more effective than Medicare Advantage, which has been touted as a significant source of cost-savings for Medicare.

The healthcare system spends about $1,000 more per patient per year on Medicare Advantage enrollees, explained Gaus and co-author David Pittman, health policy and communications adviser at NAACOS, citing data from the Medicare Payment Advisory Commission (MedPAC).

Conversely, Medicare ACOs have reduced spending on beneficiaries by 1 to 2 percent compared to traditional Medicare.

The data underscores the reason why some industry leaders do not see Medicare Advantage as the best national model for healthcare reform, Gaus and Pittman stated.

CMS just recently launched a new population-based alternative payment model that allows providers and other healthcare suppliers to coordinate care under a directing contracting framework. The model currently has 51 participants partaking in its implementation period ending in March 2021.

But more work is still needed to be done to make ACOs and other population-based alternative payment models truly effective at lowering costs and improving quality of care, the experts indicated. Participation, for example, needs to grow in Medicare’s largest ACO initiative.

Medicare Shared Savings Program has recently declined. NAACOS has attributed the recent dip to recent program changes that required ACOs to take on downside financial risk sooner under Pathways to Success. Since the changes took effect, an average of 38 new ACOs have joined the program each of the past two years. Prior to that, the program averaged 107 new ACOs a year, the organization has explained.

“If CMS’s goal is to grow value-based payment models and APM participation, then it needs to reevaluate policies that have stunted the growth of its largest and most successful model to date,” wrote Gaus and Pittman.

Just recently, their organization urged President-elect Joe Biden and Vice President-elect Kamala Harris to encourage growth in ACO programs.

“A new administration needs to examine unintended and negative consequences of the Centers for Medicare & Medicaid Service’s (CMS) Pathway to Success policies and consider remedies such as restoring lowered shared savings rates for ACOs and allowing providers more time before taking on financial risk. The CMS Innovation Center can promote accountable care models, such as Direct Contracting, by applying lessons we have learned over the last decade,” Gaus said in a statement on the NAACOS website.

Population-based or total cost of care alternative payment mechanisms may become more popular after the COVID-19 pandemic. Early data has shown that providers receiving capitated payments have fared better than providers relying on fee-for-service revenue amid community shutdowns and the explosion of telehealth.

A population-based payment system could prevent the economic fallout experienced by providers during the most recent COVID-19 surge, industry experts are saying.