Identifying what is working with accountable care organizations

Oct. 13, 2017 / By Steve Delaronde

A primary objective of the Triple Aim for healthcare payers is to reduce costs associated with inefficient, ineffective, or medically unnecessary care. The accountable care organization, or ACO, has been touted as a promising approach to achieving savings by assigning accountability to a health system for the cost and quality of patient care. While the number of ACOs has proliferated over the past 5 years, there are still many questions that remain about their effectiveness.

Defining and measuring quality has always been challenging, however, measuring cost should be straightforward. The basic approach is to tally costs for members prior to entering the ACO and compare this to costs incurred after entering the ACO. The difference should represent the savings attributable to the ACO; but it’s not that simple.

The who, what, and when of program evaluation must be considered when developing a methodology for measuring ACO savings. 

  • First, whose healthcare costs are getting measured? Is it only those who have been attributed to an ACO through a pre-defined attribution methodology? Does it include patients who joined late or left early from the ACO?
  • Secondly, what is being measured? Is it all costs associated with the patient, or only those that an ACO would be expected to impact? What happens when an intensive care stay associated with an automobile accident incurs a large bill?  Should this be counted or is there a stop loss amount that should be applied? 
  • Finally, what time period is being measured? Is one year enough to recognize savings from an ACO or should we not expect to see savings for two or three years after participating in an ACO?

The ultimate goal is to compare costs incurred for members in an ACO to the costs they would have incurred in the absence of the ACO. This is known as the counterfactual. Obviously, it is impossible to know this, since a member cannot simultaneously be in and not be in an ACO. Therefore, the method used to measure the impact of an ACO on cost must rely on a creating a comparison group that simulates the counterfactual—a group of members similar to ACO members in every way except that they did not participate in the program.

A two-group comparison study is designed to determine if an intervention had an effect on the outcome.  Identifying this group through randomization is ideal, but not practical. Therefore, a comparison group that uses matching, stratification, or weighting, with or without a propensity score, is the preferred approach. This is different from a comparison to a benchmark, like the one used by the Centers for Medicare and Medicaid Services (CMS). As Michael Chernow and others discuss in their Health Affairs blog, Savings Reported by CMS Do Not Measure True ACO Savings, benchmarks are not true counterfactuals.

Reducing costs is not the only objective of the ACO. Improving outcomes and the patient experience are the other indicators of success in the Triple Aim. Unfortunately, cost and quality are not necessarily correlated, particularly for ACOs participating in the Medicare Shared Savings Program (MSSP) and Pioneer ACO model. This remains an issue that needs to be addressed across all ACOs and value-based programs. 

Identifying the methods used by successful ACOs for reducing costs is critical for understanding how to achieve, replicate, and sustain success. Knowing and employing these methods will encourage healthcare providers to enter shared savings arrangements if they know the mechanisms that will most likely lead to cost savings, as well as promote continued participation among existing ACOs. One example of the types of studies that are needed is one published in May 2017 in Health Affairs that identifies care management as the mechanism for achieving ACO savings among chronically ill patients with multiple health issues. This study is certainly a step in the right direction, but more studies are needed to determine if care management is equally effective in reducing costs with other types of populations. 

It is also important to understand the effect of other program changes that could promote better care coordination and the delivery of comprehensive care, such as EHR implementation, improved access to care through telemedicine, or expanded office hours. Changes that address utilization and the reduction of potentially preventable services, will have a farther-reaching impact on spending growth than simply shifting to a less expensive site of service.

The ACO was a relatively unknown concept prior to the passage of the Affordable Care Act in 2010. There are now more than 800 ACOs among public and private payers with participants in all 50 states. While some ACOs have demonstrated savings, many have not. The success of the ACO model hinges upon the understanding of what works and what doesn’t and using evidence-based approaches to identify the most effective components of an ACO.

Steve Delaronde is director of analytics for populations and payment solutions at 3M Health Information Systems.