Coordinated Care Equals Lower Health-Care Costs?

Physician and hospital networks known as accountable care organizations are saving Medicare big bucks, and greater savings could come from disease-specific programs.

The most recent cost-savings data for ACOs operating in the Shared Savings and Pioneer models showed overall gross savings for Medicare in 2016 of $713 million, almost twice as much as the previous year, a Centers for Medicare & Medicaid Services spokesperson told Bloomberg Law. One other ACO coordinates the work of end-stage renal disease providers. These in combination with a fourth ACO had a combined total gross Medicare savings of $836 million in 2016.

“Hospitals and physicians are continuing to join these models as they realize health care will eventually be paid on value-based payments,” David Muhlestein, chief research officer at Leavitt Partners LLC, a consulting firm in Salt Lake City, told Bloomberg Law. “Many ACOs are just starting to get used to the programs, therefore earning more savings.”

Medicare savings chartThe increase in Medicare savings through ACOs appears to correlate with the steady increase of hospitals and doctors entering these networks. The number of networks in the shared savings program, the largest Medicare ACO program, increased from 220 in 2013 to 480 in 2017, a 118 percent boost. About 28 million people are covered under these networks.

“It takes a long time to build a successful ACO and a lot of capital,” Allison Brennan, vice president of policy at NAACOs, told Bloomberg Law.

The average cost for annual ACO operations was $1.6 million in 2015, according to a 2016 NAACOS survey of ACO participants, a heavy price tag for smaller and struggling hospitals.

Many ACOs are also planning to enter risk-based models, which give them the potential to earn more, but also potentially lose money, according to a study by Leavitt Partners and the National Association of ACOs (NAACOS) in Washington.

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