https://www.kaufmanhall.com/insights/blog/gist-weekly-may-10-2024

Published by the Congressional Budget Office (CBO) last month, this report reviews recent research findings about factors that have either helped or hindered Medicare accountable care organization (ACO) cost performance over the last 12 years.

ACOs led by independent physicians, those with a high share of primary care providers, and those whose initial baseline sending was higher than the regional average have been associated with greater cost savings. But a lack of resources necessary for providers to participate, weak incentives for providers to reduce spending, and a model design that allows providers to selectively enter and exit a program based on their anticipated level of financial bonus or loss have all undermined the potential savings generated.

The report recognizes that Medicare ACOs have found success capturing the low-hanging fruit of potential cost savings, but that there are plentiful opportunities to increase the impact of these programs through targeted policy changes.

• The Gist: Medicare ACO model design attempts to strike a balance between achieving wider provider participation and generating net savings. Although ACO programs are starting to deliver some cost savings to Medicare, they have not reached their intended scale. 
• Medicare’s largest ACO model, the Medicare Shared Savings Program, generated $1.8B in savings in 2022, which is just 0.2 percent of total Medicare spending. 
• Many health systems have only mildly embraced Medicare ACOs as the level of potential cost-savings often fails to compensate for foregone fee-for-service revenue. 
• CMS will need to continue to iterate on ACO model design if it hopes to achieve its goal of having every Medicare beneficiary in one by 2030, as it’s not even halfway there yet.