ACOs have potential for big savings, reduced readmissions

LEBANON, NH - New payment models used in accountable care organizations (ACOs) have shown considerable promise, yielding overall savings and reduced readmission rates, according to a recent study conducted by the Dartmouth Institute for Health Policy and Clinical Practice. 

The study, published in the Sept. 12 issue of The Journal of the American Medical Association, examined the cost savings associated with the Physician Group Practice Demonstration (PGPD), a Medicare program that ran from 2005 to 2010 and closely resembled current ACOs.

[See also: ACOs offer new risks and rewards]

Study analysis pegged the overall annual savings from this value-based payment model at $114 per Medicare beneficiary, and the overall annual savings for dually eligible populations – that is, patients who qualify for both Medicare and Medicaid – at $532 per beneficiary.  

Report authors say the cost component findings are significant, as the nation’s 9 million dual eligibles comprise 20 percent of the Medicare population but account for 31 percent of its spending, and comprise 15 percent of the Medicaid population but 39 percent of its spending.

Readmission rates were also affected in the demonstration, with 30-day medical readmission rates decreasing 0.67 percent overall for both populations, and 1.07 percent for dually eligible beneficiaries. Moreover, surgical readmissions for dually eligible populations decreased 2.21 percent overall. With 990,117 Medicare and/or Medicaid beneficiaries included in the experimental group, and 7,514,453 beneficiaries in the control group, report authors say these numbers are statistically significant.

“The study shows promise for the new healthcare delivery system reforms,” says Carrie H. Colla, lead author of the study and assistant professor at The Dartmouth Institute for Health Policy and Clinical Practice. “And these reforms should align incentives for payers, providers and patients.”

[See also: 5 steps to solid infrastructure for ACO goals]

Colla points out that the study was done to examine the cost savings benefits of a value-based ACO program, and the PGPD was a near perfect match.  “I would say the two fundamental characteristics of the ACO-type contract are pay-for-performance and shared savings,” said Colla. Both the PGPD and the new Medicare ACO contracts include both these things, she added, and the quality metrics are very similar.  

Physician groups participating in the demonstration could receive up to 80 percent of savings they generated. In the new ACO programs, savings are generally lower, between 50 to 70 percent.

Out of 10 participating physician groups, the University of Michigan Faculty Group Practice saved the most money, averaging out to $866 per person, per year for both populations. When examining the dually eligible patients, the practice’s savings were more marked, pegged at $2,499 per person, per year.