ACOs saving some money, but Medicare is short on details
By Jenny Gold
Kaiser Health News, January 31, 2014
The Centers for Medicare and Medicaid Services [CMS] announced Thursday that, overall, provider groups involved in Medicare ACO programs saved a total of $380 million in the first year. Sounds like a lot of money, but CMS declined to explain which hospitals were winners and which were losers, how it compared to expectations and how much the participants invested in coordinating care. Also missing is the scale of the savings; CMS did not provide the context of total spending by the ACOs…. It’s also unclear whether the savings figures factored in any losses from some of the ACOs that did not do well. And the agency did not release information about which ACOs saved money and which did not….
By Kip Sullivan, JD
Congress has instructed CMS to conduct several experiments with Medicare ACOs. The first began in 2005, the year before the “accountable care organization” label was invented, and ran through 2010. The participating hospital-clinic chains were called “physician group practices” (PGPs), but within a few years ACO advocates and skeptics alike were asserting that these PGPs were indeed the equivalent of ACOs. The second and third ACO experiments began in 2012. CMS called one program the Pioneer ACO program and the other the Medicare Shared Savings program.
CMS’s reports on all three ACO experiments have been extremely misleading. Here are the headlines and dates of CMS’s last three reports on its ACO experiments:
July 2011: Physicians Groups Continue to Improve Quality and Generate Savings
Under Medicare Physician Pay-for-Performance Demonstration http://www.cms.gov/Medicare/Demonstration-Projects/DemoProjectsEvalRpts/downloads/PGP_Fact_Sheet.pdf,
July 2013: Pioneer Accountable Care Organizations succeed in improving care, lowering costs http://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-Releases/2013-Press-Releases-Items/2013-07-16.html,
January 2014: Medicare’s delivery system reform initiatives achieve significant savings and quality improvements – off to a strong start. http://www.hhs.gov/news/press/2014pres/01/20140130a.html.
Note the pattern: “Costs” are always going down, “quality” is always going up.
These reports suffer from numerous defects. The worst defects are:
• CMS fails to report how much it costs the ACOs to participate ;
• CMS usually fails to give us enough information to determine the relative size of the savings or increased costs; and
• CMS offers only the vaguest descriptions of what the ACOs are doing and yet, on the basis of a few quality measures, reports that quality is improving for all patients assigned to the ACOs.
Reports in both the general media and the professional literature rarely note these defects (for a typical example, see this article in Businessweek http://www.businessweek.com/articles/2014-01-30/obamacares-medicare-experiment-is-working). The article from Kaiser Health News quoted above (it appeared simultaneously in the Washington Post) is an exception to the rule. KHN reporter Jenny Gold criticizes CMS’s latest report – a press release issued last Thursday on the first-year (2012) results for both the Pioneer and the Shared Savings programs – for the first two defects. She notes CMS reports only on whether Medicare saved money and says not a word about whether the hospital-clinic chains that CMS certified as ACOs saved money after taking their ACO-related costs into account. And she comments on CMS’s failure to put the alleged $380-million first-year savings in context, that is, to help the reader understand whether $380 is a relatively large or small savings.
Gold goes on to quote an expert who did his own back-of-the-envelope calculation and concluded that, if CMS’s reported savings are accurate, CMS’s ACOs are cutting costs for Medicare (not Medicare plus the ACOs) by just $80 per beneficiary per year. (Gold offers a confusing explanation of his methodology, so I can’t vouch for it.) In 2012, Medicare spent $11,325 per beneficiary. Eighty dollars comes to seven-tenths of one percent of $11,325. (You can calculate 2012 per capita Medicare spending for yourself by going to page 6 of the 2013 Medicare trustees report. There you’ll find total spending in 2012 was $574.2 billion and total enrollment was 50.7 million. http://downloads.cms.gov/files/TR2013.pdf)
That estimate of seven-tenths of a percent is close to the half-percent savings (for Medicare only) that CMS reported in its July press release on Pioneer ACOs.
But if you want to know what effect CMS’s ACOs are having on the entire health care system (Medicare plus the ACOs), the only information we have that is remotely useful is the testimony to the Medicare Payment Advisory Commission I quoted here last December 9. https://pnhp.org/blog/2013/12/09/medpac-conflicted-between-fiscal-neutrality-and-paying-private-programs-more/ Katelyn Smalley stated at Medpac’s November 2013 meeting: “CMS reported [ACO Pioneer] program savings of about 0.5 percent…. The ACOs we spoke with confirmed that the cost of running the ACO was about one to two percent….” In other words, ACOs are driving costs up by a percent or two. Until CMS is more forthcoming, Ms. Smalley’s testimony must remain our most reliable estimate of whether ACOs are saving money.
My main quarrel with Gold’s article is that she or, more likely, one of her editors, inserted a misleading phrase in the headline of her article – “Medicare saving some money….” When the Washington Post published Gold’s article on their Wong Blog on January 31, their editor changed the headline to read, “Medicare won’t give a straight answer on Obamacare cost savings” http://www.washingtonpost.com/blogs/wonkblog/wp/2014/01/31/medicare-wont-give-a-straight-answer-on-obamacare-cost-savings/?tid=up_next. Now that’s more like it.
I have a modest request for the entire media: Please don’t insert the word “savings” in any future articles or broadcasts about Medicare ACOs until CMS reports on the cost incurred by the ACOs. There would still be other reasons to suspect there were no savings (the games ACOs play with risk-adjustment being one of them). But if my wish were granted, the media would no longer be an accomplice to the promulgation of CMS’s strange theory that ACO costs are non-existent or so trivial they don’t deserve mention, much less study.