Determinants of success in Shared Savings Programs: An analysis of ACO and market characteristics

Abstract

Background: Medicare's Accountable Care Organization (ACO) programs introduced shared savings to traditional Medicare, which allow providers who reduce health care costs for their patients to retain a percentage of the savings they generate.

Objective: To examine ACO and market factors associated with superior financial performance in Medicare ACO programs.

Methods: We obtained financial performance data from the Centers for Medicare and Medicaid Services (CMS); we derived market-level characteristics from Medicare claims; and we collected ACO characteristics from the National Survey of ACOs for 215 ACOs. We examined the association between ACO financial performance and ACO provider composition, leadership structure, beneficiary characteristics, risk bearing experience, quality and process improvement capabilities, physician performance management, market competition, CMS-assigned financial benchmark, and ACO contract start date. We examined two outcomes from Medicare ACOs' first performance year: savings per Medicare beneficiary and earning shared savings payments (a dichotomous variable).

Results: When modeling the ACO ability to save and earn shared savings payments, we estimated positive regression coefficients for a greater proportion of primary care providers in the ACO, more practicing physicians on the governing board, physician leadership, active engagement in reducing hospital re-admissions, a greater proportion of disabled Medicare beneficiaries assigned to the ACO, financial incentives offered to physicians, a larger financial benchmark, and greater ACO market penetration. No characteristic of organizational structure was significantly associated with both outcomes of savings per beneficiary and likelihood of achieving shared savings. ACO prior experience with risk-bearing contracts was positively correlated with savings and significantly increased the likelihood of receiving shared savings payments.

Conclusions: In the first year, performance is quite heterogeneous, yet organizational structure does not consistently predict performance. Organizations with large financial benchmarks at baseline have greater opportunities to achieve savings. Findings on prior risk bearing suggest that ACOs learn over time under risk-bearing contracts.

Implications: Given the lack of predictive power for organizational characteristics, CMS should continue to encourage diversity in organizational structures for ACO participants, and provide alternative funding and risk bearing mechanisms to continue to allow a diverse group of organizations to participate.

Level of evidence: III.

Keywords: Accountable Care Organizations; Health care costs; Medicare; Payment reform; Shared savings program.

Figure 1

Distribution of Savings per Beneficiary in First Performance Year