Unpacking “Savings” Concepts at Accountable Care Organizations

The meaning of the term “savings” for an ACO continues to generate some confusion. There are actually a few ways to measure savings, and the concepts can be surprisingly challenging. It doesn’t help that the evidence base for these savings concepts is still emerging. This leads some people to question why should we continue the ACO experiment. A new blog article on Health Affairs explains why ACOs still deserve a shot.

Researchers at Harvard Medical School, Michael Chernew and Christopher Barbey, explain three types of ACO savings and why each are important to measure in order to continue learning about the real systemic implications of ACO models.
  1. Utilization savings is the most commonly used measurement for ACOs. The authors define this as “the difference between Medicare fee-for-service spending on ACO beneficiaries and the Medicare FFS spending on those beneficiaries had there been no ACO.” This measure helps us understand the impact of an ACO’s response to incentives and the ability of a new payment model to change the care that is received by patients.
  2. Payer savings is “the difference between Medicare program spending with, versus without, the ACO.” This is different from utilization savings in the sense that the providers create utilization savings and then the payers share them; the budget impact on payers is the payer savings.
  3. Societal savings “reflect lower costs achieved by reducing utilization, minus the costs of payers and providers operating the program.” This is the hardest to measure, and there are few examples of societal savings being properly measured in the ACO field.

Early results across different ACO programs show modest but growing utilization savings and payer savings. The authors concede that “not all providers will succeed and some providers will do worse financially than they otherwise would” in an ACO, but they conclude that “this is true for any strategy to reduce spending," thus the rationale that ACOs should be further studied and improved.

Access the full article on Health Affairs here

Topics: Accountable Care