September 17, 2012 | Erin McCann – Contributing Writer and Associate Editor for Healthcare IT News
Accountable care organizations (ACOs) can deliver cost savings and reduce readmission rates, according to a recent study from 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.
Study analysis pegged the overall annual savings from this value-based payment model at $114 per Medicare beneficiary, and the overall annual savings for duallyeligible populations – that is, patients who qualify for both Medicare and Medicaid – at $532 per beneficiary.
Report authors said the cost component findings are significant, as the nation’s 9million 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 noted that these numbers are statistically significant.
“The study shows promise for the new healthcare delivery system reforms,” said 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.”
Colla pointed 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. 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 ofsavings 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.
The Middletown, Conn.-based Middlesex Health System saw the least savings all around, actually expending $749 per beneficiary for both populations and $598 for the dually eligible.?As far as non-dually eligible beneficiaries, PGPD savings were not as substantial, with some organizations seeing savings of only $59 per person, per year. However, some organizations, such as Wisconsin’s Marshfield Clinic and the University of Michigan Faculty Group Practice, observed savings of more than $500 per patient, per year for non-dually eligible beneficiaries.
Colla emphasized the significant cost and readmission improvements for the duallyeligible population. She said the study results are “a marker for populations that have higher rates of chronic disease,” and really show that “ACOs have the potential to improve healthcare and reduce spending for [the dually eligible] population.”
Overall, Colla said the study supports value-based healthcare for certain groups and can have a marked effect on complex patients in the system.
“The current fee-for-service payment system has contributed to the fragmented, poorly coordinated care that many patients, especially those who are sick, experience every day,” said Elliott S. Fisher, MD, report author and co-principal investigator of the Dartmouth Atlas Project in a Dartmouth press release. “New payment models like ACOs are intended to encourage providers to coordinate care by offering them a share of any savings achieved when they improve care. These results indicate that when organizations really try to adapt to these new models, they can benefit their patients’ lives and theirbottom lines.”