Determinants of Success in Shared Savings Programs: An Analysis of ACO and Market Characteristics

Background: Accountable Care Organizations (ACOs), a new approach to the delivery and financing of health care, provides financial incentives to providers to improve the quality of care for Medicare beneficiaries, improve populations’ overall health, and reduce unnecessary health care costs. ACOs possess different organizational components (e.g. participating primary care providers, specialists, and ACO governance), contract types (e.g. whether or not they are bearing downside risk) and capabilities (e.g. health care analytics, care coordination of complex and chronic disease patients, care transition capabilities, identification and management of high-risk patients). Shared saving programs offer a new performance-based payment strategy allowing ACOs, in addition to receiving payments for service rendered to Fee-For-Service Medicare beneficiaries, the opportunity to get a percentage of the net savings they realized. The association between these characteristics and success in the Medicare ACO programs is unknown.

Setting & Objective: According to the Centers for Medicare and Medicaid Services (CMS) performance year 1 data, 193 (53%) ACOs operating in the Pioneer and Medicare Shared Savings Programs held spending at $1.17 billion below their assigned financial benchmarks. About 1 in 4 ACOs in the Shared Savings Program received shared savings. Since organizational structure and level of development vary across ACOs, we identify organizational components and capabilities associated with superior performance.

Methods: We linked ACO financial performance data from the CMS to the National Survey of Accountable Care Organizations (NSACO). NSACO spanned three waves and surveyed all ACOs formed between January 2012 and January 2015. The survey domains informed on organizational characteristics (e.g. governance and structure, contract characteristics, physician performance and compensation), capabilities (e.g. care management and transition programs, performance monitoring, quality improvement and HIT infrastructure capabilities), ACO activities (e.g. changing physician compensation models, shared savings distribution); and response rates ranged from 59% to 70%. We conducted a cross-sectional analysis using linear and logistic regressions over a range of ACO-level and market-level characteristics for performance year 1 in determining factors associated with 1) savings per beneficiary measured as a difference between the ACO expenditures per beneficiary and their Medicare-assigned benchmark per beneficiary; and 2) shared savings receipt, a dichotomous variable

Results: No characteristic of organizational structure, composition, and level of development was consistently associated with both realization of savings and likelihood of shared savings receipt. Organizations with higher assigned financial benchmarks realized larger savings per beneficiary ($187 to $191 (p<.1)) and were more likely to receive shared savings payments. Greater local market competition was positively associated with performance. Geographical location may affect ACOs’ ability to save and receive shared savings: ACOs in Massachusetts and Texas realized between $166 (p<.05) and $484 (p<.01) in savings per beneficiary. 

Conclusions: ACO performance is heterogeneous across organizational structures, compositions, and levels of development. In the first year of performance, many different types of ACOs, with varying levels of risk-based contracts and capabilities, were able to reduce spending. The strongest predictor of success was the magnitude of the benchmark established by CMS based on historic spending patterns, possibly indicating that these organizations had more waste at baseline.