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by Heather Caspi                                                                                                                                                                       September 16, 2015

Dive Brief:

  • Medicare’s ACO experiment, in which it incents providers and hospitals to work together to improve efficiency and patient outcomes, has yet to save the government money. In fact, the ACO program cost Medicare money last year.
  • During 2014, 196 ACOs generated savings while 157 ACOs cost more than predicted. After paying bonuses to 97 ACOs and receiving payment for losses from just three, the ACO program saw a net loss of almost $3 million to the Medicare trust fund.
  • Medicare projections in 2011 expected the program to save $10 million to $320 million during 2014.

Dive Insight:

CMS is optimistic savings will be realized in time as ACOs gain experience to improve performance.

“In the long run we’re shooting to achieve those goals,” CMS Deputy Administrator Sean Cavanaugh told Kaiser Health News.

Much of the difficulty is tied to risk aversion, with just 7% of ACOs opting in 2014 to take on deals involving financial risk for the opportunity higher rewards. As a result, the government is allowing ACOs to participate without risk for up to six years rather than phasing out the option.

The strong risk aversion leaves Medicare in a bind, Kaiser Health News reports, because if risk is mandatory, too few ACOs may participate. However, without risk, ACOs have little incentive to improve.

Recommended Reading

Kaiser Health News: Medicare yet to save money through heralded medical payment model