Jan 27, 2022 - Health

The ACO plateau

Data: Centers for Medicare & Medicaid Services; Chart: Jared Whalen/Axios

The number of Medicare accountable care organizations — groups of hospitals and doctors who care for specific groups of Medicare patients — has flat-lined since 2018, new data from the federal government shows.

Why it matters: The Affordable Care Act created ACOs with the intent of both improving quality of care for patients and cutting costs, and then sharing savings with those care providers.

  • But industry interest stagnated after Medicare cracked down on models that made it too easy for providers to collect money.

Between the lines: 41% of all Medicare ACOs are still in what's called "one-sided" models (and that number used to be higher than 80%).

  • "One-sided" means hospitals and doctors collect money if they keep spending on patient care below a certain cost target and hit high-quality scores. But they don't have to pay anything to the federal government if spending is above that cost threshold — in other words, there's no risk of having to pay a penalty and all the reward of possible bonuses.
  • "Two-sided" models are where providers can still get savings, but they also are on the hook to pay back money that goes past their cost target.
  • Hospitals and doctors love one-sided ACOs because they are "a license to pick up dollar bills off the sidewalk," consultants at Gist Healthcare said in 2018.

The big picture: ACOs have scored well on quality and saved some money, but those savings are minuscule — just 0.5% of Medicare's "fee-for-service" spending.

  • And with easier ACO models now scaled back, some hospitals prefer to run their own lucrative Medicare Advantage insurance plan.
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