Interpreting the latest ACO study

Below I list some findings, and what I think they mean, from the recent study on Medicare Pioneer ACOs by Michael McWilliams and colleagues. My thoughts are informed by emails exchanged with Michael.

After one year (i.e., in 2012), Pioneer ACOs saved money (1.2%) and maintained or improved in various measures of quality of care. As much as you can take any findings about Pioneer ACOs to the bank, you can take these. No, they’re not based on a randomized design or natural experiment. No, there’s no highly plausible instrumental variable design, nor one I could imagine. So of course there are plenty of threats to a causal interpretation. But, given the constraints, the authors used about the strongest possible approach (difference-in-differences with controls) and did a large number of very strong sensitivity analyses and falsification tests. The working assumption that the results are causal is plausible and interesting, so let’s go with that.

Even ACOs that had dropped out of the Pioneer program had achieved savings. The good news is they didn’t drop out because they were failing to save money. The bad news is that they dropped out even while saving money, not exactly a good policy outcome. If the model is going to sustain itself on self-selection, this is a serious concern. One problem is that as benchmarks fall over the years, ACOs are expected to save more and more. Perhaps that’s not realistic, or the pace of change is too fast. Other approaches that don’t attempt to save so much so soon may attract and maintain more participants, which could end up saving Medicare more overall. (I may post about such approaches at another time. I have a bit of reading to do first.)

ACOs with higher initial spending achieved greater savings than initially lower-spending ACOs. It is, perhaps, not the wisest thing to do to penalize already relatively efficient ACOs. At the same time, it is, perhaps, not the wisest thing to do to expect relatively inefficient ACOs to become too efficient too quickly. Of course we’d like optimal efficiency tomorrow. But, again, in a voluntary program, too much pressure just forces organizations out. (One could argue whether the program should be voluntary. Perhaps someday it won’t be. We’re not there yet.) To put it another way, participation by inefficient organizations is especially valuable. They have the headroom to achieve gains more rapidly than more efficient organizations. But press too hard and they will leave. It’s a delicate balance.

There were no difference in savings achieved by ACOs that are financially integrated groups of physicians and hospitals versus those that are independent physician groups. Contrary to many claims, consolidation between physicians and hospitals is not necessary to reduce costs and maintain or improve quality. However, such consolidation increases market power with respect to private insurers, raising prices. These findings suggest that consolidation serves no useful purpose except to the consolidating organization itself. We should remain very wary of any claims that it does so.

Meta. This is an important study. CMS is contemplating how to tweak the program, so it’s particular well timed, as is consideration of other ACO payment approaches. Note too that this study is after one year. How Pioneer ACOs, and others, perform long term is much more important than short term results. Good research takes time. So, we will have to wait.


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