Sign-up for the weekly ALN blog

April 18, 2019

Minor League Champs

Last September, the Bowling Green Hot Rods, a minor league affiliate of the Tampa Bay Rays, beat the Peoria Chiefs 7-2 to win their first ever Midwest League Championship.

I bring you this critical, though seven-month old, item because one of the themes we are tracking this year is the migration to value-based reimbursement.  Yes, a segue is coming. 

Today, we have a little news from the minor leagues of value-based care.  See the connection?

We’re checking back in on the Accountable Care Organizations (ACOs) participating in the Medicare Shared Savings Program (MSSP). Remember when these ACOs, working in the MSSP model, were going to save us boatloads of money and fix healthcare?  Now, it seems like Single A ball.

If you’ve been reading here long, you know that the ACO/MSSP idea is a favorite punching bag for us.  For all the smoke and heat and light and energy and spending that has been put into this, CMS would have saved more money by simply asking their staff use the other side of the Sticky Notes before reaching for another.  ‘Rounding error’ is a fitting summary for the program’s ‘savings’ to date.

But we look a little deeper today.  It turns out that physician group ACOs record a net positive savings to Medicare, while hospital-integrated ACOs don’t save enough to even cover their bonuses.

Neither saves a ton, but the evidence is clear for physician ACOs.  Those that entered the program in 2012, the first year, saved $474 per Medicare beneficiary in 2015, the last year for which the data is available.  Their hospital counterparts from the same year saved only $169, less than the bonuses they received.

Bowling Green beats Peoria.

Looking at the ACOs that have been in the program longer is the right idea because they’ve had time to bake-in their strategies.  And sure enough, both hospital and physician ACOs get better over time.  But, the doc-driven ACOs start with a better savings and get better faster in subsequent years.

In 2015, the physician group ACOs saved CMS, after bonuses, $256 million dollars.  The hospital-based ACOs were net negative to the cost of the program.

It was a bit humorous to read one analysis, explaining that doc-owned ACOs outperform because they more aggressively cut spending from other providers outside their practice, but the hospital ACOs should be excused because they own all of those downstream providers and can’t be expected to reduce services to their own business units.

So, it is not real savings unless you reduce spending in your own part of the value chain, but if you own all parts of the value chain, you can’t be expected to reduce spending??

You see why we think this model is flawed?

Tim Coan
Tim Coan

CEO and founder

Tim Coan, ALN’s CEO, writes an insightful and witty blog weekly about a variety of topics relevant to independent physician practices.