Research Shows ACOs Aren’t an Effective Way to Curb Healthcare Costs

New research shows that health insurers won’t be able to curb costs and improve outcomes through accountable care organizations (ACOs). At least, they won’t be able to realize savings any time soon.

That’s according to Advisory Board, a healthcare consulting firm that  built a model to estimate how long it would take for savings from current ACO models to catch up with CMS’ National Health Expenditure Data projections regarding healthcare spending increases. It matched savings data from the Medicare Shared Savings Program (MSSP) ACOs to the projected Medicare growth rate for the next few years to capture the hypothetical breakeven point.

The result is a possible breakeven in the year 2081. And that assumes that the industry can transform all provider systems into ACOs that earned a bonus under MSSP. That’s no easy feat for the remaining providers.

Sandra Agik, senior analyst, Advisory Board Research, says the firm was prompted to conduct the research after a number of health insurers who invested in value-based care models, such as ACOs, reported frustration when estimating how long it would take them to cut costs. “We wanted to get a picture of how effective this strategy could be,” she says. “We also wanted to determine the best ways for health insurers to lower costs.”

The researchers learned that ACOs won’t be a sufficient strategy to curb costs alone. “It will take time because the amount of savings generated isn’t as high as the projected cost growth rate for Medicare,” says Rachel Sokol, practice manager, Advisory Board Research. “While ACOs might be the right long-term strategy for the health insurance industry, there are some short-term cost pressures that plans are currently facing. They will need to consider some other options to keep premiums affordable.” 

A difficult transition

Sokol says it’s difficult for provider systems to transform into successful ACOs like the systems earning savings under MSSP, especially if they still rely heavily on fee-for-service revenue. “Providers have increasingly thin margins, so it is hard for them to invest heavily in new services, new information technology, and new staff members to aid in the transition.”

Despite the amount of time it will take for health insurers to break even if providers use ACOs, Sokol says ACOs are still important to use and are a move in the right direction. “They are important for plans to teach providers about how to manage populations longitudinally,” Sokol says.

Other ways to manage healthcare spending

Agik suggests health plans invest in several things when looking to curb spending, in addition to ACOs. They need to entice high-value providers to offer more services to members. For example, primary care physicians could perform certain specialty care procedures at their offices. Secondly, payers should incentivize or make it easier for members to access low-cost providers. For example, payers could employ methods to improve transportation to primary care physician offices such as partnering with Lyft or Uber to provide cheap and convenient transportation for non-emergency situations or ask primary care physicians to keep their offices open later so members have time to seek low-cost care at those sites.

Finally, insurers should add non-clinicians to their network of providers so members can get that type of care as well when accessing medical care, Agik says. For example, sometimes members have social needs that aren’t addressed in the clinical setting. A life services coach or social worker might be able to assist with those needs.

Or, insurers could encourage providers to hire peer coaches to help patients get necessary support such as reminding them to take a medication or alerting providers if something seems amiss, Sokol says.

Karen Appold is a medical writer in Lehigh Valley, Pennsylvania.